Tax Type
Individual Income Tax
Description
Energy Income Tax Credit; Federal Credit Disallowed
Topic
Credits
Date Issued
11-05-1992
November 5, 1992
Re: §58.1-1821 Application: Individual Income Tax
Dear******************
This will respond to your letter in which you seek correction of an assessment for taxable year 1985 resulting from an adjustment of the Virginia income tax return based on a federal income tax adjustment for ************* (the "Taxpayers").
FACTS
The Taxpayers' 1985 individual income tax return was audited in 1987 by the Internal Revenue Service and a portion of the solar energy credit was disallowed due to a lack of supporting documentation. The department was informed of the adjustment and notified the Taxpayers of the corresponding Virginia adjustment on August 30, 1990. The Taxpayers protested the federal adjustment but were denied relief due to the lack of supporting documentation. Subsequently, the Taxpayers found the documentation but were precluded from filing an amended federal return because the statute of limitations had expired. The Taxpayers protested the Virginia adjustment by phone and faxed a copy of the supporting documentation for the energy credit on March 12, 1991. The Taxpayers seek abatement of the Virginia assessment on the grounds that documentation supporting the Virginia credit is available.
DETERMINATION
The Virginia energy income tax credit, effective for taxable years beginning on and after January 1, 1983 through December 31, 1987, is a decreasing percentage credit against income tax for renewable energy expenditures. Virginia Regulation (VR) 630-2-331, copy enclosed, provides that the credit is allowable in the year in which the expenditure qualified for the complementary federal income tax credit under the provisions of the Internal Revenue Code, absent any prior expenditure limitations. However, the Virginia credit is considered separate from the federal credit, and while the department utilizes federal provisions for determinations and rules applicable to renewable energy sources, allocation, ownership of property and other issues, it does not rely solely on the federal determination for purposes of granting the Virginia credit.
Based on the documentation provided by the Taxpayers, the energy source expenditure qualified for the Virginia energy income tax credit. Accordingly, since the credit is allowed for taxable year 1985, the assessment will be abated.
Sincerely.
W. H. Forst
Tax Commissioner
OTP/541OH
Rulings of the Tax Commissioner