98-118 | Virginia Tax

Tax Type

General Provisions

Description

1998 Legislative Summary

Topic

Reports

Date Issued

06-30-1998

1998 LEGISLATIVE SUMMARY - STATE TAXES

INTRODUCTION

The Legislative Summary is published by the Department of Taxation (TAX) as a convenient reference guide to state and local tax legislation enacted by the 1998 Session of the General Assembly. It includes a general description of enacted legislation affecting:

_ State taxes administered by TAX, and

_ Local taxes which TAX administers or on which TAX renders advisory assistance.

The Summary also includes legislative studies in which TAX will be directly involved or acting in a technical support role. However, in general, legislation granting property tax exemptions, creating special taxing jurisdictions or affecting taxes administered by other state agencies is not included in the Summary.

The Summary is intended to provide a synopsis of enacted legislation and is for information purposes only. The Summary is not a substitute for the actual state law, local ordinances, and TAX regulations. Additional information on new legislation affecting state taxes may be obtained from TAX at the following telephone numbers:

Individual Income Tax (804) 367-8031
Corporation Income Tax (804) 367-8036
Sales and Use Tax (804) 367-8037
Employer Withholding Tax (804) 367-8038
Voice/TDD (804) 367-8329

Additional information on new local tax legislation should be obtained from your local Commissioner of Revenue or Treasurer.

Virginia Department of Taxation
June 1998

GENERAL PROVISIONS

Statute of Limitations for Court Applications Following Commissioner’s Ruling on Administrative Appeals - New

House Bill 630 (Chapter 529) amends the statute of limitations to permit taxpayers to seek court relief of a state tax assessment within one year after the Tax Commissioner’s final determination of an appeal.

Under current law, a taxpayer’s options available to make an application to the court for the correction of an erroneous or improper assessment of state tax are:

file suit within three years of the date the assessment was made provided that the taxpayer either pays the assessment within the three year period or posts bond within 90 days of the assessment, or

pay the assessment and file a protective claim within three years of the date the tax was assessed. Upon the final determination with respect to the protective claim, a taxpayer has one year to file with the circuit court.

In the event that an appeal has not been resolved within three years from the date of the assessment, a taxpayer would not have to pay the assessment and file a protective claim in order to preserve the statute of limitations. This bill allows a taxpayer to wait to pay an assessment until after the Tax Commissioner’s final determination of an appeal.

- Effective Date: July 1, 1998

Code Section Amended: § 58.1-1825

INCOME TAX

Generally

Period for Filing Amended State Income Tax Returns Resulting From Federal Adjustments - Amended

House Bill 629 (Chapter 374) and Senate Bill 543 (Chapter 358) allow a taxpayer one year from the final determination date of a change in their federal tax liability to file an amended Virginia income tax return to claim a refund. Under current law, taxpayers have 90 days to claim a refund in this circumstance.

Generally, a taxpayer has three years from the due date of the original return to file an amended return requesting a refund. There are three exceptions to this rule that allow taxpayers to file at a later date. These exceptions, as amended by this legislation, permit a taxpayer to file an amended return requesting a refund:

Within one year of any change in federal tax liability;

Within two years of the date of filing an amended return that results in the payment of additional tax; and

Within two years of the date of payment of an assessment.

- Effective Date: Amended returns filed on or after July 1, 1998

Code Section Amended: § 58.1-1823

Corporations

Deduction for Contributions to Public School Construction - New

House Bill 1147 (Chapter 874) creates a corporate income tax deduction for contributions to the Virginia Public School Construction Grants Program and Fund (VPSCGPF) provided the corporation has not claimed a deduction for such amount on its federal income tax return.

Effective Date: Taxable years beginning on or after January 1, 2000
Code Section Amended: §§ 58.1-322 and 58.1-402

Major Business Facility Job Tax Credit - Amended

House Bill 265 (Chapter 367) amends the Major Business Facility Job Tax Credit to allow two or more affiliated companies to elect to aggregate the number of jobs created for full-time employees in order to satisfy the necessary job threshold amount as a group rather than on an individual company basis.

The Major Business Facility Job Tax Credit provides a tax credit for businesses that create over 100 new, permanent jobs for qualified full-time employees. Businesses engaged in certain specified industries can qualify for the credit, as well as businesses establishing a qualifying administrative facility in Virginia. The credit is equal to $1,000 per each qualifying new job in excess of a 100 job threshold, and is allowed ratably over a three year period with the first third of the credit claimed in the credit year. The 100 job threshold is reduced to 50 in instances where a business is located in an enterprise zone or an economically distressed area. By permitting affiliated companies to aggregate their hirings, the companies would be required to satisfy the job threshold requirement fewer times.

Effective Date: Major business facilities established or expanded on or after January 1, 1997
Code Section Amended: § 58.1-439

Historic Rehabilitation Tax Credit - Expanded

House Bill 454 (Chapter 371) amends the Historic Rehabilitation Tax Credit to allow banks, insurance companies, and utility companies to claim the credit against their respective franchise or license taxes for eligible expenses incurred in rehabilitating a certified historic structure. Under current law, the tax credit can be claimed only against individual, estate and trust, and corporate income taxes.

Effective Date: Taxable years beginning on and after January 1, 1997
Code Section Amended: § 58.1-339.2

Historic Rehabilitation Tax Credit - Clarified

House Bill 544 (Chapter 372) amends the Historic Rehabilitation Tax Credit to clarify the definition of "material rehabilitation" for purposes of determining eligible rehabilitation expenses. As amended, "material rehabilitation" is defined as certain improvements or reconstruction which cost at least 50% of the local real estate tax assessed value of the building for the year prior to the initial expenditure of any rehabilitation expenses.

Effective Date: Taxable years beginning on and after January 1, 1997
Code Section Amended: § 58.1-339.2

Alternative Corporate Recycling Tax Credit - New

House Bill 554 (Chapter 253) creates an alternative corporate income tax credit for corporations investing at least $350 million in the Commonwealth and purchasing qualifying machinery and equipment for processing recyclable materials for resale.

Currently, individuals and corporations are allowed an income tax credit equal to 10% of the purchase price paid during the taxable year for machinery and equipment used to process recycled materials for resale. The total credit allowed in any taxable year is limited to 40% of the taxpayer’s Virginia income tax liability, prior to applying the recycling credit. The Department of Environmental Quality must certify that the purchases made by individuals or corporations qualify for the credit before the taxpayer is entitled to claim the credit. Individuals and corporations are allowed to carryover unused credits for up to 10 succeeding taxable years. Unused credits cannot be carried back. Any credits that are unused at the end of the ten-year period expire.

Under the new alternative credit, the credit percentage remains unchanged at 10% of the purchase price paid for qualifying machinery and equipment. The total credit that can be claimed in any taxable year is increased from 40% to 60% of the taxpayer’s Virginia liability, prior to applying the recycling credit. In addition, the carryover period for unused credits is extended from 10 to 20 years. Any unused credits at the end of the 20 year period expire, and unused credits cannot be carried back. A qualified taxpayer can claim either the current or the alternative credit, but not both.

Effective Date: Available to taxpayers making the required investment between January 1, 1998 and January 1, 2003.

Code Section Added: §§ 58.1-439.7 and 58.1-439.8
Code Section Repealed: § 58.1-445.1

Credit for Purchase of Waste Motor Oil Burning Equipment - New

House Bill 513 (Chapter 896) creates a new credit against the corporate income tax liability of any Virginia taxpayer who accepts waste motor oil from the public. The credit is equal to 50% of the purchase price paid for equipment used exclusively to burn waste motor oil. The maximum amount of the credit in any year is $5,000.

The Department of Environmental Quality will certify the oil burning equipment. A copy of the certification must be attached to the income tax return filed by the taxpayer claiming the credit. The taxpayer can only use the credit in the year the qualified equipment is purchased. Any unused portion of the credit may not be carried forward to subsequent years.

- - Effective Date: Taxable years beginning on and after January 1, 1999

Code Section Added: § 58.1- 439.7

Tax Credit for Employers of Temporary Assistance to Needy Families (TANF) Recipients - New

House Bill 696 (Chapter 486) creates a new credit against Virginia income tax liability of any individual, estate, trust or corporation that has 100 or fewer employees and employs individuals receiving Temporary Assistance to Needy Families (TANF) benefits. The credit is equal to 5% of each qualifying employee’s annual salary, not to exceed $750. The credit is not refundable but unused credits can be carried forward for three years. Credits allowed to a partnership, S corporation or limited liability company are passed through to the partners, shareholders, and members respectively.

Credits are granted out of funds appropriated for the Virginia targeted jobs grant fund. Employers seeking the credit or the grant will apply to the Virginia Department of Social Services. An employer will not be able to qualify for a credit and a grant for the same employee.

