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Constitutional Amendments requiring personal property tax exemption for disabled veterans reintroduced; helpful bills attempt to mitigate effect of real property tax exemptions on localities

Constitutional amendments that would mandate an exemption from personal property taxes for one vehicle owned by veteran with a 100 percent service-connected, permanent, and total disability have been reintroduced this year as HJ 103 (Helmer), SJ 33 (Reeves), and SJ 58 (Morrissey).  Constitutional amendments must pass the General Assembly twice in identical form – once before and once after an intervening election – before being placed before the voters for approval via referendum.  If the amendments and the accompanying bills directing the holding of the referendum pass in 2020, the amendments will be on the ballot in the November 2020 general election and, if approved, would take effect January 1, 2021.

VACo opposed the passage of the amendments as a mandate in 2019, as localities already have the ability to set a different tax rate for a motor vehicle owned by a veteran with certain service-connected disabilities, and several localities are already using this authority to provide tax relief, but the version of the amendments emerging from conference included the mandatory language.

VACo has also raised concerns about expanding mandatory tax relief to another type of property in light of the growing costs to localities of the mandatory real estate tax exemptions for disabled veterans and their surviving spouses and the surviving spouses of servicemembers who are killed in action.  Information compiled by the Commissioners of the Revenue in 2019 indicated that these exemptions cost localities approximately $53 million in 2018.

VACo was encouraged to see legislation introduced this session that attempts to mitigate the effect of these exemptions on the local property tax base.  HB 363 (Cole, M.) and SB 143 (Stuart) provide that the state would reimburse localities in which more than 1 percent of the taxable real estate is exempt pursuant to the mandatory exemptions for disabled veterans and surviving spouses.  Localities would document the amount of affected property in an application to the Auditor of Public Accounts, who would publish an annual list of affected localities.  The Governor would be required to include in the introduced budget a proposed appropriation for a state subsidy for qualifying localities (the subsidy would exclude the amount of foregone real estate tax revenue attributable to 1 percent of real estate being tax-exempt pursuant to the mandatory exemptions).  HB 1496 (Mugler) is a similar bill, but does not include the 1 percent threshold for a locality to qualify for the state subsidy.

VACo supports these bills and spoke in favor when SB 143 was heard in the Senate Finance and Appropriations Committee on January 21.  Members expressed a willingness to consider the issue but were uncomfortable with an indeterminate potential fiscal impact to the state; the bill was continued to 2021.  HB 363 and HB 1496 have been referred to the House Finance Committee.

VACo Contact:  Katie Boyle

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