Rulings of the Tax Commissioner

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 1992 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.

Legislation granting property tax exemptions, granting taxing authority through local charters, creating special taxing districts, or affecting taxes administered by other state agencies is not included in the Summary.

The Summary is merely intended to provide an overview 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

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

SUBJECTPAGE

STATE TAX LEGISLATION

General Provisions
Criminal Penalties - New Felony Provision …………………………. 2
State Tax Administration ………………………………………………. 2

Income Tax

Corporations
Extension of Recovery Period for Depreciation …………………….. 3
Enterprise Zone Credit – Expanded ………………………………….. 3
Recycling Machinery and Equipment Credit - Sunset Date Extended 4
Credit for Rent Reductions - Eligibility Increased …………………… 4
Investment Credit - New ……………………………………………….. 4
Low-Income Housing Credit - Deferred ………………………………. 5
Substance Abuse Advertising Credit - Repealed ……………………. 5

Individuals
Self-Employment Tax - Conformity Deferred ………………………… 5
Interest Subtraction - New ……………………………………………… 6
Credit for Taxes Paid Other States ……………………………………. 6
Credit for Rent Reductions - Eligibility Increased ……………………. 6
Low-Income Housing Credit - Deferred ………………………………. 7
Substance Abuse Advertising Credit – Repealed ……………………. 7

Income Tax Withholding
Individual Retirement Plans and Simplified Employee Pension Plans 8
Withholding Allowances - Adjustment Deferred ………………………. 8

Retail Sales and Use Tax
Purchase of Controlled Drugs - Exemption Expanded ………………. 9
Nonprescription Drugs - Exemption Deferred ………………………… 9
Alcoholic Beverage Exemption – Repealed ………………………….. 9
Nonprofit State Historical Society ……………………………………… 10
Locksmiths - Treated as Retailers ……………………………………… 10
Public Facilities Act ………………………………………………………. 10

Miscellaneous Provisions
Small Grains Assessment - Cost Reimbursement Prohibited ………… 11
Soybean Tax - Coordinate with National Checkoff ……………………. 11
Motor Vehicle Fuel Sales Tax ……………………………………………. 11
Estate Tax - Gifts of Principal's Property Under a Power of Attorney .. 12

LOCAL TAX LEGISLATION

License Taxes
Oil Severance Tax - Sunset Date Extended …………………………… 15
BPOL Tax - Research and Development Services …………………… 15
Coal and Gas Road Improvement Tax ………………………………… 15

Transient Occupancy Tax
Tax Base Expanded ……………………………………………………… 16

Consumer Utility Tax
Utility Sales of Alternative Motor Vehicle Fuels ……………………….. 17

Tangible Personal Property
Forest Harvesting Equipment ……………………………………………. 17
Generation and Cogeneration Equipment ……………………………… 17
Proration of Tax …………………………………………………………… 18

Real Estate
Vesting of Title - Judicial Sale ……………………………………………. 18
New Reporting Requirements – UBTI …………………………………… 18
Assessment of Real Estate Used By Railroads ……………………….. 19
Leasehold Interest in Tax Exempt Real Estate – Exemption ………… 19
Roll-back Taxes - Rezoning ……………………………………………… 19
Tax Relief -Income and Net Worth Limits ………………………………. 20

Tax Collection and Administration
Treasurers …………………………………………………………………. 20
Equalize Period to Assess and Correct Local Taxes …………………. 21
Collection of Certain Local Taxes - Deemed Held in Trust ………….. 21

Local Cigarette Tax
County Cigarette Tax …………………………………………………….. 21

Criminal Penalties - New Felony Provision

House Bill 213 (Chapter 763) creates a Class 6 felony for twoor more acts or omissions of converting or diverting sales and withholding tax collections of $1,000 or more from the state treasury, with a five year limitations period.

House Bill 213 will also:

1) clarify that any person who tenders two or more bad checks with an aggregate represented value of $1,000 or more within 90 days in payment of "trust" (sales and withholding) taxes shall be guilty of a Class 1 misdemeanor;
2) upgrade the penalties for certain tax crimes to make more uniform the level of punishment prescribed for similar acts or omissions; and
3) allow Department of Taxation personnel to serve summons.

• EFFECTIVE DATE: July 1, 1992
  CODE SECTIONS AMENDED: §§ 58.1-216, 58.1-486, 58.1-637, 58.1-1005, 58.1-1008, 58.1-1017, 58.1-1614, and 58.1-1618
  CODE SECTIONS ADDED: §§ 18.2-182.1 and 58.1-1816

State Tax Administration

House Bill 245 (Chapter 678) enhances the administration of tax laws by the Department of Taxation by:
1. allowing a notice of bad check to be sent by regular mail instead of certified mail (effective July 1, 1992);
2. codifying existing policy on the taxation of Virginia lottery winnings by nonresidents (effective for all taxable years in which the Department of Lottery has paid any prizes);
3. requiring reports of federal tax changes, with some exceptions, to be in the form of an amended return and equalizing the periods in which refund claims and tax due returns must be made (effective July 1, 1992);
4. codifying existing policy requiring an income tax modification for distributions of accumulated income from a trust (effective for taxable years beginning on and after January 1, 1987); and
5. codifying existing policy that the insurance company premium tax is not in lieu of the retail sales and use tax (effective July 1, 1991).

