The Virginia Research and Development Expenses Tax Credit Form, commonly known as Form RDC, serves as an application for businesses seeking tax credit for qualified research and development expenditures incurred within the state. Tailored to incentivize innovation and research activities, this form allows entities to detail their eligible expenses and calculate the tax credit amount, adhering to guidelines set forth by the Virginia Department of Taxation. For a streamlined process in securing your tax advantages, complete and submit Form RDC with the requisite documentation by the September 1 deadline. Click the button below to begin filling out your form.
The Virginia Application for Research and Development Expenses Tax Credit, referred to as Form RDC, presents a unique opportunity for businesses engaged in qualified research activities within the state. This form allows entities to apply for a tax credit for the tax year indicated, supporting the innovative efforts of Virginia-based companies. Businesses must submit the form along with requisite documentation by a specified deadline, typically September 1, to claim the credit for expenses paid or incurred during the calendar year. The Form RDC encompasses detailed sections including taxpayer information, a comprehensive guide for calculating the credit—either through a primary or alternative simplified method, and entails a section for additional credit information that captures the breadth of the business's research activities, full-time employment metrics, collaborations with Virginia colleges or universities, and other tax credits sought within the year. Importantly, instructions provided with the form guide applicants through the process of documenting eligible research and development expenses, determining the base amount for the tax credit, and submitting supplemental forms if applicable. Virginia's Department of Taxation has outlined specific exclusions and requirements, including the exclusion of expenses related to certain types of research, underscoring the state's investment in fostering responsible and innovative research and development.
Virginia
Application for Research and Development
Taxable Year
Form RDC
Expenses Tax Credit
2022
Submit this form and supporting documentation by September 1. This credit must be approved before being claimed on your return. See the instructions for details.
Taxpayer Information
Business Name
Trading As
FEIN
SSN
Fiscal Year Filer _______________ to _______________
Street Address
City, State, ZIP Code
Email Address
Contact Name
Phone Number
Fax Number
NAICS Code
NAICS Description
Instructions
To compute your credit using the primary credit computation, complete Lines 1-7 of Section 1. Enter all Virginia qualified research and development amounts in Column A. If any portion of Virginia qualified research and development was conducted in conjunction with a
Virginia public college or university, enter those amounts in Column B. Amounts reported on Lines 1-4 of Column A must include any expenses reported on Lines 1-4 of Column B. If electing the alternative simplified method of computing the credit, skip to Section 2. All
applicants must complete Section 3.
Column A
Column B
Section 1 – Primary Credit Calculation
All Qualified Research and
College and University
Round to the nearest whole dollar.
Development Amounts
Related Research and
1.Virginia Qualified Research and Development Expenses. Enter amount paid or incurred during the calendar year. (See Schedule A, Section 1,
Line 4, Columns A and B).
$
.00
2.College and University Expenses Percentage. If expenses were incurred
in conjunction with a Virginia college or university, divide the amount on
Line 1, Column B by the amount on Line 1, Column A. Enter in Column B.
%
3.Virginia Base Amount for the Taxable Year. Enter the amount from Schedule B, Line 4a in Column A.
College and University Base Amount. If expenses were incurred in
conjunction with a Virginia college or university, multiply the amount in
Column A by the percentage on Line 2 and enter in Column B.
4.
Adjusted Expenses Amount. Subtract Line 3 from Line 1.
5.
Total Eligible Research Expenses. Enter in Column A the lesser of
$300,000 or the amount from Line 4, Column A.
Eligible College and University Research Expenses. Enter in Column B
the lesser of $300,000 or the amount from Line 4, Column B.
6.
Credit Computation. Multiply Line 5, Column A by 15% (0.15) and enter in
Column A. Multiply Line 5, Column B by 20% (0.2) and enter in Column B.
7.Credit Requested. Enter the greater of Line 6, Column A (not to exceed $45,000) or Column B (not
to exceed $60,000).
Va. Dept. of Taxation 3101050
Rev. 08/22
PAGE 1
Page 2
Section 2 – Alternative Simplified Credit Calculation
See instructions and Schedule C for information on calculating the Adjusted
Calendar Year Qualified Research and Development Expenses.
1. Total Adjusted Calendar Year Qualified Research and Development
Expenses. Enter the amount(s) from Schedule C, Line 4e in the applicable
column(s). Taxpayers without qualified research and development
expenses for the preceding 3 taxable years, enter the applicable amount(s)
from Schedule C, Line 1a in the applicable column(s).
2. Credit Computation.
If you incurred research and development expenses for the 3 preceding
taxable years, check here and multiply the amount on Line 1, Column
A and Line 1, Column B (if applicable) by 10% (0.1).
