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Update on Finance Legislation

After crossover, two finance-related bills of concern remain under consideration.

HB 2200 (Robinson) deals with BPOL taxes for oncology practices and would require a deduction from gross receipts for any amount paid for anti-cancer drugs that are purchased by a medical practice and administered to patients whose treatment is paid for by Medicare, Medicaid, or TRICARE.  VACo is opposed to a mandatory approach to tax relief for these businesses.

Although the proponents of the legislation intend to address a specific type of business and provide for a narrow carveout, the legislation sets a precedent for other types of businesses seeking similar exemptions in the future.  VACo has encouraged proponents of the legislation to explore existing regulatory authority available to localities to establish subclassifications within the existing BPOL business categories and impose taxes at lower rates on businesses within such subclassifications.

HB 2200 passed the House and will be considered by the Senate Finance and Appropriations Committee next week.

HB 1470 (Watts) provides that taxpayers who are eligible for the real property tax exemptions for disabled veterans and their surviving spouses and for the surviving spouses of servicemembers killed in action are entitled to refunds of taxes paid retroactive to their date of eligibility, potentially extending back to the date the exemptions were first enacted (2011 for the disabled veterans and surviving spouse exemption and 2015 for the exemption for surviving spouses of servicemembers killed in action). Refunds for most local taxes extend back to the current and three prior years.  The bill seeks to clarify some ambiguity between the statutes enacting the property tax exemptions and the general statute governing tax refunds.  VACo has been working with the patron and seeks to establish a reasonable lookback period that does not expose localities to potentially large, unanticipated refunds while also affording taxpayers a fair opportunity to apply for exemptions.  This bill will likely also be heard by the Senate Finance and Appropriations Committee next week.

Other finance-related bills of interest that “crossed over” from their originating chambers include the following.

  • HB 1442 (McNamara) requires local tax-assessing officers to report transient occupancy tax rates to the Department of Taxation for publication on the Department’s website and specifies that tax-assessing officers must provide adequate information to accommodations intermediaries to enable them to identify transient occupancy rates and any discounts, deductions, or exemptions. The bill includes reporting requirements for accommodations intermediaries.  This bill is headed to the Senate floor.
  • HB 1486 (Webert) expands the list of certain farm machinery and farm implements that a locality may exempt from personal property taxes to include motor vehicles used primarily for agricultural purposes, privately owned trailers primarily used by farmers in their farming operations, and season-extending vegetable hoop houses used for in-field production of produce. Equipment and machinery used in a nursery are currently included in the list of allowable exemptions; the bill expands the definition of “nursery.”  This bill is headed to the Senate floor.
  • HB 1685 (Greenhalgh), as introduced, would have capped the maximum penalties that could be assessed on certain unpaid business taxes, in addition to requiring certain notice to the taxpayer. After discussions with VACo and the Commissioners of the Revenue Association and the Treasurers’ Association, the patron removed provisions dealing with penalties, instead focusing the legislation on notice requirements.  The bill now requires license application forms to include the due date for the application, and the amount of the penalty charged for late application filing, the underpayment of estimated tax, and the late payment of tax.  Language also requires the assessing official, upon assessing any penalty or interest, to notify the affected taxpayer of the amount of such penalty, any interest assessed, and the total amount of tax owed.  This bill is headed to the Senate floor.
  • HB 1942 (Durant) adds to the required components of the notice of changes in assessments that is mandated to be provided to property owners. The bill requires that in any locality that conducts an annual or biennial reassessment of real estate or in which reassessment of real estate is conducted primarily by employees of the county, city, or town under direction of the commissioner of the revenue, the notice would have to include the effective tax rate increase if the proposed rate exceeds the lowered tax rate (the tax rate which would levy the same amount of real estate tax as the previous year).  This information is already required to be included in the notice advertising the public hearing that is required if a locality is not proposing to reduce the tax rate so as to generate no more than 101 percent of the previous year’s real property tax levies.  This bill is headed to the Senate floor.
  • HB 2110 (Bourne) extends the maximum duration of an installment agreement to pay delinquent taxes from 60 to 72 months. This bill is headed to the Senate floor.
  • HB 2414 (Scott, D.) allows a disabled veteran or surviving spouse to claim the real property tax exemption required by the Virginia Constitution prior to purchasing a qualifying dwelling by submitting required documentation to the commissioner of the revenue or other designated officer. The exemption would not take effect until the veteran takes ownership of the property, but the commissioner or designated officer would be required to process the application and notify the veteran within 20 business days following receipt of the application.
  • SB 1511 (Hanger) provides that property that formerly participated in a state or federal soil and water conservation program and continues to meet the qualifications of the program, but no longer receives payments, still qualifies as real estate devoted to agricultural or horticultural use for purposes of land use value assessment. A landowner in this situation would be able to certify on the application form that the land continues to meet the requirements of the program.  The bill also provides that the presence of noxious weeds or woody growth on the property may not be the sole reason for denying a designation as real estate devoted to agricultural use if the property owner provides documentation of a control method of such weeds or growth.

The following legislation did not advance beyond its originating chamber:

  • Legislation dealing with the sales and use tax on food for human consumption and essential personal hygiene items was passed by indefinitely in the Senate early in the session, and the remaining House bills did not make it to the House floor. HB 1484 (McNamara), which would have eliminated the local option sales tax on groceries, with lost revenue replaced via a supplemental schools payment, and HB 2196 (Byron), which would have exempted essential personal hygiene products and infant formula from the local option sales tax, were reported from the House Finance Committee and sent to the House Appropriations Committee, where they were not heard.  HB 1686 (Greenhalgh), which would have permitted localities to exempt groceries from sales tax, was not heard in House Finance.
  • HB 1749 (Walker), which would have limited local ability to raise revenues by imposing a new process for adoption of the real estate tax rate in situations in which real property assessments are increasing, failed to emerge from a subcommittee of House Finance. Under the bill, if the proposed increase to the tax rate (above the lowered rate that would otherwise be required to limit real property tax revenue growth to 1 percent or less) is less than three percent, the increase could be approved by a majority vote of the governing body after a public hearing, which could not be held on the same day as the annual budget hearing.  A proposed increase of more than three but less than five percent could be approved after public hearing but would require a supermajority vote of two-thirds of the governing body.  An increase to the rate of levy of 5 percent or greater would require a referendum.  VACo spoke against the bill during its initial hearing and members opted against proceeding with the bill during a second subcommittee meeting on January 31.
  • HB 2176 (Sickles), as introduced, would have required five percent of the individual income tax revenues collected from residents of a locality to be distributed to that locality, to be used for school construction or renovation purposes. Under the bill, a locality would be required to maintain its level of expenditure for public school purposes; however, a locality could reduce this level of expenditure to account for a loss of revenues resulting from a reduction in the machinery and tools tax rate.  This bill was tabled in a subcommittee of House Finance.  VACo has spoken to the patron about continued discussion of the concept.
  • SB 1032 (Stuart) would require the Commonwealth to subsidize local real estate tax relief for disabled veterans and surviving spouses of members of the United States Armed Forces killed in action for localities where more than one percent of the real estate tax base is lost due to such state-mandated tax relief programs. VACo has historically supported this legislation, which was passed by indefinitely in Senate Finance and Appropriations.

VACo Contact:  Katie Boyle

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