Communities of Opportunity Tax Credit

For tax years beginning on or after Jan. 1, 2010, a tax credit may be claimed by landlords with qualified housing units located in census tracts with poverty rates of less than 10% in the Richmond Metropolitan Statistical Area who participate in the Housing Choice Voucher program.

The amount of tax credit for an eligible property will be based on 10% of annual fair market rent for that specific unit and prorated when units are qualified for less than the full tax year. Prorations will be based on full calendar months. A landlord may receive tax credits on one or more units within the same tax year. Credits taken for any one tax year cannot exceed the tax liability for that year. Credits not taken for the year for which they are allocated may be carried forward, but cannot be carried forward for more than 5 years.

To be eligible for the credit, participating landlords must apply to the Department of Housing and Community Development. The maximum amount of credit that may be issued in a fiscal year is $250,000. Should eligible applications received by the March 1 deadline exceed the annual appropriation, tax credits will be prorated based on the total amount of qualified requests received and the total amount of credits available. If the annual appropriation for tax credits is not fully allocated based on qualified applications received by the March 1 deadline, the remaining balance will be allocated on a first-come, first-served basis. Unused balances will not be allocated more than 3 years after the tax year in which they were first made available.

Credits granted to a partnership, limited liability company, or electing small business corporation (S corporation) shall be allocated to the individual partners, members, or shareholders in proportion to their ownership or interest in such business entity. The landlord must assume responsibility for distributing credits in this manner. No person shall be allowed both a Communities of Opportunity Tax Credit and a Rent Reductions Tax Credit under Va. Code § 58.1-339.9 for the rental of the same dwelling unit in a taxable year.

For additional information, please contact: Virginia Department of Housing and Community Development, Main Street Centre, 600 East Main Street, Suite 300, Richmond, VA 23219, or call 804.371.7000.

Reference: Virginia Code 58.1-439.12:04

Enterprise Zone Act Credit

Businesses qualified prior to July 1, 1995 may be able to claim a general tax credit against the tax due on taxable income within the zone. The credit is a percentage of the tax due on taxable income from within the zone. In addition, a credit for a percentage of unemployment tax due on zone employees may be claimed.

Businesses qualified between July 1, 1995 and June 30, 2005 may take a credit against the tax due on the zone's taxable income and may be eligible for the real property improvement tax credit or the investment tax credit.

Effective July 1, 2005, the Enterprise Zone Act Credit was replaced with a grant program administered by the Virginia Department of Housing and Community Development (DHCD). Certain businesses that signed agreements with DHCD prior to the expiration of the act's provisions may continue to claim the business tax credit and the real property improvement credit.

For forms and more information about this credit, visit the DHCD website.

All filers must complete Form 301 and attach the certificate of qualification from DHCD to claim this credit. If applicable, attach the Certificate of Unemployment Tax Credit from the Virginia Employment Commission (VEC). Individuals must also complete Schedule CR, Part II, to claim nonrefundable credits, and Part XXVI to claim the Real Property Improvement Credit, which is refundable. Corporate filers must complete Form 500CR, Part III, to claim nonrefundable credits, and Part XXVI to claim the Real Property Improvement Credit.

Complete Form 301 and Schedule 500CR, Part III, to claim this credit. Attach the certificate of qualification from DHCD and a completed Form 301. If applicable, attach the Certificate of Unemployment Tax Credit from the VEC.

Historic Rehabilitation Credit

You may qualify to claim this credit if:

You’re rehabilitating a certified historic structure, and have certain eligible expenses. The structure could be one you’re living in, or it could be income-producing property.

The Virginia Department of Historic Resources (DHR) oversees this credit. You’ll find more information about the credit on the DHR website.

What is it?

A tax credit equal to 25% of the eligible expenses for the project. You can claim a credit of up to $5 million on your return, not to exceed your tax liability. Any unused credits may be carried forward for 10 years.

To qualify for the credit, the cost of the rehabilitation must be at least 50% of the assessed value of the structure prior to the rehabilitation, or 25% if you live in the structure.

Claim the credit against the following taxes administered by Virginia Tax:

  • individual income tax
  • fiduciary income tax
  • corporation income tax
  • bank franchise tax
  • insurance premiums license tax

The credit may also be claimed against certain utilities taxes administered by the State Corporation Commission.  Please visit the SCC website for more information.

