Could nine corporate affiliates each use a separate $100,000 Land Preservation Tax Credit on one consolidated Virginia return?

Subject

Only those taxpayers who actually earn or otherwise acquire the Credit may use it.

Plain-English summary

Virginia allowed a consolidated corporate group to claim $900,000 because each of nine affiliates separately acquired a $100,000 Land Preservation Tax Credit. The historical cap applied per taxpayer, not per consolidated return.

A consolidated return was one filing for multiple corporations, but each corporation remained a taxpayer. Applying the $100,000 limit separately to each credit-owning affiliate produced the full $900,000 allowance.

Ownership of the credits was essential. If a single affiliate had acquired the entire $900,000 while the other eight acquired none, the consolidated return could have used only that one affiliate's $100,000 maximum under the ruling.

What this means for you

• Track which legal entity earned, purchased, or otherwise acquired each credit.
• Filing one consolidated return does not merge every affiliate's taxpayer-level cap.
• Credit ownership documents must align with the affiliate claiming the benefit.
• This ruling applies a historical $100,000 limit; verify current caps and transfer rules.

Common questions

Was the limit $100,000 per consolidated return? No. It applied to each taxpayer included in the return.

Why did the group get $900,000? Nine separate affiliates each held a separate $100,000 credit.

Could unused affiliates share one affiliate's excess credit automatically? No. Only taxpayers that actually earned or acquired the credit could use it.

Citations and references

• Va. Code § 58.1-512(B)(1), as applicable to the 2005 return.
• Va. Code § 58.1-512(C)(1), as amended in 2006.
• Va. Code § 58.1-442.
• P.D. 05-136 (August 10, 2005).

Source

• Landing page: Virginia Laws, Rules & Decisions
• Ruling: P.D. 07-131

Original ruling text

August 17, 2007

Re: § 58.1-1821 Application:

Use of Land Preservation Tax Credits on a Consolidated Return

Dear *:

This is in response to your letter of April 5, 2007, in which you requested that the Department of Taxation ("TAX") reinstate the Land Preservation Tax Credits (the "Credits") on the 2005 consolidated corporate income tax return filed by * (the "Taxpayer").

FACTS

Nine affiliates of the Taxpayer each acquired Credits in the amount of $100,000. In 2005, these nine corporations filed a consolidated Virginia corporate income tax return. The total amount of the Credit that was claimed on this return was $900,000. This amount was later limited by TAX to $100,000. You object to this limitation and ask that TAX reinstate the Credit in the amount of $900,000.

RULING

Taxpayers who possess the Credit are limited to claiming $100,000 in each taxable year. Thus, the amount of the Credit is typically limited to $100,000 per income tax return. In Public Document ("P.D.") 05-136 (8/10/05), however, TAX examined whether married taxpayers who each possessed a Credit could claim more than the allowable $100,000 on a joint return. In that case, we concluded that the taxpayers could claim up to $200,000 on the joint return. This conclusion was based on the fact that both spouses had purchased separate Credits. As a result, each taxpayer was allowed to claim the maximum of $100,000 on the return, which resulted in an allowable Credit of up to $200,000.

The provision applicable to the 2005 returns appeared in Va. Code § 58.1-512 B 1 as follows: "The amount of credit that may be claimed by a taxpayer shall not exceed . . .$100,000." This language was amended and moved to Va. Code § 58.1-512 C 1 in 2006. Among the amendments, the emphasized words "a taxpayer" were changed to "each taxpayer." Because the statute imposes the limitation on a per-taxpayer basis, not a per-return basis, it is clear that when more than one taxpayer is included in a return then the separate limitations must be applied to each taxpayer for which a credit is claimed. Under Va. Code § 58.1-442, a consolidated return is a single return for a group of corporations. Since each corporation in the consolidated return is a taxpayer, the $100,000 limitation will be applied to each corporation that has earned or otherwise acquired Credits claimed in the return. As a result, the Taxpayer will be allowed to claim the Credits in the amount of $900,000 on the consolidated return. The Taxpayer's account will be adjusted to reflect this ruling.

Please note that there would be a different outcome if each of the nine affiliates had not obtained their own Credits. Only those taxpayers who actually earn or otherwise acquire the Credit may use it. Thus, if only one of the nine affiliates had obtained the entire $900,000 Credit amount, the total amount of Credit that could be claimed on the consolidated return would be limited to $100,000.

I trust that this reply answers your ruling request. The Code of Virginia sections cited and other reference documents are available on-line in the Tax Policy Library section of the TAX's web site located at www.tax.virginia.gov. If you should have any questions regarding this ruling, you may contact * in the Office of Tax Policy, Policy Development, at ***.

Sincerely,

Janie E. Bowen

Tax Commissioner