Chapter 41. Neighborhood Assistance Tax Credit Program
22VAC40-41-10. Definitions.
The following words and terms when used in this chapter shall have the following meanings unless the context clearly indicates otherwise:
"Affiliate" means with respect to any person, any other person directly or indirectly controlling, controlled by, or under common control with such person. For purposes of this definition, "control" (including controlled by and under common control with) means the power, directly or indirectly, to direct or cause the direction of the management and policies of such person whether through ownership or voting securities or by contract or otherwise.
"Approved organization" means a neighborhood organization that has been found eligible to participate in the Neighborhood Assistance Program.
"Audit" means any audit required under the federal Office of Management and Budget's Circular A-133, or, if a neighborhood organization is not required to file an audit under Circular A-133, a detailed financial statement prepared by an outside independent certified public accountant.
"Business firm" means any corporation, partnership, electing small business (Subchapter S) corporation, limited liability company, or sole proprietorship authorized to do business in this Commonwealth subject to tax imposed by Articles 2 (§ 58.1-320 et seq.) and 10 (§ 58.1-400 et seq.) of Chapter 3, Chapter 12 (§ 58.1-1200 et seq.), Article 1 (§ 58.1-2500 et seq.) of Chapter 25, or Article 2 (§ 58.1-2620 et seq.) of Chapter 26 of Title 58.1 of the Code of Virginia. "Business firm" also means any trust or fiduciary for a trust subject to tax imposed by Article 6 (§ 58.1-360 et seq.) of Chapter 3 of Title 58.1 of the Code of Virginia.
"Commissioner" means the Commissioner of Social Services, his designee or authorized representative.
"Community services" means any type of counseling and advice, emergency assistance, medical care, provision of basic necessities, or services designed to minimize the effects of poverty, furnished primarily to low-income persons.
"Contracting services" means the provision, by a business firm licensed by the Commonwealth of Virginia as a contractor under Chapter 11 (§ 54.1-1100 et seq.) of Title 54.1 of the Code of Virginia, of labor or technical advice to aid in the development, construction, renovation, or repair of (i) homes of low-income persons or (ii) buildings used by neighborhood organizations.
"Education" means any type of scholastic instruction or scholastic assistance to a low-income person or eligible student with a disability.
"Eligible student with a disability" means a student (i) for whom an individualized educational program has been written and finalized in accordance with the federal Individuals with Disabilities Education Act (IDEA), regulations promulgated pursuant to IDEA, and regulations of the Board of Education and (ii) whose family's annual household income is not in excess of 400% of the current poverty guidelines.
"Housing assistance" means furnishing financial assistance, labor, material, or technical advice to aid the physical improvement of the homes of low-income persons.
"Job training" means any type of instruction to an individual who is a low-income person that enables him to acquire vocational skills so that he can become employable or able to seek a higher grade of employment.
"Low-income person" means an individual whose family's annual household income is not in excess of 300% of the current poverty guidelines.
"Neighborhood assistance" means providing community services, education, housing assistance, or job training.
"Neighborhood organization" means any local, regional or statewide organization whose primary function is providing neighborhood assistance and holding a ruling from the Internal Revenue Service of the U.S. Department of the Treasury that the organization is exempt from income taxation under the provisions of § 501(c)(3) or § 501(c)(4) of the Internal Revenue Code of 1986, as amended from time to time, or any organization defined as a community action agency in the Economic Opportunity Act of 1964 (42 USC § 2701 et seq.), or any housing authority as defined in § 36-3 of the Code of Virginia.
"Poverty guidelines" means the poverty guidelines for the 48 contiguous states and the District of Columbia updated annually in the Federal Register by the U.S. Department of Health and Human Services under the authority of § 673(2) of the Omnibus Budget Reconciliation Act of 1981.
"Professional services" means any type of personal service to the public which requires as a condition precedent to the rendering of such service the obtaining of a license or other legal authorization and shall include, but not be limited to, the personal services rendered by medical doctors, dentists, architects, professional engineers, certified public accountants, attorneys-at-law, and veterinarians.
"Scholastic assistance" means (i) counseling or supportive services to elementary school, middle school, secondary school, or postsecondary school students or their parents in developing a postsecondary academic or vocational education plan, including college financial options for such students or their parents, or (ii) scholarships.
Statutory Authority
§§ 58.1-439.20 and 63.2-217 of the Code of Virginia.
