Could Virginia extend an expired Land Preservation Tax Credit so a purchaser could claim the remaining 2006 credit in 2012?

Subject

Absent statutory authority, the Department cannot extend the time established by law to claim or transfer any unused Land Preservation Tax Credit.

Plain-English summary

Virginia denied the request to use the remaining credit in 2012. The Land Preservation Tax Credit had been earned by a donor in 2006, and the taxpayer purchased part of it in 2009.

For a credit earned in 2006, the law allowed carryover for the next five consecutive tax years: 2007 through 2011. The longer 10-year period described in the ruling applied to qualifying property conveyances made on or after January 1, 2007, not to this 2006 credit.

Because the five-year period had ended, the Department said it had no statutory authority to extend the deadline or allow the unused credit to be claimed or transferred. The adjustment denying the credit on the taxpayer's 2012 return was therefore correct.

What this means for you

• Track a purchased tax credit by the year it was originally earned, not only the year you acquired it.
• Determine the statutory carryover period that applies to that specific credit vintage.
• Maintain a year-by-year schedule of credit used, transferred, and remaining.
• The Department cannot grant an extra year after the statutory period expires without legal authority.

Common questions

Q: Did purchasing the credit in 2009 restart the carryover period?

A: No. The ruling measured the period from the 2006 year in which the credit was earned.

Q: Why did the ruling discuss a 10-year carryover?

A: That longer period applied to qualifying conveyances made on or after January 1, 2007. The credit at issue was earned in 2006 and had a five-year carryover.

Q: Could the Department make an equitable exception?

A: No. It said that absent statutory authority, it could not extend the time to claim or transfer the unused credit.

Citations and references

• Va. Code § 58.1-512.
• Chapters 4 and 5, 2006 Acts of Assembly, Special Session I.

Source

• Landing page: Virginia Laws, Rules & Decisions
• Ruling: P.D. 15-108

Original ruling text

May 15, 2015

Re: Request for Ruling: Land Preservation Tax Credit

Dear *:

This will reply to your letter in which you request a ruling concerning the utilization or transferability of the Land Preservation Tax Credit (the "Credit") by * (the "Taxpayer") when the carry over period expires.

FACTS

The Credit was issued to a donor during the 2006 taxable year. The Taxpayer purchased a part of this Credit during the 2009 taxable year. The Taxpayer and her husband filed joint Virginia income tax returns for the 2009 through 2011 taxable years utilizing the Credit to the extent of their income tax liability. Their claim for the remaining portion of the Credit on their 2012 return was denied by the Department because the carry over of the 2006 Credit expired in 2011. The Taxpayer requests that the Department grant an additional year to claim the Credit.

RULING

Virginia Code § 58.1-512 provides a Credit for 40% of the fair market value of real property or an interest in real property donated to an eligible charitable organization or instrumentality of the Commonwealth for qualifying land conservation purposes. Currently, a taxpayer may carry over the Credit for 10 consecutive taxable years (or longer under certain circumstances) following the taxable year in which the Credit was earned. The carry over period of 10 consecutive taxable years pursuant to Va. Code § 58.1-512 C 1 applies to any conveyance of property or interest in property made on or after January 1, 2007. See Chapters 4 and 5 of the 2006 Acts of Assembly , Special Session I.

For amounts of the Credit earned for the 2006 taxable year, the carry over period was five consecutive taxable years following the taxable year in which the Credit was earned. The five consecutive taxable years following the 2006 taxable year included the 2007 through 2011 taxable years. Accordingly, no Credit earned in 2006 could be claimed on a 2012 income tax return.

Absent statutory authority, the Department cannot extend the time established by law to claim or transfer any unused Credit. Accordingly, the Taxpayer's request to claim any of the Credit at issue on her 2012 Virginia income tax return is denied, and the Department's adjustment to the 2012 taxable year return is correct.

The Code of Virginia sections cited are available on-line at www.tax.virginia.gov in the Laws, Rules & Decisions section of the Department's web site. If you have any questions regarding this ruling, you may contact * in the Office of Tax Policy, Appeals and Rulings, at ***.

Sincerely,

Craig M. Burns
Tax Commissioner

AR/1-5927958376.B