Virginia Tax Department Changes Conservation Easement Tax Credit Procedures
Virginia Tax Department Changes Conservation Easement Tax Credit Procedures
The Virginia Department of Taxation (“Tax”) is modifying its procedures for issuing land upkeep tax credits and it is attempting to improve its customer support. In a meeting located by Molly Ward, Virginia Secretary of Natural Sources, on August 28, 2014, Tax representatives described the way they have amended and continuously amend their procedures.
Background. Landowners can be eligible for a Virginia land upkeep tax credits by looking into making an irrevocable donation of the qualifying curiosity about land for conservation purposes. The tax credit is equivalent to 40% from the fair market price from the donation. The landowner receives the loan by making use of for that credit on the form LPC-1. Once received, the tax credit is transferable to a different Virginia citizen.
Once the LPC-1 is filed with Tax, Tax looks at the donation for overall compliance using the statutory needs. Tax issues the credits towards the landowner when the application passes the preliminary review. Tax’s issuance from the tax credit doesn’t preclude Tax from auditing the donation. Actually, Tax audits about 10% from the donations made. Based on Tax, 1 / 2 of the donations susceptible to this extra review are recognized as filed. From the remaining half, Tax and also the landowner usually resolve any disagreement without getting to turn to litigation. Based on Tax representatives, under 3 % from the donations since 2000 happen to be challenged by Tax.
The Virginia land upkeep tax credit has incentivized many conservation donations. Based on Tax, 3,221 qualifying donations happen to be made because the land upkeep tax credit was permitted by Virginia law. The amount of donations arrived at its peak in the year 2006 when 460 donations were created. In 2007, Virginia capped the amount of tax credits it might issue. Presently the cap is a hundred million dollars each year. From 2007 through 2012, the cap was arrived at and a few contributors were needed to wait for a following year’s credits. This Year and 2013, the cap wasn’t arrived at. This Year, under 60 million dollars of credits were issued. In 2013, under 76 million dollars of credits were issued. This Year and 2013, the amount of donations (222 donations this year and 213 donations in 2013) was slightly under in the past years. In 2014, by August 28, 2014, there has been only six donations utilizing about 9.3 million dollars of credits. Based on Tax representatives, there aren’t any LPC-1 tax credit applications presently pending before Tax. The Virginia Outdoors Foundation reports it has about 40 donations pending approval at its next board meeting.
The Virginia conservation community has expressed some worry about the lower interest in credits. There are many theories on why there’s a drop. Individuals who work carefully with conservation contributors have ongoing to share to Virginia government officials their thought that landowners are suppressing on making donations due to Tax policies and government-favored statutes. Some landowners fear an audit from Tax which will reduce their expected benefits. Landowners fear getting to stop an invaluable curiosity about land value not understanding without a doubt if the government will disagree using their good-belief make an effort to value their donation. They fear the irrevocable nature from the gift along with the uncertainty to be audited whenever within the next 3 or more years.
Other landowners result in the donation hoping of receiving tax credits around from the donation. Until 2011, most thought that Tax needed to issue the tax credits that the landowner claimed with their LPC-1. This Year, the Virginia General Set up gave Tax the authority to not issue the tax credits to some donor if Tax asked the landowner’s claimed value for that donation. The tax credits wouldn’t be issued until Tax and also the landowner arrived at a contract or perhaps a court resolved the disagreement. Some have speculated the uncertainty over whether Tax will issue credits upon application also deters donations.
Tax representatives have stated they feel the cap isn’t being arrived at because (i) there’s uncertainty regarding how charitable conservation gifts is going to be treated in the federal level, and (ii) landowners continue to be awaiting land values to go back to their pre-recession levels.
It seems that Virginia Governor Terry McAullife’s administration is hearing the landowners’ concerns which Tax gets pressure in the McAuliffe administration to manage the tax credit program in a manner that gives landowners more confidence for making donations for conservation purposes. Based on Secretary Molly Ward, Governor McAuliffe wants landowners to create more donations of land for conservation purposes to ensure that all a hundred million land upkeep tax credits on offer are : used. In the meeting on August 28, 2014, Tax described the way it promises to have better customer support and how it’s altering its procedures to supply landowners with increased certainty. Tax’s new procedures might not be sufficient to supply that confidence because a number of individuals attending the meeting ongoing to request more certainty by getting a pre-donation approval process. Tax representatives made an appearance reluctant to complete greater than the things they were proposing within the meeting.
Tax’s Proposals. The popular features of Tax’s suggested changes follow:
1) Tax really wants to expedite the processing and overview of LPC applications. Tax promises to establish goals to process and review LPC applications on time. For applications seeking under a million dollars of credits, the typical review and processing occasions could be 15 days, unless of course the applying was filed in October, November or December, by which event the typical goal could be four weeks. For applications seeking a million dollars of credits or even more, the typical review and processing occasions could be four weeks, unless of course the applying was filed in October, November or December, by which event the typical goal could be forty-5 days.
2) Tax really wants to enhance customer support.
a) Tax procedure is to give a preliminary review before issuing the credits after which, following the credits are issued, to appear more carefully at approximately 10 % from the donations. Tax will attempt to perform a more thorough review before issuing the credits. Tax representatives couldn’t promise that the donation wouldn’t be audited following the credits were issued, however their intention and hope were generally to avoid so.
b) Land upkeep tax credits can’t be used in organizations before Tax issues the credits towards the landowner. Years back, Tax guaranteed to issue the credits prior to the finish of the season if your complete LPC-1 was filed before December 1. The complete application must be filed prior to the close of economic on November 1. Whether or not the complete application isn’t filed by November 1, Tax representatives expressed a readiness to utilize landowners to try and issue credits prior to the finish of the season whenever possible.
c) Tax promises to hire additional appraisers to examine appraisals in times of high volume.
d) In instances where Tax promises to seek another evaluation, Tax promises to hire appraisers that aren’t utilized by Tax. Tax representatives stated that it’s their hope that the outdoors appraiser will give you a far more objective resolution of value.
3) Tax promises to do more outreach to utilize conservation agencies yet others thinking about conservation to recognize and resolve issues.
4) Tax really wants to increase visibility and use of LPC information and also to add transparency towards the LPC application. Tax promises to enhance the LPC-1 website, provide solutions to faq’s, and supply an instructional video that looks at the LPC application and review process at Tax. Tax hopes with an online submission process by June 30, 2015.
Conclusion. It’s unclear whether these changes will incentivize landowners to create more donations. Tax representatives seem to be sincere within their desire to utilize landowners, they also appear equally worried about protecting the treasury and enforcing what the law states. What’s promising for that conservation community is the fact that Tax is opening a dialogue that, if ongoing, is only going to assist in improving the procedure for those.
November 14, 2017