An amended version of HB 1896 (Byron) was recommended for reporting by the House Finance Committee’s subcommittee #3, which met on Monday, January 30. As introduced, the bill would have allowed banks with $40 billion or greater in Virginia deposits to choose to pay their bank franchise taxes directly to the state, which would allocate the local portion to a separate fund and distribute those revenues statewide, based on the latest yearly estimate of population provided by the Weldon Cooper Center for Public Service at the University of Virginia. Given the difficulty in determining the impact on each locality and working through other technical details within the constraints of a short legislative session, the industry proposed removing these provisions and instead convening a workgroup on the issue. The substitute version approved by the subcommittee on Monday does the following:
- Requires electronic filing of bank franchise tax returns and directs the Department of Taxation to maintain a secure online portal to receive returns and other required submissions for use by commissioners of the revenue (or other local assessing officers) in accepting returns and certifying and transmitting returns to the Department of Taxation. The Department of Taxation has estimated initial implementation costs of $844,280 in FY 2024, $233,970 in FY 2025, and $156,000 per year thereafter.
- Allows banks to elect a 60-day extension to file the tax return (although payment would still be due in June).
- Requires localities to provide electronic access to real estate assessment records to banks.
- Takes effect January 1, 2025.
- Directs the Department of Taxation to convene a work group to assess potential alternative methods for the filing and allocation of bank franchise tax revenues for consideration in the 2024 Session of the General Assembly. The enactment clause directs the work group to evaluate proposals to allow banks to submit their bank franchise tax payments to the Commonwealth, the formula used to redistribute funds to local governments, the impact of the new method of collecting and distributing funds on counties, cities, and towns, the timeline for implementation of any proposed changes, and the cost to the Commonwealth and local governments of implementing these changes.
VACo views the substitute as an improvement in that it provides time for a more thorough vetting of any proposal to change filing and allocation methods and requires the state to develop the online filing system. VACo appreciates the discussion with the proponents of the legislation and has indicated that it does not object to the bill in its current form.
SB 1182 (Ruff), the companion bill, was reported from Senate Finance and Appropriations on Tuesday morning with the same provisions.
VACo Contact: Katie Boyle