What do you mean by “rehabilitation?”

Fixing up the structure so that you can continue using it while maintaining its historic character. You could also be working on it so that it can be used for a new purpose. The work must meet the Secretary of the Interior’s Standards for Rehabilitation.  

What is a certified historic structure?

One that is:

  • listed on the Virginia Landmarks Register,
  • certified as eligible for listing, or
  • certified as a contributing structure to a district listed on the Virginia Landmarks Register

Please see the DHR website for further details.

What are eligible expenses?

Generally, work on the structure of the building, or certain site work, necessary to rehabilitate the structure are considered eligible expenses. Most enlargements and additions do not qualify. DHR certifies the work for the credit. Please see their website for more details on eligible expenses.  

To apply for the credit:

You will need to have the credit certified by DHR. Visit their website, and follow their application process.   

Using this credit:

Claim the credit on your Virginia tax return for the year DHR certified the rehabilitation. You can claim a credit of up to $5 million on your return, not to exceed your tax liability. Any unused credits may be carried forward for 10 years. To claim the credit, complete the following and attach it to your return:

To allocate the credit among members of a limited partnership or other pass-through entity, complete Form PTE within 30 days of the credit certification, but at least 90 days before filing your income tax return. The credit may be allocated as mutually agreed to by the partners, or as laid out in the partnership agreement or other documentation.

Related

Livable Home Tax Credit

This credit is administered by the Department of Housing and Community Development (DHCD). Individuals and licensed contractors who are corporations may be eligible for an income tax credit of $5000 for the purchase of a new accessible residence and 50% of the cost of retrofitting activities, not to exceed $5000.

Any tax credit that exceeds the eligible individual's tax liability may be carried forward for 7 years. If the total amount of tax credits issued under this program exceeds $1 million in a fiscal year, DHCD will pro rate the amount of credits among the eligible applicants. Applications are to be filed with the DHCD by Feb. 28 of the year following the year in which the purchase or retro-fitting was completed. For additional information please contact Kathy Robertson at 804.225.3129.

Reference: Virginia Code 58.1-339.7

Neighborhood Assistance Act Credit

The purpose of the Neighborhood Assistance Program (NAP) is to encourage individuals, trusts and businesses to make donations to approved 501(c) (3) (4) non-profit organizations for the benefit of low-income persons or an eligible student with a disability. To be considered for the NAP program, a 501(c)(3) (4) non-profit organization would submit an application to the Department of Social Services (DSS) or Department of Education (DOE) by the first business day of May each year. Applicants submitting all required information and meeting the eligibility criteria will be determined approved organizations.

  • Individuals making a donation of cash or marketable securities directly to an approved NAP nonprofit organization may be eligible for the credit. The NAP state tax credit for an individual may be offered up to 65% of the donation's value. To qualify, individuals must donate at least $500. An individual may be eligible to receive a NAP tax credit for a donation value up to $125,000 per taxable year.
  • Trusts making a donation of cash, stock, merchandise, real estate, and rent/lease of non-profit's facility directly to an approved NAP nonprofit organization may be eligible for the credit. The NAP state tax credit for a trust may be offered up to 65% of the donation's value. To qualify, a trust must donate at least $616 per taxable year.
  • Businesses making a donation of cash, stock, merchandise, real estate, rent/lease of non-profit's facility, professional services, or contracting services directly to an approved NAP nonprofit organization may be eligible for the credit. The NAP state tax credit for a business may be offered up to 65% of the donation's value. To qualify, a business must donate at least $616 per taxable year.
  • Limited health care, pharmaceutical, mediation, or physician specialists providing services directly to an approved NAP non-profit organization may be eligible for the credit. The NAP state tax credit may be offered up to 65% of the donation's value. The minimum donation value must be at least $616 per taxable year.

A NAP tax credit is non-refundable and non-transferable. Excess donor credit, if applicable, may be carried forward for the next 5 taxable years.

To claim the NAP state tax credit on an income tax return:

  • An individual filer must complete Schedule CR, Section 1, Part 3
  • A business filer must complete Form 500CR, Section 1, Part 2
  • A trust must claim the credit on Form 770, line 5(e)

Information about the application process or making a donation to a NAP approved organization can be found at the Department of Social Services Neighborhood Assistance Program or by calling 804.726.7920 or 804.726.7924.

Reference: Virginia Code 58.1-439.18:24