Tax Bulletins
Document Number:99-74
Bulletin Number: VTB 99-4
Tax Type:Corporation Income Tax
Brief Description:Worker retraining tax credit;Implementation of credit
Topics:Credits
Date Issued:04/05/1999
WORKER RETRAINING TAX CREDIT

Generally.

Effective for taxable years beginning on or after January 1, 1999, the Worker Retraining Tax Credit allows an employer to claim a tax credit for the training costs of providing eligible worker retraining to qualified employees. Eligible worker retraining includes noncredit courses provided by any of the Commonwealth's community colleges or a private school and credit or non-credit worker retraining courses undertaken through an apprenticeship agreement approved by the Virginia Apprenticeship Council.

Definitions

"Eligible Worker Retraining'' means the retraining of a qualified employee that promotes economic development accomplished in the form of (i) noncredit courses provided by any of the Commonwealth's community colleges or private schools or (ii) worker retraining programs undertaken through an apprenticeship agreement approved by the Virginia Apprenticeship Council. Retraining of a qualified employee will promote economic development when the employment brings new income into the Commonwealth of Virginia, stimulates additional employment, improves existing processes, products or services, or is the basis for further economic growth.

"Noncredit courses'' include, but are not limited to:

--specific job-related skills/studies,
--computer training due to process or equipment change of entry-
level computer skills (ongoing computer software upgrades are not included),
--continuous improvements such as team building and quality training,
--management and supervisory training,
--safety and environmental training programs, and
--credit or non-credit approved apprenticeship courses.

"Qualified Employee'' means an employee of an employer eligible for the Worker Retraining Credit who works in a full-time position requiring a minimum of 1,680 hours in the normal year of the employer's operation and if the standard fringe benefits are offered by the employer to the employee.

Employees in seasonal or temporary positions are not qualified for this program. Employees eligible to take credit or non-credit courses undertaken through a registered apprenticeship agreement must be employed in a full-time position requiring a minimum of 1,924 hours in the normal year of the employer's operation unless otherwise approved by the Virginia Apprenticeship Council. A Qualified
Employee shall not be (i) a spouse, child, grandchild, parent or sibling of an employer or in the case of a corporation, an individual that owns five percent or more of the corporation's stock and (ii) shall not own, directly or indirectly, five percent or more of the corporation's stock. Qualified employees also include those employees undertaking credit or non-credit worker retraining courses through an apprenticeship agreement approved by the Virginia Apprenticeship Council.

"Retraining'' means an upgrade in training for existing employees, which is identified as essential to the production or distribution of a product, rendering services, or retraining provided through an apprenticeship agreement approved by the Virginia Apprenticeship Council.

"Standard Fringe Benefits'' means the benefits that a particular employer offers to its full time employees.

"Training Costs'' means instruction, instructional materials, facilities fees, and other costs determined to be necessary to the delivery of the training. Trainee wages and curriculum development costs are not covered.

Applicability of Credit

An employer shall be allowed a credit against taxes imposed by Articles 2 (Individuals; 58.1-320 et seq.), 6 (Estate and Trust Tax; 58.1-360 et seq.) and 10 (Corporate Income Tax; 58.1-400 et seq.) of Chapter 3; Chapter 12 (Bank Franchise Tax; 58.1-1200 et seq.); Article 1 Insurance Companies; 58.1-2500 et seq.) of Chapter 25, or Article 2 (Telegraph, Telephone, Water, Heat, Light, Power and Pipeline Companies ( 58.1-2620 et seq.) of Chapter 26 of Title 58.1 of the Code of Virginia.

Allowable Credit

The amount of credit allowed is thirty percent of all training costs incurred for noncredit courses paid by an employer to Virginia community colleges during the taxable year for eligible worker retraining for qualified employees. Employers who send their qualified employees to private schools for eligible worker retraining are allowed an annual credit equal to the cost per student or $100 per student, whichever is less. The credit is effective for taxable years beginning on or after January 1, 1999, and the total amount of credits that can be granted by the Commonwealth for each fiscal year is limited to $2,500,000.

Procedures for Requesting Credits and Certification Applications for the certification of courses eligible for Worker Retraining Tax Credits must be submitted to the Department of Business Assistance. However, applications for credits for worker retraining courses undertaken through an apprenticeship agreement approved by the Virginia Apprenticeship Council will be submitted to the Department of Taxation.

In order for an employer to have course work or a retraining program certified as eligible worker retraining, an application requesting a worker retraining credit with supporting documentation must be submitted to the Department of Business Assistance. The Department of Business Assistance shall certify to the Department of Taxation the courses that are eligible for the credit and forward the certification to the Department of Taxation. The Department of Taxation will notify employers of the amount of credit approved.

Employers providing worker retraining courses through an apprenticeship agreement approved by the Virginia Apprenticeship Council must submit an application and supporting documentation to the Department of Taxation for approval. The Department of Taxation will notify employers of the amount of credit approved.

For employers that qualify for a worker retraining tax credit and use the 1999 calendar year as their taxable year, an application and supporting documentation requesting a worker retraining credit must be submitted no later than April 1, 2000.

For taxable years ending after December 31, 1999, and before January 1, 2001, employers who qualify for a worker retraining tax credit must submit an application and supporting documentation requesting a worker retraining credit no later than April 1, 2001.

For taxable years thereafter, for any taxable year that ends after January 1, and on or before December 31, employers who qualify for a worker retraining tax credit must submit an application and supporting documentation requesting a worker retraining credit no later than April 1 of the subsequent calendar year.

All applications will be reviewed for completeness and employers will be notified of any errors no later than May 1. Employers must respond to any unresolved issues by no later than May 15.
All employers shall be notified by June 30 as to the amount of applicable worker retraining credit it may claim for the year the application was made.

Allocation of Credits

In the event that requests for worker retraining credits exceed the annual fiscal limitation of $2,500,000, each employer shall be granted a pro rata amount as determined by the Department of Taxation. The amount of such prorated credit shall be determined by multiplying a fraction, the numerator of which shall be the credit requested by the employer for such year, and the denominator of which shall be the total credits requested by all employers for such year, by the annual fiscal limitation of $2,500,000.

Submission of State Tax Returns

An employer, upon receipt from the Department of Taxation of copies of the credit certificate, may file the applicable state tax returns. In order for the Department of Taxation or the State Corporation Commission to grant the credit, the appropriate copy of the credit certificate must be attached to the employer's state tax return.

Employers which do not receive the final certification of their credits prior to the due date of their state tax return must either file the appropriate return extension or amend their return subsequent to receiving credit certification. Amended returns to claim the credit must be filed within the applicable statute of limitations.

Pass Through Entities

When a partnership, S corporation, or limited liability company requests a credit on behalf of its partners, shareholders, or members, each partner, shareholder, or member must attach a photocopy of the credit certificate to its state tax return. The credit shall be allocated to each partner, shareholder, or member according to their ownership interest in the entity.

Credit Carryover

Any credit not usable for the taxable year may be carried over to the next three taxable years. No credit may be carried back to a preceding taxable year. The credit is not refundable.

Requests for Applications

Applications for credits are available from the Department of Taxation, Forms Request Unit, 4790 Eubank Road, Richmond, VA, 23231, (800) 236-2760 or 1-888-268-2829 (toll-free outside the Richmond area). Fax requests should be sent to (804) 236-2759. Applications are also available at the Department's site on the World Wide Web at http://www.state.va.us/tax.