EFFECTIVE DATE: See above

• • CODE SECTIONS AMENDED: §§ 58.1-12, 58.1-302, 58.1-311, 58.1-322, 58.1-402, 58.1-906, 58.1-1823, and 58.1-2508

• • • • • • • • • • CORPORATIONS

Extension of Recovery Period for Depreciation

House Bill 582 (Chapter 320) and Senate Bill 59 (Chapter 296) defer for two years the ACRS recovery provisions available to corporate taxpayers for taxable years beginning January 1, 1992 through December 31, 1993. The bills also extend by two years, to 1997, the length of time that it will take corporate taxpayers to recover outstanding amounts of depreciation which have not been previously subtracted.

The following table illustrates the differences in the recovery provisions under prior law and under House Bill 582 and Senate Bill 59.

Taxable % of Outstanding ACRS Additions Recovered
Year Prior Law HB 582 and SB 59
1988 10% 10%
1989 10% 10%
1990 10% 10%
1991 - -
1992 10% -
1993 20% -
1994 20% 10%
1995 20% 20%
1996 - 20%
1997 - 20%

• EFFECTIVE DATE: Taxable years beginning on and after January 1, 1992
  CODE SECTION AMENDED: § 58.1-323.1

Tax Credits

Enterprise Zone Credit – Expanded

Senate Bill 351 (Chapter 301) expands from five years to ten years the duration of the tax credit program for businesses which begin operations within an enterprise zone on or after July 1, 1992. The bill also removes the phase-out of the tax credit after the second year. Qualified business firms currently operating in enterprise zones remain subject to the terms of the program provided under the law in effect prior to July 1, 1992.

• EFFECTIVE DATE: July 1, 1992
  CODE SECTION AMENDED: § 59.1-280

Recycling Machinery and Equipment Credit - Sunset Date Extended

House Bill 403 (Chapter 313) extends from January 1, 1993 to January 1, 1995, the sunset date of the income tax credit for purchases of machinery and equipment for processing recyclable materials.

• EFFECTIVE DATE: July 1, 1992
  CODE SECTION AMENDED: § 58.1-445.1

Credit for Rent Reductions - Eligibility Increased

House Bill 359 (Chapter 369) modifies the corporation income tax credit for rent reductions to aged or disabled low-income tenants so that the qualifying rent reduction can be based on comparable units in the same market area when there are no comparable units in the same property. This change willallow more rural taxpayers with smaller properties to take advantage of the rent reduction credit.

• EFFECTIVE DATE: Taxable years beginning on or after January 1, 1992
  CODE SECTION AMENDED: § 58.1-339

Investment Credit - New

Provided that it is reenacted by the 1993 General Assembly, House Bill 981 (Chapter 686) will allow a credit in an amount equaling 10% of "new Virginia business activity investment," which is defined as the amount of property that would have qualified for the 10% investment tax credit under § 46 of the Internal Revenue Code as it existed on December 31, 1985, and which increases the taxpayer's property apportionment numerator from the previous taxable year.

Any credit not usable for the taxable year the investment was made may be carried over to the extent usable for the next five succeeding taxable years or until the full credit is utilized, whichever is sooner.

• EFFECTIVE DATE: Taxable years beginning on and after January 1, 1994 (if reenacted by the 1993 General Assembly). The provision expires for taxable years beginning on and after January 1, 1999.
  CODE SECTION ADDED: § 58.1-438

Low-Income Housing Credit - Deferred

House Bill 580 (Chapter 347) and Senate Bills 55 (Chapter 325) and 423 (Chapter 754) postpone from taxable year 1992 until taxable year 1994 the provisions of the Low-Income Housing Credit enacted by the 1989 General Assembly. Corporations will be entitled to the credit if they have received the equivalent federal credit. The federal credit, which is a prerequisite for the state credit, was scheduled to expire, but has been temporarily extended through June 1992. Thus, no Virginia credit will be available unless the federal credit is further extended.

Senate Bill 423 also shifts responsibility of administration of the credit from the Virginia Housing Development Authority to the Department of Housing and Community Development.

• EFFECTIVE DATE: Taxable years beginning on and after January 1, 1992
  CODE SECTIONS AMENDED: §§ 36-55.63 and 58.1-435

Substance Abuse Advertising Credit - Repealed

House Bill 300 (Chapter 394) repeals the corporation income tax credit for substance abuse advertising. The credit was scheduled to become effective for taxable years beginning on and after January 1, 1992.

• EFFECTIVE DATE: Taxable years beginning on and after January 1, 1992
  CODE SECTION AMENDED: § 58.1-437

Self-Employment Tax - Conformity Deferred

House Bill 583 (Chapter 665) and Senate Bill 56 (Chapter 691) defer until taxable years beginning on and after January 1, 1994 Virginia's conformity to the federal deduction for 1/2 of self--employment taxes paid. Taxpayers will be required to add back the federal deduction in computing their Virginia tax for an additional two years, taxable years 1992 and 1993. However, they will be provided subtractions in taxable years 1994 through 1997 to recover the amount of the additions required in taxable years 1990 through 1993. Legislation enacted in 1990 originally deconformed Virginia from the federal deduction for taxable years 1990 and 1991.

• EFFECTIVE DATE: Taxable years beginning on and after January 1, 1992
  CODE SECTION AMENDED: § 58.1-322

Interest Subtraction - New

Provided that it is reenacted by the 1993 General Assembly, House Bill 981 (Chapter 686) will allow the first $250 in interest income per person to be subtracted from federal adjusted gross income to determine Virginia taxable income. Since the bill provides for an interest subtraction, federal adjusted gross income has to be greater than or equal to the amount of interest subtracted.

