Could a separated spouse claim half of a conservation credit when Department transfer forms named only her husband?

Subject

Credit transfer forms controlled despite spouse's marital-property claim

Plain-English summary

Virginia denied the wife's claim to half of a Land Preservation Tax Credit because the official transfer documents named only her husband. The husband bought the credit in December 2006. After the couple separated, he filed a separate 2006 Virginia return claiming all of it; the wife later filed separately and claimed half.

Section 58.1-513(C) required a prescribed notification and form for a credit transfer. The Department had received those documents showing the husband as the sole transferee, so it properly allowed his full claim and disallowed the wife's.

The wife argued that half was her marital property. Virginia said the Department had no jurisdiction to decide what property was marital or supervise equitable distribution. Its role was limited to administering the tax-transfer records. Her 2006 assessment therefore remained due.

What this means for you

• Transferred-credit forms determine who the Department recognizes as the transferee.
• A marital-property claim does not authorize tax administrators to rewrite transfer records.
• Divorce and equitable-distribution issues must be resolved in the forum with jurisdiction over marital property.
• Separate filing can expose a disagreement that a planned joint return would have obscured.

Common questions

Who did the transfer records name?

The husband alone.

Could Virginia divide the credit as marital property?

No. The Department said it lacked that jurisdiction.

Was the wife's assessment removed?

No.

Citations and references

• Va. Code § 58.1-513(C).
• Virginia Public Document 99-103.

Source

• Landing page: Virginia Laws, Rules & Decisions
• Ruling: P.D. 10-66

Original ruling text

May 12, 2010

Re: § 58.1-1821 Application: Individual Income Tax

Dear *:

This will reply to your letter in which you seek correction of the individual income tax assessment issued to * (the "Taxpayer") for the taxable year ended December 31, 2006. I apologize for the delay in responding to your letter.

FACTS

In December 2006, the Taxpayer's husband purchased a Land Preservation Tax Credit (the "Credit") in his name. The Taxpayer and the husband separated in 2007 and their divorce became final in 2009. They originally agreed to file a joint Virginia income tax return for the 2006 taxable year. However, in July 2007, the husband filed a separate 2006 Virginia return claiming the entire Credit. In October 2008, the Taxpayer filed a separate 2006 Virginia return and claimed half the Credit.

The Department allowed the full Credit claimed by the husband and disallowed the Credit claimed by the Taxpayer. As a result, additional Virginia income tax and interest was assessed against the Taxpayer. The Taxpayer appeals the assessment, contending that the Department should allow her to claim half of the Credit because it constituted her share of marital property.

DETERMINATION

Virginia Code § 58.1-513 C provides that a taxpayer carrying a Credit may transfer an unused but otherwise allowable Credit to another taxpayer. Notification of such a transfer must be made to the Department through a prescribed procedure and form.

The Department received a notification that the Credit had been transferred to the husband through the required procedure using the proper forms. The Department's documents show the husband as the sole transferee of the Credit. In accordance with these procedures, the Department properly allowed the husband to claim the full Credit on his 2006 Virginia return.

With regard to marital property settlement, the Department lacks the jurisdiction to determine what property constitutes marital property, or to oversee the equitable distribution of marital property. See Public Document (P.D.) 99-103 (5/10/1999). The Department's role is limited to properly administering the laws regarding taxation. As such, the Department does not have the authority to distribute any of the Credit between the husband and the Taxpayer.

Based on the foregoing, the assessment issued to the Taxpayer for the taxable year ended December 31, 2006 is, correct and remains due and payable. The Taxpayer will receive an updated bill with interest accrued to date. The outstanding balance should be paid within 30 days of the bill date to avoid the accrual of additional interest.

The Code of Virginia sections and public document cited are available on-line at www.tax.virginia.gov in the Tax Policy Library 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,

Janie E. Bowen

Tax Commissioner

AR/1-3829616781.B