23 Va. Admin. Code § 10-110-227

Current through Register Vol. 41, No. 3, September 23, 2024

Section 23VAC10-110-227 - Qualified Equity and Subordinated Debt Investments Tax Credit; qualified business application procedure

A. Every eligible entity desiring to be designated as a qualified business for purposes of this tax credit must make an application on the Application for Designation as a Qualified Business for the Qualified Equity and Subordinated Debt Investments Tax Credit to the Department of Taxation. Such application must be made prior to the issuance of any equity or subordinated debt; otherwise, the issuance shall not qualify for the tax credit, except as provided in subsection B of this section.

1. A qualified business application must be made at least 90 days prior to the issuance of any equity or subordinated debt to ensure that the Department of Taxation's determination regarding the entity's qualification will be made prior to the issuance date.

2. A qualified business application may be made less than 90 days prior to the issuance of any equity or subordinated debt; however, the Department of Taxation cannot ensure that its determination regarding the entity's qualification will be made prior to the issuance date.

B. A qualified business application will not be accepted after the issuance date of any equity or subordinated debt, except in the following instances:

1. Issuances of equity or subordinated debt made between January 1, 2001, and before September 1, 2001, the qualified business application is made by October 1, 2001;

2. Issuances of equity or subordinated debt made on or after September 1, 2001, and before January 1, 2002, the qualified business application is made prior to the issuance date as described in subdivisions A 1 and 2 of this section. (For example, issuances made on September 1, 2001 and before January 1, 2002, will require a qualified business application no later than June 1, 2001, to ensure that the Department of Taxation's determination will be made prior to the issuance date); and

3. Issuances of equity or subordinated debt made on or after January 1, 2002, but within three months of the end of the most recently completed taxable year of the qualified business, the application is made by the first business day of the fourth month following the end of the most recently completed taxable year.

C. The entity seeking designation as a qualified business shall make application by completing and submitting the Application for Designation as a Qualified Business for the Qualified Equity and Subordinated Debt Investments Tax Credit to the Department of Taxation.

D. If the Department of Taxation determines the entity is a qualified business, the Department of Taxation shall issue a certification to the entity stating the same. Such designation shall be valid only for the calendar year of issuance.

E. Upon issuance of equity or subordinated debt to taxpayers, the qualified business shall issue a statement to each taxpayer for attachment to the taxpayer's tax credit application. Such statement shall contain the following information:

1. The qualified business certification granted by the Department of Taxation;

2. The type of investment at issue (i.e., equity or subordinated debt) and the amount; and

3. That the investment at issue meets the definition of a qualified investment for purposes of this credit.

a. If the investment at issue is equity, the statement must also indicate that such issuance is an original issuance which provides new capital to the qualified business, and that it is not required or subject to an option on the part of the taxpayer to be redeemed by the issuer within five years from the date of issuance.

b. If the investment at issue is subordinated debt, the statement must also indicate that such issuance is an original issuance which provides new capital to the qualified business, and that (i) by its terms requires no repayment of principal for the first three years after issuance; (ii) is not guaranteed by any other person or entity, or secured by any assets of the issuer or any other person or entity; and (iii) is subordinated to all indebtedness and obligations of the issuer to national or state-chartered banking or savings and loan institutions.

23 Va. Admin. Code § 10-110-227

Derived from Virginia Register Volume 18, Issue 11, eff. March 13, 2002.

Statutory Authority

§§ 58.1-203 and 58.1-339.4 of the Code of Virginia.