| 1 | 1 | | 2025 SESSION |
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| 2 | 2 | | |
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| 3 | 3 | | INTRODUCED |
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| 4 | 4 | | |
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| 5 | 5 | | 25104551D |
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| 6 | 6 | | |
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| 7 | 7 | | HOUSE BILL NO. 2646 |
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| 8 | 8 | | |
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| 9 | 9 | | Offered January 14, 2025 |
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| 10 | 10 | | |
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| 11 | 11 | | A BILL to amend and reenact 58.1-405.1 and 58.1-408 of the Code of Virginia, relating to income tax; eligibility of companies for apportionment modification; certification by the Virginia Economic Development Partnership Authority. |
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| 12 | 12 | | |
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| 13 | 13 | | |
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| 14 | 14 | | |
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| 15 | 15 | | PatronMorefield |
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| 16 | 16 | | |
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| 17 | 17 | | |
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| 18 | 18 | | |
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| 19 | 19 | | Committee Referral Pending |
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| 20 | 20 | | |
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| 21 | 21 | | |
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| 22 | 22 | | |
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| 23 | 23 | | Be it enacted by the General Assembly of Virginia: |
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| 24 | 24 | | |
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| 25 | 25 | | 1. That 58.1-405.1 and 58.1-408 of the Code of Virginia are amended and reenacted as follows: |
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| 26 | 26 | | |
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| 27 | 27 | | 58.1-405.1. Eligibility of companies for apportionment modification; certification by the Virginia Economic Development Partnership Authority. |
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| 28 | 28 | | |
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| 29 | 29 | | A. For purposes of this section: |
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| 30 | 30 | | |
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| 31 | 31 | | "Authority" means the Virginia Economic Development Partnership Authority. |
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| 32 | 32 | | |
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| 33 | 33 | | "Eligible company" means a corporation or pass-through entity, as defined in 58.1-390.1, that does not have any existing property or payroll in Virginia as of January 1, 2018, and on or after January 1, 2018, but before January 1, 2025 2031, (i) either (a) spends at least $5 million on new capital investment in a qualified locality or qualified localities and creates at least 10 new jobs in a qualified locality or qualified localities or (b) creates at least 50 new jobs in a qualified locality or qualified localities; (ii) is a traded-sector company; and (iii) is certified by the Authority as generating a positive fiscal impact pursuant to subsection B. |
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| 34 | 34 | | |
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| 35 | 35 | | "New capital investment" means real property acquired in a qualified locality or qualified localities on or after January 1, 2018, but before January 1, 2025 2031, and any improvements to real property in a qualified locality or qualified localities on or after January 1, 2018, but before January 1, 2025 2031. |
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| 36 | 36 | | |
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| 37 | 37 | | "New job" means a permanent, full-time position of indefinite duration that pays at least 150 percent of the minimum wage, as defined in the Virginia Minimum Wage Act ( 40.1-28.8 et seq.), and that requires a minimum of (i) 35 hours of an employee's time a week for the entire normal year of the eligible company's operations, which normal year shall consist of at least 48 weeks, or (ii) 1,680 hours per year. |
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| 38 | 38 | | |
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| 39 | 39 | | "Qualified development site" means real property that is in a locality adjacent to a qualified locality and, before January 1, 2018, either (i) was owned or partly owned by a qualified locality or an industrial development authority of which a qualified locality is a member or (ii) was owned or partly owned by a locality or industrial development authority, was leased to a private party, and was subject to a revenue-sharing agreement providing that a portion of the revenues from the lease would be distributed to a qualified locality. "Qualified development site" does not include real property that is not owned by the Commonwealth or a political subdivision thereof. |
