The House Finance Committee and Senate Finance and Appropriations Committee began hearing legislation last week. Several bills of interest to local government were considered, as discussed further below.
Real property tax legislation
HB 175 (Feggans) authorizes localities to provide a total exemption from real property taxes for surviving spouses of members of the Armed Forces who died in the line of duty. Under current law, such property is only exempt up to the average assessed value for a dwelling situated on property that is zoned as single-family residential, with the remaining property value subject to real estate taxation. This bill is on the House floor. SB 8 (DeSteph), a similar bill, has not yet been heard in the Senate.
HB 282 (Callsen), which is also on the House floor, adds the cities of Charlottesville, Falls Church, Fredericksburg, and Newport News to a statute that allows several other cities to impose real estate taxes on improvements to real property at a different rate than the tax imposed on the land on which improvements are located, provided that the rate imposed on improvements does not exceed the rate imposed on the land. Legislation which would have extended this authority to all localities (HB 10 (McNamara)), and allowed the tax rate on improvements to real property to be greater than, less than, or equal to the tax rate imposed on the land, was tabled in subcommittee.
Grocery tax
Several bills have been introduced to eliminate the remaining 1 percent local option sales and use tax on groceries and replace the lost revenue with a state appropriation based on each locality’s monthly pro rata share of total sales and use tax collections. SB 9 (Suetterlein) was heard in Senate Finance and Appropriations last week and “carried over,” or continued to 2027; VACo spoke in opposition and registered concerns about eliminating a local revenue source and relying on the state to continue to appropriate the replacement revenue in perpetuity. Similar bills HB 13 (McNamara) and HB 703 (Tata) have not yet been heard.
Plastic bag tax
HB 341 (Martinez), which requires that counties imposing a disposable plastic bag tax distribute a portion of these revenues to their towns based on the local sales tax distribution formula, is on the House floor.
Car tax study
HJ 34 (Franklin, L.) and SR 6 (Marsden) are study directives that would require the Department of Taxation to study options for abolishing the car tax. The Department would be required to quantify the financial impact on localities and examine alternative revenue sources to replace the lost local revenue. The Department would be required to consult with VACo and the Virginia Municipal League as part of the study. VACo is supporting this approach of gathering essential data, in consultation with localities, to inform further discussions of this issue. HJ 34 is on the House Floor; SR 6 has been referred to Senate Rules.
VACo Contact: Katie Boyle