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Virginia allows a Research and Development Expenses Tax Credit ("RDC") against corporate income tax for qualified expenses equal to 15% of the first $300,000 paid or incurred by the taxpayer during the taxable year, or 20% of the first $300,000, if the qualified expenses were in conjunction with a Virginia public or private college or university, to the extent the expenses exceed the Virginia base amount for the taxpayer. This credit is limited to a yearly maximum of $45,000 (or $60,000), but the excess is refundable. Use Virginia Form RDC to claim this credit.
If the taxpayer has more than $5,000,000 in QREs in a year, the state of Virginia provides the Major Research and Development Expenses Tax Credit ("MRD"). This credit equals 10% of the excess QREs over the base amount, has no limit, and is not refundable. It may only offset up to 75% of the tax liability in the tax year, but can be carried forward for 10 years. Use Virginia Form MRD to claim this credit.
Virginia Department of Revenue requires additional supporting details and schedules (compared to the federal R&D credit) with the application, so it's important to work with experts in the industry.
Learn more about the Virginia R&D Credit here.
R&D Tax Credit Available:
Yes - set to expire on December 31, 2024
C-Corporations, S-Corporations, LLCs, Partnerships
Deadline for Tax Filing:
Must be mailed. Application due no later than September 1st. (i.e. postmarked by 9/1)
Data Required to Compute Credit:
Claim Period VA Qualified R&D Expenses (QREs)
What Information is needed?
Virginia QREs for Prior 3 Years
Gross Receipts for Prior 4 Years
None for RDC / 10 Years for MRD
Primary Virginia R&D Credit Method (Form RDC)
Major Research and Development Expenses Tax Credit' (Form MRD)
For both calculations, since the award letter is not provided until late November, taxpayers will need to either submit an extension payment for any tax due or file an amended return once you have received the credit certification.
The total amount of credits granted by Form RDC cannot exceed $7 million for tax year 2020 (the yearly cap increases to $7.7 million in 2021). This application is due September 1st, and the taxpayer will receive a certification letter by November 30. The credit is claimed using Schedule CR (individuals) or Form 500CR (corporations).
The total amount of credits granted by Form MRD cannot exceed $20 million for tax year 2020 (the yearly cap increases to $24 million in 2021). This application is also due September 1st, and the taxpayer will receive a certification letter by November 30. The credit is claimed using Schedule CR (individuals) or Form 500CR (corporations).
To get an estimate of the potential value of your unclaimed R&D Tax Credits, try out our credit calculator.
Download our R&D Tax Credit Calculator for Android to see how much you can receive from your qualified R&D tax credit expenses.
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