When did a Virginia Land Preservation Tax Credit application over $1 million enter the 2007 allocation queue?

Subject

When is an application for a credit of over $1 million would be considered complete?

Plain-English summary

Virginia said an application for more than $1 million of Land Preservation Tax Credits was not complete, and did not enter the allocation queue, until the Department received the required verification of conservation value from DCR. The Department rejected the idea of reserving a tentative queue position while verification was pending because later applications would then remain exposed to reallocation.

For donations made during calendar year 2007, the Department intended to issue credits claimable on 2007 returns even when an application was completed well into 2008, until the $100 million 2007 allocation was exhausted. A delay could therefore push the donor's first usable credit into taxable year 2008 if the 2007 cap had already been reached.

What this means for you

• For the period covered by this ruling, a claim over $1 million did not secure a queue position before DCR verification arrived.
• A submission awaiting verification could lose access to the remaining annual allocation even if the donation occurred earlier.
• This ruling describes the 2007 cap and procedures; confirm the rules for the donation year involved.

Citations and references

• Va. Code § 58.1-512(D)(3)(a), required conservation-value verification for credits over $1 million.
• Va. Code § 58.1-512(D)(4)(a), issuance in the order complete applications are received.

Source

• Landing page: Virginia Laws, Rules & Decisions
• Ruling: P.D. 07-95

Original ruling text

May 25, 2007

Dear *:

You requested clarification regarding policy of the Department of Taxation (`TAX") with respect to the queue for allocation of Land Preservation Tax Credits. In particular, you inquired when an application for a credit of over $1 million would be considered "complete" as required by Va. Code § 58.1-512 D 4a, which provides that: "The credits shall be issued in the order that each complete application is received."

TAX has determined that an application for a credit of more than $1 million will not be considered to be complete for purposes of issuing credits until verification of conservation value is received from the * ("DCR") as required by Va. Code § 58.1-512 D 3a. As a result, an application for a credit of over $1 million will not enter the queue until the taxpayer has obtained DCR verification of the donation.

It has been suggested that TAX place applications in the queue pending receipt of DCR verification. The significance of an application's place in the queue is the amount of the annual cap ($100 million for donations made in 2007) that may be allocated to the applicant, particularly as allocations approach the annual cap. If one application's eligibility is tentative while DCR action is pending, then every subsequent application is also subject to reallocation of credits should the application not be verified by DCR. While I understand that you may disagree with this determination, I must point out that, under Va. Code § 58.1-512 D, TAX is clearly given the sole authority to establish procedures and deadlines for the issuance of Land Preservation Tax Credits. I believe that the determination that we have made is in the best interests of all donors.

To clarify the impact of this determination, TAX intends to issue 2007 credits (i.e., that may be claimed on a 2007 return) for donations made during calendar year 2007 regardless of when the application is received and completed, even if well into 2008, until the $100 million allocation is used up. Therefore, the worst that can happen to any taxpayer because of a delay in completing an application is that the 2007 credit cap will be reached and the taxpayer will have to wait until taxable year 2008 to claim his first credit. We recognize that this determination will mean that 2007 credits are likely to go to those who donate and apply early in 2007; and we believe that this is a desirable tax policy.

If you have any further questions, or if there is anything else I can do, please let me know.

Sincerely,

Janie E. Bowen

Tax Commissioner