Historical Notes
Derived from Virginia Register Volume 15, Issue 9, eff. February 17, 1999; amended, Virginia Register Volume 18, Issue 12, eff. April 1, 2002; Volume 23, Issue 22, eff. September 1, 2007; Volume 25, Issue 23, eff. September 1, 2009; Volume 27, Issue 19, eff. July 1, 2011; Volume 29, Issue 1, eff. October 10, 2012; Volume 32, Issue 6, eff. December 31, 2015; Volume 33, Issue 2, eff. October 19, 2016.
22VAC40-41-20. Purpose; procedure for becoming an approved organization; eligibility criteria; termination of approved organization; appeal procedure.
A. The purpose of the Neighborhood Assistance Program is to encourage business firms and individuals to make donations to neighborhood organizations for the benefit of low-income persons.
B. Neighborhood organizations that do not provide education services and that wish to become an approved organization must submit an application to the commissioner. Neighborhood organizations that provide education services must submit an application to the Superintendent of Public Instruction. The application submitted to the Superintendent of Public Instruction must comply with regulations or guidelines adopted by the Board of Education. The application submitted to the commissioner must contain the following information:
1. A description of eligibility as a neighborhood organization, the programs being conducted, the low-income persons assisted, the estimated amount that will be donated to the programs, and plans for implementing the programs.
2. Proof of the neighborhood organization's current exemption from income taxation under the provisions of § 501(c)(3) or 501(c)(4) of the Internal Revenue Code, or the organization's eligibility as a community action agency as defined in the Economic Opportunity Act of 1964 (42 USC § 2701 et seq.) or housing authority as defined in § 36-3 of the Code of Virginia.
3. For neighborhood organizations with total revenues (i) of more than $100,000, an audit or review for the most recent year or (ii) of $100,000 or less, a compilation for the most recent year. The audit, review, or compilation shall be performed by an independent certified public accountant. "Total revenues" means all revenues, including the value of all donations for the organization's most recent year.
4. A copy of the organization's current federal form 990.
5. A current brochure describing the organization's programs.
6. A copy of the annual report filed with the Department of Agriculture and Consumer Services' Division of Consumer Protection.
7. A statement of objective and measurable outcomes that are expected to occur and the method the organization will use to evaluate the program's effectiveness.
C. To be eligible for participation in the Neighborhood Assistance Program, the applicant and any of its affiliates must meet the following criteria:
1. Applicants must have been in operation as a viable entity, providing neighborhood assistance for low-income people, for at least 12 months.
2. Applicants must demonstrate that at least 50% of the persons served shall be low-income and at least 50% of the total revenues shall be used to provide services to low-income persons.
3. Applicant's audit must not contain any significant findings or areas of concern for the ongoing operation of the neighborhood organization.
4. Applicants must demonstrate that at least 75% of total revenue received is expended to support their ongoing programs each year.
D. Beginning with tax credit allocations for fiscal year 2016‑2017, the applicant and any of its affiliates must meet the following requirements:
1. Affiliates of neighborhood organizations must demonstrate that at least 50% of the persons served are low-income persons;
2. Affiliates of neighborhood organizations must demonstrate that at least 50% of the revenues are used to provide services to such persons;
3. Affiliates must also meet the definition of "neighborhood organization" under § 58.1-439.18 of the Code of Virginia; and
4. Affiliates are not required to submit an audit, review, or compilation, and such reports shall not apply in determining the eligibility of the neighborhood organization submitting a proposal.
E. Requirements in subsection D of this section do not apply to a neighborhood organization submitting a proposal and any of its affiliates, provided that:
1. The neighborhood organization otherwise meets all statutory requirements and regulations;
2. The neighborhood organization received a fiscal year 2013‑2014 allocation of neighborhood assistance tax credits; and
3. No affiliate of the neighborhood organization submits a proposal for or receives an allocation of tax credits pursuant to this chapter for the program year for which the neighborhood organization has submitted its proposal.
F. The application period will start no later than March 15 of each year. All applications must be received by the Department of Social Services no later than the first business day of May. An application filed without the required audit, review, or compilation will be considered timely filed provided that the audit, review, or compilation is filed within 30 days immediately following the deadline.
G. Those applicants submitting all required information and reports and meeting the eligibility criteria described in this section will be determined an approved organization. The program year will run from July 1 through June 30 of the following year.
H. The commissioner may terminate an approved organization's eligibility based on a finding of program abuse involving illegal activities or fraudulent reporting on contributions.
