94-227 | Virginia Tax

Tax Type

General Provisions

Description

1994 Legislative Summary

Topic

Basis of Tax

Date Issued

05-30-1994

VIRGINIA DEPARTMENT OF TAXATION

Legislative Summary

STATE TAX LEGISLATION

GENERAL PROVISIONS

Secrecy of Information

House Bill 1399 (Chapter 493) requires state agencies and other administrative or regulatory units of state government to provide the names, addresses and social numbers of taxpayers to the Tax Commissioner for use in the performance of his official duties regarding the administration and enforcement of the tax laws. The Tax Commissioner's request must be made in writing, setting forth the reason for the request. In addition, any information received from state agencies and other units of state government would be subject to the prohibitions and penalties prescribed in the secrecy of information provisions.

The bill also (i) makes it a Class 2 misdemeanor for any person to disseminate, publish or cause to be published any confidential tax document (a Class 2 misdemeanor is punishable by confinement in jail for not more than six months and a fine of up to $ 1,000, either or both); (ii) restricts the publication of "delinquent" lists by tax officials to lists showing the names of only those taxpayers who are currently delinquent rather than those who failed to timely pay; and (iii) clarifies that the imprinting of motor vehicle identification information on a motor vehicle local license decal would not be a violation of the secrecy of tax information laws.

Effective Date: July 1, 1994

Code Section Amended: § 58.1-3

Offers in Compromise/Responsible Officers

House Bill 1136 (Chapter 800) clarifies that TAX may deposit payments submitted with offers in compromise without prejudice to the Tax Commissioner's acceptance or denial of the offer. This will eliminate any concern that the deposit of funds prior to the issuance of a final determination may be deemed tacit acceptance of the offer. Should an offer be rejected, the amount deposited would be credited towards the total amount due under the assessment.

The bill also codifies current tax policy by permitting the conversion of any tax administered by TAX to a responsible officer.

Effective Date: July 1, 1994

Code Sections Amended: §§ 58.1-105 and 58.1-1813

Tax Payment by Credit or Debit Card

Senate Bill 278 (Chapter 369) allows TAX to accept credit card and debit card payments for all amounts owed. It also permits TAX to pass on to the taxpayer the bank's service fees, not to exceed 4% of the amount of tax, penalty and interest owed. Initially, TAX will limit this form of payment to delinquent taxes.

Effective Date: July 1, 1994

Code Section Added: § 58.1-13.1

INCOME TAX

Corporations

Fixed Date Conformity - Repealed

Senate Bill 185 (Chapter 1) retroactively repeals Chapter 640 of the Acts of Assembly of 1993, which temporarily froze Virginia's conformity to federal income tax law as it existed on December 31, 1992. In effect, the bill reconforms Virginia tax law to federal tax law as if deconformity had never occurred. Thus, no additions or subtractions for deconformity items are required on Virginia income tax returns for 1993.

Virginia Tax Bulletin 94-2 (February 15, 1994) gave taxpayers instructions for filing 1993 tax returns. Most taxpayers were not affected by the change because only a limited number of taxpayers would have been required to make the special fixed date conformity modifications.

Effective Date: Taxable years beginning on and after January 1, 1993

Amended: Chapter 640 of the 1993 Acts of Assembly

Income Tax Credits and Sales Tax Exemption - Deferred

Senate Bill 282 (Chapter 611) provides additional funding for various local educational programs by:

Deferring from 1994 to 1996 the provisions of the low-income housing credit;
Deferring from July 1, 1994 to July 1, 1996, the sales and use tax exemption for nonprescription drugs and proprietary medicines; and
Deferring from July 1, 1994 to July 1, 1996, the effective date for the increase in the total amount of tax credits available under the Neighborhood Assistance Act. It also extends the program two years by authorizing credits through fiscal year 1998.

Deferring from 1994 to 1996 the provisions of the low-income housing credit;
Deferring from July 1, 1994 to July 1, 1996, the sales and use tax exemption for nonprescription drugs and proprietary medicines; and
Deferring from July 1, 1994 to July 1, 1996, the effective date for the increase in the total amount of tax credits available under the Neighborhood Assistance Act. It also extends the program two years by authorizing credits through fiscal year 1998.

The low-income housing credit is the state version of the similar federal credit. Both individuals and corporations are entitled to the credit if they have received the equivalent federal credit. The Department of Housing and Community Development certifies the amount of the credit, but the aggregate of all credits may not exceed $ 3.5 million annually. The federal credit, which is a prerequisite for the state credit, was permanently extended by the 1993 Omnibus Budget Reconciliation Act (Public Law 103-66). This bill postpones implementation of the credit from taxable year 1994 to taxable year 1996.

The Neighborhood Assistance Act provides a credit to businesses which invest in approved neighborhood assistance projects to benefit low income individuals. The Department of Social Services approves the projects and certifies when a business makes a qualifying investment. In 1993, the General Assembly increased the total amount of tax credits available under the Act for each fiscal year from $ 5.25 million to $ 8 million and extended the program through fiscal year 1996. These changes were to become effective July 1, 1994. This bill defers the effective date for the increase in total credits available; thus the $ 5.25 million credit limitation will be effective through June 30, 1996. The total amount of credits available will increase to $ 8 million for each fiscal year from July 1, 1996 through June 30, 1998. No credits will be authorized after June 30, 1998.

The additional revenue generated by this bill, with the exception of the 1/2% retail sales and use tax deposited in the Transportation Trust Fund and the 1% local retail sales and use tax returned to localities by point of sale, shall be used for reducing class size in the early grades (Kindergarten through 3), providing programs for unserved at-risk children four year of age, and providing expanded access to educational technology.

Effective Date: July 1, 1994

Code Sections Amended: §§ 36-55.63, 58.1-336, 58.1-435, 58.1-609.7 and 63.1-323

Major Business Facility Job Tax Credit - New

House Bill 1407 (Chapter 768) and Senate Bill 606 (Chapter 750) allow individuals, estates, trusts, corporations, banks, insurance companies and public service corporations engaged in qualifying industries a Virginia tax credit if the taxpayer creates over 100 new full-time jobs in Virginia. The bills also allow a tax credit to businesses engaged in any industry if the taxpayer establishes a qualifying administrative facility in Virginia and creates over 100 new full-time jobs. If a taxpayer is located in an enterprise zone, or in an economically distressed city or county, the threshold at which a company earns a credit is reduced from 100 new jobs to 50. An area will be designated as "economically distressed" by the Department of Economic Development if it is a city or county with an unemployment rate for the preceding year of at least .5% higher than the previous year's average statewide unemployment rate.

The credit is equal to $ 1,000 per each qualifying new job in excess of the 100 job threshold, and allowed ratably in thirds over a three year period. The credit only applies to facilities where an announcement to expand or establish such a facility was made on or after January 1, 1994.

