                                 CODE OF VIRGINIA

QUALIFIED EQUITY AND SUBORDINATED DEBT INVESTMENTS TAX CREDIT (§ 58.1-339.4)

A. As used in this section:
			&#8220;Commercialization investment&#8221; means a qualified investment in a
qualified business that was created to commercialize research developed at or in
partnership with an institution of higher education.			&#8220;Equity&#8221;
means common stock or preferred stock, regardless of class or series, of a
corporation; a partnership interest in a limited partnership; or a membership
interest in a limited liability company, which is not required or subject to an
option on the part of the taxpayer to be redeemed by the issuer within three
years from the date of issuance.			&#8220;Qualified business&#8221; means a
business which (i) has annual gross revenues of no more than $3 million in its
most recent fiscal year, (ii) has its principal office or facility in the
Commonwealth, (iii) is engaged in business primarily in or does substantially
all of its production in the Commonwealth, (iv) has not obtained during its
existence more than $3 million in aggregate gross cash proceeds from the
issuance of its equity or debt investments (not including commercial loans from
chartered banking or savings and loan institutions), and (v) is primarily
engaged, or is primarily organized to engage, in the fields of advanced
computing, advanced materials, advanced manufacturing, agricultural
technologies, biotechnology, electronic device technology, energy, environmental
technology, information technology, medical device technology, nanotechnology,
or any similar technology-related field determined by regulation by the
Department of Taxation to fall under the purview of this
section.			&#8220;Qualified investment&#8221; means a cash investment in a
qualified business in the form of equity or subordinated debt; however, an
investment shall not be qualified if the taxpayer who holds such investment, or
any of such taxpayer&#8217;s family members, or any entity affiliated with such
taxpayer, receives or has received compensation from the qualified business in
exchange for services provided to such business as an employee, officer,
director, manager, independent contractor or otherwise in connection with or
within one year before or after the date of such investment. For the purposes
hereof, reimbursement of reasonable expenses incurred shall not be deemed to be
compensation.			&#8220;Subordinated debt&#8221; means indebtedness of a
corporation, general or limited partnership, or limited liability company that
(i) by its terms required no repayment of principal for the first three years
after issuance; (ii) is not guaranteed by any other person or secured by any
assets of the issuer or any other person; and (iii) is subordinated to all
indebtedness and obligations of the issuer to national or state-chartered
banking or savings and loan institutions.

B. For taxable years beginning on or after January 1, 1999, but before January
1, 2026, a taxpayer shall be allowed a credit against the tax levied pursuant to
&#xA7;&#xA7; 58.1-320 and 58.1-360 in an amount equal to 50 percent of such
taxpayer&#8217;s qualified investments during such taxable year. No credit shall
be allowed to any taxpayer that has committed capital under management in excess
of $10 million and engages in the business of making debt or equity investments
in private businesses, or to any taxpayer that is allocated a credit as a
partner, shareholder, member or owner of an entity that engages in such
business.

C. The amount of any credit attributable to a qualified investment by a
partnership, electing small business corporation (S corporation), or limited
liability company shall be allocated to the individual partners, shareholders,
or members, as the case may be, as they may determine.

D. The aggregate amount of the credit for each taxpayer shall not exceed the
lesser of (i) the tax imposed for such taxable year or (ii) $50,000. Any credit
not usable for the taxable year in which the credit was allowed may be, to the
extent usable, carried over for the next 15 succeeding taxable years or until
the total amount of the tax credit has been taken, whichever occurs first.

E. The amount of tax credits available under this section for a calendar year
shall be $5 million. Of the amount of available credits, one-half of the amount
shall be allocated exclusively for credits for commercialization investments.
Such allocation of tax credits shall constitute the minimum amount of tax
credits to be allocated for commercialization investments. However, if the
amount of tax credits requested for commercialization investments is less than
one-half of the total amount of credits available under this section, the
balance of such credits shall be allocated for qualified investments in any
qualified business under this section.

F. Unless the taxpayer transfers the equity received in connection with a
qualified investment as a result of (i) the liquidation of the qualified
business issuing such equity, (ii) the merger, consolidation or other
acquisition of such business with or by a party not affiliated with such
business, or (iii) the death of the taxpayer, any taxpayer that fails to hold
such equity for at least three full calendar years following the calendar year
for which a tax credit for a qualified investment is allocated pursuant to this
section shall forfeit both used and unused tax credits and in addition shall pay
the Department of Taxation interest on the total allowed credits at the rate of
one percent per month, compounded monthly, from the date the tax credits were
allocated to the taxpayer. The Department of Taxation shall deposit any amounts
received under this subsection into the general fund of the Commonwealth.

G. Prior to December 31, 1998, the Department of Taxation shall promulgate
regulations in accordance with the Administrative Process Act (&#xA7; 2.2-4000
et seq.) (i) establishing procedures for claiming the tax credit provided by
this section and (ii) providing for the allocation of tax credits among
taxpayers requesting credits in the event the amount of credits for which
requests are made exceeds the available amount of credits in any one calendar
year. Notwithstanding the foregoing, the Department of Taxation shall permit an
application for certification as a qualified business to be filed at any time
during the calendar year regardless of when the investment was made during the
calendar year.

HISTORY: 1998, c. 491; 2004, c. 614; 2009, c. 853; 2025, c. 306.