Ezel / Tax Rulings / VA
VA P.D. 18-136 Individual Income Tax 2018-07-11

Could Virginia accept a 2017 Qualified Equity and Subordinated Debt Credit application postmarked after the April 1 deadline?

Short answer: No. Form EDC for a prior-year investment had to be filed by April 1. The application was postmarked April 17, 2018. Because the credit was capped and allocated among timely applicants, Virginia enforced the hard deadline and denied the request.

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This page answers the general question as of 2018. Ezel answers yours, under current Virginia tax law, with citations.

Currency note: this ruling is from 2018
Subsequent statutory amendments, regulation changes, court decisions, or later rulings may have changed the analysis. Treat this page as historical context, not current tax advice. Verify current law before relying on any specific rule, rate, or position mentioned here.
Disclaimer: This is an official published Ruling of the Virginia Tax Commissioner (Virginia Department of Taxation), issued as a redacted public document. It is based on the specific facts the taxpayer presented and the law in effect when issued; different facts or later changes in the law can change the result, and another taxpayer should not assume it applies to their situation. Virginia's retail sales and use tax is administered by the Department, but many Virginia local taxes, including the business license (BPOL) tax, business tangible personal property tax, and machinery and tools tax, are administered by local commissioners of the revenue. This summary is informational only and is not legal or tax advice. Consult a licensed Virginia tax professional about your specific situation.
About this page: The plain-English summary, reader guidance, and Q&A below were written by Ezel based on the official state tax ruling. The original ruling (linked on this page as a PDF) is the authoritative source for any reliance.
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Plain-English summary

Virginia denied a Qualified Equity and Subordinated Debt Tax Credit application for a 2017 investment because Form EDC was postmarked April 17, 2018, after the April 1 deadline.

The credit equaled 50% of a qualifying investment but was subject to a $5 million annual cap and pro-rata allocation. The Department enforced a hard deadline so late approvals would not disrupt the capped allocation.

Common questions

What was the deadline? April 1, 2018.

When was the application postmarked? April 17, 2018.

Citations and references

  • Va. Code § 58.1-339.4
  • P.D. 04-201, P.D. 13-189, and P.D. 15-201

Source

Original ruling text

July 11, 2018

Re: § 58.1-1821 Application: Individual Income Tax

Dear *:

This will reply to your letter contesting the denial of the application for the Qualified Equity and Subordinated Debt Tax Credit (the “Credit”) submitted by * (the “Taxpayer”) for the taxable year ended December 31, 2017.

FACTS

The Taxpayer filed an application for the Credit, postmarked April 17, 2018, with respect to an investment made in a qualified business during the 2017 taxable year. The Department did not accept the application because it was not filed by the April 1, 2018 deadline for the 2017 taxable year. The Taxpayer requests that the Department reconsider its denial of the Credit request and allow the investment to be included in the computation of the Credit allowable to qualifying investors.

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. Under the statute, when the aggregate amount of requests for the Credit for a calendar year exceeds $5 million, the Department allocates the available Credit pro rata among the approved applicants.

In order to receive the Credit, an eligible taxpayer must submit Form EDC and any supporting documentation to the Department no later than April 1 in order to claim the Credit for the preceding taxable year. This requirement is clearly set forth in the instructions for the application.

Because the Credit is subject to an annual cap, the Department must have a deadline for tax credit applications. Adopting a policy of approving late applications for the Credit could result in the amount of tax credits exceeding the tax credit cap for a particular year. The Department’s policy of establishing a hard deadline for capped tax credits has been applied to all capped tax credits that are administered by the Department. See Public Document (P.D.) 04-201 (11/4/2004), P.D. 13-189 (10/18/2013), and P.D. 15-201 (10/19/2015).

In this case, the Taxpayer submitted its Form EDC to the Department after the April 1, 2018 deadline passed. Because the Taxpayer failed to submit its application in a timely fashion, the Taxpayer’s request cannot be granted.

The Code of Virginia sections and public documents 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/1678.A

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