Form 306 - Virginia Coal Related Refundable Tax Credits - 2015 Page 2
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7Instructions for Completing Form 306 - Coal Related Refundable Tax Credits
TAX BULLETIN: See Virginia Tax Bulletin 97-1 for additional information and examples on how this credit applies for current and
future taxable years. The bulletin is available by writing to the Virginia Department of Taxation, Forms Request Unit, P. O. Box
1317, Richmond, VA 23218-1317, calling (804) 367-8031 or visiting the Department’s website
You may claim only the Coalfield Employment
tonnage report (Form DM-CM-2), will be aggregated for the
Enhancement Tax Credit OR the Virginia Coal
calendar year. The total hours from all tonnage reports filed by
the entity will be divided by 1,920 equivalent hours per job to
Employment and Production Incentive Tax Credit that
derive the number of coal mining jobs for the employment factor
has been allocated to you per ton of coal.
computation.
Note: A taxpayer with facilities that do not have an assigned Mine
Part I - Qualifications
Index Number from the DMME, such as stand alone preparation
Qualifications for the coal credit and coal bed methane credit are
plants, coal handling facilities, shops or administrative or
listed separately below. If additional guidance is needed to determine
engineering facilities, who wishes to file employment data from
if you qualify for either credit, see the box above.
these facilities for the purpose of calculating the employment
factor, may file a separate annual tonnage report (Form DM-CM-2)
Coal Credit Qualifications
with the DMME, inserting “none” in the space for the mine
Check this box on Form 306, Part I, if you meet all coal credit
index number and leaving the tonnage spaces blank. When
qualifications below.
completing the form, if coal mining jobs are allocated to one or
1. The person (individual, partnership, corporation, estate or trust)
more contractor(s), enclose an explanation with Form DM-CM-2.
earning this credit has an economic ownership interest in coal
6. The person earning this credit may not also claim the Virginia
mined in Virginia for which the coal credit is claimed. “Economic
Coal Employment and Production Incentive Tax Credit unless
interest” is defined as the economic ownership interest required
received as a distribution from a different entity.
by IRC § 611 as of December 31, 1977, in order to claim the
depletion deduction. Note that a party who only receives an arm’s
Coal Bed Methane Credit Qualifications
length royalty is not considered as having an economic interest in
Check this box on Form 306, Part I, if you meet the qualification
coal mined in Virginia. Coal is considered “mined in Virginia” if the
below.
portal through which the coal is brought to the surface is located
A coal bed methane gas producer is the person who was issued a
in Virginia. Coal mined by surface methods will be considered
permit by the DMME to operate a coal bed methane well.
“mined in Virginia” if mined from within the boundaries of the
permit area defined in Va. Code § 45.1-229.
The Virginia Coal Employment and Production Incentive Tax
Credit Qualifications
2. The same ton of coal used to compute this credit is not being used
to compute the Coal Employment and Production Incentive Tax
Check this box on Form 306, Part I, if you meet the qualification
Credit (Va. Code § 58.1-433.1 or § 58.1-2626.1). For purposes
below.
of this credit, “ton” means the same as customarily used in
The person (individual, partnership, corporation, estate or trust) has
transactions between a knowledgeable buyer and seller.
an economic ownership interest in coal mined in Virginia as described
3. The seam thickness of coal mined using underground mining
in the Coal Credit Qualifications and has been allocated this credit
methods (Part III, Section A) is based on the weighted average
by a qualifying electricity generator. The allocation must be executed
isopach mapping of actual coal seam thickness by mine as
by December 31 of the year that the coal was purchased. Schedule
certified by a professional engineer. Isopach maps must have
306C AND all corresponding Forms 306T must be completed and
been provided to the Virginia Department of Mines, Minerals and
enclosed with this return.
Energy (DMME) within the time frames specified in Virginia Tax
Part II - Tons of Coal Sold
Bulletin 97-1. (If claiming this credit for coal mined from a seam
36” thick or less, the DMME acknowledgment must be enclosed
Special Instructions for Line 2 (and Schedule 306A)
with the income tax return of the entity which qualified for this
If coal was sold during the taxable year and a statement was supplied
credit.) All information upon which the isopach mapping is based
to the purchaser that the coal is Virginia mined coal for purposes of
will be available for review by the DMME.
claiming another coal credit, complete Schedule 306A to determine
4. The employment factor (Part III, Section B) is the ratio of the
the tonnage amounts to enter on Line 2. Instructions for completing
number of Virginia coal mining jobs, for the calendar year ending
Schedule 306A are provided on the schedule. The other coal credit
during the taxable year in which the credit is earned, to the
referenced above is:
number of Virginia coal mining jobs for the prior calendar year.
• Coal Employment and Production Incentive Tax Credit
It is computed on the total number of Virginia coal mining jobs
(Va. Code §§ 58.1-433.1 and 58.1-2626.1).
and not on a per mine basis. Results are always rounded up.
Form 306, Part II, Line by Line Instructions
Taxpayers who file consolidated or combined returns will calculate
the employment factor and corresponding credit on a separate
1. Enter the number of tons of qualifying coal sold during the taxable
company basis.
year. Complete Columns A, B and C to report this tonnage by
each mining method.
5. A Virginia coal mining job will be considered to be any job required
to be reported on the Mine Safety and Health Administration
2. Enter the number of tons of qualifying coal sold during the
(MSHA) Form 7000-2 pursuant to 30 CFR Part 50 as of
taxable year for which the purchaser is eligible for a coal credit.
January 1, 1995, and for which wages are properly reported
Complete Columns A, B and C to report this tonnage by each
on Form VEC-FC-20 pursuant to the Virginia Unemployment
mining method.
Compensation Act (Va. Code § 60.2-100 et seq.). The total
3. Subtract Line 2 from Line 1 for each column. The amounts from
hours worked at these jobs during each quarter, calculated in
this line will be entered on Part III, Lines 1, 2 and 3.
accordance with 30 CFR Part 50 and reported on the DMME
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