- - Effective Date: Taxable years beginning on or after January 1, 1999

Code Section Added: § 58.1-439.7

Vehicles Emissions Testing Tax Credit - Amended

House Bill 66 (Chapter 599) extends the vehicle emissions testing equipment tax credit to taxpayers in localities that are adjacent to a locality with a mandatory enhanced vehicle emissions program. This credit is available to taxpayers that purchase enhanced vehicle emissions testing equipment. Enhanced vehicle emissions programs are required in the following localities: (1) the counties of Arlington, Fairfax, Fauquier, Loudoun, Prince William, and Stafford and (2) the cities of Alexandria, Fairfax, Falls Church, Manassas, and Manassas Park.

Effective Date: Taxable years beginning on and after January 1, 1998
Code Section Amended: § 58.1-438.1

Enterprise Zone Act - Amended and Clarified

House Bill 984 (Chapter 759) amends and clarifies the Enterprise Zone Act. Under current law, the amount of enterprise zone tax credits that can be granted by the Department of Housing and Community Development (DHCD) to business firms which qualify for incentives after July 1, 1995, is subject to an annual fiscal limitation of $8 million. This annual limitation takes the form of two distinct credit "pools" of $3 million and $5 million. Large qualified business firms are granted credits from a $3 million pool, and small qualified business firms are granted credits from a $5 million pool.

House Bill 984 increases the annual fiscal limitation on enterprise zone tax credits granted to small business firms from $5 million to $16 million.

Other amendments to the Enterprise Zone Act made by House Bill 984 include:

The definition of a "large qualified business firm" for purposes of the General Business Tax Credit is amended. The qualified zone investment amount is decreased from $25 million to $15 million, and the required number of resulting jobs created is reduced from 100 to 50 permanent full-time positions.

The expansion of existing enterprise zones that border adjacent localities with a county manager form of government into the adjacent county. Such expansion will require approval of the locality with the existing enterprise zone and the adjacent county. This expanded or redesignated zone would be a “joint enterprise zone”.

- - Effective Date: July 1, 1998

Code Section Amended: §§ 59.1-280, 59.1-280.1 and 59.1-280.2
Code Section Added: § 59.1-274.2

Double-weighted Sales Factor - New

Senate Bill 709 (Chapter 644) adopts a double weighted sales factor for corporate apportionment contingent upon the reenactment of the bill during the 1999 Session of the General Assembly.

Under this formula, the sales factor is weighted 50% and payroll and property as 25% each in determining the overall corporate apportionment factor. Under current law, apportionment for most corporations is based on a formula which averages a property, payroll, and sales factor, with each factor weighted equally.

- - Effective Date: Taxable years beginning on and after January 1, 2000, if the bill is reenacted during the 1999 Session of the General Assembly

Code Section Amended: § 58.1-408

Individuals

Subtraction of Certain Military Pay - New

House Bill 1147 (Chapter 874) allows military service personnel to subtract all military pay and allowances attributable to service in a combat zone or a qualified hazardous duty area designated by order of the President of the United States with the consent of Congress.

By operation of federal law, enlisted military personnel can exclude amounts received as compensation for active duty service in a combat zone or a qualified hazardous duty area designated by order of the President of the United States. Officers serving in these areas are allowed a partial exclusion for such compensation. Because of Virginia’s conformity with federal law, this compensation is also exempt from Virginia income taxation.

This bill exempts the remaining portion of an officer’s military pay attributable to service in a combat zone or a qualified hazardous duty area from Virginia taxation to the extent it was not exempt from federal taxation. Military personnel serving in the former Yugoslavia as part of the NATO Peace Keeping Mission designated Operation Joint Endeavor do not qualify for this subtraction as Virginia law already provides a subtraction for all military pay and allowances for service in this operation.

Effective Date: January 1, 1998
Code Section Amended: § 58.1-322

Qualified Agricultural Contribution Sunset Date - Extended

House Bill 3 (Chapter 135) extends the sunset date for the qualified agricultural contribution subtraction from January 1, 1999 to January 1, 2004. The qualified agricultural contribution subtraction, also referred to as the "Gleaning Subtraction," was originally enacted by the 1985 Session of the General Assembly.

The purpose of the deduction is to provide an incentive for farmers to allow tax-exempt organizations to harvest or "glean" edible, but not saleable, agricultural products. Contributors must be in the trade or business of growing or raising such agricultural products to qualify for this subtraction.

Effective Date: Expires for taxable years beginning on or after January 1, 2004
Code Section Amended: § 58.1-322.2

Special "Border State" Tax Credit Computation - Expanded

House Bill 33 (Chapter 291) extends the benefit currently received by Virginia residents who earn wages in a border state to those Virginia residents who operate a sole proprietorship within a state bordering Virginia. The current provisions for the special "border state" computation for the individual out-of-state tax credit have been expanded to allow a sole proprietor to claim a credit equal to 100% of the income taxes paid to a bordering state on Schedule C business income, limited to the Virginia tax otherwise payable on such income.

Under the provisions of this legislation, the special "border state" credit computation is applicable to Virginia residents who have earned income or Schedule C business income from a single state contiguous to Virginia and such other state’s computation of taxable income results in an amount less than Virginia taxable income.

Currently, the only state bordering Virginia that meets this criteria is North Carolina.

Effective Date: Taxable years beginning on or after January 1, 1998
Code Section Amended: § 58.1-332

Tax Credit Created for Taxes Paid on Foreign Pension Income - New

House Bill 52 (Chapter 292) creates an individual income tax credit for taxes paid to a foreign country on pension or retirement income derived from foreign sources as a result of past employment in a foreign country. The credit is nonrefundable, and any unused credit cannot be carried forward or back.

The credit is limited to the lesser of the amount of income tax actually paid to the foreign country on the pension income or the amount of Virginia income tax attributable to such income. The credit is calculated by translating the foreign currency into U.S. dollars using the prevailing rate of exchange which most nearly reflects the value of the foreign currency at the time the taxes were actually paid.

No credit is permitted on the Virginia return for taxes paid to any foreign country if a foreign tax credit is not available or permitted for federal income tax purposes. For example, a federal foreign tax credit can not be claimed for taxes paid to any country that (1) has been designated by the Secretary of State as a country that repeatedly provides support for acts of international terrorism; (2) the United States has severed or does not conduct diplomatic relations; or (3) the United States does not recognize the government. A list of the nonqualifying countries is provided by the Internal Revenue Service.

Effective Date: Taxable years beginning on and after January 1, 1998
Code Section Created: § 58.1-332.1

Virginia Earned Income Credit for Low Income Families with Children - New

House Bill 848 (Chapter 855) creates a nonrefundable Virginia earned income tax credit for low income families with eligible children. The credit amount equals the greater of (1) 75% of the allowable federal earned income tax credit or (2) $300 for each eligible dependent child under the age of 18.

Eligibility to claim the tax credit will be determined based on the amount of the family's total Virginia adjusted gross income and family size. A "family" is defined as an individual, the individual's spouse, and any person claimed as a dependent on the individual's income tax return for the taxable year. To ensure that this credit benefits low income Virginians, the following family Virginia adjusted gross income threshold amounts apply:
Maximum Family
Family Size Virginia Adjusted Gross Income Two persons $10,850
Three persons $13,650
Four persons $16,450
Five persons $19,250
Six persons $22,050
Seven persons $24,850
Eight or more persons $27,650

For taxable years after 1998, the Virginia adjusted gross income threshold amounts will be adjusted annually to reflect changes in the federal poverty guidelines.

The credit, however, will not be effective unless all of the following conditions are met: (1) the U.S. Department of Health and Human Services determines that the credit qualifies as a portion of the Commonwealth's maintenance of effort requirement under its Temporary Assistance to Needy Families (TANF) plan; (2) the Commonwealth is exempt from certain federal reporting requirements for families receiving the tax credit; and (3) the above exemption will not disqualify the Commonwealth from (i) receiving work participation rate reduction based on a reduction in the TANF caseload, (ii) receiving a high performance bonus, or (iii) being considered for a reduction in penalties for failing to meet the work participation requirements.

This bill also allows the Tax Commissioner to disclose information on taxpayers who claim this credit to the Virginia Department of Social Services and the U.S. Department of Health and Human Services to assist in documenting the Commonwealth's compliance with the maintenance of effort provisions of the TANF plan.

Effective Date: Taxable years beginning on and after January 1, 1998, however, the credit does not become effective unless the conditions described above are satisfied.
Code Section Amended: § 58.1-3
Code Section Added: § 58.1-339.4

Equity and Subordinated Debt Investments in Small Businesses Tax Credit - New

House Bill 1359 (Chapter 491) creates a new credit for individual and fiduciary income tax equal to 50% of a qualified equity and subordinated debt investment made during the taxable year in a qualified Virginia small business venture. The aggregate amount of the credit available for each taxpayer in a taxable year is limited to the lesser of the tax imposed for such taxable year or $50,000. Unused credit can be carried forward to offset future income tax for up to 15 taxable years.

Definitions:

“Equity” is common stock or preferred stock, regardless of class or series, of a corporation. The definition would also include an interest in a limited partnership, or a membership in a limited liability company. However, no equity investment would qualify if it is required to be redeemed, or subject to an option on the part of the taxpayer to be redeemed, by the issuer within 5 years from the date of issuance.

