Tax Type
Individual Income Tax
Description
Neighborhood Assistance Act Tax Credit
Topic
Credits
Date Issued
10-17-2007
October 17, 2007
Re: § 58.1-1821 Application: Individual Income Tax
Dear *****:
This will respond to your letter in which you seek correction of the individual income tax assessment issued to ***** (the "Taxpayers") for the taxable year ended December 31, 2005.
FACTS
The Taxpayers, a husband and wife, claimed a Neighborhood Assistance Act Tax Credit (the "Credit") on their 2005 individual income tax return. The Department denied a portion of the Taxpayers' Credit that was not certified by the Department of Social Services (DSS) and issued an assessment.
The Taxpayers contest the assessment on the basis that the husband, a retired physician, provided health care services without charge at the ***** (the "Clinic"), a partnership of health professionals, physicians, hospitals and ***** (the "County") to provide primary health services to low income, uninsured County residents. The Taxpayers believe the Department has unfairly denied the Credit because the County failed to properly obtain approval for the Credit from DSS.
DETERMINATION
The Neighborhood Assistance Act provides tax credits for eligible taxpayers that contribute to approved neighborhood organizations designed to benefit impoverished individuals. Under Va. Code § 63.2-2004 C, physicians are eligible for the Credit if they donate time to perform health care services at a clinic operated by an organization that has received approval to allocate Credits from DSS.
In this case, the husband has provided a letter issued by the County confirming his donation of time to provide health care services to patients of the Clinic. These services appear to qualify for the Credit provided that the Clinic or the County was approved by DSS to allocate Credits for 2005.
Pursuant to Va. Code § 63.2-2002, neighborhood organizations must submit an annual application to DSS requesting an allocation of Credits for use by eligible taxpayers under regulations adopted by the State Board of Social Services. Under these regulations, an application must be submitted by May 1 of each year. See Title 22 of the Virginia Administrative Code (VAC) 40-41-20.
Records provided to the Department by DSS indicate that the Clinic was not approved for the allocation of Credits for the 2005 taxable year. The County confirmed to the Taxpayers that it was too late for the Clinic to receive certification from DSS. Without certification from DSS, the Department cannot permit the Taxpayers to claim the Credit for services donated to the Clinic. While I appreciate the Taxpayers' situation, the Department correctly denied the portion of the Credit not approved by DSS.
The Department failed to deny a credit carryforward from the 2004 taxable year. In addition, it appears that the Taxpayers overpaid the assessment. As such, the Taxpayer's 2005 income tax return will be adjusted based on this determination and a further review of the Taxpayers' records. A member of the Department's staff will contact the Taxpayers to fully explain any additional adjustments. A bill or refund, as appropriate, will be issued.
If you have any questions regarding this response, you may contact ***** in the Department's Office of Policy and Administration, Appeals and Rulings, at *****.
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- Sincerely,
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- Janie E. Bowen
Tax Commissioner
- Janie E. Bowen
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AR/1-1222271468o
Rulings of the Tax Commissioner