Clean Fuel Vehicle Job Creation Tax Credit

Businesses manufacturing or converting vehicles to operate on clean fuel, and manufacturers of components for use in clean fuel vehicles, are eligible to receive an income tax credit for each new, full-time job created, over and above the previous year's employment level. The credit is equal to $700 in the year the job is created and, in each of two succeeding years, if the job is continued, for a maximum of $2,100 per job. The credit is available through December 31, 2011.

An income tax credit is available to companies which purchase clean fuel vehicles or invest in related refueling facilities. The credit is equal to 10% of the IRS allowed deduction or credit for these purchases.

For more information, contact the at (804) 367-8036.

Low-Income Housing Tax Credits Program (LIHTC)

The Federal Low-Income Housing Tax Credits program is sponsored by the US Treasury Department and administered by the Virginia Housing Development Authority (VHDA) in Virginia. LIHTC is authorized under Section 42 of the Internal Revenue Code of 1986, encouraging the development of affordable rental housing by providing owners with a federal income tax credit. The program also serves as an incentive for private investors to participate with developers in the construction and rehabilitation of low-income housing. For more information, contact Jim Chandler, Virginia Housing Development Authority Director of LIHTC Programs, VHDA, at (804) 343-5786.

Neighborhood Assistance Tax Credit

The Virginia Neighborhood Assistance Program provides tax credits, based on availability, to businesses donating money, goods, property, limited professional and contract services directly to pre-approved Neighborhood Assistance Program (NAP) organizations. NAP organizations' primary function must be to benefit impoverished individuals. The tax credit is equal to 45% of the qualifying donation amount. Licensed physicians, dentists, nurses, nurse practitioners, physician assistants, optometrists, dental hygienists, professional counselors, clinical social workers, clinical psychologists, marriage and family therapists, physical therapists and pharmacists donating their services in a pre-approved NAP clinic may also be eligible for credits. Effective July 1, 2004, chiropractors were made eligible health care professionals. Qualified organizations are approved for a twelve-month period. Tax credits are limited to $175,000 per year, with the minimum credit being $400. Excess donor credit, if applicable, may be carried forward for the next five taxable years. To claim the tax credit, a certificate from the Department of Social Services must be attached to your return. For a list of approved organizations or additional information, call (804) 726-7923 or 726-7924.

Recycling Tax Credit

A ten-percent (10%) tax credit is available to manufacturers for the purchase of certified machinery and equipment for processing recyclable materials. The credit is equal to 10% of the original total capitalized cost of the equipment. The total credit cannot exceed 40% of the Virginia income tax liability in any taxable year. The unused amount of the credit can be carried over for 10 years. The Virginia Department of Environmental Quality certifies recycling equipment for this credit. Contact this department at (804) 698-4000.

Sales and Use Tax Exemptions

Virginia's combined state and local sales and use tax rate of 5.0% is among the lowest in the nation. Manufacturers receive exemptions for purchases used directly in production, including machinery, tools, spare parts, industrial fuels, and raw materials. Distributors receive exemptions for items purchased for resale. All businesses receive exemptions for custom computer software, items used in research and development, and certified pollution control equipment and facilities. Contact the at (540) 562-3510.

Virginia's Worker Retraining Tax Credit

The Worker Retraining Tax Credit allows an employer to claim a tax credit for the costs of providing worker retraining to qualified employees. Application must be made prior to claiming the credit. Eligible worker retraining includes noncredit courses provided by any of Virginia's community colleges, private school or any accredited school and credit or noncredit worker retraining courses undertaken through an apprenticeship agreement approved by the Virginia Apprenticeship Council. The credit is 30 percent of all training costs incurred through a community college or an annual credit of up to $100 per student if training through a private school. The credit is allowable against individual income tax, estate and trust tax, corporate income tax, bank franchise tax and taxes imposed upon insurance companies and utility companies. The credit is nonrefundable, but excess credit may be carried forward for the next three taxable years. Click here to download a copy of the application and instructions. For more information, contact the Virginia Department of Business Assistance at (804) 371-8120.

Partial Tax Exemption on Rehabilitated Buildings

This exemption is provided by the city of Roanoke for buildings, 25 years old or older, suitable for residential, commercial, or industrial use. Buildings must be improved to increase the assessed value no less than 60% for commercial and industrial structures or 40% for residential structures. The exemption runs with the building for a period of five years and is equal to the difference in the appraised value immediately before rehabilitation and the appraised value after completion of rehabilitation. (Note: Exemptions within H-1 and H-2 Historical Districts or Conservation/Rehabilitation Districts run for ten years. Residential structures with an assessed value prior to rehabilitation of more than $300,000 get a three year exemption.) The total square footage of the structure cannot be increased by more than 15%. Application for the exemption must be made prior to beginning any construction because a preconstruction appraisal is required for participation. Contact the Commissioner of the Revenue at (540) 853-2523.