"Qualified business" is a corporation, general or limited partnership or limited liability company that (I) has its headquarters and principal business operations within Virginia; (ii) engages in its business activities primarily within Virginia; and (iii) has annual gross receipts of $5 million or less based on the most recently completed fiscal year. A "qualified business" is not to include certain financial, government, construction, mining and real estate organizations.

“Qualified investment" is a cash investment in a “qualified business” in the form of “equity” or “subordinated debt” made during the taxable year.

"Subordinated debt" is indebtedness of a corporation, general or limited partnership, or limited liability company that: (I) by its terms requires no repayment of principal for the first 3 years after issuance; (ii) is not guaranteed by any other person or secured by any assets of the issuer or any other person; and (iii) is subordinated to all indebtedness and obligations owed by the issuer to nationally or state-chartered banking or savings and loan institutions.

An individual cannot make a "qualified investment" in a “qualified business” if that individual, members of such individual’s family, or any entity with which such individual is affiliated receives compensation from the “qualified business” in exchange for services provided as an employee, officer, director, manager, independent contractor or otherwise at any time during the holding period required for the particular type of "qualified investment.” Reimbursement of reasonable out-of-pocket expenses incurred would not be deemed to be compensation.

An equity investment or subordinated debt investment does not qualify for the credit if the investment was originally issued to someone other than the taxpayer. This means the credit will not apply to already existing investments bought and sold on secondary markets. The credit only applies to transactions where the “qualified business” gets new capital directly from the individual. Thus, the same instrument will not qualify for multiple credits by transferring it between investors.

The amount of tax credits allowed for any fiscal year is limited to $5 million. The Department of Taxation is responsible for implementing and administering a program of monitoring the $5 million cap.

Effective Date: Taxable years beginning on or after January 1, 1999

Code Section Added: § 58.1-339.4

Individual Income Tax Deduction for Purchasers of Prepaid Tuition Contracts - New

House Bill 608 (Chapter 373) creates a new individual income tax deduction for the purchase price of a prepaid tuition contract with the Virginia Higher Education Tuition Trust Fund. The deduction is limited to $2,000 per contract per taxable year, and any unused balance can be carried forward until the purchase price is fully deducted. The deduction is subject to recapture in taxable years in which distributions or refunds are made for any reason other than: (1) to pay qualified higher education expenses, or (2) beneficiary's death, disability, or receipt of a scholarship.

Effective Date: The deduction is retroactive to taxable years beginning on and after January 1, 1996. However, the amount paid for contracts purchased during taxable years prior to and including 1998 would be deducted on the 1998 tax return, subject to the $2,000 annual limitation.

Code Section Amended: §§ 23-38.78 and 58.1-322

Deduction for Contributions to Public School Construction - New
House Bill 1147 (Chapter 874) creates an individual income tax deduction for contributions to the Virginia Public School Construction Grants Program and Fund (VPSCGPF), provided the individual has not claimed a deduction for such amount on their federal income tax return.

Effective Date: Taxable years beginning on or after January 1, 2000
Code Section Amended: § 58.1-322

Historic Resources Fund Check-off - New

House Bill 438 (Chapter 51) and Senate Bill 282 (Chapter 283) create an income tax refund check-off to fund the Historic Resources Fund. This fund assists the Department of Historic Resources in the designation and preservation of historic landmarks.

Effective Date: Taxable years beginning on and after January 1, 1998, but before January 1, 2004
Code Section Added: § 58.1-346.8

Voluntary Contribution to the Family and Children’s Trust Fund - Amended

House Bill 1126 (Chapter 239) amends the voluntary contribution to the Family and Children’s Trust Fund to allow individuals not eligible to receive a tax refund to make a contribution or to allow a contribution when the amount of their tax refund is lees than the amount of the individual’s desired contribution. Contributions will be collected by the department and deposited with the state treasurer.

Effective Date: Taxable years beginning on and after January 1, 1998
Code Section Amended: § 58.1-346.3:1

Application of Reciprocity Agreements to Nonresident Trust Income - Amended

Senate Bill 284 (Chapter 352) authorizes the Department of Taxation to enter into reciprocal agreements with other states to exempt nonresidents from the income tax on income distributed to nonresidents by a trust domiciled in the reciprocating state. Currently, the department is authorized to enter into such reciprocal agreements exempting nonresidents from income tax on compensation paid in the reciprocating state.

Effective Date: July 1, 1998
Code Section Amended: § 58.1-342

Acceleration of Final Payment under Federal Retiree Settlement Program

House Bill 100 (Chapter 559) accelerates the final payment due to participants of the federal retiree settlement program (Harper) to September 30, 1998, if there is a 1997-98 fiscal year-end general fund surplus of at least $62.5 million. If the surplus is less than $62.5 million, a special "early" installment payment will be made on September 30, 1998, with the final installment payment and excess interest distribution on March 31, 1999. Under previous legislation, the fifth and final installment payment was scheduled for March 31, 1999.

Effective Date: July 1, 1998
Code Section Amended: None

Employer Withholding

Filing date for Annual Year-End Withholding Tax Returns - Amended

Senate Bill 475 (Chapter 335) changes the filing date for the Virginia year-end employer withholding information return (Form VA-6) from January 31 to February 28.

This change was made to conform the deadlines for businesses to submit year-end withholding information to the department and the Internal Revenue Service (IRS) and ease the burden on employers by conforming to federal deadlines for similar information.

Effective Date: Returns due to be filed on and after January 1, 1999
Code Section Amended: § 58.1-478

RETAIL SALES AND USE TAX

Services Exemption - Clarified

House Bill 278 (Chapter 481) clarifies the current exemption from the sales and use tax for professional, insurance, and personal service transactions to codify the department’s current policy that exempts certain service transactions involving access to and use of the Internet network of computer systems.

Virginia sales and use tax law currently exempts telecommunications services as pure service transactions because they do not involve the exchange of tangible personal property. The department has consistently held transactions involving data accessed on-line by personal computers as nontaxable service transactions. This is also true of transactions occurring via fax, modem or by other electronic means.

Since Internet access and on-line services generally constitute pure service transactions, this bill amends the services exemption to include charges for Internet access and for products sold over the Internet and transferred electronically.

Effective Date: July 1, 1998
Code Section Affected: § 58.1-609.5(1)

Various Nonprofit and Miscellaneous Exemptions - New

Exemptions from the retail sales and use tax were created for various nonprofit organizations by House Bill 131 (Chapter 812). The exemptions apply to several nonprofit organizations, generally exempt from taxation under § 501(c)(3) of the Internal Revenue Code, and established for a specific purpose. The exemptions are designated by type and category. The known affected organizations and the Code section amended are noted in parentheses.

Exemptions for Nonprofit Organizations

Educational (effective July 1, 1998, through June 30, 1999):

· An organization organized exclusively to operate a school which provides an ecumenical Christian education for students in grades seven through twelve and to develop Christian study programs and train teachers in education. (§ 58.1-609.4(28) - Center for Christian Studies, Inc.)

An organization located in the Tidewater region and organized exclusively to provide an affordable and quality education program to pre-school children of parents pursuing self-sufficiency. (§ 58.1-609.4(29) - Downtown Hampton Child Development Center)

An organization organized to (1) develop a pool of data processing professionals whose expertise is used to enhance ongoing endeavors, (2) sponsor computer competitions, training camps, and free workshops for the minority community, and (3) provide college scholarships to computer competition team members. (§ 58.1-609.4(30) - Black Data Processing Associates of Richmond)

Medical-related (effective July 1, 1998, through June 30, 1999):

- - - - An organization organized to provide cancer education programs, free community cancer screenings, and to acquire, own, and operate an out-patient medical facility providing radiation therapy services to cancer patients. (§ 58.1-609.7(28) - Williamsburg Radiation Therapy Center)
      - · An organization organized to provide support and assistance to primary and secondary victims of Alzheimer’s disease, their families, friends and communities; facilitate community education; and support research in disease prevention. (§ 58.1-609.7(29) - The Charlottesville-Piedmont Alzheimer’s Association and Related Disorders)
        
        · An organization organized exclusively to provide breast cancer support and outreach for the medically under served, including free mammography programs. (§ 58.1-609.7(30) - Tranquility Breast Center Foundation, Inc.)
        
