By Matthew R. Staul, E.A., M.B.A.
The Virginia Economic Development Partnership offers a Real Property Investment Grant for qualifying businesses located in Enterprise Zones throughout the state of Virginia. Many Enterprise Zones exist throughout the Hampton Roads area, most of which are located in Hampton and Newport News. Virginia started offering this grant to encourage job creation and local improvements in areas deemed to be in need of economic enhancements. The Real Property Investment Grant is available to eligible businesses for up to 20% of the real property investment. The real property investment can either be the construction of a new building or an improvement to an existing building. Rehabilitation to an existing building must cost at least $100,000 to qualify for the grant. For projects under five million dollars, the grant is capped at $100,000, and for projects over five million dollars, the grant is capped at $200,000.
Example for $550,000 improvement: ($550,000-$100,000 threshold) * 20% = $90,000 eligible grant
The Real Property Investment Grant is awarded in five-year periods. After five years from the time the grant was distributed, you can apply again if you intend to start a new project under the Virginia Economic Development Partnership guidelines. Note, however, that a limited budget exists for the Real Property Investment Grant. In 2020, the amount of money requested exceeded the budget, so all of the companies which were approved for funding received a pro-rated rate of 88 cents per dollar requested.
It is essential to keep all expense records for the qualifying projects. If a project has a chance to reach the five-million-dollar threshold at any point throughout the construction process, all expenses dated back to the start of the project must be reported. Costs incurred in previous years before the grant that directly correlates with the project may be eligible to be included in the project’s total cost.
The Real Property Investment Grant is limited to one grant per property. Business owners who have more than one property can qualify for the grant for all eligible properties. If you own a business and decide to construct a new building on your property, the project would be considered an expansion to an existing property. Your project will be subject to the $100,000 minimum cost threshold. The total cost of the project cannot include two significant expenses: architectural and engineering work.
It is crucial to consider the tax effect of The Real Property Investment Grant as well. Unfortunately, this specific grant is not tax exempt. A 1099 will be issued to the business owner, and the grant will be considered taxable income for the year it was received. Check the Enterprise Zone map, located on the Virginia Economic Development Partnership website, to see if your business qualifies for this opportunity.
Matthew R. Staul is an enrolled agent with the Medical Management Consulting Group, Inc., a full-service consulting and accounting firm in Virginia Beach. mmcgonline.com