The Department of Taxation convened a stakeholder group on July 23 to assist in developing a uniform procedure for localities to adjust bills and account balances for payments made in cash to address shortages of pennies. Since the United States Mint ceased production of penny coins last year, local offices have experienced problems in securing pennies to make exact change for taxpayers who pay bills in cash; to address these issues, House Finance Chair Vivian Watts introduced HB 954 at the request of the Treasurers Association of Virginia and with the support of VACo. As introduced, the bill provided broad authority for local governing bodies to set out procedures for the adjustment of bills and account balances for taxes and other charges due to the locality, which could include rounding to the nearest five-cent increment or the write-down or write-off of sums due that are less than five cents. The bill was amended in the Senate to provide that this authority would expire July 1, 2027; in the meantime, the Department of Taxation was directed to evaluate options and recommend a uniform procedure for localities to address making change for cash payments. Henrico County’s Treasury Director, Jennifer Casanova, is serving as a subject matter expert on the workgroup.
At the July 23 meeting, staff at the Department of Taxation shared findings from their research on how other states and other countries have addressed the elimination of the penny coin or equivalent denomination. In general, there is consensus among other countries that taxes should be calculated on the exact, pre-rounding amount of the tax base; rounding is performed only on the final payment and only for cash payments, not electronic transactions. Few states have taken action on this topic, with only Indiana and Kentucky passing legislation to govern rounding in cash transactions. Indiana requires the state and localities to round down when collecting cash payments, while Kentucky provides for symmetric rounding (rounding up or down as appropriate) to the nearest five-cent increment for local government collections. Legislation has been proposed in Pennsylvania and Ohio, but not enacted.
Department staff raised a series of questions for stakeholders to consider, including whether symmetric rounding or always rounding down would be the more workable approach; whether local financial systems would be able to accommodate rounding or would require a transition period; and whether writing off small balances of less than five cents or carrying them forward would be operationally feasible. Subject matter experts noted that localities collect cash payments for transactions other than taxes, including utility bills, library fines, and other fees. There was also discussion about how state agencies handle cash transactions. The Department plans to conduct a survey of localities to compile answers to these questions and will solicit written comment on its draft report. A final report is due to the General Assembly by November 1.
VACo Contact: Katie Boyle