        · An organization organized to develop a citizens’ voluntary movement to work toward improved research, prevention, detection, diagnosis and treatment of kidney disorders. (§ 58.1-609.7(31) - National Kidney Foundation of Virginia)
  Civic and community service (effective July 1, 1998, through June 30, 1999, unless otherwise noted):
  - - - · An organization organized exclusively to foster, sponsor and promote physical education, athletic programs and contests for youths in the Fifth Planning District. (§ 58.1-609.8(11)(b) - Inner City Athletic Association in Roanoke, effective July 1, 1997, through June 30, 1999)

An organization organized to receive federal grant assistance under the Department of Housing and Urban Development (HUD) Section 8 programs. (§ 58.1-609.8(40) - The Lewinsville Retirement Residence)

- - - - An organization organized to provide rehabilitative services, training, employment, referral services, and personal opportunities for growth to disabled and disadvantaged individuals within the Fifth, Twelfth, Fifteenth, and Sixteenth Planning Districts. (§ 58.1-609.8(58) - Goodwill Industries Tinker Mountain; Goodwill Industries of Danville Area, Inc.; Richmond Goodwill Industries; Rappahannock Goodwill Industries, effective July 1, 1995, through June 30, 1999)

- - - - An organization organized for promoting gardening among amateurs; protecting the Commonwealth’s native trees, wildflowers, and birds; encouraging conservation of our natural resources; promoting civic planting; encouraging roadside beautification; and assisting in the restoration and preservation of historic gardens in the Commonwealth. (§ 58.1-609.8(97) - Garden Club of Virginia)
        
        An organization organized exclusively to support and strengthen the family unit by working to improve living conditions, provide meaningful activities for children and greater educational opportunities in a positive, constructive and structured environment through day care, educational programs, home nursing care, grant programs, job counseling and job skills improvement programming. (§ 58.1-609.8(98) - Northumberland County Community Center, Inc.)
        
        An organization organized to assist young people and the elderly, conserve natural resources, develop community facilities, and create international understanding and goodwill. (§ 58.1-609.8(99) - Kiwanis Clubs)
        
        An organization organized primarily to rehabilitate and educate adolescents about alcohol and drug abuse by providing shelter, nutrition, and medical, emotional, and academic services 24 hours a day. (§ 58.1-609.8(100) - Shalom et Benedictus, Inc.)
        
        An organization organized for promoting conservation of marine resources and coastal wildlife through education and volunteer projects, including conducting seminars for dive clubs and publishing a newsletter. (§ 58.1-609.8(101) - Oceanwatch)

An organization organized to promote better understanding of math, science and technology through robotics education; and advance the state of assistive technology through research on robotic wheelchairs. (§ 58.1-609.8(102) - KISS Institute for Practical Robotics)

- - - - An organization organized to provide therapeutic horse back riding for clients with disabilities through a year round riding program and a summer camp program located in the Third Planning District. (§ 58.1-609.8(103) - Therapeutic Riding Center for the Handicapped, Inc.)
        
        An organization organized solely to promote addiction treatment and prevention services by disseminating information on existing treatment and self-help programs for addictive diseases. (§ 58.1-609.8(104) - APTNA, Inc.)
        
        An organization organized exclusively for the purpose of improving the community by researching, initiating, and funding projects for children. (§ 58.1-609.8(105) - Fredericksburg Area Service League, Inc.)
        
        An organization organized exclusively to educate and motivate disabled persons in Virginia through the use of television, video, radio, print, and seminars. (§ 58.1-609.8(106) - The Harris Group)
        
        An organization organized exclusively to provide labor and materials to build housing for low-income families in the Eleventh Planning District and to provide interest-free mortgages to such low-income families. (§ 58.1-609.8(107) - Appomattox County Habitat for Humanity, Inc.)
        
        An organization organized to hold meetings for members for prayer, fellowship, and training in Christian character and to provide ministry opportunities. (§ 58.1-609.8(108) - People of Praise, Inc.)
        
        An organization organized to provide donations to religious, charitable, scientific and educational entities and to award scholarships to the children and spouses of employees. (§ 58.1-609.8(109) - The Circuit City Foundation)
        
        An organization organized exclusively to provide support for the Virginia Rehabilitation Center for the Blind and citizens receiving services from the Center. (§ 58.1-609.8(110) - Virginia Rehabilitation Center for the Blind Volunteer Council)
        
        An organization organized exclusively to provide services to families affected
        by domestic violence, including educational support for female victims and
        educational prevention for children who experience domestic violence. (§
        58.1-609.8(111) - Hanover Domestic Violence Task Force, Inc.)
        
        An organization organized to improve the lives of persons with mental
        retardation by providing scholarships, adult recreation, transportation, adaptive
        equipment and respite care. §58.1-609.8(112)Hanover Association for Retarded
        Citizens, Inc.)
        
        An organization organized exclusively to provide assistance to residents who served, or had family that served, in Operation Desert Shield/Storm. (§ 58.1-609.8(113) - The VII Corps Desert Storm Veterans Association, Inc.)
        
        An organization organized exclusively to provide: (1) legal and accounting representation free of charge to Virginia citizens whose income level is at or below 250 percent of the federal poverty level; (2) outreach and teaching materials for low income taxpayers; and (3) publications, including a quarterly newsletter, about low income taxation. (§ 58.1-609.8(114) - The Community Tax Law Project)
        
        An organization organized exclusively for the purpose of providing to the citizens of the Commonwealth educational opportunities related to the James River Watershed. (§ 58.1-609.8(115) - The James River Association)
        
        An organization organized exclusively to reduce traffic fatalities and injuries in Virginia by working with traffic safety advocates to develop strategies and programs. (§ 58.1-609.8(116) - Drive Smart Virginia, Inc.)
        
        An organization organized exclusively to encourage the development of 4-H
        youth and adults in cooperation with the Extension Division of Virginia Polytechnic
        Institute and State University and other groups through community programs and
        services. (§ 58.1-609.8(117) - 4-H Educational Centers)
        
        An organization organized exclusively to promote, develop, and maintain a comprehensive program for the treatment and rehabilitation of alcoholics and other drug abusers. (§ 58.1-609.8(118) - Serenity House Substance Abuse Recovery Program, Inc.)

An organization organized exclusively to provide emergency assistance to abused, runaway, and to homeless children. (§ 58.1-609.8(119) - Alternative House)

- - - - An organization organized exclusively to promote, organize and put on public block parties in the downtown area of a city, with all profits donated to qualified charities. (§ 58.1-609.8(120) - Downtown Promoters, Inc.)

An organization organized exclusively to perform missionary outreach work in West Africa by providing food, clothing and rent assistance.

- - - - (§ 58.1-609.8(121) - Agape Gospel Mission, Inc.)
      An organization organized exclusively to provide a means for citizens of the Commonwealth to protect the Chesapeake Bay and to provide information related to Chesapeake Bay restoration. (§ 58.1-609.8(122) - The Alliance for the Chesapeake Bay)
      
      An organization organized primarily to raise money to fund summer study scholarships to a British university for Richmond area high school teachers and Virginia college students. (§ 58.1-609.8(123) - The Richmond Branch of the English-Speaking Union of the United States)
      
      An organization organized to provide daily care for preschool children of low-income families. (§ 58.1-609.8(124) - Roberta Webb Child Care Center, Inc.)
      
      · An organization organized exclusively to enhance the economic and personal independence of persons who are blind by improving employment opportunities. (§ 58.1-609.8(125) - National Industries for the Blind)
      
      · An organization organized exclusively to promote the central business district of a city by recruiting new businesses, assisting businesses with historically accurate design plans, and organizing events and activities which draw people to the area. (§ 58.1-609.8(126) - The Martinsville Uptown Revitalization Association)
      
      · An organization organized to raise funds to purchase equipment, uniforms, and supplies for high school baseball and softball teams in the Second Planning District. (§ 58.1-609.8(127) - Tazewell Baseball Boosters)

- - An organization organized exclusively by volunteers to provide recreational activities
    - for the youth of any county located within the boundaries of the Seventeenth Planning
      District. (§ 58.1-609.8(128) - Youth Club of Lancaster County, Inc.)
      
      An organization organized to operate an approximately 78,000 square- foot facility for the purpose of providing to Virginia’s citizens a location for Christian and community events sponsored primarily by other nonprofit organizations. (§ 58.1-609.8(129) - Cecil D. Hylton Memorial Chapel Foundation). Senate Bill 81 (Chapter 544) provides an identical exemption.
    - · An organization organized to facilitate the provision of affordable housing opportunities for low-income and moderate-income families within the boundaries of the Fifth Planning District. (§ 58.1-609.8(130) - Roanoke Valley Housing Corporation)
      · An organization organized to operate a twenty-four-hour, seven-day per week telephone hotline providing crisis intervention since 1969. (§ 58.1-609.8(131) - Northern Virginia Hotline, Inc.)
      · An organization organized to educate and train young people throughout the world about the environment and the protection thereof. (§ 58.1-609.8(132) - Earth Force, Inc.)
  - - An organization organized for thirty or more years to provide treatment to
      individuals suffering from the effects of substance abuse, and to their families,
      regardless of economic status. (§ 58.1-609.8(133) - Vanguard Services Unlimited)

Cultural (effective July 1, 1998, through June 30, 1999, unless noted otherwise):

- - - An organization organized to provide opportunities for health education programs, primarily regarding women’s health care; youth activities; education on issues of importance to the community; and an opportunity for doctors from Israel to participate in an exchange program with physicians associated with medical colleges in Virginia. Previously this charitable organization was exempt only on charges for accommodations, lodgings, and meals furnished by the organization. (§ 58.1-609.9(23) - Hadassah, the Women’s Zionist Organization of America, effective July 1, 1997, through June 30, 1999)
      
      · An organization organized to build and maintain through a nonprofit plan a permanent concert and to cultivate an interest in good music by qualified artists. (§ 58.1-609.9(24) - Community Concert Association)
      An organization organized to preserve and exhibit objects relating to the history of the
      Fredericksburg area. (§ 58.1-609.9(25) - Fredericksburg Area Museum & Cultural
      Center)
      
      An organization organized to provide opportunities for cultural enrichment,
      educational ventures, musical concerts, an art league, and affordable studio and office
      space for artists and community groups. (§ 58.1-609.9(26) - Hanover Arts and Activities
      Center)

- - - · An organization organized exclusively to establish and promote a facility for the collection, maintenance, exhibition and interpretation of the history of a city. (§ 58.1-609.9(27) - Hampton History Museum Association, Inc.)
      
