International Trade Facility Tax Credit
An income tax credit is allowed for either capital investment in an international trade facility (ITF) or increasing jobs related to an international trade facility. To qualify, an ITF must show at least a 5% increase in shipments through Virginia Port Authority (VPA) ports in Virginia. The amount of the credit is equal to $3,500 per new qualified full-time employee that results from increased qualified trade activities by the taxpayer or 2% of the amount of capital investment made by the taxpayer to facilitate the increased eligible trade activities. Taxpayers can elect to claim either credit, but cannot claim both credits in the same taxable year.
A qualified company that claims employees for the Major Business Facility Job Tax Credit or the International Trade Facility Tax Credit cannot receive a Port of Virginia Economic and Infrastructure Development Grant (POV Grant) for those previously claimed jobs.
The company must be an international trade facility. For purposes of this credit, an “international trade facility” is defined as a company that:
- Is engaged in port-related activities.
- Uses Virginia Port Authority-operated marine port facilities located in Virginia.
- Transports at least 5% more cargo through maritime port facilities in the Commonwealth during the taxable year than was transported by the company through such facilities during the preceding taxable year.
For purposes of this credit, the term “international trade facility” refers to the company itself, rather than the facility where port-related activities are being conducted by the company.
For taxable year 2012 and thereafter, the jobs portion of the International Trade Facility Tax Credit is equal to $3,500 per qualified full-time employee that results from increased qualified trade activities by the taxpayer. A “qualified full-time employee” is an employee filling a new, permanent full-time position in an international trade facility in Virginia. To qualify as a “new, permanent full-time position,” the position filled by the employee must be either:
- A job of indefinite duration, created by the company after establishing or expanding an international trade facility in Virginia, requiring a minimum of 35 hours of employment per week for the entire normal year (defined as 48 weeks in a calendar year) of the company’s operations; or
- A position of indefinite duration that requires a minimum of 35 hours of employment per week for the portion of the taxable year in which the employee was initially hired for, or transferred to, the international trade facility in Virginia.
Only employees filling permanent full-time positions qualify for this credit. Accordingly, employees filling seasonal or temporary positions do not qualify for this credit.
Additionally, positions that are ancillary to the principal activities performed by the employees at the international trade facility do not qualify for this credit. Such positions include jobs in building and grounds maintenance and security.
Jobs created when a job function is shifted from an existing location in Virginia to the international trade facility do not qualify for this credit. However, otherwise qualifying jobs created when a job function is shifted from an existing location in another state to an international trade facility located in Virginia are eligible for the credit.
"Qualified trade activities" means the completed exportation or importation of at least (i) one International Organization for Standardization ocean container with a minimum 20-foot length, (ii) 16 tons of non-containerized cargo, or (iii) one unit of roll-on/roll-off cargo through any publicly or privately owned cargo facility located within the Commonwealth through which cargo is transported. Export cargo must be loaded on a barge or ocean-going vessel, and import cargo must be discharged from a barge or ocean-going vessel at such facility.
Capital investment includes the following:
- Expenditures associated with any exterior, structural, mechanical, or electrical improvements necessary to expand or rehabilitate a building for commercial or industrial use.
- Expenditures associated with excavations, grading, paving, driveways, roads, sidewalks, landscaping, or other land improvements.
- The cost of machinery, tools, and equipment placed in service by the international trade facility on and after January 1, 2011.
For purposes of this credit, “machinery, tools, and equipment” does not include the following:
- Property for which an International Trade Facility Tax Credit was previously granted.
- Property previously placed in service by the taxpayer, a related party as defined in IRC § 267(b), or a trade or business under common control as defined in IRC § 52(b).
- Property previously in service in Virginia that has a basis in the hands of the person acquiring it, determined in whole or in part by reference to the basis of such property in the hands of the person from whom acquired or IRC § 1014(a).
