Could a taxpayer receive Virginia's 2011 research credit after filing Form RDC more than ten months late?

Plain-English summary

Virginia denied the taxpayer's 2011 Research and Development Expenses Tax Credit because Form RDC was filed more than ten months after the application deadline. The taxpayer had claimed the credit on its corporate return before submitting the required application and before receiving Department certification.

The statute authorized the Department to publish application guidelines. Those guidelines and the Department's forms and instructions required the 2011 application by April 1; because that date fell on a Sunday, the deadline moved to April 2, 2012.

Virginia explained that a firm deadline was necessary because the credit had an annual cap. Accepting late applications could cause approved credits to exceed that cap. The February 20, 2013 application was therefore denied.

What this means for you

• Filing a tax return that claims a credit does not replace a separately required credit application.
• Obtain any required Department certification before claiming the credit as instructed.
• Treat application deadlines for capped credits as substantive requirements.
• Check weekend and holiday rules, but do not assume they excuse a filing months late.
• Preserve the form, instructions, submission proof, and certification for the applicable credit year.

Common questions

Q: Why was April 2, 2012 the deadline?
A: The published April 1 deadline fell on a Sunday, so Virginia's deadline rule moved it to the next business day.

Q: Was the deadline written directly in the credit statute?
A: No. The statute authorized the Department to publish application guidelines, and the Department used that authority to establish the deadline.

Q: Why did Virginia enforce the deadline strictly?
A: The credit had an annual cap, and accepting late applications could push allocations over that cap.

Q: How late was the taxpayer's Form RDC?
A: It was filed February 20, 2013, more than ten months after the April 2, 2012 deadline.

Citations and references

• Va. Code § 58.1-439.12:08, including subsection C.
• Va. Code § 58.1-8.
• Va. Code § 58.1-339.4 G, discussed by comparison.
• Virginia Public Document 04-201, discussed as another capped-credit deadline ruling.

Subject

Research and Development Expenses Tax Credit Application

Source

• Landing page: Virginia Laws, Rules & Decisions
• Ruling: P.D. 13-189

Original ruling text

October 18, 2013

Re: § 1821 Application: Research and Development Expenses Tax Credit Application

Dear *:

This is in response to your request that the Department of Taxation ("the Department") accept * ("the Taxpayer's") 2011 Form RDC, Application for Research and Development Expenses Tax Credit ("Form RDC"), which was filed after the 2011 Form RDC deadline.

FACTS

The Taxpayer claimed the Research and Development Expenses Tax Credit on its Taxable Year 2011 Corporation Income Tax Return. Such return claiming the tax credit was filed prior to submitting Form RDC to the Department and without receiving a credit certification from the Department, contrary to the Department's corporate income tax forms and instructions. Accordingly, the Department denied the tax credit on the Taxpayer's return. The Taxpayer subsequently filed 2011 Form RDC with the Department on February 20, 2013, requesting a tax credit in the same amount claimed on the Taxpayer's 2011 return. The Department denied the Taxpayer's application because it was received after the April 2, 2012 deadline for 2011 Form RDC. The Taxpayer is appealing the Department's denial of its 2011 Research and Development Expenses Tax Credit.

DETERMINATION

Pursuant Va. Code § 58.1-439.12:08, an individual, corporation, or pass-through entity may apply for Research and Development Expenses Tax Credits in an amount equal to either 15 percent or 20 percent of its Virginia qualified research and development expenses, to the extent that such expenses exceed its Virginia base amount. Under Va. Code § 58.1-439.12:08 C, the Department has the authority to develop and publish guidelines that specify the tax credit application requirements. As set forth in the draft Research and Development Expenses Tax Credit Guidelines, which were published on November 18, 2011, an eligible taxpayer must submit Form RDC and any supporting documentation to the Department no later than April 1 in order to claim Research and Development Expenses Tax Credits for the taxable year. This requirement is also clearly set forth in the Form RDC instructions, in the corporate income tax instructions, and on the Department's website. Pursuant to Va. Code § 58.1-8, because April 1, 2012 fell on a Sunday, the Form RDC deadline for Taxable Year 2011 was moved to the next business day, which was April 2, 2012.

Because the Research and Development Expenses Tax Credit is subject to an annual cap, the Department must have a deadline for tax credit applications. Adopting a policy of approving Research and Development Expenses Tax Credits for late applications could result in the amount of tax credits exceeding the tax credit cap for a particular year. The Department's policy of establishing a deadline for capped tax credits has been clearly applied to all capped tax credits that are administered by the Department.

For example, in Public Document (P.D.) 04-201 (11/4/2004) the taxpayer submitted its application for the Qualified Equity and Subordinated Debt Investments Tax Credit (Form EDC) for Taxable Year 2003 on April 14, 2004. The Department rejected the taxpayer's application because it was not submitted by the April 1, 2004 deadline. The Department determined that, even though the filing deadline was set by regulation rather than by statute, the Virginia General Assembly expressly gave the Department the authority to issue regulations that establish procedures for taxpayers to claim Qualified Equity and Subordinated Debt Investments Tax Credits and for the Department to allocate such tax credits among taxpayers when it enacted Va. Code § 58.1-339.4 G.

Similarly, although Va. Code § 58.1-439.12:08 does not set a deadline for submitting Form RDC, the statute does grant the Department the authority to publish guidelines regarding the submission of Form RDC. Pursuant to that authority, the Department included an April 1 deadline for submitting Form RDC in the Research and Development Expenses Tax Credit Guidelines, and also published this deadline in the Form RDC instructions and on the Department's website.

In the present case, the Taxpayer submitted its 2011 Form RDC to the Department more than ten months after the April 2, 2012 deadline. Because the Taxpayer failed to submit its application in a timely fashion, the Taxpayer's request is denied.

CONCLUSION

I hope this has addressed your inquiry. The Code of Virginia provisions and regulations cited, along with other reference documents, are available online in the Laws, Rules & Decisions section of the Department's website, located at www.tax.virginia.gov . If you have additional questions, please contact * in the Office of Tax Policy, Policy Development Division, at ***.

Sincerely,

Craig M. Burns

Tax Commissioner