Virginia Administrative Code › Title 23 - TAXATION › Agency 10 - DEPARTMENT OF TAXATION › Chapter 110 - INDIVIDUAL INCOME TAX › Section 23VAC10-110-145 - Subtraction for income attributable to an investment in a Virginia venture capital account

Current through Register Vol. 40, No. 24, July 15, 2024
A. To
				the extent included in federal adjusted gross income, any income, including
				investment services partnership interest income, attributable to an investment
				made in a Virginia venture capital account on or after January 1, 2018, but
				before December 31, 2023, shall be subtracted from federal adjusted gross
				income in determining Virginia taxable income. If such income was partially
				excluded or deducted in determining federal adjusted gross income, it shall be
				subtracted from federal adjusted gross income only to the extent included
				therein. If such income has already been excluded from Virginia taxable income,
				it shall not be subtracted again pursuant to this section.
B. The following words and terms when used
				for purposes of this section shall have the following meanings, unless the
				context clearly indicates otherwise:
"Affiliated" means a direct or indirect ownership interest of
				  at least 80% in an entity. An indirect ownership interest includes direct
				  ownership interests held by a taxpayer's family members or an entity affiliated
				  with such taxpayer or family members, or any combination of these.
"Department" means the Virginia Department of
				  Taxation.
"Family member" means, when applied with respect to an
				  individual taxpayer, (i) spouse, (ii) children, (iii) grandchildren, (iv)
				  parents, (v) spouse's parents, and (vi) grandparents.
"Investment services partnership interest income" means
				  income from an investment partnership treated as carried interest income for
				  federal income tax purposes.
"Professional experience" means full-time employment
				  involving venture capital investment.
"Qualified portfolio company" means the same as that term is
				  defined in subdivision 27 of §
										58.1-322.02
				  of the Code of Virginia.
"Substantially equivalent experience" means an undergraduate
				  degree from an accredited college or university in economics, finance, or a
				  similar field of study or a combination of professional experience totaling
				  less than four years, professional training, and undergraduate education from
				  an accredited college or university in economics, finance, or a similar field
				  of study demonstrating competency in venture capital investing.
"Virginia venture capital account" means the same as that
				  term is defined in subdivision 27 of §
										58.1-322.02
				  of the Code of Virginia.
C.
				The subtraction may not be claimed for an investment in a company that is owned
				or operated by a family member or an affiliate of the individual. The
				subtraction may not be claimed for an investment that was used to claim the
				subtraction for certain long-term capital gains allowed pursuant to subdivision
				24 of §
									58.1-322.02
				of the Code of Virginia, or the qualified equity and subordinated debt
				investments tax credit allowed pursuant to §
									58.1-339.4
				of the Code of Virginia.
D.
1. Every investment fund desiring to be
				certified by the department as a Virginia venture capital account for purposes
				of this subtraction must first register with the department by submitting an
				application indicating that it intends to invest at least 50% of the capital
				committed to its fund in qualified portfolio companies and currently employs at
				least one investor who has at least four years of professional experience in
				venture capital investment or substantially equivalent experience.
2. Each investment fund must include with its
				registration application documentation of the investor's work experience,
				training, and education adequately demonstrating that such individual meets the
				professional experience or substantially equivalent experience requirement.
				Such documentation may include proof of employment, certifications, and
				transcripts.
3. The registration
				application required by this subsection must be submitted before or at the time
				the application required by subsection E of this section is
				submitted.
4. Once the department
				determines that an investment fund intends to invest at least 50% of the
				capital committed to its fund in qualified portfolio companies, has at least
				one investor who has at least four years of professional experience in venture
				capital investment or substantially equivalent experience, and has submitted
				the required attachments, it will provide certification to the investment fund
				stating that the registration application has been approved. Such certification
				shall be valid only for the calendar year for which it was issued. An
				investment fund may reapply for certification each calendar year.