If you did not incur research and development expenses for the
3 preceding taxable years, check here and multiply the amount on
Line 1, Column A and Line 1, Column B (if applicable) by 5% (0.05).
3.Credit Requested. Enter the greater of Line 2, Column A (not to exceed $45,000) or Column B (not
Section 3 – Credit Information
1.Number of full time employees during the year for which the credit is sought.
2.Total gross receipts or anticipated gross receipts for the taxable year the credit is sought.
3.If research was conducted in conjunction with a Virginia public or private college or university, enter name of college or university. Enclose a copy of the agreement.
4. Have you ever received a federal credit for these research activities?
Yes (If yes, enclose federal Form 6765)
No
5.If you applied for any other Virginia tax credits this year, identify the credit(s) below.
6.Research Field:
Biotechnology
Engineering
Medical
Cyber Security
Food & Beverage Development
Technology
Industrial
Other ______________________
7.Provide: (1) A description of your research project(s).
(2)A summary of how this research qualifies as defined in IRC § 41(d).
8.Do you conduct research and development in Virginia on human cells or tissue derived from
induced abortions or from stem cells obtained from human embryos?
Yes
9. If you are a pass-through entity, do you plan to allocate your credit?
I (we) the undersigned declare, under the penalties provided by law, that this form (including any accompanying schedules, statements, and enclosures) has been examined by me (us) and is, to the best of my (our) knowledge and belief, a true, correct, and complete application, made in good faith pursuant to the income tax laws of the Commonwealth of Virginia.
Authorized Signature
Title
Date
Printed Name
PAGE 2
Research and Development Expenses Tax Credit
Schedule A
Summary of Qualified Expenses
Name as it Appears on Form RDC
Supplemental Forms Checklist
Prior to completing the Form RDC Schedule A, qualified expenses must be recorded on the applicable expense forms. Check the boxes below to indicate which supplemental forms have been used to complete this schedule. See the instructions on these forms for details.
Schedule RD-CON, Research and Development Tax Credits Schedule of Contract Research Expenses: Complete and
submit this schedule if claiming the credit on the basis of contract research expenses.
Schedule RD-SUP, Research and Development Tax Credits Schedule of Supply Expenses: Complete and submit this schedule if claiming the credit on the basis of supplies used in the conduct of qualified research.
Schedule RD-WAGE, Research and Development Tax Credits Schedule of Qualified Wages: Complete and submit this schedule if claiming the credit on the basis of qualified wages.
Instructions for Schedule A
Do not include expenses incurred in relation to research conducted in Virginia on human cells or tissue derived from induced abortions or stem cells obtained from embryos. See the Form RDC instructions and IRC § 41 for additional requirements regarding qualified research
and development expenses.
Section 1 – Summary of Expenses: All filers must complete Section 1. In Column A, enter the total amount of qualified research and development expenses that were reported on the expense schedule(s) listed above. If claiming the Research and Development Expenses Tax Credit for expenses incurred in connection with a college or university, enter those amounts in Column B. The amounts reported in
Column A must include the amounts entered in Column B.
Section 2 – List of Colleges & Universities: Filers who are claiming the credit based on college and university related expenses must report the names of the institutions in Section 2. A copy of the research agreement must also be enclosed with the Form RDC. See the R&D Enclosure Checklist on Page 8 for additional information.
Section 1 – Summary of Expenses
Expense Type
All Virginia Expenses
Related Expenses
1.
Contract Research Expenses
Column A: Enter amount from Schedule RD-CON, Column G.
Column B: Enter the amount associated with a college or university.
2.
Supply Expenses
Column A: Enter the amount from Schedule RD-SUP, Column C.
3.
Wages
Column A: Enter the amount from Schedule RD-WAGE, Column C.
Total Qualified Expenses
Column A: Add Column A, Lines 1-3 and enter result in Column A, Line 4.
Column B: Add Column B, Lines 1-3 and enter result in Column B, Line 4.
Section 2 – List of Colleges & Universities
7.
8.
9.
10.
Va. Dept. of Taxation 1600041 Rev. 08/22
PAGE 3
Schedule B
Worksheet for Computing Virginia Base Amount
(Primary Method)
Use this schedule when computing the credit using the Primary Credit Calculation.
Section 1 – VA Qualified Research and Development Expenses
Fiscal year filers: Include expenditures and gross receipts for Calendar Year 2022 (CY), regardless of fiscal year (FY) incurred.