Qualifying industries include: (i) manufacturing or mining; (ii) agriculture, forestry or fishing; (iii) transportation or communications; or (iv) a public utility subject to the corporation income tax. In addition, an administrative facility engaged in the following activities may satisfy the requirements for the credit: (i) central administrative offices and warehouses; (ii) research, development and testing laboratories; (iii) computer programming, data-processing and other computer related services facilities; and (iv) financial, insurance and real estate services.

The credit is limited to the amount of tax paid by the company. The credit is not refundable, but unused credits may be carried forward to the five succeeding taxable years; no carrybacks are permitted. The bills also contain a recapture provision that ensures that the credit will not be available unless the positions are of a permanent, long-term nature. The credit will be reduced proportionately if employment decreases during the five years following the initial credit year. However, if employment falls below the 100 employee threshold (50 for enterprise zones or economically distressed areas) during the five years following the credit year, all of the credit will be recaptured. Additionally, the bills limit job churning -- transfers of job functions and/or employees between related parties.

Effective Date: Taxable years beginning on or after January 1, 1995, but before January 1, 2005

Code Section Added: § 58.1-439

Tax Credit for Clean Fuel Vehicles

House Bill 949 (Chapter 164) limits the credit allowed against income taxes for purchases of clean-fuel vehicles and certain refueling property to vehicles principally garaged in Virginia or refueling property placed in service in Virginia. The bill does not change the amount of the credit, which is limited to 10% of the deduction permissible under IRC § 179A.

The clean-fuel credit was enacted by the 1993 General Assembly. The limitation contained in this bill is made retroactive to the effective date of the original legislation creating the credit.

Effective Date: Taxable years beginning on and after January 1, 1993

Code Section Amended: § 58.1-438.1

House Bill 97 (Chapter 875) amends the income tax credit for purchases of clean fuel vehicles to include certain electric vehicles, eligible for a federal credit under IRC § 30.

As originally enacted in 1993, the Virginia credit was tied to the federal deduction for clean fuel property under IRC § 179A. Although the federal law included electricity in its definition of clean fuel, electric vehicles eligible for a separate federal credit were excluded from the provisions of IRC § 179A. Thus, the Virginia credit did not apply to such vehicles.

The credit is limited to 10% of the deduction allowed under IRC § 179A or the costs used to compute the credit under IRC § 30. If the amount of the credit exceeds the taxpayer's tax liability for the year of purchase, it may be carried forward up to 5 years. The provisions of IRC §§ 179A and 30 apply only to property placed in service after June 30, 1993.

Effective Date: January 1, 1995

Code Section Amended: § 58.1-438.1

Age Deduction

House Bill 1244 (Chapter 488) changes the effective date of the age deduction from January 1, 1991 to January 1, 1990. During taxable year 1990, elderly taxpayers were entitled to claim an age subtraction. The age deduction has been in effect for taxable years beginning on and after January 1, 1991.

Taxpayers who claimed an age subtraction on their 1990 individual income tax return are allowed to amend their 1990 tax returns to claim an age deduction in lieu of the age subtraction -- however, the bill only allows one day, July 1, 1994, for taxpayers to file an amended return. Taxpayers who file amended returns before or after July 1, 1994, would not be eligible to claim the age deduction for taxable year 1990.

Effective Date: Change is made retroactively effective to taxable years beginning on and after January 1, 1990 and ending before January 1, 1991. However, for purposes of filing an amended return for taxable year 1990, taxpayers are only allowed a one-day filing period, limited to July 1, 1994.

Code Sections Amended: §§ 58.1-322 and 58.1-1823

Subtraction for Federally Disallowed Research and Development Expenses

House Bill 1298 (Chapter 590) permits individuals, corporations, S corporations shareholders and individual partners to subtract research and development expenses which are disallowed in computing federal taxable income.

Federal law provides an income tax credit for research and development expenses basically equal to 20% of the excess of "qualified research expenses," over a base amount of expenses. The expenses used for the income tax credit are not permitted to be taken as a deduction in determining federal taxable income. Although Virginia law automatically gives taxpayers the deductions permitted under the Internal Revenue Code, federal tax credits do not flow through. Since Virginia has no similar credit nor does it permit the disallowed expenses to be subtracted in computing Virginia taxable income, taxpayers do not currently receive any Virginia income tax benefit for such expenses.

This bill will provide a benefit to taxpayers by allowing a deduction on the Virginia return for the amount of expenses not allowed as a deduction at the federal level.

Effective Date: Taxable years beginning on and after January 1, 1995

Code Sections Amended: §§ 58.1-322 and 58.1-402

Out-of-State Tax Credit for Taxes Paid on Sale of Principal Residence

House Bill 335 (Chapter 195) expands the current out-of-state tax credit to allow Virginia residents to claim a credit for income taxes paid to another state on the sale of a principal residence. Currently, the credit is limited to taxes paid to another sate on earned or business income subject to taxation in another state.

Presently, an individual who has moved into Virginia and sells a principal residence located in another state potentially could be taxed on the gain by Virginia and the state in which the home is located. The existing out-of-state credit would not be applicable as the gain on the sale of the home represents neither earned nor business income.

This bill would allow a credit for income taxes paid to another state on the sale of a former home only to the extent that any portion of the gain is included in federal adjusted gross income and subject to taxation in Virginia.

Effective Date: Taxable years beginning on and after January 1, 1994

Code Section Amended: § 58.1-332

Income Tax Checkoff - Community Policing Fund

House Bill 425 (Chapter 637) adds a new income tax refund checkoff to allow taxpayers to contribute to the Community Policing Fund. Money disbursed from the Fund will be used to provide grants to local law enforcement agencies for the purchase of equipment or support services, as approved by the Criminal Justice Services Board, relating to community policing.

Effective Date: Taxable years beginning on and after January 1, 1994, and before January 1, 2000

Code Section Added: § 58.1-346.5

Voter Registration Information

House Bill 282 (Chapter 632) requires TAX to include in the packet of information and forms for individual taxpayers an application to register to vote and instructions for completing and mailing the application. The bill is contingent upon the approval of a constitutional amendment which will allow registration by mail.

Effective Date: Taxable years beginning on and after January 1, 1995, contingent upon the approval of the people at the November 1994 election of the amendment to the Constitution of Virginia proposed in Chapter 891 of the 1993 Acts of Assembly.

Code Section Added: § 58.1-341.1

Statute of Limitations for Federal Retirees

House Bill 4006 (Chapter 2, Special Session) provides that the one year period for filing amended returns as set forth in Va. Code § 58.1-1823(B) has not begun as a result of the June 18, 1993 United States Supreme Court decision in Harper v. Virginia Department of Taxation, 112 S.Ct. 2519.

Va. Code § 58.1-1823(B) gives federal retirees one year from the final legal decision on the federal pension issue in which to file amended returns. Since the Supreme Court's June 18, 1993 decision is not the final decision on the case, the statute of limitations has not begun and federal retirees do not need to file anything with TAX at this time to protect their rights to a refund.

