Revenue fairness bills heading to conference

February 25, 2020

HB 785 (Watts and Kilgore) and SB 588 (Hanger, and incorporating bills by Senators Favola, Lewis, Mason, and Locke) are working their respective ways toward a conference committee to reconcile the differences between the two bills.  HB 785 was heard in the Senate Finance and Appropriations Committee last week and conformed to SB 588 as it passed the Senate, with one additional amendment (to change the date after which a locality in which a meals tax referendum had failed would need to delay imposing the tax).  The bill then passed the Senate in its amended form.  SB 588 was heard in the House Finance Committee and conformed to HB 785 as it passed the House; the amended bill passed the House floor on February 24.  The next steps are for the House to reject the Senate amendments and vice versa; then each chamber will insist on its amendments and appoint committees of conference to resolve the differences.

The key difference between the two bills is the breadth of the authority they would grant to Counties.  The Senate approach would authorize Counties to impose admissions taxes with a cap of 10 percent (with the exception of James City County and York County); meals taxes with a cap of 6 percent; and cigarette taxes with a cap of 40 cents per pack.  Transient occupancy taxes would be allowed up to 5 percent, with revenues to be dedicated to tourism promotion.  The bill would take effect July 1, 2021, and would require a stakeholder study in the interim of streamlining the process of collecting cigarette taxes.  The bill would also require the Division of Legislative Services to convene a stakeholder workgroup to recommend any additional technical amendments that might be necessary to effectuate the bill’s provisions and to review the differences between County and City authorities and responsibilities.  The Senate has included language in the House bill providing that any County in which a meals tax referendum failed between July 1, 2016, and July 1, 2020, would not be able to impose a meals tax until July 1, 2022.

The House approach would not impose caps on the taxes that might be levied, but would require a county in which a meals tax referendum failed prior to July 1, 2020, to wait six years after the date of the referendum to levy a meals tax (unless a subsequent referendum had passed).  The bill would also require revenues from transient occupancy taxes imposed at rates between 2 percent and 5 percent to be used for tourism promotion, but would allow revenues generated by rates above 5 percent to be used for general purposes.

VACo Contact:  Katie Boyle

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