1a. VA Qualified Research and Development Expenses in CY 2022. For FY filers, this will include a portion of 2 taxable years.
1b. Short year filers only: Enter the number of months included in the short year.
1c. Short year filers only: Divide the number of months in Line 1b by 12.
Section 2 – Determine the Fixed Base Percentage
The Average Qualified Research and Development Expenses for the 3 taxable years ending before the CY 2022.
2a. Expenses for the 3rd preceding taxable year. CY filers: enter expenses for Taxable Year 2019.
FY filers: enter expenses for Taxable Year 2018.
2b. Expenses for the 2nd preceding taxable year. CY filers: enter expenses for Taxable Year 2020. FY filers: enter expenses for Taxable Year 2019.
2c. Expenses for the preceding taxable year. CY filers: enter expenses for Taxable Year 2021.
FY filers: enter expenses for Taxable Year 2020.
2d. Total Expenses. Add Lines 2a-2c.
2e. Average Qualified Research and Development Expenses for the Prior 3 Taxable Years. Divide amount on Line 2d by 3.
The Average Total Gross Receipts for the 3 taxable years ending before the CY 2022.
2f. Gross receipts for the 3rd preceding taxable year. CY filers: enter the gross receipts for Taxable Year 2019.
FY filers: enter gross receipts for Taxable Year 2018.
2g. Gross receipts for the 2nd preceding taxable year. CY filers: enter gross receipts for Taxable Year 2020. FY filers: enter gross receipts for Taxable Year 2019.
2h. Gross receipts for the preceding taxable year. CY filers: enter gross receipts for Taxable Year 2021.
FY filers: enter gross receipts for Taxable Year 2020.
2i. Total Gross Receipts. Add Lines 2f through 2h.
2j. Average Gross Receipts for Prior 3 Taxable Years. Divide Line 2i by 3.
2k. Percentage of Virginia Qualified Research and Development Expenses. Divide Line 2e by 2j
(round to 4 decimal places).
Section 3 – Determine the Virginia Base Amount
The Average Total Gross Receipts for the 4 taxable years ending before the CY 2022.
3a. Gross receipts for the 4th preceding taxable year. CY filers: enter gross receipts for Taxable Year 2018.
FY filers: enter gross receipts for Taxable Year 2017.
3b. Gross receipts for the 3rd preceding taxable year. CY filers: enter gross receipts for Taxable Year 2019.
3c. Gross receipts for the 2nd preceding taxable year. CY filers: enter gross receipts for Taxable Year 2020. FY filers: enter gross receipts for Taxable Year 2019.
3d. Gross receipts for the preceding taxable year. CY filers: enter gross receipts for Taxable Year 2021.
3e. Total Gross Receipts. Add Lines 3a through 3d.
3f. Average Gross Receipts for Prior 4 Taxable Years. Divide Line 3e by 4.
3g. Base Amount. Calendar Year Filers: Multiply Line 2k by Line 3f.
Short Year Filers: Multiply Line 2k by Line 3f. Then multiply the product by Line 1c.
Section 4 – Virginia Base Amount
4a. Virginia Base Amount. Your Virginia Base Amount is the greater of the amount on Line 3g OR 50% (0.5) of the 2022 Virginia Qualified Expenses from Line 1a. Enter here and on Form RDC, Section 1, Line 3,
Column A.
Va. Dept. of Taxation 1600042 Rev. 08/22
PAGE 4
Schedule C
Worksheet for Determining Adjusted
Research and Development Expenses
(Alternative Simplified Method)
Use this schedule when computing the credit using the Alternative Simplified Credit Calculation.
Section 1 – Virginia Qualified Research and Development Expenses
Fiscal year filers: Include expenditures for Calendar Year 2022 (CY), regardless of fiscal year (FY) incurred.
1a.
Virginia Qualified Research and Development Expenses in CY 2022.
Line 1a – Column A
Line 1a – Column B
In Column A, enter total qualified research and development expenses
from Schedule A, Section 1, Line 4, Column A. In Column B, enter the total
qualified college and university related research expenses from Schedule A,
Section 1, Line 4, Column B (if any). For FY filers, this will include a portion
of 2 taxable years.
1b.
Short year filers only: Enter the number of days included in the short year.
1c.
Short year filers only: Divide the number of days in Line 1b by 365 (366 if a leap year).
Section 2 – Determination of How to Compute the Credit
2.Were research and development expenses paid or incurred for the 3 taxable years immediately preceding the taxable year for which the credit is being claimed? If “Yes,” complete Sections 3 and 4 below. If no, stop here and enter the amount(s) on Line 1a above on Form RDC Section 2, Line 1.
