Income tax, state; tax credit for certain small businesses.

Plain English Breakdown

The bill summary does not provide specific details on how unused credit amounts are carried over, only that they can be used in subsequent years.

Small Business Tax Credit

This bill establishes a one-time, nonrefundable tax credit of $2,500 for eligible small businesses in retail trade and accommodation and food services starting operations in designated Virginia Main Street Communities from 2026 to 2030, with an annual limit of $5 million.

What This Bill Does

• Establishes a one-time, nonrefundable tax credit of $2,500 for eligible small businesses in retail trade and accommodation and food services starting operations in designated Virginia Main Street Communities from January 1, 2026 to December 31, 2030.
• Limits the total amount of credits claimed annually to $5 million on a first-come, first-served basis.
• Allows unused credit amounts to be carried over for up to five years or until fully used.
• Requires the Tax Commissioner to develop guidelines for implementing and allocating these tax credits.

Who It Names or Affects

• Small businesses in retail trade (NAICS codes 44 and 45) and accommodation and food services (NAICS code 72).
• Individuals or entities owning small businesses that meet the size standards set by the U.S. Small Business Administration.

Terms To Know

Eligible small business

A business in retail trade (NAICS codes 44 and 45) or accommodation and food services (NAICS code 72) that meets specific size requirements set by the U.S. Small Business Administration and starts operations in a designated Virginia Main Street Community.

Tax credit

An amount subtracted from the total tax owed by a taxpayer, reducing their liability.

Limits and Unknowns

• The bill does not specify what happens if the $5 million limit is reached before all eligible businesses can claim their credits.
• It is unclear how many small businesses will qualify and apply for this credit within the specified timeframe.

Official Summary Text

Income tax; tax credit for certain small businesses.
Establishes a one-time, nonrefundable tax credit for taxable years 2026 through 2030 for eligible small businesses, as defined in the bill, equal to $2,500. The bill limits the total aggregate amount of small business credits claimed to $5 million per taxable year.

Current Bill Text

A BILL to amend the Code of Virginia by adding in Article 3 of Chapter 3 of Title 58.1 a section numbered
58.1-339.15
, relating to income tax; small business tax credit.

Be it enacted by the General Assembly of Virginia:

1. That the Code of Virginia is amended by adding in Article 3 of Chapter 3 of Title 58.1 a section numbered
58.1-339.15
as follows:

§
58.1-339.15
.

S
mall business tax credit.

A. For the purposes of this section
,
"
e
ligible small business" means
a business

in the retail trade (NAICS
44
and
45
) or the accommodation
and food services
(NAICS
72
)
industries

that meets the size standards set by the
U.S.
Sm
all Business Administration
for
such
industry
and, during the taxable year for which a credit is claimed pursuant to this section,
(i
)
commenced operations and (ii)
leased or purchased a
place of business
in a designated Virginia Main Street Community, as defined by the Department of Housing and Community Development
.

B. For taxable years beginning on and after January 1, 2026, but before January 1, 2031, a
n eligible

small business
shall be allowed a nonrefundable credit against the tax levied pursuant to §
58.1-320

or
58.1-400

in an amount
equal to $2,
5
00
.
The credit shall only be claimed one time per taxpayer
.
The aggregate amount of credits allowable under this section shall not exceed $5 million per taxable year. Credits shall be allocated by the Department on a first-come, first-served basis.

C. The amount of the credit claimed shall not exceed the total amount of tax imposed by this chapter upon the
taxpayer
for the taxable year. Any credit not usable for the taxable year for which the credit was first allowed may be carried over for credit against the income taxes of the
taxpayer
in the next five succeeding taxable years or until the total amount of the tax credit has been taken, whichever is sooner.

D. 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, respectively, in proportion to their ownership or interest in such business entities.

E. The Tax Commissioner shall develop guidelines implementing the provisions of this section. The guidelines shall include procedures for the allocation of tax credits among participating taxpayers. Such guidelines shall be exempt from the provisions of the Administrative Process Act (§
2.2-4000
et seq.).