Effective Date: Emergency, effective from date of passage

Code Section Added: § 58.1-1823

Setoff Debt Collection Act

Recovery of Administrative Fees for Set-off Debt Collection

House Bill 1143 (Chapter 484) allows all localities which participate under the Setoff Debt Collection Act to recover administrative costs associated with a debt in an amount not to exceed $ 25 per claim.

The purpose of the Setoff Debt Collection Act is to augment existing collection procedures for debts owed to the Commonwealth. This mechanism allows TAX to seize individual income tax refunds for outstanding debts owed to agencies of the Commonwealth, Virginia local governments and the Virginia court system. Under current law, localities collect only a net amount and must absorb all their administrative costs. The Setoff Debt Collection Act allows TAX to retain up to 25% of any amount collected for localities to offset its costs. Currently, TAX only retains 4% of the debts collected for localities.

Effective Date: July 1, 1994

Code Section Added: § 58.1-520.1

Seizure of Refunds for Criminal Restitution

House Bill 418 (Chapter 197) allows TAX to offset state income tax refunds under the Setoff Debt Collection Act of individuals owing criminal restitution.

Currently, court fines and costs may be collected through the setoff program. This bill includes court ordered restitution as a delinquent debt of the Commonwealth and allows for the collection of such outstanding debts under the Setoff Debt Collection Act.

Effective Date: July 1, 1994

Code Sections Amended: §§ 19.2-305.1 and 58.1-520

INCOME TAX WITHHOLDING

Withholding Allowance - Adjustment Deferred

Senate Bill 5 (Chapter 139) and House Bill 6 (Chapter 147) defer from January 1, 1995 to January 1, 1997 the effective date of a 1989 law change which allows taxpayers to claim additional withholding allowances to reflect their anticipated itemized deductions. The law change applies only to individuals who itemize their deductions. Legislation enacted in 1990 and 1992 deferred the original effective date from January 1, 1991 to January 1, 1993 and January 1, 1995, respectively.

Current law allows a taxpayer to claim additional withholding allowances when the withholding tables would produce a substantial refund and authorization has been obtained from the Tax Commissioner. Such requests have been granted administratively and remain available to taxpayers until the new law becomes effective.

Effective Date: January 1, 1997

Amended: Second enactment clause of Chapter 289 of the 1989 Acts of Assembly, as amended and reenacted by Chapter 888 of the 1990 Acts of Assembly and Chapters 385 and 401 of the 1992 Acts of Assembly

RETAIL SALES AND USE TAX

Exemptions - Extensions, Expansions and Additions

House Bill 20 (Chapter 381) and Senate Bill 34 (Chapter 365) extend several expiring provisions, expand, clarify and add new exemptions.

* Extensions

* The exemptions found in § 58.1-609.7 (medical-related exemptions) and § 58.1-609.8 (nonprofit civic and community service exemptions) are extended to June 30, 1998;

* The exemptions found in § 58.1-609.9 (nonprofit cultural organization exemptions) are extended to June 30, 1999.

The exemptions were to expire on June 30, 1994. The new sunset dates correspond to the next cycle year in which the General Assembly will receive the Sales and Use Tax Expenditure Study for each grouping.

* Expansions

* Agricultural exemption extended to beekeepers. The bills exempt all tangible personal property, other than structural construction materials, purchased by beekeepers, provided such property is used in agricultural production for market. Additionally, the purchase of bees themselves is exempt. The bills also include provisions which treat products derived from bees and beekeeping as agricultural commodities -- thus, the purchase of honey for processing would be exempt.

* Ronald McDonald House exemption applies to organizations providing services to "individuals," not just children.

* Clarifications

* Nonprofit tissue bank exemption applies to organizations established to procure, preserve, process, allocate or distribute bones, organs, blood, skin and other human tissue.

* Items used directly in the drilling, extraction, refining or processing of natural gas or oil and the reclamation of the well area are exempt from the tax. Currently, Va. Code § 58.1-609.3(2) exempts fuel, power, energy, supplies, machinery or tools and repairs thereof used directly in manufacturing, mining and refining. The existing exemption applies to gas and oil well drilling and to processing and refining of gas or oil. Consequently, this exemption merely codifies current department policy.

* New

* Tangible personal property purchased for use or consumption or sold by a volunteer medical services organization which is i) exempt from taxation under IRC § 501(c)(3); and ii) established to provide reconstructive surgery and related health care to indigent children and young adults in developing countries and the United States is exempt from the tax. One organization, Operation Smile, Inc., is known to qualify for the exemption. The exemption is effective from July 1, 1994 through June 30, 1998.

Effective Date: July 1, 1994

Code Sections Affected: §§ 58.1-609.2, 58.1-609.3, 58.1-609.7, 58.1-609.8 and 58.1-609.9

Exemption for Volunteer Emergency Organizations - Expanded

House Bill 141 (Chapter 325) expands the current sales and use tax exemption for volunteer fire departments, rescue squads or their auxiliaries to include their nonprofit junior organizations and nonprofit associations whose membership is composed of volunteer fire departments and rescue squads. The exemption would apply to both purchases and sales by the qualifying organizations.

Effective Date: July 1, 1994

Code Section Amended: § 58.1-609.8

Refund for Certain Building Materials - Extended

Resale Exemption Restriction for Antiques- Deferred

House Bill 1175 (Chapter 728) extends for five years the current program to refund sales tax paid on building materials by nonprofit low-income housing organizations like Habitat for Humanity and Housing Partnership, Inc. The provision was scheduled to expire on July 1, 1994; it is extended until June 30, 1999.

In order to be eligible for the refund provided by this bill, an organization must meet the following criteria:

* Exempt from taxation under IRC § 501(c)(3);

* Organized and operated primarily to acquire land and purchase materials to erect or rehabilitate low-cost homes on such land;

* Sell the homes at cost on a nondiscriminatory basis to persons who otherwise would not be able to afford to buy a home through conventional means.

Also, an organization which is exempt from taxation under IRC § 501(c)(3) may apply for a refund of sales tax paid on tangible personal property used to repair or rehabilitate homes owned by low-income persons who cannot afford to finance the repairs themselves.

This bill also postpones the effective date of the 1993 law change affecting antique dealers from January 1, 1994 to July 1, 1995. The 1993 law change prohibits Virginia dealers from accepting resale exemption certificates from an out-of-state purchaser of antiques or other tangible personal property which is more than 50 years old, unless the purchaser is registered to remit tax to the Commonwealth or posts security to secure the collection of the tax. The purchaser would be required to pay the sales tax and apply for a refund of the tax paid after the property is resold, provided it is resold within 18 months.

Virginia Tax Bulletin (April 11, 1994) provides dealers with information on changes regarding the acceptance of resale exemption certificates and procedures for seeking refunds for prior compliance. In addition, TAX recognizes that there are many issues surrounding the implementation of the new law and is forming an advisory group to work with the department over the next year to resolve the issues and ensure that the requirements established under the law are satisfied.

