Land preservation tax credits are transferrable. You can transfer any unused credits to someone else to claim on their Virginia income tax return. The person you give the credits to is subject to the same limit on the amount of credit that can be claimed per year, and may carry forward any unused credits for up to 11 years after the credit was originally issued, for most taxpayers.
If you sell your unused credits to someone, you owe a transfer fee equal to 5% of the credit amount transferred. Transfers and credit allocations between pass-through entities, (s-corporations, LLCs, etc.) are usually also subject to the fee. Pay the fee when you file form LPC-2 to report the transfer.
Exceptions: Virginia Tax will usually waive the fee if the party giving the credits is a single member LLC or a grantors trust, also known as a “disregarded entity.” Please include a copy of your federal income tax return indicating this, (Form 1040 Schedule C or E,) and a copy of your operating agreement, when you file form LPC-2.
There is no fee if you transfer credits to a designated beneficiary.
When to file form LPC-2
File form LPC-2 to notify us of the transfer of the credits, and to pay any transfer fee that you owe. File form LPC-2 within 90 days of the credit transfer, but at least 90 days before you file your Virginia income tax return claiming the credit. We will send a receipt for fees paid to the person giving the credits, and a letter acknowledging the credit to the person receiving it. For more information, please see the Instructions for Form LPC-2.