      · An organization organized exclusively to present internationally acclaimed artists in the Commonwealth, showcase art excellence from the Commonwealth to others, and increase appreciation of the arts among school children. (§ 58.1-609.9(28) - Virginia Waterfront International Arts Festival, Inc.)
      
      · An organization organized to operate, manage, and promote a museum dedicated to recording, preserving, and providing information relating to the history of a city located in the Hampton Roads area. (§ 58.1-609.9(29) - Chesapeake’s Museum and Information Center, Inc.)
  - - An organization organized to promote public interest in Virginia’s cultural, historical,
      and scientific heritage by providing resources and support for Virginia’s museums and
      historic sites. (§ 58.1-609.9(30) - Virginia Association of Museums)
      
      An organization organized exclusively to perpetuate a memorial to Holocaust victims
      and survivors and to educate the general public through tours and lectures about the
      Holocaust. (§ 58.1-609.9(31) - Virginia Holocaust Museum)

Miscellaneous (effective July 1, 1998, through June 30, 1999):

- - - · An organization organized solely to operate a nonprofit swim team for children age 18 and under. (§ 58.1-609.10(17) - Urbanna Swim Team)
      
      · An organization organized exclusively to promote long-distance running as a competitive sport and healthful exercise through a variety of activities. (§ 58.1-609.10(18) - Road Runners Club of America, Inc.)
  An organization organized exclusively to sponsor and promote baseball programs for
  boys ages thirteen through eighteen and to sponsor baseball tournaments at the local
  and state levels. (§ 58.1-609.10(19) - Dixie Boys/Majors Baseball of Virginia, Inc.)
  - - An organization organized exclusively to advance the moral character of youth and
      promote sportsmanship, team spirit, fair play, honesty, and patriotism among youth by
      providing and supervising a community soccer program. (§ 58.1-609.10(20) -
      Harrisonburg Soccer Association)
      
      An organization organized exclusively to promote a unique region of the
      Commonwealth that was once a stage for Civil War activities.(§ 58.1-609.10(21) - The
      John Singleton Mosby Heritage Area Association)

- - - An organization which receives funding from specified government sources and is organized to foster economic development by working with owners and managers of small businesses to create jobs, make capital improvements, and increase sales. (§ 58.1-609.10(22) - Dr. William E. S. Flory Small Business Center)
  Little League Baseball or Softball: § 58.1-609.10(14)
  
  House Bill 131 also expands the current exemption from the sales and use tax for tangible personal property purchased for use or consumption by any civic youth organization or corporation which is organized solely for the purpose of promoting community little league-type baseball or softball.
  
  This bill, however, removes the current exemption for tangible personal property sold by any such organizations.
  
  The current exemption is limited to civic youth organizations promoting community little league-type baseball or softball in the Second (Cumberland Plateau) Planning District. House Bill 131 eliminates the geographical restriction.
  
  This provision is effective July 1, 1997, through June 30, 1999.
  
  Other Transactions
  
  Virginia Veterans Care Center: § 58.1-609.1(14)
  
  House Bill 131 also exempts from the sales and use tax sales of tangible personal property sold to residents and patients of the Virginia Veterans Care Center.
  This exemption is solely for sales of tangible personal property sold by the canteen located at the center to residents and patients of the center. All revenue from sales in the canteen go back into the purchase of inventory.
  
  The center is operated by the Virginia Veterans Care Center Board of Trustees, an exempt state governmental agency.
  
  This provision is effective July 1, 1998.
  
  Exempt Textbooks for Free Distribution to Professors: § 58.1-609.6(7)
  
  House Bill 131 and House Bill 105 (Chapter 645) also exempt from the sales and use tax textbooks and other educational materials withdrawn from inventory at book-publishing distribution facilities for free distribution to professors and other individuals who have an educational focus.
  
  Under prior law, book publishers and other manufacturers are subject to use tax, based on the cost price, for items withdrawn from a resale inventory and distributed free of charge. This policy has been confirmed by the Virginia Supreme Court’s opinion in Commonwealth v. Miller-Morton Co., 220 Va. 856, 263 S.E.2d 413 (1980). By withdrawing books and other educational materials from inventory for free distribution to professors and other individuals, a book-publishing distribution facility is deemed to exercise a taxable use over such items.
  
  This amendment allows a book-publishing distribution facility to provide textbooks and other educational materials free of charge to professors and individuals with an educational focus without incurring the use tax.
  
  This provision is effective from July 1, 1998, through June 30, 1999.
  
  Consideration of Sales and Use Tax Exemption Legislation
  
  House Bill 131 also amends Code of Virginia § 30-19.1:3 so that the General Assembly may consider, in any year, legislation extending the expiration date or delaying the effective date of any retail sales and use tax exemption.
  
  The 1996 General Assembly enacted legislation, effective on or after July 1, 1998, providing that any retail sales and use tax exemption bill shall be considered by the General Assembly only in regular sessions convened in even-numbered years.
  
  Extending Expiring Sunset Dates
  
  House Bill 131 also extends, from June 30, 1998, to June 30, 1999, the sunset date for the expiring medical-related and civic and community service exemptions.
  
  Entitlement to Certain Sales Tax Revenues - Expanded
  
  House Bill 161 (Chapter 497) and Senate Bill 55 (Chapter 492) authorize the sales and use tax generated by sales at the Portsmouth Hotel and Conference Center (a public facility) to be returned to the City of Portsmouth. The tax so returned must be applied to the repayment of municipal bonds issued to finance the construction of the facility.
  
  The tax returned to the City of Portsmouth does not include the 1% sales tax returned to localities based on school age populations nor the ½% sales tax dedicated to the Transportation Trust Fund.
  
  The mechanism described in this amendment was originally enacted in 1992. Under prior law, the only municipality which qualified was the City of Roanoke. The tax returned to the City of Roanoke is used to pay the municipal bonds issued to construct the Hotel Roanoke. This amendment expands the prior law to include the City of Portsmouth’s Hotel and Conference Center as a qualifying facility eligible for the return of sales and use tax on sales made at this facility.
  
  Effective Date: July 1, 1998
  Code Section Amended: § 58.1-608.3
  
  Disposition of State Sales and Use Tax Revenues - Expanded
  
  House Bill 38 (Chapter 320) dedicates a portion of the sales and use tax which is generated by sales of hunting, fishing, and other outdoor-related equipment in Virginia. The dedicated portion is calculated at 2% of the gross sales of such equipment as reported by federal census data (National Survey of Fishing, Hunting, and Wildlife-Associated Recreation).
  
  The funds generated under this amendment are dedicated to the Game Protection Fund which is administered by the Department of Game and Inland Fisheries and used to pay expenses incident to carrying out the provisions of hunting, trapping, and fishing laws. This amendment also creates the Capital Improvement Fund which will be used by the Department of Game and Inland Fisheries for the purchase, construction or repair of its capital assets.
  
  This amendment does not impose additional sales or use taxes on the purchase of outdoor-related equipment. Nor does it impose any additional filing requirements on businesses which sell such equipment. This amendment diverts General Fund revenue to the Game Protection Fund.
  
  Effective Date: July 1, 2000
  Code Section Amended: § 58.1-638
  Code Section Added: § 29.1-101.01
  
  MISCELLANEOUS TAXES
  SCC Tax
  
  Retaliatory Tax Credit for License Tax on Insurance Companies - New
  
  House Bill 80 (Chapter 365) establishes a credit against the license tax on gross premiums imposed on insurance companies for the “retaliatory costs” incurred during the taxable year by a domestic insurance company as a result of the difference between lower premium tax rates and other costs imposed by other states and tax rates and costs imposed by Virginia. A “domestic insurance company” is any insurance company that is incorporated or organized under the laws of Virginia and is headquartered within Virginia.
  
  Eligible “retaliatory costs” include any taxes, or other fees paid for the privilege of doing business in another state, that are paid by a domestic insurer to another state as a result of Virginia’s lower premium tax rates and regulatory costs. Penalties or interest for late payment of taxes, fees or other charges, fines or penalties assessed as the result of the violation of laws of such other state, or sums paid in settlement or compromise of alleged violations of such laws would not qualify as retaliatory costs for the purposes of this credit.
  