Effective Date: Housing refund provision extended through June 30, 1999; Antique dealer resale exemption restriction deferred to July 1, 1995

Code Sections Amended: § 58.1-608.1

Amended: Second enactment clause of Chapter 371 of the Acts of Assembly of 1993

Exemption for Printing - Expanded

House Bill 144 (Chapter 446) exempts an out-of-state advertising business from the sales and use tax on the purchase of catalogs and similar printed materials from a Virginia printer which are stored in Virginia for 12 months or less for use out-of-state.

Printing for out-of-state use is generally exempt under current law even if initial delivery occurs in Virginia. However, advertising businesses enjoy an exemption on their sales of advertising, and must pay the tax on all tangible personal property purchased for use in advertising, including printing. As such, advertising businesses have been precluded from taking advantage of the sales tax exemption for catalogs and similar printed materials.

This bill would exempt only sales of printed materials to out-of-state advertising agencies. Sales to in-state advertising businesses would remain taxable as the sale of the advertising itself is exempt in Virginia.

Effective Date: July 1, 1994

Code Section Amended: § 58.1-609.6

Maintenance Contracts - New

Senate Bill 28 (Chapter 595) exempts from the sales and use tax one-half of the total charge for maintenance contracts when such contracts provide for both repair or replacement parts and repair labor. Parts used to fulfill the terms of the maintenance contracts may be purchased under a resale exemption certificate.

Under current policy, maintenance contracts which provide:

Only repair labor are deemed service contracts and thus are nontaxable.

Only replacement parts represent the sale of tangible personal property and thus are taxable.

Both repair or replacement parts and labor are deemed to represent the sale of tangible personal property. The total charge for such contracts is subject to the tax since at the time the contract is executed, it cannot be determined what portion of future repair transactions will represent taxable parts and what portion will represent exempt labor.

This bill would only affect plans involving parts and labor. Such plans would be taxed on 50% of the cost of the plans rather than 100%.

Effective Date: January 1, 1996

Code Section Amended: § 58.1-609.5

Legislative Consideration of Exemptions

Senate Bill 148 (Chapter 222) contains the recommendations of the Joint Subcommittee of the Senate and House Finance Committees to Develop Criteria for Evaluating Sales Tax Exemption Requests (1993 SJR 249).

The bill requires organizations seeking a sales and use tax exemption to submit to TAX by November 1 prior to the session in which the exemption is sought, information based upon the eight criteria established under current law. It also requires organizations seeking an exemption under the educational, medical-related, civic and community services, and cultural groupings to submit to TAX by November 1 additional information relating specifically to the operation and administration of the organization such as:

Documentation indicating federal exemption from taxation;

The charitable purpose of the entity and how its functions or services are provided to Virginia citizens.

Documentation that no more than one-third of its gross annual revenue is spent on general administration and fundraising.

The location of its financial records and the salaries, including benefits, of the 5 most highly compensated employees.

Proof of compliance with Chapter 5 of Title 57 (Solicitation of Contributions) of the Code of Virginia.

The names and addresses of a volunteer board of directors.

TAX is required to review the information and issue a preliminary determination, by January 5 prior to the session in which the exemption is sought, that the organization has furnished all the required information. TAX's preliminary determination must be submitted with a drafting request before Legislative Services may draft a bill. In reviewing the information, TAX is authorized to share information with the Department of Agriculture and Consumer Services.

Lastly, the bill provides that the time limitation for introduction of retail sales and use tax exemption bills applies only to bills providing for a new exemption. A bill extending the sunset date or delaying the effective date of an exemption would not be subject to the time limitation.

Under current law, the Secretary of Finance is required to investigate and analyze, on an ongoing basis, each category of exemptions set out in Va. Code §§ 58.1-609.1 through 58.1-609.10. A report is due to the House and Senate Finance Committees each year by December 1. This bill requires that the information and questionnaire be updated every five years by the organizations being studied. The information is due to TAX by July 1 prior to the December 1 deadline for the report. Additionally, the bill provides that beginning July 1, 1994, organizations must remain in compliance with all the information requirements; failure to do so may constitute grounds for the revocation of exempt status.

Effective Date: July 1, 1994

Code Sections Amended: §§ 30-19.05 and 30-19.1:3

Code Section Added: § 58.1-608.2

Income Tax Credits and Sales Tax Exemption - Deferred

Senate Bill 282 (Chapter 611) provides additional funding for various local educational programs by:

Deferring from 1994 to 1996 the provisions of the low-income housing credit;

Deferring from July 1, 1994 to July 1, 1996, the effective date for the increase in the total amount of tax credits available under the Neighborhood Assistance Act. It also extends the program two years by authorizing credits through fiscal year 1998.

Deferring from July 1, 1994 to July 1, 1996, the sales and use tax exemption for nonprescription drugs and proprietary medicines; and

The nonprescription drug exemption was enacted by the 1990 General Assembly to be effective July 1, 1992. Chapter 601 of the 1992 Acts of Assembly deferred the effective date to July 1, 1994. This bill deferred it again until July 1, 1996.

The additional revenue generated by this bill, with the exception of the 1/2% retail sales and use tax deposited in the Transportation Trust Fund and the 1% local retail sales and use tax returned to localities by point of sale, shall be used for reducing class size in the early grades (Kindergarten through 3), providing programs for unserved at-risk children four year of age, and providing expanded access to educational technology.

Effective Date: July 1, 1994

Code Sections Amended: §§ 36-55.63, 58.1-336, 58.1-435, 58.1-609.7 and 63.1-323

MISCELLANEOUS TAXES

Recordation Tax

Exemptions

Senate Bill 226 (Chapter 429) removes unnecessary language from the recordation tax exemptions and clarifies which deeds are eligible for which exemptions. The history of the recordation tax statutes makes it clear that the exemptions listed in subsection A of Va. Code § 58.1-811 are intended to apply only to deeds conveying property and subject to the tax imposed by § 58.1-801, while the exemptions in subsection B are intended to apply only to deeds of trust subject to tax under §§ 58.1-803 and 58.1-804. However, due to recodification, in referring to the imposition sections, the subsections inadvertently referred to both § 58.1-801 (applicable only to deeds conveying real estate) and § 58.1-803 (applicable only to deeds of trusts and mortgages). This bill removes the inappropriate references.

Effective Date: July 1, 1994

Code Section Amended: § 58.1-811

Watercraft Sales and Use Tax

Boat Motors

House Bill 68 (Chapter 443) subjects any boat motor used to power a watercraft to the watercraft sales and use tax. The watercraft sales and use tax rate is 2% of the purchase price with a maximum tax of $ 2,000 due on any individual purchase.

A watercraft is defined in Va. Code § 58.1-1401 as any contrivance (i) used or which is capable of being used as a means of transportation on water, (ii) which is 15 feet or more in overall length and (iii) which is powered by a motor in excess of 25 horsepower. The term also includes any sail-powered vessel (i) used or which is capable of being used as a means of transportation on water and (ii) which is in excess of 18 feet. It does not include a seaplane or a watercraft which has a valid marine titling document issued by the United States Coast Guard.

