What's New For Tax Credits
In addition to any new tax credits, several changes to existing tax credits impact taxpayers filing their annual returns.
Food Crop Donation Tax Credit - The due date for Form FCD-1 is February 1.
For taxable years beginning on or after January 1, 2016, but before January 1, 2022, any person engaged in the business of farming as defined under 26 C.F.R. § 1.175-3 that donates food crops grown by the person in the Commonwealth to a nonprofit food bank shall be allowed a credit against the tax levied pursuant to § 58.1-320 or 58.1-400 for the taxable year of the donation. The person shall be allowed a credit in an amount equal to 30 percent of the fair market value of such food crops donated by the person to a nonprofit food bank during the taxable year but not to exceed an aggregate credit of $5,000 for all such donations made by the person during such year. Any unused credit amount can be carried forward for five years.
Green Job Creation Tax Credit – The expiration date has been extended to December 31, 2017.
- Land Preservation Tax Credit – Effective 2015, the following changes have been implemented:
- The annual cap has been reduced to $75 million for each calendar year.
- For conveyances recorded on or after July 1, 2015 and forward, Form LPC-1 must be received/postmarked no later than December 31 of the year following the calendar year of the conveyance.
- Postmark dictates filing deadline & effective year of credit (Example: A "complete" Form LPC-1 that is postmarked on/after January 1, 2016 will be granted a 2016 credit and NOT a 2015 credit).
- The maximum claim amount has been reduced to $20,000 for taxable years 2015 and 2016 and $50,000 for each taxable year thereafter.
- For any qualifying fee simple donation of land conveyed to the Commonwealth on or after January 1, 2015, the amount of credit claimed by each taxpayer would be limited to $100,000 provided that no part of the charitable contributions deduction under §170 of the Internal Revenue Code related to such fee simple donation is allowable by reason of sale or exchange of property.
The Virginia Department of Taxation is unable to guarantee that any LPC-1 application received/postmarked on or after the first business day in November will be processed in time to make a current year transfer. We will use our best efforts and resources available to process these applications by the end of the year. Due to the volume of applications received during the months of October-January it may take approximately 30 business days for processing.
- Major Business Facility Job Tax Credit – A qualified major business facility may spread the credit allowed per qualified full-time employee over two taxable years through the December 31, 2019 expiration date for the credit.
- Major Research and Development Expenses Tax Credit - The due date for Form MRD is July 1
- The credit is effective for taxable years beginning on or after January 1, 2016, but before January 1, 2022
- It can be claimed against the tax levied pursuant to § 58.1-320 or 58.1-400
- This credit is for taxpayers with Virginia qualified research and development expenses for the taxable year in excess of $5 million
- You cannot receive a Research and Development Credit and a Major R&D Credit for the same taxable year
- The credit is a non refundable tax credit and may be carried forward for 10 years
- It is equal to 10 percent of the difference between (i) the Virginia qualified research and development expenses paid or incurred by the taxpayer during the taxable year and (ii) 50 percent of the average Virginia qualified research and development expenses paid or incurred by the taxpayer for the three taxable years immediately preceding the taxable year for which the credit is being determined.
- If the taxpayer did not pay or incur Virginia qualified research and development expenses in any one of the three taxable years immediately preceding the taxable year for which the credit is being determined, the tax credit shall equal five percent of the Virginia qualified research and development expenses paid or incurred by the taxpayer during the relevant taxable year.
- Neighborhood Assistance Tax Credit:
- Effective for tax credit allocations that occur in fiscal years beginning on or after July 1, 2015, physician specialists who donate specialty medical services to patients who are referred from certain approved neighborhood organizations whose sole purpose is to provide specialty medical referral services to patients of participating clinics or federally qualified health centers may now be eligible for this credit regardless of where the physician specialist performs the specialty medical services. To be eligible, the approved neighborhood organization must have received an allocation of tax credits from the Commissioner of Social Services and must be exempt from taxation under the provisions of § 501(c) (3) of the Internal Revenue Code.
- A business firm or individual that is eligible for this credit may agree in writing to a credit of less than 65% of the qualified donation.
- Recyclable Materials Processing Equipment Tax Credit – The due date for Form RMC is June 1.
