Form 306 - Virginia Coal Related Refundable Tax Credits (Page 2 of 7) in pdf

Instructions 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 from the Virginia Department of Taxation, Forms Request Unit, P. O. Box 1317,

Richmond, VA 23218-1317. Telephone: (804) 440-2541 or from

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

Employment and Production Incentive Tax Credit that

the entity will be divided by 1,920 equivalent hours per job to

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), attach an explanation to 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 Virginia Department of Mines, Minerals and Energy

“mined in Virginia” if mined from within the boundaries of the

(DMME) to operate a coal bed methane well.

permit area defined in Va. Code § 45.1-229.

2. The same ton of coal used to compute this credit is not being used

The Virginia Coal Employment and Production Incentive Tax

Credit Qualifications

to compute the following credit: coal employment and production

incentive tax credit (Va. Code § 433.1 or § 58.1-2626.1). For

Check this box on Form 306, Part I, if you meet the qualification

purposes of this credit, “ton” means the same as customarily

below.

used in transactions between a knowledgeable buyer and seller.

The person (individual, partnership, corporation, estate or trust) has

3. The seam thickness of coal mined using underground mining

an economic ownership interest in coal mined in Virginia as described

methods (Part III, Section A) is based on the weighted average

in the Coal Credit Qualifications and has been allocated this credit

isopach mapping of actual coal seam thickness by mine as

by a qualifying electricity generator. The allocation must be executed

certified by a professional engineer. Isopach maps must have

by December 31 of the year that the coal was purchased. Schedule

been provided to the Virginia Department of Mines, Minerals and

306C AND all corresponding Forms 306T must be completed and

Energy (DMME) within the time frames specified in Virginia Tax

attached to this return.

Bulletin 97-1. (If claiming this credit for coal mined from a seam

Part II - Tons of Coal Sold

36” thick or less, the DMME acknowledgment must be attached to

the income tax return of the entity which qualified for this credit.)

Special Instructions for Line 2 (and Schedule 306A)

All information upon which the isopach mapping is based will be

If coal was sold during the taxable year and a statement was supplied

available for review by the DMME.

to the purchaser that the coal is Virginia mined coal for purposes of

4. The employment factor (Part III, Section B) is the ratio of the

claiming another coal credit, complete Schedule 306A to determine

number of Virginia coal mining jobs, for the calendar year ending

the tonnage amounts to enter on Line 2. Instructions for completing

during the taxable year in which the credit is earned, to the

Schedule 306A are on the schedule. The other coal credit referenced

number of Virginia coal mining jobs for the prior calendar year.

above is:

It is computed on the total number of Virginia coal mining jobs

• Coal Employment and Production Incentive Tax Credit

and not on a per mine basis. Results are always rounded up.

(Va. Code § 433.1 and § 58.1-2626.1).

Taxpayers who file consolidated or combined returns will calculate

Form 306, Part II, Line by Line Instructions

the employment factor and corresponding credit on a separate

company basis.

1. Enter the number of tons of qualifying coal sold during the taxable

year. Complete Columns A, B and C to report this tonnage by

5. A Virginia coal mining job will be considered to be any job required

each mining method.

to be reported on the Mine Safety and Health Administration

(MSHA) Form 7000-2 pursuant to 30 CFR Part 50 as of

2. Enter the number of tons of qualifying coal sold during the

January 1, 1995, and for which wages are properly reported

taxable year for which the purchaser is eligible for a coal credit.

on Form VEC-FC-20 pursuant to the Virginia Unemployment

Complete Columns A, B and C to report this tonnage by each

Compensation Act (Va. Code § 60.2-100 et seq.). The total

mining method.

hours worked at these jobs during each quarter, calculated in

3. Subtract Line 2 from Line 1 for each column. The amounts from

accordance with 30 CFR Part 50 and reported on the DMME

this line will be entered on Part III, Lines 1, 2 and 3.

Page 2

Form 306 - Virginia Coal Related Refundable Tax Credits Page 2

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