• EFFECTIVE DATE: Taxable years beginning on and after January 1, 1994 (if reenacted by the 1993 General Assembly). The provision expires for taxable years beginning on and after January 1, 1999.
  CODE SECTION AMENDED: § 58.1-322

Tax Credits

Credit for Taxes Paid Other States

House Bill 512 (Chapter 317) provides that the individual income tax credit for taxes paid to another state, contiguous to Virginia, will be equal to the full amount of the tax paid to another state, not to exceed the income tax otherwise payable to Virginia. This provision is applicable to Virginia residents who have only earned 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.

This change will affect Virginia residents who work in North Carolina and is intended to correct the effects of a 1989 North Carolina law change.

• EFFECTIVE DATE: Taxable years beginning on and after January 1, 1992
  CODE SECTION AMENDED: § 58.1-332

Credit for Rent Reductions - Eligibility Increased

House Bill 359 (Chapter 369) modifies the individual income tax credit for rent reductions to aged or disabled low-income tenants so that the qualifying rent reduction can be based on comparable units in the same market area when there are no comparable units in the same property. This change will allow more rural taxpayers with smaller properties to take advantage of the rent reduction credit.

• EFFECTIVE DATE: Taxable years beginning on or after January 1, 1992
  CODE SECTION AMENDED: § 58.1-339

Low-Income Housing Credit - Deferred

House Bill 580 (Chapter 347) and Senate Bills 55 (Chapter 325) and 423 (Chapter 754) postpone from taxable year 1992 until taxable year 1994 the provisions of the Low-Income Housing Credit enacted by the 1989 General Assembly. Individuals will be entitled to the credit if they have received the equivalent federal credit. The federal credit, which is a prerequisite for the state credit, was scheduled to expire, but has been temporarily extended through June 1992. Thus, no Virginia credit will be available unless the federal credit is further extended.

Senate Bill 423 also shifts responsibility of administration of the credit from the Virginia Housing Development Authority to the Department of Housing and Community Development.

• EFFECTIVE DATE: Taxable years beginning on and after January 1, 1992
  CODE SECTIONS AMENDED: §§ 36-55.63 and 58.1-336

Substance Abuse Advertising Credit - Repealed

House Bill 300 (Chapter 394) repeals the individual income tax credit for substance abuse advertising. The credit was scheduled to become effective for taxable years beginning on and after January 1, 1992.

• EFFECTIVE DATE: Taxable years beginning on and after January 1, 1992
  CODE SECTION AMENDED: § 58.1-339.1

Individual Retirement Plans and Simplified Employee Pension Plans

Senate Bill 389 (Chapter 519) exempts from Virginia income tax withholding benefits received from individual retirement plans and simplified employee pension plans. In addition, the bill exempts from the Virginia income tax withholding requirements imposed on other payers of pensions any financial institution, corporation, partnership or other person acting as custodian, trustee, or depository for an individual retirement plan or simplified employee pension plan.

• EFFECTIVE DATE: Taxable years beginning on and after January 1, 1992
  CODE SECTION AMENDED: § 58.1-460

Withholding Allowances - Adjustment Deferred

House Bill 581 (Chapter 401) and Senate Bill 58 (Chapter 385) defer to January 1, 1995 the effective date of 1989 legislation allowing taxpayers to adjust their withholding allowances to reflect the difference between the standard deduction and itemized deductions. The bill applies only to individuals who itemize their deductions. Legislation in 1990 deferred the original effective date from January 1, 1991 to January 1, 1993.

• EFFECTIVE DATE: January 1, 1992
  CODE SECTIONS AMENDED: §§ 58.1-461, 58.1-462, and 58.1-470

Purchase of Controlled Drugs - Exemption Expanded

House Bill 70 (Chapter 494) expands the current sales and use tax exemption for purchases of controlled drugs by a physician to include the purchase of controlled drugs by professional corporations and partnerships on behalf of their physicians.

Since sales and use tax exemptions are strictly construed, the current exemption precludes the exempt purchase of controlled drugs unless purchased by a physician; thus, purchases by professional corporations and partnerships on behalf of their physicians would be taxable. This bill brings the current exemption into conformity with its perceived legislative intent that all purchases of controlled drugs for use by physicians, whether organized as a sole proprietorship, partnership, or professional corporation, should be exempt.

• EFFECTIVE DATE: July 1, 1992
  CODE SECTION AMENDED: § 58.1-608

Nonprescription Drugs - Exemption Deferred

Senate Bill 525 (Chapter 601) defers for two years, from July 1, 1992 to July 1, 1994, the effective date of the sales and use tax exemption for nonprescription drugs and proprietary medicines. The exemption was enacted by the 1990 General Assembly.

• EFFECTIVE DATE: July 1, 1992
  CODE SECTION AMENDED: § 58.1-608

Alcoholic Beverage Exemption - Repealed

House Bill 418 (Chapter 314) repeals the sales and use tax exemption for alcoholic beverages sold by the Department of Alcoholic Beverage Control (ABC) through its government stores. All monies collected from ABC sales are to be deposited into the general fund and used specifically to support the Medicaid program.

• EFFECTIVE DATE: July 1, 1992
  CODE SECTION AMENDED: § 58.1-608

Nonprofit State Historical Society

Senate Bill 27 (Chapter 437) amends the current sales and use tax exemption for purchases of historical documents, maps, rare books and manuscripts acquired by a nonprofit state historical society by deleting the requirement that there be no charge for admission to the society's library, museum or educational department. The current exemption requires the qualifying organization to maintain a research library open to the public for research and educational purposes without charge.

This bill also makes a number of nonsubstantive changes to place all the sales tax exemption expiration dates in the Code of Virginia.

• EFFECTIVE DATE: July 1, 1992
  CODE SECTION AMENDED: § 58.1-608

Locksmiths - Treated as Retailers

House Bill 64 (Chapter 415) and Senate Bill 24 (Chapter 404) require than any person engaged in the business of furnishing and installing locks and locking devices be treated as a retailer and not a using or consuming contractor.