Effective Taxable Year 2015 and thereafter, the following changes have been implemented:
- The expiration date has been extended to December 31, 2019.
- The credit allowed has been increased from 10 to 20 percent of the purchase price of qualifying machinery and equipment.
- The machinery or equipment must be used predominately in or on the premises of manufacturing facilities or plant units which manufacture, process, compound, or produce items of tangible personal property from recyclable materials.
- The annual cap is $2 million.
Effective Taxable Year 2016 and thereafter, the following changes have been implemented:
- DEQ Form 50-11s must be filed with DEQ no later than March 1st
- Form RMC must be filed with TAX no later than June 1st
- Tax will issue a credit certificate by September 1st
- Research and Development Expenses Tax Credit - The due date for Form RDC is July 1.
Effective for taxable years beginning on or after January 1, 2016
The tax credit amounts are:
- 15% of the first $300,000 in Virginia qualified research and development expenses or
- 20% of the first $300,000 of Virginia qualified research and development expenses if the research was conducted in conjunction with a Virginia public or private college or university.
The credit was previously only allowed on the first $234,000 of qualified R&D expenses and the due date for Form RDC was April 1st..
There are now 2 ways to calculate the credit:
- The Primary Credit Calculation Method (old method) – use this spreadsheet to compute the Virginia Base Amount, or
- The Alternative Simplified Method (new method for 2016)
The cap on the total amount of credits allowed in any fiscal year also increased from $6 million to $7 million.
Note: If the total qualified expenses are more than $5,000,000, you must apply for the new Major Research and Development Tax Credit
- Telework Expenses Tax Credit - Credit expired December 31, 2016.
- Worker Retraining Tax Credit HB 1923 – Non-credit courses must be approved by the Virginia Economic Development Partnership. For information on noncredit course approval, call 804-545-5706.
(1) Section 58.1-512(D)(2) of the Land Conservation Incentives Act states: “Applications for otherwise qualified donations of a less-than-fee interest shall be accompanied by an affidavit describing how the donated interest in land meets the requirements of § 170(h) of the United States Internal Revenue Code of 1986, as amended, and the regulations adopted thereunder. The application with accompanying affidavit shall be submitted to the Department of Taxation, with a copy also provided to the Department of Conservation and Recreation.”
The requirements of this section can be met by completing Form LPC-1 Section VI- Less-Than-Fee-Donations. This section should be completed by the applicant describing how the donation meets the requirements of §170(h) of the United States Internal Revenue Code of 1986, as amended.
(2) Section 58.1-512.1(C) of the Land Conservation Incentives Act states: “Any appraisal submitted in support of an application for a credit under this article shall include an affidavit by the appraiser that to the best of his knowledge and belief the valuation complies with this section and shall set forth in the affidavit or refer to the specific portion of the appraisal setting forth the facts and basis for this knowledge and belief.”
The requirements of this section can be met with a notarized affidavit from the appraiser or a signed statement made under penalty of perjury that meets the requirements of § 8.01-4.3 of the Code of Virginia.
The statement should :
1. State to the best of the appraiser's knowledge and belief that the valuation made in the appraisal complies with § 58.1-512.1 of the Code of Virginia (1950), as amended.
2. Set forth specific facts and basis for this knowledge and belief (or refer to specific portions of the appraisal in which such facts are set out) and that such facts are true and correct to the best of the appraiser's knowledge and belief.
3. Include the declaration set out in § 8.01-4.3 such as: I declare under penalty of perjury that the forgoing is true and correct.
4. Include the date of the appraiser's signature.
The following would be an acceptable example:
I declare under penalty of perjury that to the best of my knowledge and belief (i) that the valuation made in the foregoing appraisal complies with § 58.1-512.1 of the Code of Virginia (1950), as amended, (ii) that all of the relevant facts and assumptions that form the basis for the valuation and compliance with § 58.1-512.1 are set forth in section(s) ___________ of this appraisal, and (iii) that such facts are true and correct to the best of my knowledge and belief except as qualified in the foregoing sections, and if qualified, that the stated reservations concerning the facts were taken into account in the valuation.
LPC-1 applications received on or after August 1, 2009 that do not have Section VI completed (if applicable), and a signed statement or a notarized affidavit from the appraiser, will be considered incomplete and cannot be processed until these requirements have been met.