Uncasing Virginia’s Farm Wineries and Vineyards Tax Credit

Overview of farm wineries and vineyards tax credit

The roots of America’s wine industry extend deep into the clay soils of Virginia. With a dynamic history spanning over 400 years, Virginia’s wine industry generates close to $6.41 billion in total economic activity, including sizeable federal, state, and local tax revenues. In 2022, Virginia’s wine industry paid approximately $209.10 million in state and local taxes, along with nearly $288.62 million in federal taxes, totaling $497.72 million in tax revenues. From the Eastern Shore to the Appalachian Mountains, Virginia’s 300+ wineries have made the state one of America’s leading wine producers and a premier agritourism destination.

To incentivize winery and vineyard establishment and expansion in this industry, the Virginia General Assembly enacted the Farm Wineries and Vineyards Tax Credit, Va. Code § 58.1-339.12. Administered by the Virginia Department of Taxation, this individual and corporate income tax credit is available in an amount equal to 25% of the cost of all qualified capital expenditures and improvements made in connection with the establishment of new Virginia farm wineries and vineyards.

Tax credit requirements

“Qualified capital expenditures” include expenditures made by the taxpayer for the purchase and/or installation of items such as barrels, irrigation equipment, chemicals, grape plants, tractors, and other specifically listed expenditures. The taxpayer must be a “Virginia vineyard” consisting of at least one contiguous acre of agricultural lands located in Virginia that is dedicated to the growing of grapes that are used or are intended to be used in the production of wine by a Virginia farm winery. Alternatively, the taxpayer must be a “Virginia farm winery” located in Virginia and licensed pursuant to Va. Code § 4.1-206.1.

The total amount of this tax credit for a calendar year cannot exceed $250,000, and any credits that exceed that amount will be allocated on a pro rata basis. Any credit amounts that exceed a taxpayer’s liability can be carried forward for 10 years. To apply for this credit, taxpayers must submit Form FWV at the beginning of each calendar year for qualified capital expenditures made during the preceding taxable year. Form FWV and any attachments must be completed and mailed to the Department of Taxation no later than April 1 to claim expenditures for the preceding taxable year. The credit is issued by June 30. There may be additional forms for business and pass-through entities claiming the credit. Taxpayers must apply for this tax credit each year, but they cannot claim both this credit and a federal deduction for the same expenses under IRC § 179.

Thomas Jefferson — America’s first wine connoisseur — is often attributed with stating, “Good wine is a necessity of life for me.” We at Keiter CPAs think that good tax credits, too, are a necessity of life to preserve and grow Virginia’s vital wine industry. Let us help your Virginia vineyard or farm winery take advantage of this tax credit today. Contact your Keiter Opportunity Advisor or Email | Call: 804.747.0000.

Sources

• Wine America – Virginia Economic Impact Study 2022
• Virginia Tourism Corporation – The Birthplace of American Wine: The Untold Story behind Virginia’s Vines
• Thomas Jefferson Monticello – Good wine is a necessity of life for me