Currently, the purchase of a boat motor separately from a watercraft is subject to the 4 1/2% retail sales and use tax. By contrast, when purchased with or as a part of a watercraft, the price of a motor is included in the total cost of the watercraft and taxed at the 2% rate.

Effective Date: July 1, 1994

Code Section Added: § 58.1-1401.1

Disposition of Revenue

House Bill 92 (Chapter 322) shifts the disposition of watercraft sales and use tax revenue from the General Fund to the Motorboat and Water Safety Fund of the Game Protection Fund. This shift would be phased in over five years beginning with fiscal year 1996. In fiscal year 1996 and continuing through 1998, 50% of the proceeds from the tax will be allocated to the Fund. In fiscal year 1999, 75% will be allocated, with the entire tax credited to the Fund in fiscal year 2000 and thereafter.

The Motorboat and Water Safety Fund is funded by monies collected from the numbering and issuing of certificates for motorboats. This legislation is the result of recommendations made by the study of the long-range financial status of the Game Protection Fund pursuant to House Joint Resolution 444 (1993). It will provide additional funding for the Department of Game and Inland Fisheries from the collection of the watercraft sales and use tax.

Effective Date: July 1, 1994; however, no funds may be allocated until July 1, 1995

Code Section Amended: § 58.1-1410

Bank Franchise Tax

Receipt Requirements

Senate Bill 423 (Chapter 186) eliminates the statutory requirement for a receipt to be submitted to TAX in order to claim a credit for bank franchise tax paid to localities.

The state imposes a franchise tax on the net capital of banks, and the locality in which a bank headquarters or branch is located is authorized to impose a similar tax. A local tax credit of up to 80% of the state tax assessed is allowed, provided such tax has actually been paid to localities. Under current law, banks are required to obtain a receipt from the treasurer of each locality in which it has paid a local franchise tax and attach the receipts to the state franchise tax return. However, TAX is able to identify errors from the list of credits claimed for local tax payments without reviewing receipts from each locality.

Local treasurers would still be free to give taxpayers receipts in the same manner as for other taxes. This bill merely eliminates the requirement that the receipt be on a particular form.

Effective Date: Beginning with returns of net capital as of January 1, 1994, due to be filed on or before March 1, 1994

Code Section Amended: § 58.1-1213

Estate Tax

Taxation of Remainder Interests

House Bill 700 (Chapter 208) clarifies that remainder interests coupled with a general power of appointment will not be subject to the inheritance tax if they are included in the federal taxable estate of the life tenant. The bill stipulates that it is declarative of existing law.

The bill addresses a perceived double tax upon the death of a person who was the beneficiary of a certain kind of trust. When the inheritance tax was repealed effective for decedents dying on and after January 1, 1980, the old law continued in effect until all of the postponed inheritance taxes on remainder interest had been collected. Thus, two tax liabilities may have been triggered by the death of a beneficiary: an estate tax on the beneficiary estate and the postponed inheritance tax on remainder interest. In most cases, the remainder interest would not be subject to both. However, certain kinds of trust are required to be included in the federal taxable estate, which would subject it to both tax liabilities.

This bill makes it clear that no additional inheritance taxes are to be collected if the remainder interest under consideration has been taxed previously as follows: (i) the estate of the original decedent paid a "pick-up" tax (equal to the federal estate tax credit) on the estate which included such remainder interest in its valuation or (ii) a pick-up tax has been paid on an estate which included the remainder interest in its valuation, even though the estate tax return covers a different decedent.

Effective Date: Declarative of existing law

Amended: Second enactment clause of Chapter 838 of the Acts of Assembly of 1978

Apportionment of Estate Taxes

House Bill 810 (Chapter 917) revises the statutory presumptions as to which beneficiaries of an estate must bear the burden of federal and state estate taxes. It clarifies how much of the total estate tax must be borne by each beneficiary receiving each type of asset subject to an estate tax, unless the decedent has clearly expressed otherwise. The bill has no effect on the amount of tax owed to the state.

Effective Date: Estate returns required to be filed on or after July 1, 1994, or to decedents dying on or after July 1, 1994

Code Sections Amended: §§ 64.1-160, 64.1-161, 64.1-163 and 64.1-165

Code Section Added: § 64.1-165.1

Code Section Repealed: § 64.1-66.1

ENFORCEMENT AND COLLECTION PROCEDURES

Tax Collection Fees

House Bill 1007 (Chapter 932) permits TAX and localities to pass on outside collection fees to taxpayers whose outstanding accounts are being collected.

TAX generally employs collection agencies for the collection of delinquent taxes from nonresident individuals and out-of-state businesses after the accounts have been delinquent for more than 90 days. Generally, outside collection agencies charge a fee which is measured by an amount equal to a fixed percentage of the outstanding amount collected. Presently, TAX pays this cost.

This bill will allow TAX to recapture its collection costs -- not to exceed 20% of the amount being collected. The costs that may be passed on to the taxpayer shall include the amount equal to the compensation, including costs and expenses, to be paid to a collector or collection agency. In cases where collection is made by action at law or suit in equity, such costs and expenses may include litigation expenses and attorney's fees.

The bill also allows localities to pass along collection and attorney fees to delinquent taxpayers. Localities are limited to a maximum of 20% of the delinquent tax bill and attorneys fees may be added only if the delinquency is collected by action at law or suit in equity.

Additionally, no tax assessment or tax bill shall be deemed delinquent and subject to the local collection procedures while it is under administrative appeal, so long as the appeal is filed within 90 days of the date of the assessment, and for 30 days after the date of the final determination of the appeal.

Effective Date: July 1, 1994

Code Sections Amended: §§ 15.1-321, 58.1-1803, 58.1-3916 and 58.1-3958

Offers in Compromise/Responsible Officers

House Bill 1136 (Chapter 800) clarifies that TAX may deposit payments submitted with offers in compromise without prejudice to the Tax Commissioner's acceptance or denial of the offer. This will eliminate any concern that the deposit of funds prior to the issuance of a final determination may be deemed tacit acceptance of the offer. Should an offer be rejected, the amount deposited would be credited towards the total amount due under the assessment.

The bill also codifies current tax policy by permitting the conversion of any tax administered by TAX to a responsible officer.

Effective Date: July 1, 1994

Code Sections Amended: §§ 58.1-105 and 58.1-1813

Collection of Court Fines, Costs, Fees, Restitution, Etc.

House Bill 1208 (Chapter 945) and Senate Bill 293 (Chapter 841) require TAX to use its recently acquired Enhanced Collection System to collect unsatisfied judgements for court fines, costs, fees, restitution, etc. referred by the courts. TAX would contact the delinquent debtor, but actual payments would go directly to the court. TAX, the Attorney General, Compensation Board, State Auditor of Public Accounts, Commonwealth's Attorney, Executive Secretary of the Supreme Court, and Clerks of all local courts are required to coordinate their procedures and efforts to collect the court fines.

