August 8, 2018
Re: § 58.1-1821 Application: Individual Income Tax
Dear *****:
This will reply to your letter in which you contest the denial of the application for the Qualified Equity and Subordinated Debt Tax Credit (the “Credit”) submitted for ***** (the “Taxpayer”) for the taxable year ended December 31, 2017.
FACTS
The Taxpayer filed an application for the Credit, postmarked April 18, 2018, with respect to an investment made in a qualified business during the 2017 taxable year. The Department did not accept the application because it was not filed by the April 1, 2018 deadline for the 2017 taxable year. The Taxpayer requests that the Department reconsider its denial of the Credit request and allow the investment to be included in the computation of the Credit allowable to qualifying investors.
DETERMINATION
Virginia Code § 58.1-339.4 provides a credit for individual and fiduciary income tax equal to 50% of a qualified equity and subordinated debt investment made during the taxable year in a qualified business venture. Under the statute, when the aggregate amount of requests for the Credit for a calendar year exceeds $5 million, the Department allocates the available Credit pro rata among the approved applicants.
In order to receive the Credit, an eligible taxpayer must submit Form EDC and any supporting documentation to the Department no later than April 1 in order to claim the Credit for the preceding taxable year. This requirement is clearly set forth in the instructions for the application.
Because the Credit is subject to an annual cap, the Department must have a deadline for tax credit applications. Adopting a policy of approving late applications for the Credit could result in the amount of tax credits exceeding the tax credit cap for a particular year. The Department’s policy of establishing a hard deadline for capped tax credits has been applied to all capped tax credits that are administered by the Department. See Public Document (P.D.) 04-201 (11/4/2004), P.D. 13-189 (10/18/2013), and P.D. 15-201 (10/19/2015).
In this case, the Taxpayer submitted its Form EDC to the Department after the April 1, 2018 deadline passed. Because the Taxpayer failed to submit its application in a timely fashion, the Taxpayer’s request cannot be granted.
The Code of Virginia sections and public documents cited are available on-line at www.tax.virginia.gov in the Laws, Rules & Decisions section of the Department's web site. If you have any questions regarding this determination, you may contact ***** in the Office of Tax Policy, Appeals and Rulings, at *****.
Sincerely,
Craig M. Burns
Tax Commissioner
AR/1717A