Tax Type
Local Taxes
Property Tax
Description
Exemption; Previously Assessed Tax
Topic
Collection of Tax
Exemptions
Local Power to Tax
Local Taxes Discussion
Property Subject to Tax
Date Issued
11-28-1984
[Opinion - Virginia Attorney General: 1984 at 332]
REQUEST BY: Honorable Owen B. Pickett Member, House of Delegates
OPINION BY: Gerald L. Baliles, Attorney General
OPINION:
You have asked whether a locality may, with specific authorization from the General Assembly, exempt real property from taxation for a prior tax year for which the tax has been legally assessed but currently remains uncollected.
The authority to classify or designate certain entities as tax exempt lies only with the General Assembly pursuant to Art. X, § 6(a)(6) of the Constitution of Virginia (1971).1 Approval by three-fourths vote of each house of the General Assembly is required in order for these entities to obtain tax exempt status.2 Consequently, a locality has no authority to grant a property tax exemption. The question then becomes whether the General Assembly may exempt real property from taxation pursuant to Art. X, § 6(a)(6) for a prior tax year for which the tax has been previously legally assessed but currently remains uncollected.
In holding a statute valid which imposed a retroactive tax, the Supreme Court of Virginia stated: "It is well settled that the mere retroactivity of a statute affecting taxation does not render it unconstitutional. Such a statute is valid if it is not arbitrary and does not disturb vested rights, impair contractual obligations, or violate due process." Pipeline Company v. Commonwealth, 206 Va. 517, 521, 145 S.E.2d 227, 231 (1965), appeal dismissed, 384 U.S. 268 (1966);3 see also Eaton v. Davis, 176 Va. 330, 336, 10 S.E.2d 893 (1940); 1983-1984 Report of the Attorney General at 343.
In Pipeline, the Court spoke of "statute[s] affecting taxation . . ." without limiting its decision to statutes which only impose taxes. Thus, the four standards4 cited for testing the validity of retroactive tax legislation also apply to retroactive exemption statutes.
If the General Assembly passes retroactive tax exemption legislation which has the effect of prohibiting collection, the issue may arise whether the right to collect an already validly assessed local tax is a vested property right of the locality which subsequent State legislation could not defeat. A locality's power to tax is derived solely from delegation of that power by the General Assembly. See Art. X, § 4; § 58-758. Cf. Whiting & Als. v. Town of West Point, 88 Va. 905, 907, 14 S.E. 698, 699 (1892). In this regard, the legislature has authority to make modifications pertaining to a locality's authority so that it cannot be validly contended that a locality acquires a vested right superior to the authority of the General Assembly in collection of a particular tax.
Based on the foregoing, it is my opinion that the General Assembly, but not a locality, may exempt real property from taxation pursuant to Art. X, § 6(a)(6) for a prior tax year for which the tax has previously been legally assessed but currently remains uncollected.5
1 Certain other entities are exempted from taxation directly by the Constitution without the necessity of legislative action. See Art. X, § 6(a)(1)-(a)(4) concerning the property of public bodies, churches, nonprofit cemeteries, public libraries and nonprofit institutions of learning. I assume that you are concerned only with legislatively authorized exemptions granted pursuant to Art. X, § 6(a)(6).
2 All legislation granting the tax exempt designation pursuant to Art. X, § 6(a)(6) is currently codified in §§ 58-12.2 through 58-12.187. These sections have been recodified, effective January 1, 1985, as § 58.1-3650.1 et seq. Presumably, all future legislation granting tax exemptions under Art X, § 6(a)(6) will be similarly codified in serial order.
3 In the Pipeline decision, the Court relied on a United States Supreme Court case which affirmed the constitutionality of a retroactive state income tax. See Welch v. Henry, 305 U.S. 134 (1938).
4 The four tests are whether the statute (1) is arbitrary, (2) disturbs vested rights, (3) impairs contractual obligations, and (4) violates due process.
5 I note that statutes are normally given only prospective application. Thus, if the General Assembly intends for a statute to have retroactive effect, it should clearly evidence that intent. See Whitlock v. Hawkins, 105 Va. 242, 249, 53 S.E.401 (1906).
Attorney General's Opinion