Was a company's 2014 Form QBA timely when its certified-mail receipt said December 31 but the Department's envelope was postmarked January 2?

Subject

Qualified Equity and Subordinated Debt Investments Tax Credit

Plain-English summary

Virginia upheld the denial because the company's Form QBA was not timely filed. Although the company produced a certified-mail receipt bearing a December 31, 2014 postmark, the Department's original envelope and application showed first-class mail postmarked January 2, 2015.

Form QBA generally had to be submitted by December 31 of the investment year. A later deadline could apply when equity or subordinated-debt issuances occurred within three months of the business's taxable-year end, but the company provided no evidence that this exception applied.

What this means for you

• Preserve the actual application envelope, mailing method, and postmark evidence.
• Confirm the ordinary year-end deadline before issuing qualified equity or subordinated debt.
• If relying on the late-year issuance exception, retain evidence that the issuance date and taxable-year end satisfy it.

Common questions

Q: Did the certified-mail receipt establish a timely filing?

A: No. The Department relied on the original envelope and application showing a January 2 first-class-mail postmark.

Q: Did Virginia find the extension applicable?

A: No. The company supplied no evidence showing that the regulatory exception applied.

Citations and references

• Va. Code § 58.1-339.4.
• 23 VAC 10-110-227(B)(3).
• Chapter 614, 2004 Acts of Assembly.

Source

• Landing page: Virginia Laws, Rules & Decisions
• Ruling: P.D. 15-112

Original ruling text

June 15, 2015

Re: Ruling Request: Income Tax

Dear *:

This is in response to your letter submitted on behalf of your client, * (the "Company"), requesting that the Department reconsider the denial of its Application for Designation as a Qualified Business (Form QBA) submitted by the Company for purposes of the Qualified Equity and Subordinated Debt Investments Tax Credit (the "Credit").

FACTS

The Department denied the Company's Credit application for the 2014 calendar year on the basis that it was not filed by the end of that year. The Company appealed, contending that it filed the application on December 31, 2014.

DETERMINATION

Virginia Code § 58.1-339.4 provides a credit for individual and fiduciary income tax equal to 50% of a qualified equity and subordinated debt investment made during the taxable year in a qualified business venture. As originally enacted, the statute provided a definition of a qualified business and mandated that the Department promulgate regulations establishing procedures for claiming the Credit and providing for the allocation of tax credits among taxpayers requesting credits, without specific guidance regarding when businesses must apply for qualification. Pursuant to the statutory mandate, the Department published guidance explaining the application procedure for qualified businesses in Title 23 of the Virginia Administrative Code (VAC) 10-110-227 in 2002. This regulation provides that an application for designation as a qualified business must generally be made prior to the issuance of any equity or subordinated debt.

In 2004, Va. Code § 58.1-339.4 G was amended to state that, notwithstanding the authority of the Department to promulgate regulations, "the Department of Taxation shall permit an application for certification as a qualified business to be filed at any time during the calendar year regardless of when the investment was made during the calendar year." (Emphasis added.) See Chapter 614, Acts of Assembly . As a result of this law change, the Department currently allows taxpayers to submit Form QBA after the date of issuance, provided such form is submitted by December 31 of the year of investment.

Although generally Form QBA is required to be submitted by the end of the calendar year for which the business is seeking qualification, an extension of time is granted when issuances of equity or subordinated debt are made within three months of the end of the most recently completed taxable year of the business. In that case, the application must be submitted by the first business day of the fourth month following the end of the most recently completed taxable year. See Title 23 VAC 10-110-227 B 3.

The Company contends that it filed its 2014 application on December 31, 2014. As evidence, the Company provided a certified mail receipt bearing a postmark with that date. However, the original envelope and application in the Department's possession indicates that the application was sent by first class mail with a postmark date of January 2, 2015. Further, no evidence has been provided to show that the exception under Title 23 VAC 10-110-227 B 3 applies in this case. Accordingly, I find that the application was not timely filed and the Department's denial is upheld.

The Code of Virginia section and regulation 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 determination, you may contact * in the Office of Tax Policy, Appeals and Rulings, at ***.

Sincerely,

Craig M. Burns
Tax Commissioner