Could a taxpayer claim Virginia's Livable Home Tax Credit without a certificate of approval from the Department of Housing and Community Development?

Plain-English summary

Virginia disallowed a 2015 Livable Home Tax Credit because the taxpayer had not provided the required certificate of approval from the Department of Housing and Community Development.

The credit covered part of the price of a qualifying accessible new residence or the cost of retrofitting an existing residence to improve accessibility and universal visitability. Eligibility depended on DHCD's requirements, and the DHCD certificate was the evidence Virginia Tax needed before allowing the credit.

The taxpayer had not responded to an earlier documentation request. The ruling gave her one final 30-day period to submit the certificate so the assessment could be reviewed and adjusted if appropriate.

Common questions

Was proof of construction spending alone enough? No. The ruling required DHCD approval and certification.

Who had the burden of proving eligibility? The taxpayer, because the assessment was presumed correct.

Was the credit permanently lost at the time of the ruling? Not necessarily. The taxpayer received 30 days to provide the missing certificate.

Citations and references

• Va. Code §§ 58.1-111, 58.1-205, and 58.1-339.7
• Howell's Motor Freight, Inc. v. Virginia Department of Taxation, Roanoke City Circuit Court, Law No. 82-0846 (October 27, 1983)

Subject

Livable Home Tax Credit

Source

• Landing page: Virginia Laws, Rules & Decisions
• Ruling: P.D. 17-63

Original ruling text

May 10, 2017

Re: § 58.1-1821 Application: Individual Income Tax

Dear *:

This will respond to your letter in which you seek correction of the individual income tax assessment issued to * (the “Taxpayer”) for the taxable year ended December 31, 2015.

FACTS

The Taxpayer filed a 2015 Virginia individual income tax return and claimed a Livable Home Tax Credit. Under audit, the Department disallowed the credit and issued an assessment for additional tax and interest. The Taxpayer appeals the assessment, contending she received no explanation for the assessment and she believes her return was filed correctly.

DETERMINATION

Pursuant to Va. Code § 58.1-339.7, taxpayers and certain contractors can claim a tax credit against their Virginia income tax liability for a portion of the total price paid for a new residence or the total amount expended to retrofit an existing residence, provided that the new residence or retrofitting of the existing residence is designed to improve accessibility, provides universal visibility and meets the eligibility requirements established by the Department of Housing and Community Development (DHCD).

Eligible taxpayers must first submit an application to DHCD and receive a certificate of approval. The certificate provides evidence to the Department that a taxpayer is eligible to claim such credit.

By reason of their character as legislative grants, statutes relating to deductions and subtractions allowable in computing income and credits allowed against a tax liability must be strictly construed against the taxpayer and in favor of the taxing authority. See Howell's Motor Freight, Inc., et al. v. Virginia Dep't of Taxation , Circuit Court of the City of Roanoke, Law No. 82-0846 (10/27/1983).

The Department issued a notice in April 2016 that the Taxpayer's return had been adjusted to disallow the credit. The letter included contact information if she had any questions. The Taxpayer filed an appeal without contacting the Department.

By letter dated September 8, 2016, the Department briefly explained the issue and requested documentation supporting the Taxpayer's eligibility and the amount of the credit to be claimed. As of the date of this letter, no response has been received.

When a taxpayer fails or refuses to provide documentation sufficient to calculate an accurate liability, Va. Code § 58.1-111 permits the Department to make an estimate of the amount of taxes due from any information in its possession and issue an assessment to such taxpayer. Further, under the provisions of Va. Code § 58.1-205 any proceeding relating to the interpretation of the tax laws of Virginia, an “assessment of a tax by the Department shall be deemed prima facie correct.” As such, the burden of proof is on the Taxpayer to show she was eligible to claim the credit.

Without a certificate from DHCD, the Department must disallow the credit. The Department will, however, grant the Taxpayer one last opportunity to provide adequate documentation with regard to her claim of the livable home tax credit. The DHCD certification should be submitted within 30 days from the date of this letter to: Virginia Department of Taxation, Office of Tax Policy, Appeals and Rulings, P.O. Box 27203, Richmond, Virginia 23161-7203, Attention: *. Upon receipt, the information will be reviewed and assessment will be adjusted, as appropriate. If the documentation is not received within the allotted time, the assessment will be considered to be correct as issued and collection actions may result.

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 determination, you may contact * in the Office of Tax Policy, Appeals and Rulings, at ***.

Sincerely,

Craig M. Burns

Tax Commissioner

AR/765.D