The bill also includes other provisions affecting the acceptance of checks and credit cards and installment payments by the courts, Department of Motor Vehicles (DMV) licensing procedures, persons on home/electronic incarceration work release programs and other provisions relating to the courts.

Effective Date: July 1, 1994; except DMV licensing provisions effective January 1, 1995

Code Sections Amended: §§ 19.2-349, 19.2-353.3, 19.2-354, 46.2-391.1, 46.2-395 and 53.1-131.2

LOCAL TAX LEGISLATION

GENERAL PROVISIONS

Property Omitted from Personal Property Books

House Bill 254 (Chapter 252) increases the dollar amount below which an assessment may be omitted for assessing personal property taxes. It gives localities the option to raise the amount from $ 5 to $ 15.

Currently, counties, cities and towns may omit property from the personal property book if the amount of the levy is less than $ 5. On a local option basis, localities may elect to assess only that property generating a tax of $ 5 or more or assess all tangible personal property.

Effective Date: July 1, 1994

Code Sections Amended: §§ 58.1-3001 and 58.1-3005

LICENSE TAXES

BPOL Tax Guidelines

House Bill 505 (Chapter 267) requires TAX to update its guidelines for the local Business, Professional and Occupational License (BPOL) Tax by July 1, 1995, and every three years thereafter. It is anticipated that the updated guidelines will reflect recent court decisions, opinions of the Attorney General and Tax Commissioner, and the development of new types of businesses. The bill results from the joint subcommittee studying the BPOL tax pursuant to 1993 HJR 526.

Effective Date: July 1, 1994

Code Section Amended: § 58.1-3701

BPOL Tax - Definition of Gross Receipts

House Bill 1087 (Chapter 397) creates a "pass-through" provision for determining gross receipts for BPOL tax purposes on receipts from real estate sales transactions.

Commissions received by real estate brokers and agents are considered gross receipts for BPOL tax purposes. Under current law, the broker is subject to the BPOL tax on the entire commission realized on the sale, while the agent is subject to the tax on that portion of the commission received from the broker.

This bill creates an exception the BPOL tax by allowing the broker to deduct commissions paid to agents in determining gross receipts, provided the agent is subject to the BPOL tax and is identified as receiving excluded receipts by the broker on its BPOL application.

Effective Date: July 1, 1994

Code Section Added: § 58.1-3732.2

TANGIBLE PERSONAL PROPERTY TAX

Classification - Motor Vehicles Using Clean Special Fuels

Senate Bill 20 (Chapter 171) allows localities to establish a separate classification for tangible personal property for motor vehicles which use clean special fuels. Clean special fuels as defined in Va. Code § 58.1-2101 means all products or energy sources used to propel a vehicle which, when compared to conventional gasoline or reformulated gasoline, will result in lower emissions or oxides of nitrogen, volatile organic compounds, carbon monoxide or particulates or any combination thereof, and includes compressed natural gas, liquified natural gas, liquified petroleum gas, hydrogen, hythane and electricity. Localities could levy a tax on such property at a lower rate (on a local option basis) than the general class of personal property.

Effective Date: July 1, 1994

Code Section Amended: § 58.1-3506

Classification - Motor Vehicles Owned by Rescue Squad & Fire Department Volunteers

Senate Bill 91 (Chapter 221) allows counties that provide a reduced personal property tax rate for vehicles used by a volunteer fire department or rescue squad member to provide for more than one certification date (now permitted only in January each year) to account for the possibility that a new vehicle may be bought during the course of the year and the member may lose the benefit of the tax break. In addition, the requirement that the vehicle be regularly used to respond to calls is deleted; thus, the only requirements for the special tax rate would be that a vehicle is owned by the volunteer and the volunteer regularly responds to calls. Localities could levy a tax on such property at a lower rate (on a local option basis) than the general class of personal property.

Effective Date: July 1, 1994

Code Section Amended: § 58.1-3506

Classification - Wild or Exotic Animals

House Bill 494 (Chapter 266) establishes a separate classification for wild or exotic animals kept for public exhibition in a facility licensed by the federal government or the Commonwealth. Localities could levy a tax on such property at a lower rate (on a local option basis) than the general class of personal property.

Effective Date: July 1, 1994

Code Section Amended: § 58.1-3506

Classification - Planned Development Subdivision

House Bill 267 (Chapter 631) establishes a separate classification for furniture, office and maintenance equipment, excluding motor vehicles, owned and used by a planned development subdivision whose real property is assessed in accordance with § 58.1-3284.1 and which is used for the purpose of maintaining or using an open or common space within a residential development. Localities could levy a tax on such property at a lower rate (on a local option basis) than the general class of personal property.

Effective Date: July 1, 1994

Code Section Amended: § 58.1-3506

Alternative Method for Filing Returns for Motor Vehicles

House Bill 1153 (Chapter 292) allows localities to adopt an alternative method for filing personal property tax returns on motor vehicles. Only persons with new information to report or with changes to a previously filed return with regard to name, address, status or situs of the personal property would be required to file.

Effective Date: July 1, 1994

Code Section Added: § 58.1-3518.1

Situs of Motor Vehicle by Student Attending College

House Bill 772 (Chapter 961) and House Bill 818 (Chapter 962) provide that when the owner of a motor vehicle is a student attending an institution of higher education, the situs for assessment of tangible personal property will be the domicile of the vehicle's owner.

Currently, taxable situs is established where a vehicle is normally garaged or parked for a tax year. When this cannot be determined, the domicile of the owner is used as the taxable situs. This bill provides that even if situs can be established, taxable situs will be the domicile in every case in which the owner is a student attending an institution of higher education.

House Bill 818 also addresses the local licensing of student-owned vehicles in a similar manner and provides that situs for purposes of license fees shall also be the domicile of the student.

Effective Date: July 1, 1994

Code Section Amended: § 46.2-752 and 58.1-3511

Condition of Tangible Personal Property to Include Technological Obsolescence

Senate Bill 111 (Chapter 827) emphasizes accounting for "technological obsolescence" when determining the condition of tangible personal property for tax assessment purposes.

Current law allows a commissioner of the revenue to take into account the condition of the property when valuing tangible personal property. Condition of the property from an appraisal stand point includes depreciation from all causes, including functional and economic obsolescence and physical deterioration. This legislation requires that a commissioner of the revenue consider the condition of property, which shall include technological obsolescence, upon request.

The legislation may be seen as codifying the recent decision of the Virginia Supreme Court in Board of Supervisors of Fairfax County v. Telecommunications Industries, Inc., 246 Va. 472 (11/5/93), in which the Court rejected the argument that application of a depreciation schedule was uniform and could be reasonably expected to determine actual fair market value in all cases. While the county's depreciation method may approximate fair market value, the Court noted the definition of fair market value as the "price property will bring when offered for sale by a seller who desires but is not obligated to sell and bought by a buyer under no necessity of purchasing." The Court held that the technological obsolescence of tangible personal property may affect its fair market value and must be considered by the tax assessor and the courts under the appropriate circumstances, if necessary to make a determination of fair market value.

