March 1, 2023
Re: § 58.1-1821 Application: Pass Through Entity
Dear *****:
This will respond to your letter in which you appeal the denial of the application for the ***** (the “Credit”) submitted by ***** (the “Taxpayer”) for the 2021 taxable year.
FACTS
The Taxpayer mailed its Form FWV, Application for Farm Wineries and Vineyards Tax Credit (the “Application”), for the 2021 taxable year on June 24, 2022. The Department received the Application on July 1, 2022. The Application included a copy of an envelope postmarked March 31, 2022, that had been returned to the Taxpayer by the post office for insufficient postage. The Department denied the Application on the basis that the Taxpayer had not submitted the Application by the April 1, 2022, deadline. The Taxpayer appealed, contending that the timely postmarked envelope validated its late submission, and that the Department should consider the Application as having been timely submitted considering the unsettled times and difficulties facing the postal service.
DETERMINATION
Virginia Code § 58.1-339.12 allows Virginia farm wineries and vineyards to claim a credit in an amount equal to 25% of the cost of all qualified capital expenditures made in connection with the establishment of new Virginia farm wineries and vineyards and capital improvements made to existing Virginia farm wineries and vineyards. The total amount of the Credit available for all taxpayers for each calendar year is limited to $250,000. If applications for the Credit exceed $250,000, the Department allocates the Credit to all applicants on a pro rata basis.
An eligible taxpayer must submit Form FWV 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 and in the corporate and individual income tax instructions.
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), P.D. 15-201 (10/19/2015), and P.D. 20-26 (2/27/2020).
In this case, the Application the Department received was mailed on June 24, 2022, well after the April 1, 2022, deadline had passed. Because the deadline must be strictly enforced, the Department must deny an application that was not received by the deadline because it was returned to the applicant for insufficient postage. While I empathize with the Taxpayer’s situation, I find that the Application was properly denied.
The Code of Virginia section and public documents cited are available online at www.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,
Craig M. Burns
Tax Commissioner
AR/4284.X