September 13, 2024
Re: § 58.1-1821 Appeal: Individual Income Tax
Dear *****:
This will respond to your letter in which you appeal the denial of an application for the Qualified Equity and Subordinated Debt Investments Tax Credit (the “Credit”) submitted by ***** (the “Taxpayer”), for the taxable year ended December 31, 2023.
FACTS
The Taxpayer filed an application for the Credit, Form EDC, related to an investment made in a qualified business during the 2023 taxable year. The Department denied the application because it was not filed by the April 1, 2024, deadline. The Taxpayer states that he assumed the deadline for filing was April 15 and requests that the Department grant the Credit.
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.
Title 23 of the Virginia Administrative Code (VAC) 10-110-288 provides that, “[f]or any taxable year that ends after January 1, and on or before December 31 of a calendar year, eligible taxpayers must submit an application and supporting documentation requesting the tax credit no later than April 1 of the subsequent calendar year.” Therefore, in order to receive the Credit, an eligible taxpayer must submit an application for the Credit (currently Form EDC) and any supporting documentation to the Department no later than April 1 of the year following the investment. This requirement is also clearly set forth in the instructions for the application.
Because the Credit is subject to an annual cap, the Department must impose a strict deadline for tax credit applications. Adopting a policy of approving late applications for the Credit could result in the amount of tax credit exceeding the tax credit cap for a particular year. The Department’s deadline policy for capped 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), P.D. 15-201 (10/19/2015), P.D. 20-26 (2/27/2020), and P.D. 20-193 (11/24/2020). This hard deadline applies without regard to a taxpayer’s awareness of the deadline. See P.D. 15-201.
In this case, the application was submitted on April 18, 2024, after the April 1, 2024, deadline had passed. While the Department empathizes with the Taxpayer’s situation, because the application was received after the deadline, the Credit cannot be granted.
The Code of Virginia sections and regulation cited are available online at law.lis.virginia.gov. The public documents cited are available at tax.virginia.gov in the Laws, Rules, & Decisions section of the Department’s website. If you have any questions regarding this determination, you may contact ***** in the Office of Tax Policy, Appeals and Rulings, at *****.
Sincerely,
James J. Alex
Tax Commissioner
Commonwealth of Virginia
AR/4917.X