• EFFECTIVE DATE: July 1, 1992
  CODE SECTION AMENDED: § 58.1-610

Public Facilities Act

House Bill 135 (Chapter 851) creates a mechanism which will allow sales tax revenues attributable to sales in new or substantially renovated or expanded public facilities located in a city with a population of at least 95,000 but no more than 100,000 to be transferred back to municipalities to pay the costs of the bonds issued between January 1, 1992 and January 1, 1996 to finance such facilities. Entitlement to the revenues may continue for the lifetime of the bonds, but not to exceed 30 years, and all such revenues are required to be applied to the repayment of the bonds. The term "public facilities" includes, but is not limited to, the following: auditoriums, coliseums, convention centers, and hotels, if such hotel is owned by a foundation whose sole purpose is to benefit a state--supported university and which is attached to and is an integral part of such facility.

Currently, Roanoke is the only city which meets the population requirements of the bill.

• EFFECTIVE DATE: July 1, 1992
  CODE SECTIONS ADDED: §§ 15.1-227.66 through 15.1-227.69

• • • • • • MISCELLANEOUS PROVISIONS

Small Grains Assessment - Cost Reimbursement Prohibited

House Bill 1124 (Chapter 776) prohibits the Department of Taxation from charging a fee to the small grains fund for its services in collecting the small grains assessments from handlers. Additional housekeeping amendments clarify references to different boards.

• EFFECTIVE DATE: July 1, 1992
  CODE SECTIONS AMENDED: §§ 3.1-684.43, 3.1-684.44, 3.1-684.46, and 3.1-684.53

Soybean Tax - Coordinate with National Checkoff

Senate Bill 328 (Chapter 124) eliminates potential conflicts between the state assessment on soybeans and the new federal soybean checkoff and authorizes the Department of Taxation to collect the new national assessment in the same manner as the existing state assessment. The two assessments are coordinated so that the soybean handler pays only one assessment and the Soybean Board ensures that the funds are properly distributed to the national board and to states in which the soybeans were produced.

• EFFECTIVE DATE: July 1, 1992
  CODE SECTION AMENDED: § 3.1-684.14

Motor Vehicle Fuel Sales Tax

House Bill 1065 (Chapter 579) allows the revenues collected from the 2% motor vehicle fuel sales tax on fuels sold in certain transportation districts to be used as capital for the mass transit system. Under current law, the revenues must be applied to the operating deficit and debt service of the mass transit system.

• EFFECTIVE DATE: July 1, 1992
  CODE SECTION AMENDED: § 58.1-172.1

Estate Tax - Gifts of Principal's Property Under a Power of Attorney

House Bill 782 (Chapter 544) provides that attorneys in fact or agents may make gifts of the principal's property to individuals and certain charitable or public purpose organizations if: (i) granted a general authorization to do anything the principal could do, or (ii) the grant of the power of attorney evidences an intent to give the agent authority to deal with any of the principal's affairs or property, and provided the creating document does not expressly limit the agent's authority to make the gift. The gifts must be in accordance with the principal's personal history of making or joining in the making of lifetime gifts.

House Bill 782 also includes a procedure for an agent under a durable power of attorney to petition the circuit court for authority to make gifts of the principal's property.

This bill overturns Estate of Olive Casey (4th Cir., 11/4/91) which held that such gifts were includible in the gross estate as a revocable transfer because-the power of attorney lacked a provision expressly granting the attorney-in-fact authority to make gifts. The court also held that a pattern of gift making cannot be inferred when the principal never conveyed her own property but merely joined in conveyances to release her dower rights.

• EFFECTIVE DATE: July 1, 1992
  CODE SECTION ADDED: § 11-9.5

Oil Severance Tax -Sunset Date Extended

House Bill 446 (Chapter 397) extends to July 1, 1995 the authority of counties and cities toimpose a license tax on businesses that sever oil from the earth. Authority to impose the taxwas scheduled to expire on July 1, 1992.

• EFFECTIVE DATE: July 1, 1992
  CODE SECTION AMENDED: § 58.1-3712.1

BPOL Tax - Research and Development Services

Senate Bill 475 (Chapter 632) creates a new classification and rate limitation of 3 cents per $100 of gross receipts from identifiable federal appropriations for research and development services (as defined in § 31.205-18 of the Federal Acquisition Regulation) in five areas: (1) computer and electronic systems, (2) computer software, (3) applied sciences, (4) economic and social sciences, and (5) electronic and physical sciences.

This bill also allows a business to deduct from its gross receipts the original cost of computer hardware and software, if the purchaser was contractually obligated at the time of the purchase to resell the equipment or software to a federal or state government entity, and the equipment or software was actually sold to such government entity within two years of the purchase. This exclusion does not occur until the time of resale to the government entity.

• EFFECTIVE DATE: July 1, 1993
  CODE SECTIONS AMENDED: §§ 58.1-3706 and 58.1-3732

Coal and Gas Road Improvement Tax

House Bill 155 (Chapter 676) authorizes any county with a population of at least 17,000 but not more than 18,000, as determined by the 1990 census, to transfer up to $1 million per year of unexpended balances collected from its local coal and gas road improvement tax to the county's general fund for public primary and secondary education purposes. The authorization expires on July 1, 1995.

According to the 1990 census, four counties fall within the population range, but only Dickenson County produces coal and gas and levies the local coal and gas road improvement tax.