Yes No
Section 3 – Average Qualified Research and Development Expenses Calculation
3a.
Expenses for the 3rd preceding taxable year. CY filers: enter expenses for Taxable Year 2019.
3b.
Expenses for the 2nd preceding taxable year. CY filers: enter expenses for Taxable Year 2020.
FY filers: enter expenses for Taxable Year 2019.
3c.
Expenses for
the preceding taxable year. CY filers: enter expenses
for Taxable Year 2021.
3d.
Total expenses from preceding 3 taxable years. Add Lines 3a-3c.
3e.
Average qualified research and development expenses for the preceding 3 taxable years.
Divide amount on Line 3d by 3. If the credit year is a short taxable year, multiply the average qualified
research and development expenses for the preceding 3 taxable years by the amount determined in
Line 1c.
Section 4 – Adjusted Expenses Calculation
Column B.
All Qualified Research
For filers with Virginia qualified research and development expenses for the
preceding 3 taxable years
and Development
Amounts
4a.
Enter the current year expenses. Column A must include the amount
reported in Column B, if any.
4b.
If expenses were incurred in connection with a Virginia college or university,
divide the amount on Line 4a, Column B by the amount on Line 4a, Column A.
4c.
Column A – Enter the amount from Line 3e.
Column B – If expenses were incurred in connection with a Virginia college or
university, multiply the amount on Line 4c, Column A by the percentage on
Line 4b, Column B.
4d.
Multiply the amount(s) on Line 4c by 50% (0.5).
4e.
Subtract Line 4d from Line 4a. Enter here and on Form RDC, Section 2,
Line 1 in the applicable column(s).
Va. Dept. of Taxation
1600043 Rev. 08/22
PAGE 5
2022 Instructions for Form RDC
Application for Research and Development Expenses Tax Credit
General Information
The Research and Development Expenses Tax Credit
may be claimed against individual and corporate income taxes for qualified research and development expenses for taxable years beginning on or after January 1, 2011, but before January 1, 2025. The credit may also be claimed against the bank franchise tax for taxable years beginning on or after January 1, 2021, but before January 1, 2025.
If the taxpayer elects the primary method of computing the credit, the tax credit amount is equal to (i) 15% of the first $300,000 in Virginia qualified research and development expenses, or (ii) 20% of the first $300,000 of Virginia qualified research and development expenses if the research was conducted in conjunction with a Virginia public or private
college or university, to the extent the expenses exceed the
base amount. The credit amount cannot exceed $45,000 or $60,000 if the Virginia qualified research was conducted in conjunction with a Virginia public or private university.
At the election of the taxpayer, an alternative simplified
calculation may be used to determine the Research and Development Expenses Tax Credit. The alternative
simplified calculation of the Research and Development Expenses Tax Credit is equal to: 10% of the difference of (i) the Virginia qualified research and development expenses
paid or incurred by the taxpayer during the taxable year
and (ii) 50% of the average Virginia qualified research and
development expenses paid or incurred by the taxpayer
for the three taxable years immediately preceding the taxable year for which the credit is being determined. If the taxpayer did not pay or incur Virginia qualified research and
development expenses in any one of the three taxable years
immediately preceding the taxable year for which the credit
is being determined, the tax credit is equal to 5% of the
Virginia qualified research and development expenses paid
or incurred by the taxpayer during the relevant taxable year.
The aggregate amount of credits allowed to each taxpayer cannot exceed $45,000 or $60,000 if the Virginia qualified research was conducted in conjunction with a Virginia public
or private university.
There is a $7.7 million cap on the total amount of credits allowed in any fiscal year. If the total amount of tax credits exceeds the $7.7 million limit, credits will be apportioned on
a pro rata basis.
If the total amount of approved tax credits is less than the $7.7 million credit cap, the Department will allocate
the remaining amount, on a pro rata basis, to taxpayers
already approved for the credit that were subject to the
$45,000 and $60,000 credit limitations. Supplemental
credits will be in the following amounts: if a taxpayer elected
the primary computation, an amount equal to 15% of the second $300,000 in qualified research expenses (or 20% of such expenses if the research is conducted in conjunction with a Virginia public or private college or university); or if
the taxpayer elected the alternative simplified method of
computing the credit, in an amount equal to the excess of the limitation. The maximum supplemental credit amount
is $45,000, or $60,000 if the research is conducted in conjunction with a Virginia public or private university.
Any taxpayer who is allowed a research and development expenses tax credit is not allowed to use the same expenses
as the basis for claiming any other Virginia tax credit. No
taxpayer may claim both this credit and the Major Research
and Development Expenses Tax Credit.
