Tax Type
Individual Income Tax
Description
Credit for the purchase of machinery and equipment for processing recyclable materials
Topic
Credits
Date Issued
10-23-2009
October 23, 2009
Re: § 58.1-1821 Appeal: Individual Income Tax
Dear *****:
This will reply to your letter in which you seek correction of the individual income tax assessment issued to your clients, ***** (the "Taxpayers"), for the taxable year ended December 31, 2005.
FACTS
The Taxpayers, husband and wife, are Virginia residents who claimed a tax credit for the purchase of machinery and equipment for processing recyclable materials (the "Credit") on their 2005 Virginia individual income tax return, Form 760. The Credit was passed through to the husband from his interest in a Virginia S Corporation (VSC).
Under audit, the Credit was disallowed because it is not available for individual taxpayers for the 2005 taxable year. An assessment was issued for additional tax and interest. The Taxpayers contest the assessment, asserting that the statute allows the Credit to be passed through to individual shareholders of S corporations.
DETERMINATION
In 1990, the General Assembly enacted the Credit for the purchase of machinery and equipment for processing recycled materials. See Chapter 709, 1990 Acts of Assembly. Under this chapter, two separate sections were added. Virginia Code § 58.1337 allowed the Credit against the individual income tax and Va. Code § 58.1-445.1 allowed the Credit against the corporate income tax.
The Credit for both individuals and corporations included a sunset provision. This provision was extended several times. For the individual income tax credit, the provision was Extended through taxable years ending before January 1, 2004 (Chapter 91, Acts of Assembly) by the 2001 General Assembly. No further extensions were enacted and the Credit for individuals expired after the 2003 taxable year.
In 1998, the General Assembly (Chapter 253, Acts of Assembly) repealed and reenacted the Credit for corporations under Va. Code §§ 439.7 and 439.8. The 2007 General Assembly enacted legislation (Chapters 529 and 593, Acts of Assembly) to permit the Credit to be passed through to individuals for taxable years beginning on or after January 1, 2007.
Because the Credit for individuals expired after 2003 and was not permitted as a pass through credit until 2007, the Credit could not be claimed by individuals for the 2005 taxable year. Accordingly, the assessment is upheld, and is now due and payable. Payment of the remaining balance due, as shown on the enclosed schedule, should be mail to : Virginia Department of Taxation, Appeals and Rulings, Post Office Box 27203, Richmond, Virginia 23261-7203, Attention: *****. No additional interest will accrue provided the outstanding balance is paid within 30 days from the date of this letter.
The Code of Virginia and regulation sections cited, along with other reference documents, are available on-line at www.tax.virginia.gov in the Tax Policy Library section of the Department's website. If you have questions concerning this determination, you may contact ***** at *****.
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- Sincerely,
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Janie E. Bowen
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- Tax Commissioner
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AR/1-3438037078.C
Rulings of the Tax Commissioner