• EFFECTIVE DATE: July 1, 1992
  CODE SECTION AMENDED: § 58.1-3713

House Bill 1157 (Chapter 636) authorizes any county with a population of more than 28,000 but less than 29,000, as determined by the 1990 census, to transfer up to $250,000 per year of unexpended balances collected from its local coal and gas road improvement tax to the county's general fund for public primary and secondary education purposes. The authorization expires on June 30, 1993.

According to the 1990 census, two counties fall within the population range, but only Russell County produces coal and gas and levies the local coal and gas road improvement tax.

• EFFECTIVE DATE: July 1, 1992
  CODE SECTION AMENDED: § 58.1-3713

Tax Base Expanded

Senate Bill 157 (Chapter 834) expands the tax base for the transient occupancy tax by adding other facilities (cottages, duplexes, apartments, condominiums, townhouses, etc.) offering guest rooms for continuous occupancy for fewer than 30 days. The bill also prohibits a corporation or partnership from qualifying as an individual or group of individuals for purposes of computing the 30 consecutive days exemption, unless a county's local ordinance specifically defines them as such.

• Senate Bill 157 also contains some special provisions applicable to Arlington County.

• EFFECTIVE DATE: July 1, 1992
  CODE SECTIONS AMENDED: §§ 58.1-3819 and 58.1-3820

Utility Sales of Alternative Motor Vehicle Fuels

House Bill 566 (Chapter 399) excludes from the local consumer utility tax utility sales of products used as motor vehicle fuels. This bill eliminates the possibility of double taxation of utility sales of compressed natural gas and other similar types of alternative fuels used as motor vehicle fuel. Utility sales of products used as a motor fuel by a motor carrier may be subject to the road tax administered by the State Corporation Commission.

• EFFECTIVE DATE: July 1, 1992
  CODE SECTION AMENDED: § 58.1-3814

Forest Harvesting Equipment

House Bill 425 (Chapter 642) includes forest harvesting equipment in the separate class for tax rate purposes of tangible personal property consisting of heavy construction equipment. A locality may impose a different tax rate on this class of property than the rate imposed on the general class of tangible personal property, provided that such rate shall be no higher than the general tangible personal property tax rate.

• EFFECTIVE DATE: July 1, 1992
  CODE SECTION AMENDED: § 58.1-3506

Generation and Cogeneration Equipment

House Bill 489 (Chapter 680) adds generation and cogeneration equipment owned by those engaged exclusively in the manufacture of electricity or steam, or both, to the separate class of tangible personal property for tax rate purposes currently comprised of generating or cogenerating equipment purchased by a manufacturer for the purpose of converting a manufacturing facility's energy source from oil or natural gas to an alternative energy source. A locality may impose a different tax rate on this class of tangible personal property than on other personalty, provided that the rate shall be no higher than the rate imposed on machinery and tools.

• EFFECTIVE DATE: July 1, 1992
  CODE SECTION AMENDED: § 58.1-3506

Proration of Tax

House Bill 140 (Chapter 602) adds the Cities of Lexington and Winchester, the Counties of Frederick and Henrico, and the Towns of Hamilton and Leesburg to the group of localities authorized to prorate assessments of tangible personal property taxes levied on motor vehicles, boats and trailers.

• EFFECTIVE DATE: July 1, 1992
  CODE SECTION AMENDED: § 58.1-3516

Senate Bill 16 (Chapter 669) adds the Cities of Lexington, Manassas and Manassas Park, the Counties of Henrico and Southampton, and the Towns of Hamilton andLeesburg to the group of localities authorized to prorate assessments of tangible personal property taxes levied on motor vehicles, boats and trailers.

• EFFECTIVE DATE: Taxable years beginning on and after January 1, 1993
  CODE SECTION AMENDED: § 58.1-3516

Vesting of Title - Judicial Sale

House Bill 246 (Chapter 854) provides that title to real estate purchased at a judicial sale conducted to collect delinquent taxes vests in the purchaser absolutely on December 31 following the fifth anniversary of the date of the sale. House Bill 246 also reduces from two years to one year the period of time following a judicial sale of real estate during which a former owner, his heirs, or assigns may institute a claim for any excess proceeds of the judicial sale.

• EFFECTIVE DATE: July 1, 1992
  CODE SECTION AMENDED: § 58.1-3967

New Reporting Requirements - UBTI

House Bill 1115 (Chapter 889) requires an owner of tax exempt real estate to report to the commissioner of the revenue on or before May 1, 1993 whether such owner has reported unrelated business taxable income (UBTI) to the Internal Revenue Service for the 1992 tax year and the amount, if any, of such income. Commissioners of the revenue are required to organize the reported information and relay it to the Department of Taxation on or before August 1, 1993.

If reenacted by the 1994 General Assembly, House Bill 1115 will make taxable any tax exempt real estate whose owner has unrelated business taxable income, arising from use of the exempt property, in an amount exceeding the real estate taxes which would be due from such property, if the property were determined to be taxable.

• EFFECTIVE DATE: July 1, 1992
  CODE SECTIONS AMENDED: §§ 58.1-3603 and 58.1-3605

Assessment of Real Estate Used by Railroads

Senate Bill 200 (Chapter 388) requires the Department of Taxation to assess all real estate used by railroads for common carrier purposes, regardless of the extent of title held by any railroad in such real estate.

• EFFECTIVE DATE: January 1, 1992
  CODE SECTIONS AMENDED: §§ 58.1-2653 and 58.1-2655

Leasehold Interest in Tax Exempt Real Estate - Exemption

Senate Bill 266 (Chapter 842) exempts from taxation the leasehold interest in tax exempt real estate, provided that the lessee is exempt from federal income taxes pursuant to IRC § 501(c) and the lessee uses the exempt property primarily for literacy, scientific, or educational purposes.

