July 6, 2016
Re: Ruling Request: Income Tax
Dear *****:
This will reply to your letter submitted on behalf of ***** (the “Company”), requesting that the Department reconsider the denial of its application for the Research and Development Expenses Tax Credit (the “Credit”) for the 2015 taxable year.
FACTS
The Department received the Company's application for the Credit on April 6, 2016. The application did not bear a postmark. The Department denied the application on the basis that the Company had not submitted the application by the April 1, 2016, deadline. The Company appealed, contending that they mailed the application prior to April 1, 2016.
RULING
Pursuant to Va. Code § 58.1-439.12:08, an individual, corporation, or pass-through entity may apply for the Credit in an amount equal to either 15% or 20% of its Virginia qualified research and development expenses, to the extent that such expenses exceed its Virginia base amount. Under Va. Code § 58.1-439.12:08 C, the Department has the authority to develop and publish guidelines that specify the Credit application requirements.
As set forth in the Research and Development Expenses Tax Credit Guidelines, published as Public Document (P.D.) 15-1 (1/7/2015), an eligible taxpayer must submit the application (Form RDC) and any supporting documentation to the Department no later than April 1 of the year following the credit year. This requirement is clearly set forth in the Form RDC instructions, in the corporate income tax instructions, and on the Department's website. In addition, the Form RDC instructions specifically state that “[for any application received without a postmark, the date received by the Department will be used to determine if the application was received by the filing deadline.”
Because the Credit is subject to an annual cap, the Department must have a deadline for tax credit applications. Adopting a policy of approving credits for late applications could result in the amount of tax credits exceeding the tax credit cap for a particular year. The Department's policy of establishing a deadline for capped tax credits has been clearly applied to capped tax credits that are administered by the Department. See, e.g., P.D. 04-201 (11/4/2004) and P.D. 13-189 (10/18/2013).
In this case, the Department received the Company's application on April 6, 2016, and the application did not bear a postmark. Therefore, the application was considered filed on the date it was received, which was after the April 1, 2016 deadline. Accordingly, I find that the application was properly denied.
The Code of Virginia sections and public documents cited are available on-line at www.tax.virginia.gov in the Laws, Rules & Decisions section of the Department's web site. If you have any questions regarding this ruling, you may contact ***** in the Office of Tax Policy, Appeals and Rulings, at *****.
Sincerely,
Craig M. Burns
Tax Commissioner
AR/1-6362266884.M