  To qualify for the credit, a domestic insurance company, or an affiliated group of domestic insurance companies, must make a “qualified investment” in Virginia and for license years beginning on or after July 1, 1998, maintain the employment level required for a qualified investment. A "qualified investment" is an investment in Virginia by a domestic insurance company or by one or more members of an affiliated insurance group that results in an increase of at least 325 qualified full-time employees as of December 31, 1997, above such company’s or group's total combined employment level in Virginia as of December 31, 1996. For any taxable year beginning on or after January 1, 2001, a domestic insurance company, or an affiliated group of domestic insurance companies, must have more than 100 qualified full-time employees in Virginia during the entire taxable year to meet the requirements of a qualifying investment.
  
  Any credit not used to offset tax for the taxable year in which the credit was allowed may be carried forward for five taxable years. If two or more domestic insurance companies paying retaliatory costs in any year are members of an affiliated
  insurance group, the total of the retaliatory costs paid may be combined and apportioned among the members of the affiliated insurance group as the members may agree. However, under no circumstances may a single member of an affiliated group, or the group collectively, receive a refund in excess of $800,000 in a single year.
  
  Effective Date: July 1, 1998
  Code Section Amended: § 58.1-2500
  Code Section Added: § 58.1-2510
  Recordation Tax
  
  Exemption of Deed of Trust between Political Entities -Amended
  
  Senate Bill 228 (Chapter 333) exempts a deed of trust or mortgage from the state recordation tax given by a local government entity or political subdivision of the Commonwealth to secure a debt payable to any other local government entity or political subdivision.
  
  Deeds conveying real estate to the United States, the Commonwealth, counties, cities, town districts or any other political subdivision of the Commonwealth are currently exempt from the recordation tax. The current exemption that applies to political subdivisions does not cover deeds of trusts or mortgages. This bill makes deeds of trust or mortgages between political subdivisions exempt from the recordation tax. This is consistent with other exemptions from the tax currently provided under law.
  
  Effective Date: July 1, 1998
  Code Section Amended: § 58.1-811
  
  Definition of Existing Debt - Amended
  
  Senate Bill 234 (Chapter 349) eliminates the recordation tax on refinanced deeds of trust or mortgages with the same lender, provided the amount refinanced on the deed of trust or mortgage does not exceed the amount of the original deed of trust or mortgage.
  
  Currently, a borrower pays a recordation tax on a deed of trust or mortgage at a rate of fifteen cents per $100 of the amount borrowed. If a borrower refinances a deed of trust or mortgage with the same lender, the tax is paid on the amount of the new loan which exceeds the existing debt.
  
  Effective Date: July 1, 1998
  Code Section Amended: § 58.1-803
  
  Probate Tax
  
  Filing Threshold Increase - Amended
  
  House Bill 344 (Chapter 117) increases the filing threshold for the tax on wills and administration from $5,000 to $10,000. Currently, a tax is imposed in the probate of every will or the administration of every estate which is valued in excess of $5,000. The tax rate is ten cents per every $100 of the estate value.
  
  Effective Date: Upon Passage
  Code Sections Amended: §§ 26-4, 26-12.3, 58.1-1712 and 58.1-1714
  
  Forest Products Tax
  
  Alternative Tax Method for Forest Products Tax - New
  
  House Bill 657 (Chapter 420) creates an alternate method for taxpayers to compute the forest products tax. The alternative method is based upon weight of their forest products.
  
  Under current law, the forest products tax is required to be computed based on volume or length measurements of the forest product. For taxpayers who measure their forest products by weight, this generally requires a complicated "conversion" for computing the tax.
  
  The new alternate method was designed to better reflect the current industry method used to measure forest products based upon weight. Taxpayers, however, will still be able to use the existing volume tax rates at their election.
  - Effective Date: July 1, 1998
  Code Section Amended: §§ 10.1-1176, 58.1-1604, 58.1-1605 and 58.1-1609
  
  LOCAL TAX
  
  LEGISLATION
  
  GENERAL PROVISIONS
  
  Statute of Limitations for Court Applications Following Commissioner’s Appeals - New
  
  House Bill 630 (Chapter 529) requires Commissioners of the Revenue to provide written responses to a taxpayer’s application for a correction of assessments, upon request. The bill also expands the statute of limitations for seeking court relief of a tax assessment to within one year after a local Commissioner’s of the Revenue final determination in a case involving any local tax.
  
  Currently, taxpayers have a number of options in making an application to the court for the correction of an erroneous and improper assessment of a local tax. A taxpayer may file suit:

within three years of the date the assessment was made provided that the taxpayer pays the assessment within the three year period,

within one year of the date the tax was assessed, or

within one year of the Tax Commissioner’s final determination in an appeal involving the business, professional and occupational license (BPOL) tax.

This makes statute of limitations for all local taxes consistent with statute of limitations allowed for appeals to the Tax Commissioner for the BPOL tax.

- - Effective Date: July 1, 1998

Code Section Amended: §§ 58.1-1821, 58.1-1825, 58.1-3981, 58.1-3984

TANGIBLE PERSONAL PROPERTY TAX

Personal Property Tax Relief - New

Senate Bill 4005 (Chapter 2 of the 1998 Acts of Assembly - Special Session) eliminates the tangible personal property tax imposed on the first $20,000 of value on passenger cars, pickup or panel trucks, and motorcycles owned or leased by natural persons and used for nonbusiness purposes. The tax is eliminated over five years with 12.5% of the tax eliminated in 1998, 27.5% in 1999, 47.5% in 2000, 70% in 2001, and 100% in 2002 and thereafter. The tax on vehicles valued at $1,000 or less will be completely eliminated beginning in 1998.

For 1998 personal property taxes, the tax relief will be in the form of a direct refund from the Commonwealth to taxpayers, after taxpayers pay their tax bill(s) in full. Taxpayers who pay their 1998 personal property tax between January 1, 1998 and June 30, 1998 will have their refund mailed no later than November 15, 1998. Taxpayers who pay their 1998 personal property tax between July 1, 1998 and December 31, 1998 will have their refund mailed no later than May 15, 1999. Taxpayers who pay their 1998 personal property tax after December 31, 1998 will have their refund mailed within one hundred days of payment.

For 1999 personal property taxes and thereafter, the tax relief will be displayed on the taxpayer’s personal property tax bill and the taxpayer will not have to make payment for the tax relief.

The bill provides that the Commonwealth will compensate localities for any loss of local revenue resulting from the elimination of the tax. Funding to localities is based upon tax rates and assessment ratios in effect on August 1, 1997. The bill provides that no more than 8.5% of general fund revenues may be dedicated to fund localities in any fiscal year.

The bill provides a mechanism for freezing the tax relief if the Commonwealth’s revenue growth is insufficient. The percentage of tax relief is frozen at the current percentage of tax relief in effect if any one of three revenue growth tests is not met. When revenue growth returns, the percentage of tax relief will increase to the next highest level of tax relief.

Effective Date: Upon passage
Code Sections Amended: §§ 2.1-155, 22.1-175.1, 22.1-175.2, 22.1-175.3, 46.2-208, 46.2-263 and 58.1-3912
Code Sections Added: §§ 15.2-1636.20, 22.1-175.4, 58.1-3523 - 58.1-3536, 58.1-3916.01

Penalties for Delinquent Taxpayers Receiving Special Property Tax Rate - Amended

House Bill 731 (Chapter 649) allows localities, by ordinance or resolution, to revoke the distribution of free license decals to qualified taxpayers and subject them to a special penalty if they are over thirty days delinquent in paying the property tax on their motor vehicles.

Under current law, localities may, by ordinance, apply a lower tax rate to motor vehicles owned by certain taxpayers who use these vehicles in their activities with volunteer organizations such as volunteer fire and rescue squads. The penalty authorized by this bill is the net difference in the tax liability due for motor vehicles subject to the special classification versus the tax liability due if the motor vehicles were subject to the general classification of personal property under § 58.1-3503.

Effective Date: July 1, 1998
Code Sections Amended: §§ 46.2-752 and 58.1-3916

Separate Classification for Farm Machinery - New

Senate Bill 109 (Chapter 332) adds a separate classification of tangible personal property for farm machinery that is designed for the planting, production, or harvesting of a single product or commodity. Localities have the option of taxing separate classifications of tangible personal property at the same rate as other personal property, at a lower rate, or exempting it from tax completely.

Effective Date: July 1, 1998
Code Section Amended: § 58.1-3505

Exemption for Certified Solar Energy Equipment and Recycling Equipment - Amended

House Bill 555 (Chapter 606) gives taxpayers the election of deducting the exemption amount on their solar energy equipment and recycling equipment, facilities, or devices either from the real property tax due on the property to which the exempted property is attached or from the machinery and tools tax due on such property. Currently, the tax exemption attributable to certified solar energy or recycling property can only be deducted from the real property tax due on the real estate to which the equipment, facilities, or devices are attached.

Effective Date: July 1, 1998
Code Section Amended: § 58.1-3661

REAL ESTATE TAX

Exemption for Erosion Control Improvements and Pollution Abatement - Expanded

House Bill 1425 (Chapter 272) creates a separate classification for real estate used for erosion control improvements and pollution abatement or prevention. Localities, by ordinance, will be able to partially exempt such property from tax. “Erosion control improvements” include the placing of rock or concrete break waters, bulkheads, gabions, revetments, or similar structures which primary purpose is to abate or prevent water pollution.