Statutory Authority
§§ 58.1-439.20 and 63.2-217 of the Code of Virginia.
Historical Notes
Derived from Virginia Register Volume 15, Issue 9, eff. February 17, 1999; amended, Virginia Register Volume 18, Issue 12, eff. April 1, 2002; Volume 23, Issue 22, eff. September 1, 2007; Volume 25, Issue 23, eff. September 1, 2009; Volume 29, Issue 1, eff. October 10, 2012; Volume 30, Issue 20, eff. July 2, 2014; Volume 30, Issue 23, eff. August 15, 2014; Volume 32, Issue 6, eff. December 31, 2015; Volume 33, Issue 2, eff. October 19, 2016; Volume 33, Issue 23, eff. August 10, 2017.
22VAC40-41-30. Allocation of tax credits.
A. The available tax credits will be allocated among all approved organizations as follows:
1. Any amounts legislatively set aside for special purposes will be allocated for these purposes.
2. In any year in which the available amount of tax credits exceeds the previous year's available amount, at least 10% of the excess amount shall be allocated to approved organizations that did not receive any allocations in the preceding year. If the amount of tax credits requested by organizations not receiving allocations in the preceding year is less than 10% of the excess amount, the unallocated portion of such 10% shall be allocated to other approved organizations.
3. Approved organizations that received a tax credit allocation within the last four years will be given an allocation based on the average amount of tax credits actually used in prior years. The allocation process may include a determination of the reasonableness of requests, caps, and percentage reductions in order to stay within the total available funding.
B. During the program year, approved organizations that have used at least 75% of their allocation may request additional allocations of tax credits within the limits described in this section. Requests will be evaluated on reasonableness, and tax credits will be reallocated on a first-come basis as they become available. An exception may be made for organizations that have received a written commitment for a donation of real estate.
C. Maximum allocation of tax credits.
1. An organization shall receive an allocation of tax credits as specified in § 58.1-439.20 C of the Code of Virginia.
2. For the process of determining the maximum allocation for an organization whose purpose is to support and benefit another approved organization, the combined allocation will not exceed the maximum cap set by § 58.1-439.20 of the Code of Virginia.
D. Organizations may release all or a portion of their unused tax credit allocation to be reallocated in accordance with subsection B of this section.
Statutory Authority
§§ 58.1-439.20 and 63.2-217 of the Code of Virginia.
Historical Notes
Derived from Virginia Register Volume 15, Issue 9, eff. February 17, 1999; amended, Virginia Register Volume 23, Issue 22, eff. September 1, 2007; Volume 29, Issue 1, eff. October 10, 2012; Volume 33, Issue 19, eff. June 15, 2017.
22VAC40-41-40. Value of donations.
A. The approved organization is responsible for maintaining documentation as required by the Department of Social Services to verify the date and value of all donations.
B. The value of donations of cash, including stocks, real estate, and merchandise to be used by the approved organization is the value determined for federal tax purposes using IRS regulations (26 CFR 1 et seq., and as amended).
C. The value of merchandise, other than a motor vehicle, donated to be sold, auctioned or raffled is the lesser of the value determined for federal tax purposes using IRS regulations or the actual proceeds received by the approved organization.
D. The value of a motor vehicle donated to be sold, auctioned, or raffled is the value determined for federal tax purposes using IRS regulations.
E. The value assigned for donated rent/lease of the approved organization's facility must be reasonable and cannot exceed the prevailing square footage rental charge for comparable property.
F. The value of professional and contracting services is determined as follows:
1. When a business donates professional or contracting services provided by employees, the value of the donation shall be equal to the salary that such employee was actually paid for the period of time that such employee rendered professional or contracting services to the approved organization. Operating overhead and benefit costs are not included in determining the value.
2. When a sole proprietor, partner in a partnership, or member of a limited liability company renders professional or contracting services to an approved organization, the value of the professional or contracting services shall not exceed the lesser of the reasonable cost for similar services from other providers or the maximum amount set forth in §§ 58.1-439.22 and 58.1-439.23 of the Code of Virginia.
Statutory Authority
§§ 58.1-439.20 and 63.2-217 of the Code of Virginia.
Historical Notes
Derived from Virginia Register Volume 15, Issue 9, eff. February 17, 1999; amended, Virginia Register Volume 18, Issue 12, eff. April 1, 2002; Volume 23, Issue 22, eff. September 1, 2007; Volume 25, Issue 23, eff. September 1, 2009.