For additional information regarding the credit, see the Research and Development Expenses Tax Credit
Guidelines, which are available on the Department’s website at www.tax.virginia.gov.
Determining the Virginia Base Amount for the Primary Research and Development Expenses
Tax Credit
In order to determine the Virginia Base Amount for the
primary credit computation, follow these steps:
Determine Fixed Base Percentage:
Step 1 Determine the average amount of Virginia qualified
research and development expenses for the 3
taxable years preceding the year in which the tax
credit is being claimed. If the taxpayer has been in business for less than 3 years, but at least 1, use the number of years in business instead of 3.
Step 2 Determine the average of the total gross receipts for the 3 taxable years preceding the taxable year that the tax credit is being claimed, or the number of years used in Step 1a, if less.
Step 3 Calculate the percentage of Virginia qualified
research and development expenses by dividing
the average amount determined in Step 1 by the average amount determined in Step 2. This is the “Fixed Base Percentage.”
Do not make any adjustments to account for a short taxable year when computing the fixed-base percentage.
Determine the Virginia Base Amount:
Step 4 Determine average of the total gross receipts for the 4 taxable years preceding the taxable year
that the tax credit is being claimed, or the number of years used for Step 2, if less. For purposes of
determining the Virginia base amount, if any of the
taxable years preceding the credit year that must be accounted for when computing the credit is a short
taxable year, the gross receipts for such year(s) are
deemed to be equal to the gross receipts actually derived in that year, multiplied by 12, and divided by
the number of months in that year.
PAGE 6
Step 5 Multiply the fixed base percentage in Step 3 by the average gross receipts in Step 4.
Step 6 Determine the greater of the amount in Step 5 or
50% of Virginia qualified research expenses for the credit year. This is the “Virginia Base Amount.”
RefertoFormRDC,ScheduleB,ResearchandDevelopment
Expenses Tax Credit Worksheet for Computing Virginia
Base Amount (Primary Method), for detailed instructions on calculating the base amount.
Computing the Average Amount of Virginia Qualified Research and Development Expenses for Determining the Credit Using the Alternative Simplified Method
If electing to compute the Research and Development
Expenses Tax Credit using theAlternative Simplified Method,
the taxpayer must complete Form RDC, Schedule C to determine the average amount of Virginia qualified research and development expenses on which the credit amount will be calculated. Taxpayers who calculate the credit based on less than 3 years of qualified research and development expenses must complete Sections 1 and 2 on Form RDC, Schedule C. Taxpayers who calculate the credit based on qualified research and development expenses for the 3
taxable years preceding the credit year must complete all sections of Form RDC, Schedule C.
When determining the average amount of Virginia qualified
research and development expenses for the 3 years preceding the credit year, if 1 or more of the 3 taxable years preceding the credit year is a short taxable year, then the
Virginia qualified research and development expenses for that year must be modified by multiplying that amount
by 365 (366 in a leap year) and dividing the result by the number of days in the short taxable year.
Definitions
Virginia gross receipts – whole, entire, total receipts, without deduction.
Virginia qualified research – qualified research, as defined in IRC § 41(d), as amended, that is conducted in Virginia. In general, this is research that is undertaken for the purpose
of discovering information that is technological in nature and the application of which is intended to be useful in the development of a new or improved business component of
the taxpayer.
Virginia qualified research and development expenses
–qualified research expenses, as defined in IRC § 41(b), as amended, incurred for Virginia qualified research. In general, this is the sum of the in-house research expenses and the contract research expenses.
Stem Cell Research
Research and development expenses that are paid or incurred for research conducted in Virginia on human cells or tissue derived from induced abortions or from stem cells obtained from embryos do not qualify for the credit.
However, if a taxpayer engaged in research in Virginia
on human cells or tissue derived from induced abortions
or from stem cells obtained from human embryos, it may receive a nonrefundable credit for other Virginia qualified
research and development expenses. If the amount of nonrefundable credit that a taxpayer is allowed to claim exceeds the taxpayer’s tax liability for the taxable year, then the excess amount of credit will not be refunded to
the taxpayer and cannot be carried over to future taxable years. Research and development expenses that are paid or incurred for research conducted in Virginia on nonhuman embryonic stem cells may qualify for the credit.
When to Submit Application
Form RDC and any supporting documentation must be completed and mailed no later than September 1.
For any application received without a postmark, the date received by the Department will be used to determine if the application was received by the filing deadline.
What to Enclose
To allow us to process this application, provide the following:
•Outline of the type of research and development being conducted in Virginia.
