MRD: Major Research and Development Tax Credit Application (2024)
Virginia · Virginia Tax · Used for tax years 2024
Virginia Form MRD is an application for the 2024 Major Research and Development Expenses Tax Credit. It reports qualified Virginia research expenses, research project details, and the credit requested. The credit must be approved before it is claimed on your tax return.
Who files this form
Use Form MRD to apply for Virginia’s Major Research and Development Expenses Tax Credit for tax year 2024. Your Virginia qualified research and development expenses for calendar year 2024 must exceed $5 million, including if you file on a fiscal-year basis.
Qualified research must be conducted in Virginia and meet the definition in Internal Revenue Code § 41(d). The credit is available against individual income tax, corporate income tax, and bank franchise tax.
The credit must be approved before you claim it on your return. You cannot claim both this credit and Virginia’s Research and Development Expenses Tax Credit, or use the same expenses to claim another Virginia tax credit.
When it's due
For the tax year 2024 application, the printed instructions give the following dates without specifying their calendar year:
- September 1: Complete and mail Form MRD and supporting documentation no later than this date. If there is no postmark, the Department uses the date it receives the application to determine whether it was timely.
- November 1: The Department will contact you by this date if it needs additional information.
- November 15: Respond to any request for additional information by this date. If you have not received acknowledgment of your application, call (804) 786-2992.
- November 30: The Department will issue the credit by this date.
- December 15: If you have not received your credit certification, call (804) 786-2992.
If the return on which you will claim the credit is due on or before November 30, the instructions say you may need to submit an extension payment for tax due or amend your return after receiving certification.
What you'll need
Prepare a completed and signed Form MRD, including taxpayer identification, contact information, employee count, gross receipts, and research information.
Include these supporting documents:
- A description of your research projects and a summary explaining how the research qualifies under IRC § 41(d).
- Schedule A, summarizing qualified expenses.
- Schedule B, determining adjusted research and development expenses.
- Schedule RD-CON, if claiming contract research expenses.
- Schedule RD-SUP, if claiming supply expenses.
- Schedule RD-WAGE, if claiming qualified wages. Include employees’ full names, complete Social Security numbers, and salary allocated to Virginia qualified research and development activities.
- A copy of federal Form 6765, if you have ever received a federal credit for these research activities.
Keep copies of supporting expense records. The Department may request proof of purchase, such as invoices, receipts, cancelled checks, bank statements, or credit card statements.
How to file
- Record qualified expenses on the applicable expense schedules before completing Schedule A.
- Complete Schedules A and B, then the applicable credit calculation on Form MRD. Complete the research information, sign the application, and attach the required enclosures.
- Mail Form MRD and enclosures to:
Virginia Department of Taxation
ATTN: Tax Credit Unit
P.O. Box 715
Richmond, VA 23218-0715
The instructions also allow you to fax the application to (804) 774-3902.
If you report more than 25 employees, you may submit an electronic copy of wage information in the same format as Schedule RD-WAGE. Call the Tax Credit Unit at (804) 786-2992 for instructions on sending that information electronically.
After receiving notification of the allowable credit, claim it on the applicable Virginia return. Attach Schedule 500CR for a corporation, Schedule CR for an individual, Schedule 502ADJ for a pass-through entity, or Form 64, Schedule CR for a bank franchise.
If approval has not arrived by your income tax return due date, the instructions allow filing during the extension period or filing without the credit and then amending the return after approval.
Pass-through entities: File Form TCA when allocating the credit to participants. It should be filed within 30 days after the credit is granted, but at least 90 days before participants file their income tax returns. Send it to the address above or fax it to the number above, but do not do both. Give each participant a Schedule VK-1.
Common mistakes
- Claiming the credit before approval. Wait for notification of the allowable credit amount.
- Using fiscal-year expenses instead of calendar-year expenses. Expenses for this application must be for calendar year 2024, regardless of the fiscal year in which they were incurred.
- Leaving out required enclosures. The Department cannot process the application until all required enclosures are submitted.
- Omitting complete employee Social Security numbers. Wages reported without complete SSNs may not qualify.
- Including excluded research expenses. Do not include expenses for Virginia research on human cells or tissue derived from induced abortions or stem cells obtained from embryos.
- Completing Form MRD before business registration. Business taxpayers should be registered with the Department first. If not registered, complete Form R-1.
- Entering an email address when you do not want email communications. Providing an email address consents to emailed communications about this application.
- Failing to file Form TCA when allocating a pass-through credit. This may cause the credit claim to be disallowed or delay processing of a participant’s return.
Questions people ask
How is the credit calculated if I had qualifying expenses in all three preceding taxable years?
Subtract 50% of your average Virginia qualified research and development expenses for the three preceding taxable years from your current-year qualified expenses. The credit is 10% of the first $1 million of that difference, plus 5% of the difference above $1 million, subject to the credit limits.
What if I had no qualifying expenses in one of the three preceding taxable years?
If you did not pay or incur Virginia qualified research and development expenses in any one of those years, the credit equals 5% of your current-year Virginia qualified expenses, subject to the credit limits.
What is the maximum credit?
The maximum per taxpayer is $300,000, or $400,000 if the qualified research was conducted in conjunction with a public or private Virginia institution of higher education. The printed rules for tax year 2024 also provide a $16 million overall cap. If approved credits exceed the cap, the Department apportions the available credits.
Can I carry forward unused credit?
The credit used for a taxable year cannot exceed 75% of your total tax for that year. Unused credit may be carried forward against income taxes for the next 10 succeeding tax years or until used up, whichever is sooner.
Where can I get help with the application?
Call the Virginia Department of Taxation’s Tax Credit Unit at (804) 786-2992, or write to Virginia Department of Taxation, ATTN: Tax Credit Unit, P.O. Box 715, Richmond, VA 23218-0715.