Title of Regulation: 22VAC40-41. Neighborhood Assistance Tax Credit Program (amending 22VAC40-41-10, 22VAC40-41-20, 22VAC40-41-40, 22VAC40-41-50, 22VAC40-41-55, 22VAC40-41-60).

Statutory Authority: § 63.2-217 of the Code of Virginia.

Effective Date: September 1, 2009.

Agency Contact: J. Mark Grigsby, Director, Office of Community Services, Department of Social Services, 7 North Eighth Street, Richmond, VA 23219, telephone (804) 726-7922, FAX (804) 726-7946, or email james.grigsby@dss.virginia.gov.

Summary:

This regulatory action implements Chapters 463 and 585 of the 2008 Acts of Assembly and Chapters 10 and 851 of the 2009 Acts of Assembly. The proposed amendments (i) update obsolete Code of Virginia citations that resulted from the Neighborhood Assistance Program statutes being moved from Title 63.2 of the Code of Virginia, pertaining to Welfare (Social Services), to Title 58.1, pertaining to Taxation; (ii) change a number of definitions to reflect statutory changes; and (iii) reflect that an organization providing educational services applies to the Superintendent of Public Instruction, not to the Commissioner of the Department of Social Services.

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:

"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.

"Commissioner" means the Commissioner of the Department 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 impoverished people.

"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 impoverished people or (ii) buildings used by neighborhood organizations.

"Education" means any type of scholastic instruction or scholarship scholastic assistance to an individual who is impoverished.

"Housing assistance" means furnishing financial assistance, labor, material, or technical advice to aid the physical improvement of the homes of impoverished people.

"Impoverished people" means, for neighborhood organizations not providing education services, people in Virginia with incomes at or below 150% of the poverty guidelines as defined by the United States Office of Management and Budget as published in the Federal Register (62 FR 10856), and as updated and republished annually in the Federal Register updated periodically in the Federal Register by the U.S. Department of Health and Human Services under the authority of 42 USC § 9902(2).

"Job training" means any type of instruction to an individual who is impoverished that enables him to acquire vocational skills so that he can become employable or able to seek a higher grade of employment.

"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 for impoverished people, and holding a ruling from the Internal Revenue Service of the United States 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.

"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 and, 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.

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 impoverished people.

B. Neighborhood organizations wishing that do not provide education services and that wish to become an approved organization must submit an application and provide the following information 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 their eligibility as a neighborhood organization, the programs being conducted, the impoverished people 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. A copy of the neighborhood organization's current audit, a copy of the organization's current federal form 990, a current brochure describing the organization's programs, and a copy of the annual report filed with the Department of Agriculture and Consumer Services' Division of Consumer Protection.

4. 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 must meet the following criteria:

1. Applicants must have been in operation as a viable entity, providing neighborhood assistance for impoverished people, for at least 12 months.

2. Applicants must be able to demonstrate that at least 50% of the total people served and at least 50% of the total expenditures were for impoverished people.

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. 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.

E. 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.

F. The commissioner may terminate an approved organization's eligibility based on a finding of program abuse involving illegal activities or fraudulent reporting on contributions.

G. Any neighborhood organization that disagrees with the disposition of its application, or its termination as an approved organization, may appeal to the commissioner in writing for a reconsideration. Such requests must be made within 30 days of the denial or termination. The commissioner will act on the request and render a final decision within 30 days of the request for reconsideration.

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.

D. 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.

E. 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 §§ 63.2-2004 58.1-439.22 and 63.2-2005 58.1-439.23 of the Code of Virginia.

22VAC40-41-50. Donations by businesses and health care professionals.

A. As provided by § 63.2-2003 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 § 63.2-2004 C 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. 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.

E. Granting of tax credits shall conform to the minimum and maximum amounts prescribed in § 63.2-2003 58.1-439.21 of the Code of Virginia.

F. 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.

G. The approved organization and donor shall complete a certification on a form prescribed by the Department of Social Services. The certification shall identify the date, type, and value of the donation.

H. All certifications must be submitted to the Department of Social Services within four years of the date of donation.

I. Upon receipt and approval of the certification, the commissioner shall issue a tax credit certificate to the business.

22VAC40-41-55. Donations by individuals.

A. As provided in § 63.2-2006 58.1-430.24 of the Code of Virginia, an individual shall be eligible for a tax credit for a cash donation to an approved organization.

B. Such donations are subject to the minimum and maximum amounts and other provisions set forth in § 63.2-2006 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. The certification shall identify the date and amount of the donation.

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.

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.