Will Virginia accept a late Farm Wineries and Vineyards Tax Credit application if the delay was caused by COVID-19?

Plain-English summary

Virginia's Farm Wineries and Vineyards Tax Credit lets qualifying farm wineries and vineyards claim 25% of the cost of certain capital expenditures for new or improved facilities, but the total credit available statewide each year is capped at $250,000, with a pro rata allocation if applications exceed that cap. To claim the credit for a given taxable year, the taxpayer's Form FWV application must reach the Department by April 1 of the following year.

A taxpayer's 2021 application was postmarked April 7, 2022 -- six days after the April 1, 2022 deadline -- and was received on April 12. The Department denied it as untimely. On appeal, the taxpayer explained the delay: COVID-19 had slowed down receiving the information needed to complete the required forms.

The Department was sympathetic but unmoved. Because the credit is subject to a hard annual dollar cap, the Department explained it has no workable alternative to a strict, hard filing deadline -- if it started accepting late applications case-by-case, the total credits claimed in a given year could exceed the statutory cap, disrupting the allocation for everyone who filed on time. The Department pointed to several prior rulings applying this same hard-deadline rule uniformly across every capped credit it administers. Since the application was undisputedly postmarked after the deadline, it was properly denied, regardless of the underlying reason for the delay.

What this means for you

Farm winery and vineyard owners planning to claim this credit

Treat April 1 as an absolute, no-exceptions deadline. Submit your Form FWV well before that date -- don't wait until the deadline itself, since even a documented, sympathetic reason for lateness (like pandemic-related delays) will not save a late application.

Anyone claiming any Virginia tax credit that has an annual dollar cap

This same hard-deadline logic applies across every capped credit Virginia administers, not just this one. If a credit program has a statewide dollar limit, expect the filing deadline to be enforced strictly, with no case-by-case leniency regardless of the taxpayer's specific excuse.

Accountants and tax professionals advising clients on capped credit programs

Build in a buffer well ahead of the statutory deadline, and consider tracking mailing with a dated proof of postmark rather than relying on ordinary mail close to the cutoff -- the consistent Department position is that capped-credit deadlines get no equitable exceptions.

Common questions

Q: Does Virginia make exceptions to tax credit filing deadlines for good cause, like COVID-19 disruptions?
A: No -- for capped tax credits like this one, the Department applies the deadline strictly regardless of the taxpayer's reason for the delay, because the program's statutory dollar cap requires a firm cutoff to administer fairly.

Q: Why does Virginia enforce these deadlines so strictly instead of allowing late filings with a good excuse?
A: Because the credit amount available each year is capped, allowing late applications on a case-by-case basis could cause total approved credits to exceed the statutory cap, which would be unfair to taxpayers who filed on time and require unwinding already-processed allocations.

Q: Does this strict-deadline rule apply only to the Farm Wineries and Vineyards credit?
A: No -- the Department has applied the same hard-deadline policy to every capped tax credit it administers, citing consistent past rulings on other credit programs.

Citations and references

• Va. Code § 58.1-339.12 (Farm Wineries and Vineyards Tax Credit; 25% of qualified capital expenditures, $250,000 annual cap, April 1 filing deadline)
• P.D. 04-201 (11/4/2004), P.D. 13-189 (10/18/2013), P.D. 15-201 (10/19/2015), and P.D. 20-26 (2/27/2020) (Department's consistent hard-deadline policy for all capped tax credits)

Subject

Tax Credit: Winery - Deadline strictly enforced

Source

• Landing page: Virginia Laws, Rules & Decisions
• Ruling: P.D. 23-7

Original ruling text

January 18, 2023

Re: § 58.1-1821 Application: Individual Income Tax

Dear *:

This will respond to your letter in which you appeal the denial of the application for the Farm Wineries and Vineyards Tax Credit (the “Credit”) that you (the “Taxpayer”) submitted for the 2021 taxable year.

FACTS

The Department received the Taxpayer’s Form FWV, Application for Farm Wineries and Vineyards Tax Credit (the “Application”), for the 2021 taxable year on April 12, 2022. The Application was postmarked April 7, 2022. The Department denied the Application on the basis that the Taxpayer had not submitted the Application by the April 1, 2022, deadline. The Taxpayer appealed, contending that his late submission was due to the slowness of receiving information to complete the required forms due to the COVID-19 pandemic.

DETERMINATION

Virginia Code § 58.1-339.12 allows Virginia farm wineries and vineyards to claim a credit in an amount equal to 25 percent of the cost of all qualified capital expenditures made in connection with the establishment of new Virginia farm wineries and vineyards and capital improvements made to existing Virginia farm wineries and vineyards. The total amount of the Credit available for all taxpayers for each calendar year is limited to $250,000. If applications for the Credit exceed $250,000, the Department allocates the Credit to all applicants on a pro rata basis.

An eligible taxpayer must submit Form FWV 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 and in the corporate and individual income tax instructions.

Because the Credit is subject to an annual cap, the Department must have a hard 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), P.D. 15-201 (10/19/2015) and P.D. 20-26 (2/27/2020).

In this case, the application was postmarked on April 7, 2022, after the April 1, 2022 deadline had passed. While I empathize with the Taxpayer’s situation, because the Application was received after the deadline, the Application was properly denied.

The Code of Virginia section and public documents cited are available online at www.tax.virginia.gov in the Laws, Rules, & Decisions section of the Department’s website. 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/4248.B

Related Documents

04-201

13-189

15-201

20-26