The Department of Taxation is conducting a study of the effects on local governments of mandatory property tax exemptions for disabled veterans and their spouses. As part of a longstanding effort in support of greater state partnership in this program, VACo and VML worked with advocacy partners to propose a workgroup on this issue through budget language in the 2026 Appropriation Act. The workgroup held its first meeting on September 16, which featured presentations from Department staff and from local governments, including Commissioners of the Revenue, and a perspective from the office of the Secretary of Veterans and Defense Affairs. The budget language directing the convening of the workgroup charges the group with reviewing and collecting data on the cost of the exemption and implications to localities (to include changes to the exemption over time); evaluating legislation previously considered by the General Assembly on the exemptions; and making recommendations to the legislature. A report is due by November 15. In preparation for the workgroup meeting, the Department of Taxation circulated a detailed survey on the local impacts of the exemption; responses were due September 21 and will be incorporated into the final report.
The Constitutional amendment establishing the real property tax exemption was ratified in November 2010 and took effect January 1, 2011. The statewide cost of the exemption has skyrocketed from $8 million in 2011 to an estimated $416 million in 2026, and is projected to approach $600 million by 2028. Some localities are experiencing more significant impacts to their tax bases than others – for example, Stafford County’s exemption represents more than 10 percent of its real estate tax base. Several bills and budget amendments were introduced in the past to provide some state assistance with the lost revenue, but these proposals were not enacted.
Department staff noted that all states provide some kind of property tax relief for veterans, although the structure of these programs varies, with some states imposing residency requirements, capping the assessed value of the property that receives the exemption, or means-testing recipients. Some states assist localities by reimbursing lost revenue, in whole or in part.
Stafford County Chairman Deuntay Diggs and Hampton City Manager Mary Bunting underscored the importance of veterans to their communities and emphasized their focus on the sustainability of the program’s financing. Chairman Diggs and Ms. Bunting documented the significant revenue pressures created by the exemption in their localities. In Stafford County, the program is growing at a rate of 35 percent per year, and is projected to reach $100 million per year in tax relief by FY 2034. In the City of Hampton, the program represents approximately $13.7 million in lost revenue per year, or 8.2 cents on its real estate tax rate. Both local representatives encouraged support for state reimbursement to localities, with the structure of that assistance open for further discussion.
Commissioners of the Revenue for Stafford County (Scott Mayausky) and Isle of Wight County (Gerald Gwaltney) noted the substantial administrative workload associated with the exemption, pointing out that the eligibility determination process can be extensive and that staff time required to verify eligibility and process applications is not reflected in staffing reimbursements by the Compensation Board. The Commissioners noted that total assessed values in the locality’s land book do not reflect tax-exempt property owned by disabled veterans, with potential implications for state funding allocations that rely on the calculation of total assessed value. The statute of limitations for refunds for the disabled veteran real estate exemption is also an unresolved issue.
Thomas Crabbs, Military Liaison in the Office of the Secretary of Veterans and Defense Affairs, noted the substantial economic benefit to Virginia of the state’s large presence of veterans, but also acknowledged the impact to localities of lost tax revenue associated with the exemption. He indicated an interest in a shared state and local government solution that would preserve benefits to veterans.
VACo has historically supported state reimbursement to localities for the lost revenue associated with this mandated exemption and looks forward to further discussions. Counties can submit written comments to Mr. Bing Yee, Senior Tax Law Analyst at the Department of Taxation (bonding.yee@tax.virginia.gov), by September 25.
VACo Contact: Katie Boyle