Effective Date: July 1, 1998
Code Section Added: § 58.1-3665

Threshold for Liability of Rollback Taxes Increases - Amended

Senate Bill 47 (Chapter 274) increases the threshold amount for roll-back tax liability to ten dollars from two dollars. If the amount of tax liability is less than the threshold amount, then the roll-back tax liability will not attach to property when its use or zoning changes.

Effective Date: July 1, 1998
Code Section Amended: § 58.1-3237

Definition of “Wetlands” and “Riparian Buffers” - Expanded

House Bill 1419 (Chapter 516) adds two new categories to the definition of real estate qualified for dedication for open-space use - “wetlands” and “riparian buffers” - that are eligible to qualify for special land-use taxation.

“Wetlands” is defined as an area that is inundated or saturated by surface or ground water at a frequency or duration sufficient to support, and that under normal conditions does support, a prevalence of vegetation typically adapted for life in saturated soil conditions, and that is subject to a perpetual easement permitting inundation by water.

“Riparian buffer” is defined as an area of trees, shrubs or other vegetation, subject to a perpetual easement permitting inundation by water that is (1) at least 35 feet in width, (2) adjacent to a body of water, and (3) managed to maintain the integrity of stream channels and shorelines and reduce the effects of upland sources of pollution by trapping, filtering, and converting sediments, nutrients, and other chemicals.

Effective Date: July 1, 1998
Code Section Amended: § 58.1-3665

Valuation of Conservation Easements - Clarified

House Bill 727 (Chapter 487) clarifies how the value of land is to be determined for tax purposes after the land has been made subject to a permanent conservation easement. The fair market value of the land must be based only on uses of the land that are permitted under the terms of the easement and must not include any value attributable to the uses or potential uses of the land that have been terminated by the easement.

Effective Date: July 1, 1998
Code Sections Amended: §§ 10.1-1011 and 58.1-3205

BPOL

Proposed Constitutional Amendment: Referendum for BPOL/Merchants’ Capital Tax Purposes - Amended

House Bill 41 (Chapter 151) provides for a referendum on November 3, 1998, to amend the Virginia Constitution to allow localities the option of exempting, either partially or completely, any business from the merchants’ capital tax or the BPOL tax or both. Currently, localities may elect to impose the local BPOL tax in lieu of the merchants’ capital tax, pursuant to § 58.1-3704. If a locality does not make this election, it must impose the merchants’ capital tax.

Effective Date: July 1, 1998.

- - Code Section Amended: Section 6 of Article X of the Virginia Constitution relating to tax/finance and exempt properties

Gross Receipts Deduction for Funeral Service Providers - New

House Bill 46 (Chapter 220) excludes from the taxable gross receipts of funeral service providers certain receipts that are received from clients for products and services provided by third-party businesses, which collected receipts are directly passed through and paid to such third-party businesses by funeral service providers. Upon applying for a BPOL license, funeral service providers must list the names of third-party businesses and the amount of receipts provided to such third-party businesses.

Effective Date: July 1, 1998
Code Section Added: § 58.1-3732.3

Exemption of Certain Gross Receipts of Staffing Firms - New

Senate Bill 113 (Chapter 347) exempts from the local BPOL tax certain amounts from the gross receipts of staffing firms. Specifically, these exempted amounts are wages, salaries, payroll taxes, payroll deductions, employee benefits, workers’ compensation costs, and similar expenses paid to contract employees pursuant to a services contract or a temporary services agreement. Consequently, the taxable gross receipts of staffing firms would generally be administrative fees received from clients.

Effective Date: July 1, 1998
Code Section Amended: § 58.1-3703

Verification of Contractor’s Compliance with Workers’ Compensation Act - New

Senate Bill 193 (Chapter 503) prohibits localities from issuing or reissuing a local Business, Professional and Occupational License (BPOL) to contractors who are not in compliance with workers’ compensation laws. Contractors are required to provide written certification of their compliance with workers’ compensation laws to localities and are subject to a Class 3 misdemeanor if they provide a false certification.

Effective Date: July 1, 1998
Code Section Amended: § 58.1-3714

MISCELLANEOUS TAXES

Admissions Tax

Brunswick County - New

House Bill 21 (Chapter 150) authorizes Brunswick County to impose an admissions tax on the charge for attendance at any event. The tax may not exceed 10 percent of admissions charges for attendance to an event.

Effective Date: July 1, 1998
Code Section Amended: § 58.1-3818

Nelson County - New

House Bill 875 (Chapter 532) authorizes any county with a population of no less than 12,450 and no more than 12,850 (currently only Nelson County) to impose an admissions tax, not to exceed 10 percent, on the charge for attendance at any spectator event. The tax would not apply to admissions charged to participants in order to participate in any event.

Effective Date: July 1, 1998
Code Section Amended: § 58.1-3818

Coal and Gas Road Improvement Tax

Distribution of Coal and Gas Road Improvement Tax - Amended

House Bill 1133 (Chapter 694) removes a requirement that cities and counties are required to follow regarding the distribution of coal and gas road improvement tax revenues for water projects. Under this bill, cities and counties are no longer required to include all water suppliers that serve such cities and counties in developing the annual plan for funding water projects.

Effective Date: July 1, 1998
Code Section Amended: § 58.1-3713.01

Consumer Utility Tax

Exemption from Consumer Utility Tax Provided to Churches - New

House Bill 198 (Chapter 337) allows any city with a population not less than 27,000 and not more than 28,500 to exempt churches and religious groups from consumer utility taxes if they are entitled to a property exemption under § 58.1-3650. Currently, Manassas is the only locality that would be affected by this bill.

Effective Date: July 1, 1998
Code Sections Amended: §§ 58.1-3812 and 58.1-3814

Transient Occupancy Tax

Chesterfield, Hanover, and Henrico Allowed to Impose Additional Tax - New

House Bill 169 (Chapter 74) and Senate Bill 144 (Chapter 444) allow any county having a population of at least 63,300 but not more than 65,000 (currently only Hanover), or at least 200,000 but not more than 210,000 (currently only Chesterfield), or any county having the county manager form of government (currently only Henrico), to impose an additional transient occupancy tax at a rate not to exceed 2 percent. The revenues collected from the additional tax must be designated and spent to expand the Richmond Centre, a convention and exhibition facility.

Chesterfield, Hanover, and Henrico counties currently impose the transient occupancy tax at a 6 percent rate. This rate consists of the 2 percent tax which any county may impose plus an additional 4 percent, the proceeds of which must be used to promote tourism and travel in the Richmond metropolitan area. House Bill 169 and Senate Bill 144 allow these counties to increase the tax to a maximum rate of 8 percent.

Effective Date: July 1, 1998
Code Section Amended: § 58.1-3823

Dinwiddie County Allowed to Impose Maximum 5% Tax - New

House Bill 1423 (Chapter 729) allows any county having a population of no less than 20,500 and no greater than 21,250 (currently only Dinwiddie County) to impose a transient occupancy tax at a rate not to exceed 5 percent. The revenues collected from that portion of the tax exceeding the 2 percent rate will be used to promote tourism and travel in the locality.

Effective Date: July 1, 1998
Code Section Amended: § 58.1-3819

Wythe County Allowed to Impose Maximum 5% Tax - New

Senate Bill 23 (Chapter 733) allows any county having a population of no less than 25,100 and no greater than 26,000 (currently only Wythe County) to impose a transient occupancy tax at a rate not to exceed 5 percent. The revenues collected from that portion of the tax exceeding the 2 percent rate will be used to promote tourism and travel in the locality.

Effective Date: July 1, 1998
Code Section Amended: § 58.1-3819

TAX COLLECTION AND ADMINISTRATION

Collection of Local Taxes - Amended, Clarified and Expanded

House Bill 730 (Chapter 648) makes several changes concerning the collection of local taxes, which include:

- - 1. Every summons or other process that a local treasurer is authorized to issue must be executed and returned in the same manner as those issued by civil court procedure.

- - 2. Local treasurers are allowed to collect other charges and costs (other than delinquent taxes) in actions of distress.

- - 3. Before a sheriff is allowed to collect delinquent taxes, the taxes must be delinquent for six months or more.

- - 4. The statute of limitations for collecting local taxes stops running for taxpayers whose assets are subject to the control of any court, including bankruptcy proceedings.

- - 5. Local governing bodies have no limitation on imposing fees for collecting delinquent taxes and costs, but attorneys and collection agencies are still limited to recovery of no more than 20% of the tax amount collected.

- - 6. If an assessment is considered erroneous and must, subsequently, be refunded, a commissioner of revenue must abate the tax liability and notify the treasurer who must refund the amount or take other steps to correct the taxpayer’s liability. This bill also repeals three statutes.

