Tax Type
Individual Income Tax
Description
Neighborhood Assistance Act credit; Maximum amount of credit for S-corp. shareholder
Topic
Credits
Date Issued
06-08-1990
June 8, 1990
Re: Ruling Request
Neighborhood Assistance Act Credit
Dear*****************
This is in response to your letter dated May 11, 1990, in which you request a ruling regarding the application of the tax credit for investments under the Neighborhood Assistance Act to a individual shareholder in several S corporations. Specifically, you ask whether the limitation regarding the maximum amount of tax credit applies to the S corporations or to the individual shareholder.
RULING
The Virginia Neighborhood Assistance Act provides a tax credit to businesses which invest in approved Neighborhood Assistance projects to benefit low income individuals. The Virginia Department of Social Services approves the projects and certifies when a business makes a qualifying investment. The tax credit is equal to 50% of the qualified investment made by the business and may not exceed $175,000 per year. Tax credits granted to partnerships and S corporations are passed through to the partners and shareholders, respectively.
Under the Neighborhood Assistance Act, the maximum tax credit limitation of $175,000 per year applies to the business making the investment. There is no limitation on the number or amount of tax credits that an individual may claim on his income tax return that have been passed through from partnerships or S corporations. Therefore, in the case of your client, as long as each investment made by the different S corporations qualifies for the credit, the sole shareholder may claim all tax credits on his return, without regard to the $175,000 limitation. Any unused credits may be carried over for the next five years.
If you have any additional questions, please do not hesitate to contact the department.
Sincerely,
W. H. Forst
Tax Commissioner
Rulings of the Tax Commissioner