• EFFECTIVE DATE: July 1, 1992
  CODE SECTION AMENDED: § 58.1-3203

Senate Bill 297 (Chapter 331) exempts from taxation a leasehold interest in tax exempt real estate and any personal property located on such real estate, provided that the leased fee interest in such property is held by a state supported institution of higher learning and that the leased property is used for purposes consistent with the mission of the institution.

• EFFECTIVE DATE: July 1, 1992
  CODE SECTION AMENDED: § 2.1-511

Roll-back Taxes - Rezoning

Senate Bill 1503 (Chapter 3,1992 Special Session) imposes roll-back taxes on real estate entered in a local use value assessment program when such real estate is rezoned at the request of the owner or his agent to permit more intensive use of the property. The owner of the property becomes liable for the roll-back taxes at the time the property is rezoned.

No penalties or interest will be imposed on roll-back taxes for real estate zoned to a more intensive use between July 1, 1988 and July 1, 1992, provided that the roll-back taxes are paid on or before October 1, 1992.

• EFFECTIVE DATE: August 1, 1992
  CODE SECTIONS AMENDED: §§ 58.1-3237 and 58.1-3237.1

Tax Relief - Income and Net Worth Limits

House Bill 555 (Chapter 346) and Senate Bill 33 (Chapter 383) add Fauquier and Henrico Counties to those localities authorized to raise to $40,000 and $150,000 the maximum income and net worth limitations, respectively, applicable to local programs granting real estate tax relief to elderly and disabled taxpayers.

• EFFECTIVE DATE: July 1, 1992
  CODE SECTION AMENDED: § 58.1-3211

• • • • • TAX COLLECTION AND ADMINISTRATION

Treasurers

House Bill 731 (Chapter 683) will:

• 1) permit local treasurers to designate any bank or savings and loan association or branch office to receive payments (taxes or other fees) due directly to the county or city;
  2) authorize local treasurers, with the approval of the local governing body, to employ private collection agents to collect local taxes (except real estate taxes) which have been delinquent for six months or more; and
  3) require six months delinquency, instead of two months, and require the local treasurer's approval before a local government can appoint a collector or attorney to collect local taxes (except real estate taxes).

• EFFECTIVE DATE: July 1, 1992
  CODE SECTIONS AMENDED: §§ 58.1-3149, 58.1-3919.1, and 58.1-3934

House Bill 242 (Chapter 287) invests town treasurers with the same authority held by county and city treasurers to summon taxpayers, or others, and requires sworn answers to the treasurer's questions concerning the tax liability of the taxpayer or any agent or employee of the taxpayer.

• EFFECTIVE DATE: July 1, 1992
  CODE SECTION ADDED: § 58.1-3939.1

Senate Bill 268 (Chapter 625) authorizes any county, city, or town treasurer, upon the approval of the governing body, to employ private collection agents to collect delinquent local taxes, other than delinquent real estate taxes, which have been delinquent at least six months. A local governing body has the same authority, with the consent of the treasurer, to employ private collection agents.

• EFFECTIVE DATE: July 1, 1992
  CODE SECTIONS AMENDED: §§ 58.1-3919.1 and 58.1-3934

Equalize Period to Assess and Correct Local Taxes

Senate Bill 28 (Chapter 382) corrects a problem created when the 1991 General Assembly revised the periods in which localities may assess local taxes and correct erroneous assessments of local taxes. Because the same period was used for both making and correcting assessments, an erroneous assessment made on the last day would allow the taxpayer no opportunity to correct it. This bill changes the time period for correction of erroneous local tax assessments so that a taxpayer will have at least one year to apply to the Commissioner of the Revenue or the court.

• EFFECTIVE DATE: July 1, 1992
  CODE SECTIONS AMENDED: §§ 58.1-3980 and 58.1-3984

Collection of Certain Local Taxes - Deemed Held in Trust

House Bill 170 (Chapter 263) aids local governments in collecting the transient occupancy tax and the food and beverage tax by providing that the taxes are deemed to be held in trust by the business responsible for collecting the tax until remitted to the locality imposing the tax.

• EFFECTIVE DATE: July 1, 1992
  CODE SECTIONS AMENDED: §§ 58.1-3819 and 58.1-3833

• • • • • • • • • LOCAL CIGARETTE TAX

County Cigarette Tax

Senate Bill 212 authorizes any county employing the urban executive form of government, and counties adjacent thereto, to impose a cigarette tax of up to 15 cents per pack. Any county with a population of at least 78,000 but no more than 80,000 would be authorized to impose a cigarette tax of up to 10 cents per pack.

Fairfax is the only county with the urban executive form of government. Therefore, this bill would allow Fairfax and the adjoining counties of Arlington, Loudoun, and Prince William to impose a local cigarette tax of up to 15 cents per pack. Roanoke County is the only county to fall within the population range specified in the bill.

On April 15, 1992, the House rejected the Governor's recommended amendment to this bill. Subsequently, the Governor vetoed Senate Bill 212. At press time, it was not known if the General Assembly would reconvene and reconsider the bill.

• EFFECTIVE DATE: July 1, 1992
  CODE SECTION AMENDED: § 58.1-3831

BY BILL NO.

