September 14, 2021
Re: § 58.1-1821 Application: Individual Income Tax
Dear *****:
This will respond to your letter in which you contest the denial of your application for the Qualified Equity and Subordinated Debt Investments Tax Credit (the “Credit”) submitted for ***** (the “Taxpayer”) for the taxable year ended December 31, 2020.
FACTS
The Taxpayer contends that he filed an application for the Credit for an investment he made in a qualified business during the 2020 taxable year by mail during the week of March 1, 2021. The Department has no record of receiving the application. The Taxpayer sent a copy of the application to the Department on April 27, 2021. He requests that the Department allow him to claim the Credit for the 2020 taxable year because his application was mailed prior to the application deadline.
DETERMINATION
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 contends that he mailed the Credit application the week of March 1, 2021. The Department has no record of receiving this application, nor has the Taxpayer provided proof that the application was mailed during the time he claims. Further, the Taxpayer’s claim that the United States Postal Service failed to deliver his application because of the effects the COVID -19 pandemic has had on its operations is speculative. After becoming aware that the Department had not received his application, he sent a copy of it to the Department on April 27, 2021. Unfortunately, because this application was filed beyond the statutory deadline, the Credit cannot be granted.
The Code of Virginia sections, regulation, 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 determination, you may contact ***** in the Department’s Office of Tax Policy, Appeals and Rulings, at *****.
Sincerely,
Craig M. Burns
Tax Commissioner
AR/3783.B