Opinion Number
11-056
Tax Type
Individual Income Tax
Property Tax
Description
Exemption from taxation under Article X, § 6-A and § 55-3219.5 does not apply in favor of a veteran who is a proprietary lessee in a real estate cooperative,
Topic
Exemptions
Date Issued
12-21-2012

December 21, 2012


Mr. Jerald D. Banagan
Real Estate Assessor, City of Virginia Beach
Municipal Center, Building 18
2424 Courthouse Drive
Virginia Beach, Virginia 23456-9054

Dear Mr. Banagan:

I am responding to your request for an official advisory opinion in accordance with § 2.2-505 of the Code of Virginia.

Issue Presented


You ask whether the exemption from real estate taxation provided by Article X, Section 6-A, of the Virginia Constitution as implemented by § 58.1-3219.5 applies to certain interests under the Virginia Real Estate Cooperative Act ("Act").1 You specifically inquire whether the cooperative interest 2of a veteran in a real estate cooperative;3 is exempt from taxation provided the veteran otherwise satisfies all of the requirements set forth in the Article X, Section 6-A exemption and in § 58.1-3219.5 implementing the exemption.

Response


It is my opinion that the exemption from taxation under Article X, § 6-A and § 55-3219.5 does not apply in favor of a veteran who is a proprietary lessee in a real estate cooperative, regardless of whether the veteran otherwise satisfies all of the other requirements imposed by law to claim the exemption.

Background

Tax Exemption

At the general election held on November 2, 2010, the voters of the Commonwealth were presented the following referendum question related to amending the Constitution of Virginia:
    • Shall the Constitution be amended to require the General Assembly to provide a real property tax exemption for the principal residence of a veteran, or his or her surviving spouse, if the veteran has a 100 percent service-connected, permanent, and total disability?4

With 82.4 percent of the voters answering the question in the affinnative,5 Article X is now amended to include a new § 6-A, which provides that:
    • Notwithstanding the provisions of Section 6, the General Assembly by general law, and within the restrictions and conditions prescribed therein, shall exempt from taxation the real property, including the joint real property of husband and wife, of any veteran who has been determined by the United States Department of Veterans Affairs or its successor agency pursuant to federal law to have a one hundred percent service-connected, permanent, and total disability, and who occupies the real property as his or her principal place of residence. The General Assembly shall also provide this exemption from taxation for real property owned by the surviving spouse of a veteran who was eligible for the exemption provided in this section, so long as the surviving spouse does not remarry and continues the real property as his or her principal place of residence.[6]

As a result of the passage of this referendum question, the 2011 Session of the General Assembly enacted legislation to implement this real property tax exemption, adding into Chapter 32 of Title 58.1, a new Article 2.3, consisting of §§ 58.1-3219.5 and 58.1-3219.67 The substantive elements implementing the tax exemption provided by the Constitutional amendment are contained in § 58.1-3219.5.
Real Estate Cooperatives

The Act, adopted in 1982, contains numerous definitions in § 55-426 that are essential to understanding its many other provisions. Also, the Act contains a number of provisions related to its applicability, including its applicability to cooperatives created prior to July 1, 1982, as primarily set forth in §§ 55-425 and 55-428E. For purposes of this opinion, I must assume that the Act applies given that your opinion request does not identify any particular cooperative. Regarding the ownership of the cooperative's real estate, the definition of a "cooperative" in § 55-426 clearly provides that the real estate comprising a cooperative is owned by an association of proprietary lessees. In fact, a cooperative is created under the Act "only by recording a declaration executed in the same manner as a deed, and by conveying to the association the real estate subject to that declarcition."8 In contrast to a condominium regime where individual units are owned separately,9 the cooperative, by its very nature, is owned by an association consisting of proprietary lessees.10

The Declaration11 of a cooperative is the instrument or instruments that create[s] the cooperative and establishes the framework for its long-term governance and operations. In selling an interest in a cooperative, all relevant instruments forming a part of the Declaration must be disclosed in a public offering statement that meets the requirements of §§ 55-477 and 55-478.
Applicable Law and Discussion

