Hundreds of investors who bought tax credits connected with the Silver Cos. Celebrate Virginia project have gotten some bad news.
The credits, which shaved millions of dollars off tax returns, are no good, according to the state Department of Taxation.
Letters from the agency began showing up in mailboxes here last week.
One of the letters, to an investor who asked to remain anonymous, begins: "Dear taxpayer: You have been identified as a direct or indirect recipient of one or more land preservation tax credits that originated with conservation easements" with Greenbank LLC, Celebrate Virginia Corporate Campus LLC, and Silver Celebrate Virginia Golf--three Silver Cos. subsidiaries.
Celebrate Virginia, currently under development straddling the Rappahannock River in Fredericksburg and Stafford County, is the region's largest mixed-used project.
"The [department] has determined that the value of the conservation easements has been overstated " the letter reads, going on to say that credits claimed under each entity were reduced by 100 percent. The letter does not explain why that reduction was made.
As part of Celebrate Virginia, the Silver Cos. set up conservation easements on 308 acres in Stafford, and 129 acres in Fredericksburg.
The company then claimed land preservation tax credits under a Virginia program that allowed it to use up to $100,000 in credits annually for up to six years, and to sell the rest. The state encourages the voluntary protection of open space by giving landowners and investors the tax breaks.
Silver qualified for up to $28 million in tax credits, but sold them at an attractive discount--at about 50 cents on the dollar.
Jud Honaker, an executive officer for the Silver Cos., said yesterday that the company believes the credits are legitimate.
Honaker said about 400 investors bought them. He did not know the total dollar amount sold.
"We will be taking action to deal with the state's claim," he said. "This is clearly far from being over."
Jesse Holshouser, the Silver Cos.' chief operating officer in Boca Raton, Fla., is handling the matter. He said yesterday that the companies became aware of the state's position only last week.
THE TAX CREDITS AND HOW THEY WORK
Under Virginia's land preservation tax-credit program, the Silver Cos. in 2003 claimed $28 million in credits, based on 50 percent of the lands' total appraised value.
The company used what credits it needed, up to $100,000 a year, and opted to sell the rest.
To make its excess credits even more attractive to investors, Silver offered them at 50 cents on the dollar. According to the prospectus, for each Class A share, costing $1,000, purchasers received $2,000 in credits.
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