•Form RDC, Schedule A to summarize the information reported on the supplemental expense schedules. You must retain a copy of any supporting documentation of these expenditures.
•The following supplemental expense schedules, as applicable:
–Schedule RD-CON (contract research expenses)
–Schedule RD-SUP (supply expenses)
–Schedule RD-WAGE (qualified wages)
•Form RDC, Schedule B and details regarding the calculation of your Virginia base amount, if electing the primary credit computation.
•Form RDC, Schedule C if electing the alternative simplified computation. Enclose a copy of the research agreement if reporting expenses in connection with a
Virginia public or private college or university.
Upon request, you may be required to provide proof of
purchase, such as an invoice, receipt, cancelled check, bank
statement, or credit card statement.
Where to Submit Application
Submit Form RDC and enclosures to the Virginia
Department of Taxation, ATTN: Tax Credit Unit, P.O. Box 715, Richmond, VA 23218-0715 or fax it to (804) 774-3902.
PAGE 7
What to Expect from the Department
Pass-Through Entities
If the Department needs additional information the agency will contact you by November 1 and you will have until
November 15 to respond. If you have not received acknowledgement of your application by November 15, call (804) 786-2992.
The Department will issue the credit by November 30. If you have not received your credit certification by December 15, call (804) 786-2992.
What Does the Taxpayer Need to Do
Upon receiving notification of the allowable credit amount, taxpayers may claim the allowable credit amount on the applicable Virginia income tax return. Taxpayers who do not receive notification of allowable credit amounts before their Virginia income tax return due date may file during the extension period or file their regular return without the credit and then file an amended tax return after receipt of notification of the allowable credit amount to claim the tax credit. As an enclosure with their return, a corporation must file Schedule 500CR; an individual must file Schedule CR; a pass-through entity must file Schedule 502ADJ; and a bank franchise must file Form 64, Schedule CR.
IMPORTANT
Online Worksheet: Spreadsheet template is available for download on our website, www.tax.virginia.gov. Use these spreadsheets to compute the Virginia Base Amount when
using the primary calculation method to compute the Research and Development Expenses Tax Credit.
All business taxpayers should be registered with the Department before completing Form RDC. If you are not registered, complete Form R-1.
If the tax return upon which this credit will be claimed is due
on or before November 30, you may need to either submit an extension payment for any tax due or file an amended return once you have received the credit certification.
A partnership, limited liability company, or electing small business corporation (S corporation) may elect to receive and claim the credit at the entity level. If this election is not
made, credits must be allocated to the individual partners, members, or shareholders in proportion to their ownership interests in such entities or in accordance with a written
agreement entered into by such individual partners, members, or shareholders.
Each pass-through entity must file Form PTE with the Department when allocating this credit to its participants. Form PTE should be filed within 30 days after the credit is granted, but at least 90 days prior to the participants filing their income tax returns. Failure to file Form PTE may result in the credit claim being disallowed and/or a delay in processing the participant’s return. This information should be sent to: Virginia Department of Taxation, ATTN: Tax Credit Unit, P.O. Box 715, Richmond, VA 23218-0715 or you may fax it to (804) 774-3902. Do not do both.
All pass-through entities distributing this credit to its participants, including owners, shareholders, partners, or
members, must give each such participant a Schedule VK-1,
Owner’s Share of Income and Virginia Modifications and
Credits.
Where To Get Help
Write to the Virginia Department of Taxation, ATTN: Tax Credit Unit, P.O. Box 715, Richmond,VA 23218-0715 or call (804) 786-2992.
PAGE 8
Checklist
Enclosure Checklist
Must be included with Form RDC
All expenses must be for the calendar year of the application, regardless of fiscal year incurred.
Provide:
1)A description of your research project(s).
2)A summary of how this research qualifies as defined in IRC § 41(d).
Check the applicable box on Form RDC to indicate whether you conduct research and development in Virginia on
human cells or tissue derived from induced abortions or from stem cells obtained from human embryos.
The Form RDC Schedule A. Include the applicable expense schedule(s) that have been used to complete the Schedule A.
The Schedule RD-CON, if claiming the credit on the basis of qualified contractor research expenses.
Note: For purposes of computing your qualified research expenses, contract research expenses are included
as follows: 1) 65% of any amount paid to a nonemployee for qualified research; 2) 75% of any amount paid to a qualified research consortium for qualified research; and 3) 100% of any amount paid to an eligible small business, an institution of higher education as defined in IRC § 3304(f), or an organization that is a federal laboratory as defined in IRC § 3304(f).
