Virginia Department of Taxation - PowerPoint Presentation

1. Virginia Department of TaxationLand Preservation Tax Credit Application ProcessVirginia Department of TaxationVIRGINIA DEPARTMENT OF TAXATION

2. Land Preservation Tax Credit (LPC)Virginia allows an income tax credit for 40 percent of the value of any land or interest in land located in Virginia that is conveyed in perpetuity for conservation purposes.The maximum amount of credits that may be issued in a calendar year shall not exceed $75 million.The Credit is transferrable for 10 years. Almost 90 percent of the land conservation in Virginia in the last decade was through the LPC.2

3. Applying for the CreditMake a qualifying donation (Fee Simple or Easement)Apply for the Credit Submit application with copy of qualified appraisalApplications are reviewed in the order receivedThe credits are issued on a "first-come, first-serve basis" until the cap is reached.3

4. Land Preservation Tax Credit (LPC)For donations made on or after January 1, 2007, the Department of Conservation and Recreation (DCR) must verify the conservation value of applications requesting $1 million or more in Land Preservation Tax Credits (LPC). TAX cannot issue the tax credits until DCR’s verification is complete. Credits are issued based upon the fair market value of the donation.The LPC application continues to be subject to a subsequent review or audit of the application.4

5. LPC Application ProcessOnce a completed application is received by TAX, it is processed and reviewed.Upon approval, TAX will issue the donor an LPC number assigned to that specific donation along with the approval letter. Once the approval letter is received, the taxpayer can use or transfer the credits.5

6. LPC Review ProcessThe Department reviews all LPC applications to assure overall compliance with the requirements of the Code of Virginia and IRS regulations.Since the LPC was enacted, over 3,700 qualifying donations have been made.The Department routinely selects about 10% of the approved applications for further review.6

7. Review ProcessOver 95% of the LPC applications are accepted as filed.In cases where the value has been challenged, almost all have been settled through the administrative process without litigation.Since the tax credit was enacted in 2000, less than 3% of the donations have been challenged.7

8. Review ProcessIn some cases, TAX may secure it’s own appraisal before issuing tax credits:TAX must notify donor within 30 daysApplication is deemed not complete until the fair market value of the donation has been finally determined by the Tax Commissioner.Tax Commissioner shall make a final determination within 180 days of notifying the donor unless the donor has filed an appeal.The donor has the right to appeal any decision of the Department in accordance with the provisions of Chapter 18 (§ 58.1-1800 et seq.).8

9. Fair Market ValueCode of Virginia § 58.1-512.1 C The fair market value of any property with respect to a qualified donation shall not exceed the value for the highest and best use that is consistent with existing zoning requirements; for which the property was adaptable and needed or likely to be needed in the reasonably near future in the immediate area in which the property is located. that considers factors such as, by way of illustration and not limitation, slopes, flood plains, and soil conditions of the property; and for which existing roads serving the property are sufficient to support commercial or residential development in the event that is the highest and best use proposed for the property9

10. How to Reduce ErrorsReview the statutes thoroughly to be aware of the requirements. Code of Virginia § § 58.1-512-513United States Internal Revenue Code § 170(e)Hire a well-qualified appraiser in your area.Get referencesTalk to someone familiar with your type of propertyRead the appraisal prior to submittal.Get guidance from Conservation foundations/groups.10