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| 40 | 40 | | |
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| 41 | 41 | | "Qualified locality" means (i) the County of Alleghany, Bland, Buchanan, Carroll, Craig, Dickenson, Giles, Grayson, Lee, Page, Russell, Scott, Smyth, Tazewell, Washington, Wise, or Wythe or the City of Bristol, Galax, or Norton; (ii) the County of Amelia, Appomattox, Buckingham, Charlotte, Cumberland, Halifax, Henry, Lunenburg, Mecklenburg, Nottoway, Patrick, Pittsylvania, or Prince Edward or the City of Danville or Martinsville; (iii) the County of Accomack, Caroline, Essex, Gloucester, King and Queen, King William, Lancaster, Mathews, Middlesex, Northampton, Northumberland, Richmond, or Westmoreland; or (iv) the County of Brunswick or Dinwiddie or the City of Petersburg. "Qualified locality" includes a qualified development site. |
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| 42 | 42 | | |
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| 43 | 43 | | "Traded-sector company" means a company that directly or indirectly derives more than 50 percent of its revenue from out-of-state sources. |
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| 44 | 44 | | |
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| 45 | 45 | | B. 1. The Authority shall determine whether a company will generate a positive fiscal impact based on the following factors: (i) job creation; (ii) private capital investment; and (iii) anticipated additional state and local tax revenue. The Authority also shall consider the additional revenue the Commonwealth likely would expend in and for the localities if the economy in the localities continues to erode. In making its determination, the Authority shall consult with the Department regarding the revenue impact of certifying such company. The Authority shall certify a company only if it determines such company will generate a positive fiscal impact. |
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| 46 | 46 | | |
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| 47 | 47 | | 2. The Authority shall deny certification to any company if it determines such taxpayer has engaged in a merger, acquisition, similar business combination, name change, change in business form, or other transaction the primary purpose of which is to obtain status as an eligible company. |
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| 48 | 48 | | |
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| 49 | 49 | | 3. The Authority shall make an annual re-certification according to subdivision B 1, and no company shall remain an eligible company for any taxable year that the Authority does not grant re-certification. |
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| 50 | 50 | | |
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| 51 | 51 | | C. Any eligible company may elect to apportion its income pursuant to the provisions of 58.1-408, 58.1-417, 58.1-418, 58.1-419, 58.1-420, 58.1-422, 58.1-422.1, or 58.1-422.2, as applicable. However, if the entire business of an eligible company is transacted or conducted within the Commonwealth, it shall not apportion its income pursuant to this subsection but may elect to apportion its income pursuant to the provisions of 58.1-405. |
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| 52 | 52 | | |
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| 53 | 53 | | 58.1-408. What income apportioned and how. |
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| 54 | 54 | | |
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| 55 | 55 | | A. The Virginia taxable income of any corporation, except those subject to the provisions of 58.1-417, 58.1-418, 58.1-419, 58.1-420, 58.1-422, 58.1-422.1, 58.1-422.2, or 58.1-422.3, excluding income allocable under 58.1-407, shall be apportioned to the Commonwealth by multiplying such income by a fraction, the numerator of which is the property factor plus the payroll factor, plus twice the sales factor, and the denominator of which is four; however, where the sales factor does not exist, the denominator of the fraction shall be the number of existing factors and where the sales factor exists but the payroll factor or the property factor does not exist, the denominator of the fraction shall be the number of existing factors plus one. |
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| 56 | 56 | | |
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| 57 | 57 | | B. Any eligible company, as defined in 58.1-405.1, may subtract from the numerator of the corresponding factor the value of its (i) property acquired in any qualified locality or qualified localities, as defined in 58.1-405.1, on or after January 1, 2018, but before January 1, 2025 2031; (ii) payroll attributable to jobs created on or after January 1, 2018, but before January 1, 2025 2031, in any qualified locality or qualified localities; and (iii) sales in the Commonwealth during the taxable year. Such eligible company may make such modification for the taxable year in which it first becomes eligible and for the six subsequent, consecutive taxable years, except for any year in which the eligible company's (a) total, cumulative new capital investment falls below the applicable initial threshold or (b) number of new jobs falls below the applicable initial threshold. |
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