Effective Date: July 1, 1994

Code Section Amended: § 58.1-3503

Assessment Method for Manufactured Homes

House Bill 251 (Chapter 152) requires that a manufactured home that is installed according to the Uniform Statewide Building Code be assessed at the same time as the real property on which it is situated and in the same manner as other buildings and improvements are assessed.

Currently, manufactured homes are assessed based on the square footage of living space, which may lead to a wide variety of valuation methods among localities. This bill will lead to greater uniformity in the manner of assessment.

Effective Date: July 1, 1994

Code Sections Amended: §§ 58.1-3520 and 58.1-3521

Code Section Added: § 58.1-3522

REAL ESTATE TAX

Exemption for Certain Rehabilitated or Industrial Real Estate

Senate Bill 233 (Chapter 608) reduces the age requirement for real estate tax relief to be granted to rehabilitated real estate from 25 to 15 years for commercial or industrial property located in an enterprise zone. It also clarifies that replacement property may also be granted a partial exemption. However, the replacement structure may not exceed the square footage of the previous structure, except in an enterprise zone where it may not exceed 110% of the previous square footage.

Effective Date: July 1, 1994

Code Section Amended: § 58.1-3221

Exemption for Rehabilitated Residential, Hotel/Motel, Commercial & Industrial Property

House Bill 879 (Chapter 424) and Senate Bill 369 (Chapter 435) expand the definition of residential, hotel/motel, commercial and industrial structures eligible for reduced real estate tax rates for "substantially rehabilitated" property. Any structure or other improvement which has undergone substantial rehabilitation, renovation or replacement is eligible for the reduced rate. The bill also increases the $ 20 cap on fees that localities may charge for processing applications requesting a partial exemption for residential, commercial and industrial structures to $ 50. Similar fees for hotel/motel structures are not capped.

Additionally, House Bill 879 provides that the partial exemption will not apply to commercial or industrial real estate where rehabilitation is achieved through the demolition or replacement of a structure that is a registered Virginia landmark or is determined by the Department of Historic Resources to contribute to the significance of a registered historic district.

Effective Date: July 1, 1994

Code Sections Amended: §§ 58.1-3220, 58.1-3220.1 and 58.1-3221

Tax Increment Financing

House Bill 1126 (Chapter 667) authorizes localities which have adopted tax increment financing to use revenues placed in the Tax Increment Financing Fund for "development project cost commitments." The "commitment" is simply a determination by the locality to pay a specific sum out of the tax increment and other available funds in a project area.

The bill also overrides the charter provisions limiting annual debt for cities with a population of at least 392,000 but not more than 395,000 (currently, only the city of Virginia Beach) that issue debt obligations secured by the Tax Increment Financing Fund.

Effective Date: July 1, 1994

Code Sections Amended: §§ 58.1-3245, 58.1-3245.2, 58.1-3245.4 and 58.1-3245.5

Code Section Added: § 58.1-3245.4:1

Legal Representation for Boards of Equalization

Senate Bill 253 (Chapter 509) provides a mechanism for obtaining legal assistance for local boards of equalization. The board should first request advice from the county or city attorney. If there is a conflict which prevents the county or city attorney from providing such advice, the board may request that the governing body employ an attorney, and the governing body must respond to the request within 10 days. If the governing body refuses the board's request, the board may petition the circuit court for authorization to hire an attorney to be paid out of the local treasury.

Effective Date: July 1, 1994

Code Section Amended: § 58.1-3376

Proceeds from Sale of Real Property Applied to Unpaid Taxes

House Bill 437 (Chapter 386) requires the purchaser, in the case of a purchase of a portion of a tract of land, to apply the sale proceeds to the payment of unpaid taxes assessed on the land, prorated on the same basis that the purchase price bears to the assessed value of the entire tract. This bill is designed to protect the purchaser of a portion of a tract of land in the event that the seller does not pay the real estate tax on the entire tract. The purchaser's portion of the tract would be relieved of any lien to the extent the proceeds exceed the purchaser's prorata share of taxes.

Effective Date: July 1, 1994

Code Section Amended: § 58.1-3340

Delinquent Taxes on Real Estate Subject to Special Land Use Assessment

House Bill 468 (Chapter 199) accelerates the removal of real property subject to special land use assessment when taxes for any prior year are delinquent. It changes from June 1 to April 1 the date on which a locality's treasurer must send notice of tax delinquency to owners of parcels of land having special assessment land use value taxation. It changes from November 1 to June 1 the date on which the treasurer must notify the commissioner of revenue that such delinquent taxes remain unpaid. Removal of the parcel from the land use program would be effective for the current tax year.

Effective Date: July 1, 1994

Code Section Amended: § 58.1-3235

MISCELLANEOUS TAXES

Transient Occupancy Tax

Nelson County

House Bill 474 (Chapter 896) authorizes any county with a population of at least 12,500, but no more than 12,800 (currently Nelson County) to levy a transient occupancy tax on condominiums, apartments, townhouses, and like buildings when rooms or units in such buildings are rented for fewer than 30 days. The rate cannot exceed 2% of the amount of charge for the occupancy of any room or space occupied. Franklin County also enjoys similar authority.

The provisions of this bill are contingent upon the passage of a referendum by the county before the end of 1995 authorizing it to impose the transient occupancy tax.

Effective Date: July 1, 1994

Code Section Amended: § 58.1-3821

Consumer Utility Tax

Cellular Phone and Other Mobile Services

House Bill 756 (Chapter 560) authorizes localities to extend the consumer utility tax collection responsibility to all providers of cellular phone and other mobile telecommunication services. A maximum tax of 10% of the service charge, up to $ 3 per month, for each mobile service consumer would be established.

Under current law, localities are permitted to levy a consumer utility tax on the consumers or services provided by telegraph and telephone companies or other companies that qualify as public service corporations. The utility is required to collect the tax from the consumer and remit it to the locality. However, localities are restricted to imposing the tax on services provided by federally licensed, state regulated providers of telecommunications.

This bill would extend the levy to all telecommunication service providers, mobile or otherwise. The bill also makes the following changes to the consumer utility tax:

* If a locality is not currently collecting the tax on local mobile telecommunications service, it may not begin to collect the tax until September 1, 1994.

* The three localities presently collecting the tax (Charlottesville, Lynchburg and Albermarle County) are grandfathered in and will be allowed to phase their rates downward over a 3-year period to meet the 10%, $ 3 per month rate cap.

Taxes will be deemed to be held in trust by the service provider for the locality.

Service providers would remit monthly to the appropriate locality the amount of tax billed during the preceding month. Providers will not be held liable for amounts attributable to bad debts and consumers that refuse to remit the tax.

Localities that do not tax other forms of telecommunication services may not tax mobile service customers.

Double taxation is prevented by allowing a refund to consumers for a legally imposed tax paid to a jurisdiction outside Virginia.