22VAC40-41-50. Donations by businesses and health care professionals.
A. As provided by § 58.1-439.21 of the Code of Virginia, a business firm shall be eligible for a tax credit based on the value of the money, property, professional services, and contracting services donated by the business firm during its taxable year to an approved organization.
B. No tax credit shall be granted to any business firm for donations to an approved organization providing job training or education for individuals employed by the business firm.
C. Health care professionals that meet certain conditions, as specified in § 58.1-439.22 C of the Code of Virginia, shall be eligible for a tax credit based on the time spent in providing health care services for such clinic.
D. Mediators that meet certain conditions, as specified in § 58.1-439.22 C of the Code of Virginia, shall be eligible for a tax credit based on the time spent in providing mediation services at the direction of an approved organization regardless of where the service is delivered.
E. Physician specialists shall be eligible for tax credits when donating specialty medical services to patients referred from an approved organization, as specified in § 58.1-439.22 D of the Code of Virginia.
F. All donations must be made directly to the approved organization without any conditions or expectation of monetary benefit. Discounted donations and bargain sales are not allowable donations for the Neighborhood Assistance Program.
G. Granting of tax credits shall conform to the minimum and maximum amounts prescribed in § 58.1-439.21 of the Code of Virginia.
H. Credits granted to a partnership, electing small business (Subchapter S) corporation, or limited liability company shall be allocated to their individual partners, shareholders, or members, respectively, in proportion to their ownership or interest in such business entities.
I. The approved organization and donor shall complete a certification on a form prescribed by the Department of Social Services, as specified in § 58.1-439.21 C of the Code of Virginia.
J. All certifications must be submitted to the Department of Social Services within four years of the date of donation.
K. Upon receipt and approval of the certification, the commissioner shall issue a tax credit certificate to the business.
Statutory Authority
§§ 58.1-439.20 and 63.2-217 of the Code of Virginia.
Historical Notes
Derived from Virginia Register Volume 15, Issue 9, eff. February 17, 1999; amended, Virginia Register Volume 18, Issue 12, eff. April 1, 2002; Volume 23, Issue 22, eff. September 1, 2007; Volume 25, Issue 23, eff. September 1, 2009; Volume 29, Issue 1, eff. October 10, 2012; Volume 32, Issue 6, eff. December 31, 2015.
22VAC40-41-55. Donations by individuals.
A. As provided in § 58.1-439.24 of the Code of Virginia, an individual shall be eligible for a tax credit for a cash donation or a donation of marketable securities to an approved organization.
B. Such donations are subject to the minimum and maximum amounts and other provisions set forth in § 58.1-439.24 of the Code of Virginia.
C. The approved organization and the individual shall complete a certification on a form prescribed by the Department of Social Services, as specified in § 58.1-439.24 E of the Code of Virginia.
D. All certifications must be submitted to the Department of Social Services within four years of the date of donation.
E. Upon receipt and approval of the certification, the commissioner shall issue a tax credit certificate to the individual.
Statutory Authority
§§ 58.1-439.20 and 63.2-217 of the Code of Virginia.
Historical Notes
Derived from Virginia Register Volume 18, Issue 12, eff. April 1, 2002; amended, Virginia Register Volume 23, Issue 22, eff. September 1, 2007; Volume 25, Issue 23, eff. September 1, 2009; Errata, 25:25 VA.R. 4447 August 17, 2009; amended, Virginia Register Volume 29, Issue 1, eff. October 10, 2012; Volume 32, Issue 6, eff. December 31, 2015.
22VAC40-41-60. Determining date of donation.
A. The date of donation for cash, including stocks, real estate, and merchandise to be used by the approved organization, is the date used for federal tax purposes according to IRS regulations.
B. The date of the donation for merchandise donated to be sold, auctioned, or raffled is the date the proceeds were received by the approved organization.
C. The date of donation for professional services is the date the service is completed.
D. The date of donation for donated rent/lease is the effective date of the lease.
Statutory Authority
§§ 58.1-439.20 and 63.2-217 of the Code of Virginia.
Historical Notes
Derived from Virginia Register Volume 15, Issue 9, eff. February 17, 1999; amended, Virginia Register Volume 23, Issue 22, eff. September 1, 2007; Volume 25, Issue 23, eff. September 1, 2009.