Bill No. Chapter No. Subject Matter Page

HB 64 415 Locksmiths - Treated as Retailers 10
HB 70 494 Purchase of Controlled Drugs - Exemption Expanded 9
HB 135 851 Public Facilities Act 10
HB 140 602 Proration of Tax 18
HB 155 676 Coal and Gas Road Improvement Tax 15
HB 157 636 Coal and Gas Road Improvement Tax 16
HB 170 263 Collection of Certain Local Taxes - Deemed Held in Trust 21
HB 213 763 Criminal Penalties - New Felony Provision 2
HB 242 287 Treasurers 20
HB 245 678 State Tax Administration 2
HB 246 854 Vesting of Title - Judicial Sale 18
HB 300 394 Substance Abuse Advertising Credit - Repealed 5, 7
HB 359 369 Credit for Rent Reductions - Eligibility Increased 4, 6
HB 403 313 Recycling Machinery and Equipment Credit -

• • • • • • • • • • Sunset Date Extended 4

HB 418 314 Alcoholic Beverage Exemption - Repealed 9
HB 425 642 Forest Harvesting Equipment 17
HB 446 397 Oil Severance Tax - Sunset Date Extended 15
HB 489 680 Generation and Cogeneration Equipment 17
HB 512 317 Credit for Taxes Paid Other States 6
HB 555 346 Tax Relief - Income and Net Worth Limits 20
HB 566 399 Utility Sales of Alternative Motor Vehicle Fuels 17
HB 580 347 Low-Income Housing Credit – Deferred 5, 7
HB 581 401 Withholding Allowances - Adjustment Deferred 8
HB 582 320 Extension of Recovery Period for Depreciation 3
HB 583 665 Self-Employment Tax - Conformity Deferred 3
HB 731 683 Treasurers 20
HB 782 544 Estate Tax - Gifts of Principal's Property Under a

• • • • • • • • • • Power of Attorney 12

HB 981 686 Investment Credit – New 4

• • • • • • • • Interest Subtraction – New 6

HB 1065 579 Motor Vehicle Fuel Sales Tax 11
HB 1115 889 New Reporting Requirement – UBTI 18
HB 1124 776 Small Grains Assessment - Cost Reimbursement Prohibited 11

SB 16 669 Proration of Tax 18
SB 24 404 Locksmiths - Treated as Retailers 10
SB 27 437 Nonprofit State Historical Society 10
SB 28 382 Equalize Period to Assess and Correct Local Taxes 21
SB 33 383 Tax Relief - Income and Net Worth Limits 20
SB 55 325 Low-Income Housing Credit - Deferred 5, 7
SB 56 691 Self-Employment Tax - Conformity Deferred 5
SB 58 385 Withholding Allowances - Adjustment Deferred 8
SB 59 296 Extension of Recovery Period for Depreciation 3
SB 157 834 Transient Occupancy Tax - Tax Base Expanded 16
SB 200 388 Assessment of Real Estate Used by Railroads 19
SB 212 County Cigarette Tax 21
SB 266 842 Leasehold Interest in Tax Exempt Real Estate – Exemption 19
SB 268 625 Treasurers 21
SB 297 331 Leasehold Interest in Tax Exempt Real Estate – Exemption 19
SB 328 124 Soybean Tax - Coordinate with National Checkoff 11
SB 351 301 Enterprise Zone Credit – Expanded 3
SB 389 519 Individual Retirement Plans and Simplified Employee

• • • • • • • • • • Pension Plans 8

SB 423 754 Low-Income Housing Credit – Deferred 5, 7
SB 475 632 BPOL Tax - Research and Development Services 15
SB 525 601 Nonprescription Drugs - Exemption Deferred 9
SB 1503 3 Roll-back Taxes – Rezoning 15

BY CODE SECTION

Va. Code § Bill No. Subject Matter Page

2.1-511 SB 297 Leasehold Interest in Tax Exempt Real Estate 19
3.1-684.14 SB 328 Soybean Tax - Coordinate with National Checkoff 11
3.1-684.43 HB 1124 Small Grains Assessment - Cost Reimbursement Prohibited 11
3.1-684.44 HB 1124 Small Grains Assessment - Cost Reimbursement Prohibited 11
3.1-684.46 HB 1124 Small Grains Assessment - Cost Reimbursement Prohibited 11
3.1-684.53 HB 1124 Small Grains Assessment - Cost Reimbursement Prohibited 11
11-9.5 HB 782 Estate Tax - Gift's of Principal's Property Under a

• • • • • • • • Power of Attorney 12

15.1-227.66-
15.1-227.69 HB 135 Public Facilities Act 10
18.2-182.1 HB 213 Criminal Penalties - Issuing Bad Checks 2
36-55.63 HB 580 Low-Income Housing Credit – Deferred 5, 7
36-55.63 SB 55 Low-Income Housing Credit - Deferred 5, 7
36-55.63 SB 423 Low-Income Housing Credit - Deferred 5, 7
58.1-12 HB 245 State Tax Administration - Notice by Mail 2
58.1-216 HB 213 Criminal Penalties - Summons 2
58.1-302 HB 245 State Tax Administration - Lottery Winnings by Nonresidents 2
58.1-311 HB 245 State Tax Administration - Amended Return 2
58.1-322 HB 245 State Tax Administration - Accumulation Distribution 2
58.1-322 HB 583 Self-Employment Tax - Conformity Deferred 5
58.1-322 HB 981 Interest Subtraction - New 6
58.1-322 SB 56 Self-Employment Tax - Conformity Deferred 5
58.1-323.1 HB 582 Extension of Recovery Period for Depreciation 3
58.1-323.1 SB 59 Extension of Recovery Period for Depreciation 3
58.1-332 HB 512 Credit for Taxes Paid Other States 6
58.1-336 HB 580 Low-Income Housing Credit - Deferred 7
58.1-336 SB 55 Low-Income Housing Credit - Deferred 7
58.1-336 SB 423 Low-Income Housing Credit - Deferred 7
58.1-339 HB 359 Credit for Rent Reductions - Eligibility Increased 4, 6
58.1-339.1 HB 300 Substance Abuse Advertising Credit – Repealed 7
58.1-402 HB 245 State Tax Administration -Accumulation Distribution 2
58.1-435 HB 580 Low-Income Housing Credit - Deferred 5
58.1-435 SB 55 Low-Income Housing Credit - Deferred 5
58.1-435 SB 423 Low-Income Housing Credit - Deferred 5
58.1-437 HB 300 Substance Abuse Advertising Credit -Repealed 5
58.1-438 HB 981 Investment Credit - New 4
58.1-445.1 HB 403 Credit for Recycling Machinery and Equipment 4