In cases of statutory interpretation, the language of the statute is the first point of inquiry.' When the language of a statute is clear on its face, no further inquiry is needed.I3 The critical language in this statute is as follows:
    • For purposes of this exemption, real property of any veteran includes real property (i) held by a veteran alone or in conjunction with the veteran's spouse as tenant or tenants for life or joint lives, (ii) held in a revocable inter vivos trust over which the veteran or the veteran and his spouse hold the power of revocation, or (iii) held in an irrevocable trust under which a veteran alone or in conjunction with his spouse possesses a life estate or an estate for joint lives or enjoys a continuing right of use or support. The term does not include any interest held under a leasehold or term of years. "14

Exemptions from real property taxation are narrowly construed and, in doubtful cases, must be construed against the application of the exemption.I5 Where the language is clear, the result is even more readily obtained. The cooperative interest of an otherwise qualified veteran in a real estate cooperative is "an ownership interest in the association coupled with a possessory interest in a unit under a proprietary lease "16 The real property interest of the individual living in the unit is a leasehold interest in the property. Because the definition of real property for purposes of the exemption excludes leasehold interests, the cooperative interest held in a real estate cooperative cannot qualify for the exemption.

Conclusion


Accordingly, it is my opinion that the exemption from taxation under Article X, § 6-A and § 55­3219.5 does not apply in favor of a veteran who is a proprietary lessee in a real estate cooperative, regardless of whether the veteran otherwise satisfies all of the other requirements imposed by law to claim the exemption.

With kindest regards, I am,
                • Very truly yours,


                  Kenneth T. Cuccinelli, II
                  Attorney General

1.VA. CODE ANN. §§ 55-424 through 55-506 (2012).
2.The Act defines "cooperative interest" as "an ownership interest in the association coupled with a possessory interest in a unit under a proprietary lease," and further defines the term "association" as the "proprietary lessees' association organized under § 55-458." Section 55426.
3.A "cooperative" is defined as "real estate owned by an association, each of the members of which is entitled, by virtue of his ownership interest in the association, to exclusive possession of a unit." Section 55-426.
4 See 2010 Va. Acts chs. 358, 588.
5 See VIRGINIA STATE BOARD OF ELECTIONS, Nov. 2, 2010, GENERAL AND SPECIAL ELECTIONS OFFICIAL RESULTS, available at https://www.voterinfo.sbe.virginia.govielection/DATA/2010/EB24720D-F5C6-4880-8DC5- 12AE4DOC3772Jofficial/9_s.shtml.
6 See 2010 Va. Acts chs. 358, 588.
7 See 2011 Va. Acts chs. 769, 840.
8.Section 55-438. (Emphasis added.)
9 Section 55-79.42 (2012).
10. In a prior opinion of this Office dealing with the applicability of a tax exemption for the elderly to interests in real estate cooperatives, the Attorney General determined that the cooperative association owned the real estate in the cooperative. Consequently, elderly owners of an interest in a real estate cooperative who otherwise met the criteria of the statute did not qualify for the tax exemption because they did not own the real estate as required by the statute. 1999 Op. Va. Att'y Gen. 205.
11 See § 55-442.
12 See Gwaltney of Smithfield, Ltd. v. Chesapeake Bay Found., Inc:, 484 U.S. 49, 56 (1989) ("It is well settled that the starting point for interpreting a statute is the language of the statute itself.")
13 Wakole v. Barber, 283 Va. 488, 495, 722 S.E.2d 238 (2012) ("Issues of statutory interpretation are pure questions of law that we review de novo. Conyers v. Martial Arts World of Richmond, Inc., 273 Va. 96, 104, 639 S.E.2d 174, 178 (2007). 'When the language of a statute is unambiguous, we are bound by the plain meaning of that language. Furthermore, we must give effect to the legislature's intention as expressed by the language used unless a literal interpretation of the language would result in a manifest absurdity." Id (internal citations omitted))
14 VA. CODE ANN. § 58.1-3219.5(D) (Supp. 2012) (emphasis added). See 2012 Va. Acts chs. 75 & 263 (adding the language quoted and indicating that this language is declaratory of existing law).
is Forst v. Rockingham, 222 Va. 270, 275, 279 S. E. 2d 400, 403 (1981); 198243 Op. Va. Att'y. Gen. 579, 580 (citing § 58-760.1, predecessor statute to § 58.1-3210).
16.See § 55-426.



Attorney General's Opinion

Last Updated 08/25/2014 16:43