Document Number
04-95
Tax Type
Individual Income Tax
Description
Empowerment Zone Employment Credit.
Topic
Credits
Date Issued
09-08-2004

September 8, 2004



Re: § 58.1-1821 Application: Individual Income Tax

Dear *******:

This will respond to your letter in which you request a refund of Virginia individual income tax paid by your clients, ******* (the "Taxpayers"), for the taxable year ended December 31, 2001. I apologize for the delay in this response.


FACTS

The Taxpayers filed a Virginia nonresident income tax return for the 2001 taxable year and claimed a subtraction for wages eligible for the federal Empowerment Zone Employment Credit. The Department disallowed this subtraction on the basis that Virginia law does not provide a subtraction for such wages.

You contest the Department's disallowance of the subtraction on the basis that Virginia allows a subtraction for wages eligible for the federal Work Opportunity Tax Credit, and the Empowerment Zone Employment Credit is substantially similar to the Work Opportunity Tax Credit.
DETERMINATION

Internal Revenue Code ("IRC") § 280C(a) disallows the deduction of salary and wage expenses to the extent utilized in computing the Empowerment Zone Employment Credit under IRC §1396. You contend that Virginia should permit the subtraction of salary and wage expense disallowed by IRC § 1396 based on the Virginia subtraction allowed for salary and wage expenses eligible for the federal Work Opportunity Tax Credit. This issue has been previously addressed in Public Document ("P.D.") 00-166 (9/6/00).

Virginia Code § 58.1-322 (C)(6) allows individuals to subtract "wages or salaries eligible for the federal Targeted Jobs Credit that were not deducted for federal purposes on account of the provisions of § 280C(a) of the Internal Revenue Code." Legislation enacted by Congress in 1996 renamed the Targeted Jobs Credit, the "Work Opportunity Tax Credit."

Virginia law specifically allows a subtraction to taxpayers for wages and salaries disallowed because of the federal Work Opportunity Tax Credit. As stated in P.D. 00­166, Virginia law contains no similar provision for the Empowerment Zone Employment Credit. As such, the Taxpayer is not allowed to take a Virginia income tax subtraction for salary and wage expense eligible for the federal Empowerment Zone Employment Credit.

Accordingly, your request for a refund of individual income tax is denied. The Code of Virginia section and public document cited, along with other reference documents, are available on-line in the Tax Policy Library section of the Department's web site, located at www.tax.state.va.us. If you have any additional questions regarding this determination, please contact*********** in the Office of Policy and Administration, Appeals and Rulings, at **********.

                • Sincerely,


                • Kenneth W. Thorson
                  Tax Commissioner



AR/49356B


Rulings of the Tax Commissioner

Last Updated 08/25/2014 16:46