Effective for taxable years beginning on or after January 1, 2016, Virginia allows an individual and corporate income tax credit for incurring more than $5 million of Virginia qualified research and development expenses during a taxable year. The amount of the credit is equal to 10% of the difference between:
- The Virginia qualified research and development expenses paid or incurred by the taxpayer during the taxable year; and
- 50% of the average Virginia qualified research and development expenses paid or incurred by the taxpayer for the three taxable years immediately preceding the taxable years.
If a taxpayer did not pay or incur Virginia qualified research and development expenses in any one of the three taxable years immediately preceding the taxable year for which the credit is being determined, the credit is equal to 5% of the Virginia qualified research and development expenses paid or incurred by the taxpayer during the relevant taxable year.
The credit is allowed for the same calendar year in which qualified research and development expenses are reported on the federal income tax return (“the credit year”), in accordance with the taxpayer’s accounting method.