Partial Tax Exemption in Redevelopment and Conservation Areas as well as Rehabilitation Districts

New construction in Redevelopment and Conservation Areas as well as Rehabilitation Districts may be eligible for a partial tax exemption. New residential structures must be designed for and used as a principal single-family home with an assessed value of at least 120% of the median value of other residentail structures in the neighborhood, as determined by the director of Real Estate Valuation. New commercial structures must be in districts zoned CN - Neighborhood Commercial and comply with the purposes permitted in CN. The amount of the exemption from real property taxation is an amount equal to the increase in assessed value resulting from the construction of the new structure or other improvement to the real estate, as determined by the director of Real Estate Valuation. This amount only, on a fixed basis, constitutes the exemption, beginning on January 1 of the year following completion of the new construction. This exemption runs with the real estate for a period of ten (10) years for residential construction initially assessed at under $300,000 and three (3) years if assessed for more. For CN districts, the exemption shall run will the real estate for a period of ten (10) years if initially assessed for under $800,000 and five (5) years if assessed for more. Only one exemption under this division is allowed at any point in time. Application for the exemption must be made prior to beginning any construction because a preconstruction appraisal is required for participation. This exemption does not apply when any existing structure is demolished and a replacement structure is built, unless the existing structure assesssed for less than $10,000. If the structure is a Virginia registered landmark or contributes to the significance of a registered historic district, the exemption does not apply. Contact the Commissioner of the Revenue at (540) 853-2523.

Partial Tax Exemption on Energy Efficient Buildings

Beginning July 1, 2007, any existing or proposed building exceeding energy efficient standards as contained in the Uniform Statewide Building Code (USBC) by 30%, will pay a special real estate tax rate of $1.07/$100 for a term of five years. Applications for the special tax rate program for energy efficient buildings must be submitted to the Building Commissioner’s Office, Division of Building Inspections of the Department of Planning Building and Development. Contact Jeff Shawver at 853-1891 for more information.

Enterprise Zone Rehabilitation Tax Credits

A real estate tax exemption may be available for businesses within Enterprise Zone One A (EZ 1A) and/or Enterprise Zone Two (EZ2) for increasing, through substantial rehabilitation or renovation, the assessed value of an existing commercial or industrial building, and in the case of EZ 1A, mixed-use commercial building (no more than 80% residential). Buildings must be at least 15 years old and have the assessed value of the building increased by at least $50,000. The rehabilitation must be completed in two years or less and all relevant building permits must be obtained. Those buildings receiving prior rehabilitation credits as above are not eligible. Buildings meeting the criteria in EZ 1A will receive a seven (7) year tax exemption on the amount equal to the appraised value immediately before rehabilitation and the appraised value after completion of the renovation, while those in EZ 2 will receive a five (5) year exemption. Additions to buildings will not count toward the $50,000 threshold. Tax exemptions for buildings in EZ 1A are limited to $100,000 over the seven year period, while buildings in EZ 2 are limited to $75,000 over the five year period. Application for the exemption must be made prior to beginning any construction because a preconstruction appraisal is required for participation. Contact the Commissioner of the Revenue at (540) 853-2523.

Tax Deduction for Manufacturers

Manufacturers can earn a federal income tax deduction by donating their excess, nonmoving inventory to a qualified charity. Regular C corporations may deduct the cost of the inventory donated, plus half the difference between cost and fair market value. Deductions may be up to twice the cost. S corporations, partnerships, and sole proprietorships earn a straight cost deduction. A free guide is available, giving step-by-step instructions as well as a formula for calculating potential tax savings. A copy can be requested from the nonprofit National Association for the Exchange of Industrial Resources at 1-800-562-0955.

Federal Rehabilitation Tax Credits

This program provides tax credits for qualifying historic properties used for income-producing purposes. A tax credit for 20% of the rehabilitation costs can be taken for historic properties on the National Register or contributing to a National Register Historic District. Substantial rehabilitation (minimum $5,000) must be undertaken in accordance with the Secretary of the Interior's Standards for Rehabilitation and approved by the National Park Service.

In addition, a Federal Rehabilitation Tax Credit of 10% is available for non-historic buildings built before 1936, which are not on the National Register or contributing to an historic district. Certification by the National Park Service is not required. However, rehabilitation must meet the Secretary of the Interior's Standards of Rehabilitation. Only commercial projects are eligible. Contact John Wells, Virginia Department of Historic Resources, at (804) 367-2323, extension 111, or the Roanoke Regional Preservation Office at (540) 857-7585.

State Rehabilitation Tax Credits

This program provides tax credits for qualifying historic properties on the Virginia Landmarks Register, or properties certified by the Virginia Department of Historic Resources as contributing to an historic district or meeting the criteria for listing on the Register. (National Register properties or districts are included on the Virginia Register.) Rehabilitation expenses must be at least 50% of the prior assessed value of the building for local real estate tax purposes. Properties do not have to be income producing; residential rehabilitation by homeowners qualifies for the credits. A 25% Rehabilitation State Tax Credit is available. The property must be rehabilitated according to the Secretary of the Interior's Standards of Rehabilitation and certified by the Virginia Department of Historic Resources. A tax certificate is issued. For information, contact Michael Pulice, Roanoke Regional Preservation Office, at (540) 857-7586.

Disabled Access Tax Credit

This tax credit is available to "eligible small businesses" of 50% for "eligible access expenditures" of at least $250, but not more than, $10,250 for a taxable year. A business may take the tax credit each year it makes an eligible access expenditure. "Eligible small businesses" had either $1 million or less in gross receipts or up to 30 full-time employees in the preceding tax year. "Eligible access expenditures" are those incurred to enable compliance with the Americans with Disabilities Act (ADA), including removal of architectural, communication, physical or transportation barriers; provision of qualified readers, taped texts, etc, for the visually impaired; provision of qualified interpreters, etc, to make orally delivered materials available to the hearing impaired; acquisition or modification of equipment/devices for the disabled; or provision of similar services, modifications, materials or equipment. Contact the Department of Rehabilitative Services at (800) 552-5019.