Could individual taxpayers claim a 2005 recyclable-materials equipment credit, or use certified unused credit amounts in later years?

Subject

Recyclable Materials Processing Equipment Tax Credit

Plain-English summary

Virginia upheld the disallowance of the credit claimed on the taxpayers' 2005 individual income-tax return. The ruling relied on an earlier Tax Commissioner determination addressing the same question and did not restate that earlier document's full analysis.

The ruling did preserve a later opportunity. The recycler had obtained the required Virginia Department of Environmental Quality certification for equipment purchased in 2005. Under the cited carryover statute, the taxpayers could use eligible unused credit amounts for tax years beginning in 2008.

The assessment therefore remained due, but the certified credit was not necessarily lost for all later years.

What this means for you

• This ruling did not allow the credit as claimed on the 2005 individual return.
• Certified unused recyclable-equipment credit could carry forward for up to ten succeeding tax years under the cited law.
• The ruling specifically identified tax years beginning in 2008 as available for the carried credit amounts.
• The reason for the original disallowance is incorporated from another public document and is not fully reproduced here.

Common questions

Was the 2005 assessment canceled?

No. The Department upheld it.

Was every possible credit amount lost?

No. The ruling said eligible certified unused amounts could be carried forward and used beginning in 2008.

Citations and references

• Va. Code § 58.1-439.7.
• P.D. 10-136, incorporated by reference but not reproduced in this ruling.

Source

• Landing page: Virginia Laws, Rules & Decisions
• Ruling: P.D. 10-227

Original ruling text

September 29, 2010

Re: Ruling Request: Recyclable Materials Processing Equipment Tax Credit

Dear *:

This is in response to your letter of May 1, 2009, in which you requested the Department of Taxation ("TAX") to reconsider the disallowance of the Recyclable Materials Processing Equipment Credit (the "Credit") on behalf of * (the "Taxpayers").

In your letter, you contend that the Taxpayers should be allowed a credit for recyclable materials processing equipment purchased by * (the "Recycler") in 2005.

A previous ruling of the Commissioner, Public Document ("P. D.") 10-136, dated July 12, 2010, addresses the question that you have presented. Based on the information that was provided by you in the present case, the credit was claimed by the Taxpayers on their 2005 individual income tax return. Therefore, as in PD 10-136, the Taxpayers do not qualify for the Credit, and the assessment is upheld.

According to TAX records, the balance of the assessment is *. Payment of the remaining balance due should be made to: Virginia Department of Taxation, Office of Customer Relations, Customer Service Section, Post Office Box 1115, Richmond, Virginia 23218-1115. No additional interest will accrue provided the outstanding balance is paid within 30 days from the date of this letter.

The Taxpayers may still be able to claim the credit for the Recycler's purchase of recyclable processing equipment made in 2005, however. Under Va. Code § 58.1-439.7 "[a]ny tax credit not used for the taxable year in which the purchase price on recycling machinery and equipment was paid may be carried over for credit against the taxpayer's income taxes in the 10 succeeding taxable years until the total credit amount is used." Therefore, because the Recycler received the necessary certification from the Virginia Department of Environmental Quality for equipment that it purchased in 2005, the Taxpayers would be allowed to utilize any carried over credit amounts for taxable years beginning in 2008.

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

Sincerely,

Craig M. Burns

Acting Tax Commissioner