Any individual who receives a Form 1099 is considered an independent contractor and his/her payroll expenses
must be reported at 65%.
The Schedule RD-SUP, if claiming the credit on the basis of qualified supply expenses used in the conduct of qualified research.
The Schedule RD-WAGE, if claiming the credit on the basis of qualified wages as defined by IRC § 3401. Include employee full names, complete SSNs, and salary allocated to Virginia qualified research and development activities. To ensure that all of your qualifying employees can be verified, you must provide their complete SSN. Wages reported without complete SSNs may not qualify for the credit. If reporting more than 25 employees, you may submit an electronic copy of the wage information using the same format as Schedule RD-WAGE. For instructions on how to send the wage information electronically, contact the Department’s Tax Credit Unit at (804) 786-2992.
The Form RDC Schedule B Worksheet and details regarding the calculation of your Virginia base amount, if electing the primary credit computation. To obtain the worksheet in a spreadsheet format, visit www.tax.virginia.gov.
The Form RDC Schedule C Worksheet, if electing the alternative simplified computation of the Research and
Development Expenses Tax Credit.
A copy of the research agreement if any of the Virginia qualified research was conducted in conjunction with a
Proof of payment, such as a copy of a cancelled check or statement of electronic transfer, for university-related research when payments are made directly to the university.
A copy of federal Form 6765, if you have ever received a federal credit for these research activities.
The Department will be unable to process the application until all of the required enclosures have been submitted.
PAGE 9
Filling out the Virginia RDC form is a systematic process that aims to ensure accuracy and compliance. It’s a necessary step for applying for the Research and Development Expenses Tax Credit for the specified Tax Year. Carefully following the given steps helps ensure the form is completed correctly, which is crucial for the approval of the credit. Once the form and all required documentation are submitted, the next phase involves a review by the Virginia Department of Taxation, which will assess eligibility for the credit based on the information provided.
It’s important to retain copies of the submitted forms and documentation for your records. Following the instructions laid out in the form and adhering to the submission deadline are crucial steps in the application process for the Research and Development Expenses Tax Credit.
The Virginia RDC Form, also known as the Application for Research and Development Expenses Tax Credit, is a document used by businesses in Virginia to apply for tax credits. This credit is for expenses related to qualified research and development activities conducted within the state. Businesses must submit this form alongside supporting documentation by September 1 of each year to be considered for the credit.
Businesses operating in Virginia that have incurred expenses for qualified research and development activities can apply for the R&D Tax Credit. This includes both individual taxpayers and corporate entities. The form requires detailed information about the taxpayer, including business name, fiscal year filing period, and the nature of the qualified R&D expenses.
All applications for the Research and Development Expenses Tax Credit must be submitted by September 1. This deadline is critical for businesses looking to claim the credit for the previous tax year. Late submissions may not be considered for the tax credit.
The primary credit computation on the Form RDC involves several steps outlined in Section 1 of the form. Applicants must:
Yes, taxpayers can elect the alternative simplified method for computing the credit if they prefer. This method, detailed in Section 2 of the form, simplifies the computation process by basing the credit on total adjusted calendar year qualified research and development expenses. The eligibility for using this method depends on specific criteria, including the taxpayer's R&D expenses history.
Alongside the completed Form RDC, applicants must provide:
The maximum credit limits depend on the calculation method used. For the primary credit computation, the maximum credit cannot exceed $45,000. When utilizing the alternative simplified method, the maximum allowed credit is $45,000 for expenses without qualified research and development expenses for the preceding three taxable years and $60,000 for expenses associated with research conducted in conjunction with a Virginia public college or university.
If the September 1 deadline is missed, your application for the Research and Development Expenses Tax Credit may not be considered for that tax year. It's crucial to prepare and submit the RDC Form and all required documentation well in advance of the deadline to ensure eligibility for the tax credit.
Filling out the Virginia Research and Development Expenses Tax Credit Form (Form RDC) can be complex, and mistakes can impact the tax credit you receive. Here are seven common errors applicants make:
Not submitting the form by the September 1 deadline. It's crucial to submit Form RDC and all supporting documentation on time to qualify for the credit.
Failing to include Supporting Documentation. Applicants must enclose all required supporting documents, such as federal Form 6765 if a federal credit was claimed, and schedules detailing the research expenses.
Incorrect calculations in the primary credit computation section. Double-check that all Virginia qualified research and development expenses are correctly entered and calculated, including expenses incurred in conjunction with a Virginia public college or university.
Opting for the wrong computation method. Ensure you select the appropriate method (primary or alternative simplified credit calculation) based on your situation and complete the relevant section accordingly.
