Was a company's March 17, 2015 Form QBA timely for equity issued near the end of its 2014 calendar year?

Subject

Qualified Equity and Subordinated Debt Investments Tax Credit

Plain-English summary

Virginia found the company's Form QBA timely. The company used a calendar year and made equity issuances within three months of the end of its 2014 taxable year.

Under 23 VAC 10-110-227(B)(3), those facts extended the filing deadline to the first business day of the fourth month after year-end: April 1, 2015. Department records showed that the company submitted its application on March 17, 2015.

What this means for you

• Identify the business's taxable-year end before calculating the Form QBA deadline.
• Document the dates of each equity or subordinated-debt issuance.
• A qualifying issuance within the final three months of the taxable year may permit the regulatory extended deadline.
• Preserve Department filing records showing when the application was submitted.

Common questions

Q: Was December 31 the controlling deadline here?

A: No. The late-year equity issuances brought the company within the regulatory exception, making April 1, 2015 the deadline.

Q: When did the Department say the company filed?

A: March 17, 2015, before the extended deadline.

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. 15-113

Original ruling text

June 15, 2015

Re: Ruling Request: Income Tax

Dear *:

This is in response to your letter on behalf of * (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 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 an exception should be granted because it contacted a Department representative in December 2014 to inquire about the application process but did not receive a response.

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 As originally enacted, the statute provided a definition of a qualified business and mandated that the Department promulgate regulations establishing procedures for claiming the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 information provided indicates that the Company was a calendar year taxpayer and issuances of equity were made within three months of the end of the 2014 taxable year. The Company, therefore, had until April 1, 2015, to submit its Form QBA for that year. The Department's records indicate that the application was submitted on March 17, 2015. Therefore, the application was timely filed.

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

AR/1-6055544965.M