Effective Date: July 1, 1994; however, localities not currently taxing mobile telephone service may not begin to collect the tax before September 1, 1994

Code Section Amended: § 58.1-3812

TAX COLLECTION AND ADMINISTRATION

Tax Collection Fees

House Bill 1007 (Chapter 932) permits TAX and localities to pass on outside collection fees to taxpayers whose outstanding accounts are being collected.

TAX generally employs collection agencies for the collection of delinquent taxes from nonresident individuals and out-of-state businesses after the accounts have been delinquent for more than 90 days. Generally, outside collection agencies charge a fee which is measured by an amount equal to a fixed percentage of the outstanding amount collected. Presently, TAX pays this cost.

This bill will allow TAX to recapture its collection costs -- not to exceed 20% of the amount being collected. The costs that may be passed on to the taxpayer shall include the amount equal to the compensation, including costs and expenses, to be paid to a collector or collection agency. In cases where collection is made by action at law or suit in equity, such costs and expenses may include litigation expenses and attorney's fees.

The bill also allows localities to pass along collection and attorney fees to delinquent taxpayers. Localities are limited to a maximum of 20% of the delinquent tax bill and attorneys fees may be added only if the delinquency is collected by action at law or suit in equity.

Additionally, no tax assessment or tax bill shall be deemed delinquent and subject to the local collection procedures while it is under administrative appeal, so long as the appeal is filed within 90 days of the date of the assessment, and for 30 days after the date of the final determination of the appeal.

Effective Date: July 1, 1994

Code Sections Amended: §§ 15.1-321, 58.1-1803, 58.1-3916 and 58.1-3958

Statute of Limitations for Tax Liens on Real Estate

House Bill 748 (Chapter 209) extends the current 20-year maximum statute of limitations during which a locality can enforce a lien for delinquent taxes on real estate by any period for which the tax was deferred under a local ordinance. This would apply to deferrals applicable under current law for elderly or handicapped individuals or when increases in real estate taxes are greater than 105% of the preceding year.

Effective Date: July 1, 1994

Code Sections Amended: §§ 58.1-3341 and 58.1-3940

Collection of Taxes by Treasurers

House Bill 476 (Chapter 207) amends the law relating to local tax bills by:

clarifying that bills sent to taxpayers by treasurers set forth the amount of tax due;

allowing bills to be issued to the obligee of debt secured by a mortgage or deed of trust based simply on the obligee's certification that an arrangement has been made with the obligor; and

eliminating the requirement that the tax form used by the treasurer be prescribed by TAX.

Effective Date: July 1, 1994

Code Section Amended: § 58.1-3912

Collection of Taxes from State Employee's Wages

House Bill 252 (Chapter 153) limits the amount of wages or salary that may be held by a state agency for payment of delinquent local taxes owed by a state employee to the sum of taxes, penalties and interest stated on the tax bill as due and payable. This will reduce or eliminate any delay in the payment of wages and salary in excess of the amount owed to the locality.

Effective Date: July 1, 1994

Code Section Amended: § 58.1-3952

Notification to Creditors of Sale of Tax Delinquent Real Estate

House Bill 314 (Chapter 884) requires that in the event of any action against tax delinquent real estate, lien creditors (such as mortgage holders and trustees under a deed of trust) must be notified of the delinquency and of any actions to be taken by the tax collection by mail unless they have been named as a defendant in a legal proceeding. If the lien creditors have been notified by mail, then they are generally not required to be named as a defendant in the proceeding brought by the locality. Currently, in order for a locality to commence any action to collect unpaid taxes against tax delinquent real estate, it must only notify the owner.

The bill also changes other procedural rules relating to tax sales, including newspaper publication of the sale at least twice (publication on only one occasion is required currently); allowing the newspaper publication at any time so long as it precedes the sale by 30 days (current law provides that the notice cannot be published more than 60 days before the sale); and allowing localities to recover the costs of tittle examination necessary to meet the legal notice requirements. Finally, the bill reduces the period of time for a taxpayer to request a rehearing in a tax sale action from one year to 90 days from the court's final decree.

Effective Date: July 1, 1994

Code Sections Amended: §§ 58.1-3965 and 58.1-3967

Delinquent Tax Sales

House Bill 1204 (Chapter 295) requires any person with an interest in real estate, including a lienor or person with a claim of title, which is subject to a tax sale by bill in equity proceedings, to file his claim within 90 days after notice by a locality of its intention to acquire the property. Failure to file in a timely manner would bar any such claim.

Effective Date: July 1, 1994

Code Sections Amended: § 58.1-3967

Tax Amnesty - City of Richmond

House Bill 1342 (Chapter 302) authorizes the City of Richmond to establish a local tax amnesty program to increase and accelerate collection of taxes.

The amnesty program would be conducted such that:

Individuals, corporations, estates or partnerships would be eligible to participate.

Taxes eligible for amnesty would include personal property, machinery and tools, and real property.

Civil penalties on current accounts receivables and previously unknown amounts would be waived provided that the tax and interest are paid in full.

Parties who are presently or at the date of the inception of the program under investigation or prosecution for fraud or evasion could not participate in the program.

Taxpayers with assessments dated or taxes due on or after January 1, 1993, would not be eligible for amnesty.

Effective Date: Amnesty program would run during the city's 1994-1995 fiscal year

Added: New act

LEGISLATIVE STUDIES

The following is a list of 1994 Legislative Studies that TAX will be involved in this year. TAX will be directly responsible for several studies, while acting in a technical support or monitoring role for others. Generally, the studies are due for presentation to the Governor and the 1995 General Assembly.

HJR 9: Continues Clean Fuels Study Subcommittee.

HJR 67: VA Recycling Markets Development Council to examine certain measures which enhance the use of recycled materials.

HJR 75: Continues joint subcommittee studying educational museums and appropriate levels of public support.

HJR 110: Continues joint subcommittee studying BPOL tax.

HJR 111: TAX to cooperate with joint subcommittee studying BPOL tax by developing a model ordinance and uniform system of classification.

HJR 148: TAX and the Department of Agriculture and Consumer Services to study the taxation of Virginia Wineries.

HJR 160: Joint subcommittee to examine local revenue resources and local taxation of cellular telephone services.

HJR 257: TAX, in cooperation with the State Treasurers' Association and the Commissioners of Revenue Association, to study the statutes of limitations for contesting local property tax assessments and for collecting local taxes.

SJR 103: Secretary of Health and Human Resources, in conjunction with the State Corporation Commission, to study the benefits and costs of tax incentives and other mechanisms to encourage the purchase of long-term care.

SJR 110: Joint subcommittee to examine for-profit and not-for-profit hospitals and their contribution to the health care community.

SJR 124: Joint subcommittee to study the Virginia retirement subtraction, treatment of social security under the income tax, and the retirement benefits of state employees.

SJR 173: Continues joint subcommittee studying pollution prevention.

Legislative Summaries