Effective Date: July 1, 1998
Code Sections Amended: §§ 58.1-3128, 58.1-3919, 58.1-3934, 58.1-3940, 58.1-3958 and 58.1-3980
Code Sections Repealed: §§ 58.1-3927, 58.1-3937 and 58.1-3939.1

Local Property Tax Exemption/Deferral Programs: Increase in Income/Net Worth Limitations - Amended

Senate Bill 677 (Chapter 361) authorizes certain localities, by ordinance, to raise the maximum income and net financial worth limits for taxpayer eligibility under the local real property tax exemption/deferral programs and under the personal property tax rate reduction programs. The income limits increase from $40,000 to the greater of $52,000 or the income limits determined by HUD under the National Housing Act. The net financial worth limits increase from $150,000 to $195,000.
Qualifying localities are those having a 1980 population of more than 500,000; any county, city or town adjacent thereto; the Cities of Manassas, Manassas Park, Chesapeake, Portsmouth, Suffolk, or Virginia Beach, the Counties of Chesterfield, Fauquier, Henrico, and Stafford; and the Town of Leesburg.

Effective Date: July 1, 1998
Code Sections Amended: §§ 58.1-3211 and 58.1-3506.2

Authority to Collect Personal Property Tax in Two Installments - Clarified

House Bill 1431 (Chapter 542) clarifies that localities have the authority to collect personal property taxes in two equal installments. The provisions of this bill apply to ordinances in effect on or after July 1, 1997, including any ordinance adopted by a governing body between July 1, 1997 and the effective date of this act.

Effective Date: Upon Passage
Code Section Amended: § 58.1-3916

Extension of Time for Fiduciaries to File Returns - Amended

House Bill 663 (Chapter 375) allows fiduciaries, acting on behalf of taxpayers that are unable to file their own local tax returns, to file returns within 120 days after the fiduciary qualifies or begins to act. The measure also provides that the failure to file a return or pay a tax due to the taxpayer’s death will not be subject to penalty or interest if the return is filed or the tax paid within 30 days of the due date.

Effective Date: July 1, 1998
Code Section Added: § 58.1-3916

Local Officials Access to Public Records - New

House Bill 790 (Chapter 235) allows local commissioners and treasurers to provide electronic access to nonconfidential public records from a remote location.

Typically, electronic access would be accomplished through the Internet or other electronic means, such as bulletin boards. In doing so, local officials would be required to protect the integrity of their local records by ensuring that remote access users cannot (1) access confidential information as defined under § 58.1-3, the Privacy Protection Act of 1976, the Virginia Public Records Act, or other applicable laws, or (2) modify or destroy any of the information.

Effective Date: July 1, 1998
Code Sections Added: §§ 58.1-3122.2 and 58.1-3172.1

LEGISLATIVE

STUDIES

- - HJR 187: Joint Subcommittee Studying the Virginia Freedom of Information Act

The subcommittee will examine provisions of the Code of Virginia affecting public access to government records and meetings and will make recommendations for any necessary revisions to the Virginia Freedom of Information Act. TAX will provide technical assistance upon request.

SJR 91: Joint Subcommittee Examining the Restructuring of the Electric Utility Industry (SJR118-1996, SJR 259-1997)

The joint subcommittee will continue its study of electric utility restructuring, review restructuring proposals, and develop a comprehensive legislative proposal for appropriately restructuring the Commonwealth’s electricity market. TAX will provide technical assistance upon request.

SJR 104: Joint Commission on Health Care’s Study of Tax Incentives for the Purchase of Long-Term Care Insurance

The commission will study the tax incentives for the purchase of long-term care insurance including (I) incentives for the individual or family who would purchase such a policy; (ii) alternative incentive plans, including Medicaid spend-down credits; and (iii) recommendations for a benefit package which provides adequate insurance benefits and protects the interests of the insured and the Commonwealth. TAX will provide assistance upon request.

SJR 171: Joint Subcommittee to Study Economic Incentives to Promote the Growth and Competitiveness of Virginia’s Shipbuilding Industry

The joint subcommittee will determine whether, and at what level, tax benefits or other economic incentives would be an effective tool in ensuring the continued health of the Commonwealth’s maritime industries. TAX will provide assistance upon request.

INDEXES

TABLE OF CONTENTS

STATE TAX LEGISLATION 1

GENERAL PROVISIONS 2
Statute of Limitations for Court Applications Following Commissioner’s Ruling on Administrative Appeals 2

INCOME TAX 3
Generally
Period for Filing Amended State Income Tax Returns Resulting From Federal Adjustments 3
Corporations
Deduction for Contributions to Public School Construction 4
Major Business Facility Job Tax Credit 4
Historic Rehabilitation Tax Credit 4
Historic Rehabilitation Tax Credit 5
Alternative Corporate Recycling Tax Credit 5
Credit for Purchase of Waste Motor Oil Burning Equipment 6
Tax Credit for Employers of Temporary Assistance to Needy Families (TANF) Recipients 6
Vehicles Emissions Testing Tax Credit 6
Enterprise Zone Act 7
Double-weighted Sales Factor 7
Individuals
Subtraction of Certain Military Pay 8
Qualified Agricultural Contribution Sunset Date 8
Special "Border State" Tax Credit Computation 9
Tax Credit Created for Taxes Paid on Foreign Pension Income 9
Virginia Earned Income Credit for Low Income Families with Children 10
Equity and Subordinated Debt Investments in Small Businesses Tax Credit 11
Individual Income Tax Deduction for Purchasers of Prepaid Tuition Contracts 12
Deduction for Contributions to Public School Construction 12
Historic Resources Fund Check-off 13
Voluntary Contribution to the Family and Children’s Trust Fund 13
Application of Reciprocity Agreements to Nonresident Trust Income 13
Acceleration of Final Payment under Federal Retiree Settlement Program 13
Employer Withholding
Filing date for Annual Year-End Withholding Tax Returns 14

RETAIL SALES AND USE TAX 15
Services Exemption 15
Various Nonprofit and Miscellaneous Exemptions 15

- - - - Exemptions for Nonprofit Organizations: Educational (15); Medical- related (16); Civic and community service (16); Cultural (21); Miscellaneous (22); Little League Baseball or Softball (22); Other Transactions: Virginia Veterans Care Center (23); Exempt Textbooks for Free Distribution to Professors (23); Consideration of Sales and Use Tax Exemption Legislation (24); Extending Expiring Sunset Dates (24)

Entitlement to Certain Sales Tax Revenues 24
Disposition of State Sales and Use Tax Revenues 24

MISCELLANEOUS TAXES 26
SCC Tax
Retaliatory Tax Credit for License Tax on Insurance Companies 26
Recordation Tax
Exemption of Deed of Trust between Political Entities 27
Definition of Existing Debt 27
Probate Tax
Filing Threshold Increase 27
Forest Products Tax
Alternative Tax Method for Forest Products Tax 28

LOCAL TAX LEGISLATION 29

GENERAL PROVISIONS 30
Statute of Limitations for Court Applications Following Commissioner’s Appeals 30

TANGIBLE PERSONAL PROPERTY TAX 31
Personal Property Tax Relief 31
Penalties for Delinquent Taxpayers Receiving Special Property Tax Rate 32
Separate Classification for Farm Machinery 32
Exemption for Certified Solar Energy Equipment and Recycling Equipment 32

REAL ESTATE TAX 33
Exemption for Erosion Control Improvements and Pollution Abatement 33
Threshold for Liability of Rollback Taxes Increases 33
Definition of “Wetlands” and “Riparian Buffers” 33
Valuation of Conservation Easements 34

BPOL 35
Proposed Constitutional Amendment: Referendum for BPOL/Merchants’ Capital Tax Purposes 35
Gross Receipts Deduction for Funeral Service Providers 35
Exemption of Certain Gross Receipts of Staffing Firms 35
Verification of Contractor’s Compliance with Workers’ Compensation Act 36

MISCELLANEOUS TAXES 37
Admissions Tax
Brunswick County 37
Nelson County 37
Coal and Gas Road Improvement Tax
Distribution of Coal and Gas Road Improvement Tax 37
Consumer Utility Tax
Exemption from Consumer Utility Tax Provided to Churches 38
Transient Occupancy Tax
Chesterfield, Hanover, and Henrico Allowed to Impose Additional Tax 38
Dinwiddie County Allowed to Impose Maximum 5% Tax 38
Wythe County Allowed to Impose Maximum 5% Tax 39

TAX COLLECTION AND ADMINISTRATION 40
Collection of Local Taxes 40
Local Property Tax Exemption/Deferral Programs: Increase in Income/Net Worth Limitations 40
Authority to Collect Personal Property Tax in Two Installments 41
Extension of Time for Fiduciaries to File Returns 41
Local Officials Access to Public Records 41

LEGISLATIVE STUDIES 42
HJR 187: Joint Subcommittee Studying the Virginia Freedom of Information Act 43
SJR 91: Joint Subcommittee Examining the Restructuring of the Electric Utility Industry 43
SJR 104: Joint Commission on Health Care’s Study of Tax Incentives for the Purchase of Long-Term Care Insurance 43
SJR 171: Joint Subcommittee to Study Economic Incentives to Promote the Growth and Competitiveness of Virginia’s Shipbuilding Industry 43

INDEXES 44

Legislative Summaries