The following are not considered capital investments for purposes of this credit:
- The cost of acquiring any real property or building
- The cost of furnishings
- Any expenditure associated with appraisal, architectural, engineering, or interior design fees
- Loan fees, points, or capitalized interest
- Legal, accounting, realtor, sales and marketing, or other professional fees
- Closing costs, permit fees, user fees, zoning fees, impact fees, and inspection fees
- Bids, insurance, signage, utilities, bonding, copying, rent loss, or temporary facilities costs incurred during construction
- Utility hook-up or access fees
- The cost of any well or septic system
- Taxpayers apply to the Department by completing Form ITF.
- Taxpayers verify containers or cargo shipped through Virginia Port Authority-operated port facilities on the Virginia Port Authority’s website.
- A validation summary must then be attached to Form ITF. Taxpayers claiming the jobs portion of the International Trade Facility Tax Credit must also complete the International Trade Facility Port Job Creation Schedule.
- Form ITF and all required validation summaries, schedules, and supporting documentation must be completed and mailed no later than April 1 of the year following the taxable year during which credits were earned.
- The Department reviews all applications for completeness and notifies taxpayers of any errors by June 1 of the calendar year in which Form ITF was submitted.
- If any additional information is needed, it must be provided no later than June 15 of that year to be considered for the tax credit.
- The Department notifies all eligible taxpayers of the amount of allocated credits by June 30 of the calendar year in which Form ITF was submitted.
- Upon receiving notification of the allowable credit amount, taxpayers may claim this amount on the applicable Virginia income tax return.
- Taxpayers claiming the credit must keep all supporting documentation, including Virginia Port Authority verification summaries and any additional supporting documentation demonstrating base-year port cargo volume and the amount of cargo transported through maritime port facilities in Virginia during the taxable year. Taxpayers claiming the jobs portion of the International Trade Facility Tax Credit must retain employment records for at least five years for recapture purposes. Taxpayers claiming the capital investment portion of the credit must retain documentation of capital expenditures, including receipts, invoices, and project plans. Any supporting documentation must be provided by the taxpayer upon request.
- The amount of the credit attributable to a partnership, electing small business corporation (S corporation), or limited liability company (LLC) must be allocated to the individual partners, shareholders, or members in proportion to their ownership or interest within the business entity using Form PTE within 30 days after the credit is granted.
Can a company apply the International Trade Facility Tax Credit to the same jobs as the Port of Virginia Economic Infrastructure Development Grant or the Major Business Facility Job Tax Credit?
No, a company may not claim the same jobs for this credit, the Port of Virginia Economic and Infrastructure Development Grant, or the Major Business Facility Job Tax Credit.
Can affiliated companies combine employees to qualify for the credit?
Yes, two or more affiliated companies may elect to aggregate the number of jobs created for qualified full-time employees as the result of the establishment or expansion by the individual companies to qualify for this credit.
How are “affiliated companies” defined?
"Affiliated companies" are two or more companies related to each other such that one company owns at least 80% of the voting power of the other (or others), or at least 80% of the voting power of two or more companies is owned by the same interests.
What additional documentation is needed from Form ITF?
Enclose Virginia Port Authority (VPA) validation summaries for current and preceding taxable years. Also retain a copy of any supporting documentation of capital investments for the company’s records. Examples of supporting documentation may include any of the following: proof of purchase, such as an invoice or receipt; proof of payment, such as a canceled check, bank statement, or credit card statement; or the depreciation worksheet for federal Form 4562 that supports capital investments being claimed/reported.
What is the maximum amount of credits that may be claimed in a year?
No more than $1.25 million in tax credits can be issued in any fiscal year. If the amount of tax credits requested exceeds $1.25 million, the credits would be allocated proportionately among all qualified taxpayers.
Where are applications for the tax credit to be sent?
All applications must be sent to:
Virginia Department of Taxation
Tax Credit Unit
P.O. Box 715
Richmond, VA 23218-0715
Can unused tax credits be carried over?
The amount of the credit is limited to 50% of the taxpayer's tax liability for the taxable year. Any unused credit amount can be carried forward for 10 years.