Omitting taxpayer information. The business name, FEIN or SSN, and contact details are mandatory fields that applicants should not overlook.
Miscalculating the Virginia Base Amount or the adjusted expenses amount. Follow the instructions carefully to compute these amounts correctly, as they significantly affect the credit amount.
Forgetting to complete Section 3 – Credit Information, which includes details like the number of full-time employees, total gross receipts, and whether research was conducted in conjunction with a Virginia college or university.
To avoid these mistakes:
Review each section of the form thoroughly before submission.
Use the provided instructions and worksheets (Schedules A, B, and C) to accurately calculate your expenses and credit amount.
Ensure all required sections are completed based on the credit computation method you are using.
Check the form for completeness, accuracy, and ensure all supporting documents are attached.
By paying attention to these details, you can improve the accuracy of your Virginia RDC form submission and maximize your potential tax credit.
When completing the Virginia Research and Development Expenses Tax Credit application, businesses often need to include additional forms and documents as part of their submission to provide a comprehensive overview of their R&D activities. These documents serve to validate the expenses claimed and comply with state requirements. Here's an overview of these associated forms:
Submitting a complete and accurate application package, including the appropriate forms and documents, is crucial for businesses seeking to capitalize on the Virginia Research and Development Expenses Tax Credit. Appropriately utilized, these documents can significantly enhance the credibility of the tax credit claim, potentially leading to a more favorable outcome.
The Virginia RDC form, designed for applying for the Research and Development Expenses Tax Credit, bears resemblance to other forms and processes employed both within the state and federally to incentivize business innovation through tax credits. Key among these are the Federal Form 6765, used for claiming the Credit for Increasing Research Activities, and Virginia's own Schedule A & B, integral parts of the RDC form's documentation requirements.
Federal Form 6765 (Credit for Increasing Research Activities) shares a fundamental goal with the Virginia RDC form—to provide a tax incentive for businesses engaging in qualified research activities. Both forms require detailed accounting of research expenditures to gauge eligibility and credit size, emphasizing costs such as wages, supplies, and contract research expenses directly tied to research activities. Similarly, they distinguish between basic and incremental research spending, albeit with different methodologies for calculating the tax credit. The Federal 6765 form leans on gross receipts and a base amount calculation to determine credit eligibility, mirroring the RDC's approach of using a base amount and qualified expenses but tailored to Virginia's tax structure.
Virginia's own Schedule A (Summary of Qualified Expenses) and Schedule B (Worksheet for Computing Virginia Base Amount), integral to the RDC application, specifically detail the expense tracking and base amount calculation required for the state's credit. Schedule A categorizes expenses into contract research, supplies, and wages—a delineation also present in the RDC form's overview of qualified research expenses. The overlap in purpose facilitates a streamlined process for applicants, ensuring consistency in how Virginia assesses research and development efforts statewide. Schedule B's role in defining the Virginia base amount complements the RDC form's Section 1 by elaborating on a critical component of the credit calculation process. This detailed breakdown assists taxpayers in navigating the nuanced requirements specific to Virginia's incentive, emphasizing the state's tailored approach to fostering research activities.
When completing the Virginia Research and Development Expenses Tax Credit Form (Form RDC), applicants must navigate a set of detailed instructions to ensure accurate and compliant submissions. The intricacies of the form require a comprehensive approach to both the data entry and the supporting documentation. Here are five recommended practices to follow, as well as five pitfalls to avoid, when filling out this form:
Do:
Don't:
Adhering to these guidelines will help ensure a smoother process in applying for the Virginia Research and Development Expenses Tax Credit, ultimately supporting your business's innovation efforts while maximizing potential tax benefits.
Understanding the nuances of the Virginia Research and Development Expenses Tax Credit form, also known as Form RDC, is crucial for businesses seeking to leverage this financial incentive. Unfortunately, misconceptions about its application, eligibility, and benefits can hinder companies from taking full advantage. Here are nine of the most common misconceptions about the Virginia RDC form, demystified for clarity.
Clearing up these misconceptions can help ensure that eligible businesses accurately apply for and potentially benefit from the RDC tax credit. It’s advisable to consult the detailed instructions provided with the form or seek professional advice to navigate the complexities of this tax credit opportunity.
Understanding and applying for the Virginia Research and Development Expenses Tax Credit involves meticulous attention to detail. Here are four key takeaways to guide you through the process:
By closely following the instructions, preparing meticulous documentation, and considering the ways to calculate and maximize your credit, businesses can more effectively navigate the application process for the Virginia Research and Development Expenses Tax Credit.
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