58.1-460 SB 389 Individual Retirement Plans and Simplified Employee

• • Pension Plans 8

58.1-461 HB 581 Withholding Allowances - Adjustments Deferred 8
58.1-461 SB 58 Withholding Allowances - Adjustments Deferred 8
58.1-462 HB 581 Withholding Allowances - Adjustments Deferred 8
58.1-462 SB 58 Withholding Allowances - Adjustments Deferred 8
58.1-470 HB 581 Withholding Allowances - Adjustments Deferred 8
58.1-470 SB 58 Withholding Allowances - Adjustments Deferred 8
58.1-486 HB 213 Criminal Penalties - Bad Checks 2
58.1-608 HB 70 Purchase of Controlled Drugs - Exemption Expanded 9
58.1-608 HB 418 Alcoholic Beverage Exemption - Repealed 9
58.1-608 SB 27 Nonprofit State Historical Society 10
58.1-608 SB 525 Nonprescription Drugs - Exemption Deferred 9
58.1-610 HB 64 Locksmiths - Treated as Retailers 10
58.1-610 SB 24 Locksmiths - Treated as Retailers 10
58.1-637 HB 213 Criminal Penalties - Bad Checks 2
58.1-906 HB 245 State Tax Administration - Amended Returns 2
58.1-1005 HB 213 Criminal Penalties - Cigarette Tax Penalties Upgraded 2
58.1-1008 HB 213 Criminal Penalties - Cigarette Tax Penalties Upgraded 2
58.1-1017 HB 213 Criminal Penalties - Cigarette Tax Penalties Upgraded 2
58.1-1614 HB 213 Criminal Penalties - Forest Products Tax Penalties Upgraded 2
58.1-1618 HB 213 Criminal Penalties - Forest Products Tax Penalties Upgraded 2
58.1-1724 HB 1065 Motor Vehicle Fuel Sales Tax 11
58.1-1816 HB 213 Criminal Penalties - New Felony Provision 2
58.1-1823 HB 245 State Tax Administration - Amended Return for Refund 2
58.1-2508 HB 245 State Tax Administration - Insurance Companies 2
58.1-2653 SB 200 Assessment of Real Estate Used by Railroads 19
58.1-2655 SB 200 Assessment of Real Estate Used by Railroads 19
58.1-3149 HB 731 Treasurers 20
58.1-3203 SB 266 Leasehold Interest in Tax Exempt Real Estate 19
58.1-3211 HB 555 Tax Relief- Income and Net Worth Limits 20
58.1-3211 SB 33 Tax Relief - Income and Net Worth Limits 20
58.1-3237 SB 1503 Roll-back Taxes - Rezoning 19
58.1-3237.1 SB 1503 Roll-back Taxes - Rezoning 19
58.1-3506 HB 425 Forest Harvesting Equipment - Tangible Personal Property 17
58.1-3506 HB 489 Generation and Cogeneration Equipment 17
58.1-3516 HB 140 Proration of Tax - Tangible Personal Property 18
58.1-3516 SB 16 Proration of Tax - Tangible Personal Property 18

58.1-3603 HB 1115 New Reporting Requirements - UBTI: Tax Exempt Property 18
58.1-3605 HB 1115 New Reporting Requirements - UBTI: Tax Exempt Property 18
58.1-3706 SB 475 BPOL Tax - Research and Development Services 15
58.1-3712.1 HB 446 Oil Severance Tax - Sunset Date Extended 15
58.1-3713 HB 155 Coal and Gas Road Improvement Tax 15
58.1-3713 HB 157 Coal and Gas Road Improvement Tax 16
58.1-3732 HB 475 BPOL Tax - Research and Development Services 15
58.1-3814 HB 566 Utility Sales of Alternative Motor Vehicle Fuels 17
58.1-3819 SB 157 Transient Occupancy Tax - Tax Base Expanded 16
58.1-3819 HB 170 Collection of Certain Local Taxes - Deemed Held in Trust 21
58.1-3820 SB 157 Transient Occupancy Tax - Tax Base Expanded 16
58.1-3831 SB 212 County Cigarette Tax 21
58.1-3833 HB 170 Collection of Certain Local Taxes - Deemed Held in Trust 21
58.1-3919.1 HB 731 Treasurers - Use of Private Collectors 20
58.1-3919.1 SB 268 Treasurers - Use of Private Collectors 21
58.1-3934 HB 731 Treasurers - Collection of Delinquent Local Taxes 20
58.1-3934 SB 268 Treasurers - Collection of Delinquent Local Taxes 21
58.1-3939.1 HB 242 Treasurers - Power to Summon Taxpayers 20
58.1-3967 HB 246 Vesting of Title - Judicial Sale 18
58.1-3980 SB 28 Equalize Period to Assess and Correct Local Taxes 21
58.1-3984 SB 28 Equalize Period to Assess and Correct Local Taxes 21
59.1-320 SB 351 Enterprise Zone Credit – Expanded 3








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