Document Number
Tax Type
Individual Income Tax
Credit : Qualified Equity and Subordinated Debt Credit - Filing Deadline
Date Issued

November 24, 2020

Re: § 58.1-1821 Application:  Individual Income Tax
Dear *****: 

This will respond to your letter in which you contest the denial of an application for the Qualified Equity and Subordinated Debt Investments Tax Credit (the “Credit”) submitted for ***** (the “Taxpayer”) for the taxable year ended December 31, 2019.


The Taxpayer filed an application for the Credit related to an investment it made in a qualified business during the 2019 taxable year. The application was dated August 13, 2020 and was received on August 17, 2020 by the Department. The Department denied the application because it was not filed by the April 1, 2020, deadline for the 2019 taxable year. The Taxpayer contends that the application was filed late because of restrictions caused by the pandemic. It requests that the Department reconsider its denial of the Credit application or, in the alternative, allow it to defer the Credit for the 2019 investment as part of the 2021 distribution.


Virginia Code § 58.1-339.4 provides a credit for individual and fiduciary income tax equal to 50% of a qualified equity and subordinated debt investment made during the taxable year in a qualified business venture. Under the statute, when the aggregate amount of requests for the Credit for a calendar year exceeds $5 million, the Department allocates the available Credit pro rata among the approved applicants. 

Title 23 of the Virginia Administrative Code (VAC) 10-110-288 provides that, “[f]or any taxable year that ends after January 1, and on or before December 31 of a calendar year, eligible taxpayers must submit an application and supporting documentation requesting the tax credit no later than April 1 of the subsequent calendar year.”  Therefore, in order to receive the Credit, an eligible taxpayer must submit Form EDC and any supporting documentation to the Department no later than April 1 of the year following the investment. This requirement is also clearly set forth in the instructions for the application.

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 credit 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). Accordingly, the Department cannot accept an application for the Credit after the deadline.

The Taxpayer also requests that the Department grant Credit in the subsequent year’s pool. As indicated above, submitting a late application will disqualify an investor’s eligibility for the Credit for the investment covered by such application. Allowing taxpayers who file late applications in one year to file the same applications the following year would effectively negate the deadline. It could also penalize applicants who timely file applications in the following year. If enough investments have been made for the following year to reach the cap, allowing unclaimed investments from prior years would reduce the applicants’ available pro rata Credit. While Virginia Code § 58.1-339.4 allows taxpayers who have timely filed an application and received the Credit to carry the benefits forward up to 15 years, it does not allow for any such carry forward of untimely applications for the Credit.

In this case, the Taxpayer submitted its application for the Credit after the April 1, 2020, deadline passed. Because the Taxpayer failed to submit its application in a timely fashion, its request cannot be granted. 

The Code of Virginia sections, regulation, and public documents cited are available on-line at in the Laws, Rules & Decisions section of the Department’s web site. If you have any questions regarding this determination, you may contact ***** in the Department’s Office of Tax Policy, Appeals and Rulings, at *****.



Craig M. Burns
Tax Commissioner



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Last Updated 01/25/2021 11:39