Did Virginia cancel a 2008 assessment caused by reducing a transferred Land Preservation Tax Credit?

Subject

Transferred land-credit assessment followed upheld appraisal

Plain-English summary

Virginia upheld the taxpayers' 2008 assessment after a transferred Land Preservation Tax Credit was reduced. A donor conveyed a conservation easement, obtained a credit using its appraisal, and transferred part of the credit to the taxpayers.

The Department later commissioned another appraisal, reduced the easement value, and assessed the transferred-credit holders. The taxpayers appealed by referring to the donor's valuation appeal.

P.D. 14-61 had already upheld the Department's appraisal as the most accurate valuation. Because the transferred credit depended on that value, the taxpayers' 2008 assessment remained in place and an updated bill with interest was to be issued.

What this means for you

• A transferred credit remains exposed to a later adjustment of the underlying donation value.
• The transferee's result can turn on the donor's separate appraisal dispute.
• This ruling did not conduct a new valuation analysis; it applied P.D. 14-61.

Citations and references

• P.D. 14-61 is the separate determination the Department cited for the easement valuation.

Source

• Landing page: Virginia Laws, Rules & Decisions
• Ruling: P.D. 14-77

Original ruling text

May 30, 2014

Re: § 58.1-1824 Application: Individual Income Tax

Dear *:

This will reply to your letter in which you seek correction of an individual income tax assessment issued to * (the "Taxpayers") for the taxable year ended December 31, 2008. I apologize for the delay in responding to your appeal.

FACTS

In November 2008, the * (the "Donor") conveyed a conservation easement on a tract of land to a donee. Pursuant to the conveyance of the easement, the Donor registered the donation with the Department for purposes of the Land Preservation Tax Credit (the "Credit"). The Donor requested and was awarded Credit based on an appraisal by an unrelated third party appraiser contracted by the Donor. Subsequently, the Donor transferred a portion of the Credit to the Taxpayers. The Taxpayers claimed the Credit on their 2008 Virginia individual income tax return.

A subsequent review of the Donor's application raised questions about the value of the easement for which the Credit was granted. The Department commissioned an appraisal from an independent third party appraiser. Based on this appraisal, the Credit was revalued and assessments were issued against the individuals that received the transferred Credit. As a result, additional tax and interest was assessed against the Credit holders, including the Taxpayers, for the 2008 taxable year.

In June 2012, the Donor appealed the revaluation of the Credit. The Taxpayers appealed the assessment referencing the appeal filed by the Donor.

DETERMINATION

The Department issued Public Document (P.D.) 14-61 (4/30/2014) upholding the valuation of the easement on the basis that the third party appraisal commissioned by the Department most accurately valued the easement. As such, the assessment issued to the Taxpayers for the 2008 taxable year is upheld. An updated bill, with interest accrued to date, will be issued.

The public document cited and other reference documents are available on-line at www.tax.virginia.gov in the Laws, Rules and Decisions section of the Department's website. If you have any questions about this determination, you may contact * in the Office of Tax Policy, Appeals and Rulings, at ***.

Sincerely,

Craig M. Burns

Tax Commissioner

AR/1-5112574891.B