Tax Type
BPOL Tax
Description
1988 Tax Changes Affecting Localities
Topic
Local Taxes Discussion
Date Issued
06-01-1988
Virginia Tax Bulletin
Virginia Department of Taxation
88-6
DATE: June 1, 1988
SUBJECT: 1988 Tax Changes Affecting Localities
The 1988 session of the General Assembly enacted a significant number of tax laws which affect localities. A brief summary of each of these laws is shown by tax type. Bills affecting more than one tax type are summarized under "Local Taxes - General."
CONSUMER UTILITY TAX
Churches
Senate Bill 390 (Chapter 702) adds Va. Code § 58.1-3814.1 to prohibit any county with a population of at least 57,500 but no more than 60,000 according to the 1980 United States census from imposing a consumer utility tax on electric service for a church at a rate which exceeds the residential rate if the church receives the residential service rate from the electric utility. Any church receiving such rate must give written notice to the electric utility that it receives such residential service rate. Effective date: July 1, 1988.
LOCAL LICENSE TAX
Affiliated Corporations
Senate Bill 105 (Chapter 480) amends Va. Code § 58.1-3703 to exempt "brother-sister" intercompany transactions from the local license tax. The definition of "brother-sister" controlled groups is taken from Section 1563(a) of the Internal Revenue Code and means two or more corporations if five or fewer persons who are individuals, estates or trusts own stock possessing: (i) at least 80 percent of the total combined voting power of all classes of stock entitled to vote or at least 80 percent of the total value of shares of all classes of the stock of each corporation, and (ii) more than 50 percent of the total combined voting power of all classes of stock entitled to vote or more than 50 percent of the total value of shares of all classes of stock of each corporation, taking into account the stock ownership of each person only to the extent such ownership is identical with respect to each such corporation. Effective date: July 1, 1988.
Industrial Loan Associations
House Bill 445 (Chapter 419) adds Va. Code § 58.1-3730.1 to limit the local license tax on industrial loan associations to $500.00. Effective date: July 1, 1988.
Local Coal and Gas Road Improvement Tax
House Bill 379 (Chapter 18) permits Buchanan County, in its discretion and with the concurrence of a majority of the members of the Coal and Gas Road Improvement Advisory Committee, to transfer unexpended balances collected from the local Coal and Gas Road Improvement Tax to the county's general fund and spend such funds for site preparation and road improvements directly related to a new state institution which is planned for the county. Effective date: March 1, 1988. However, the act will expire on December 31, 1988.
House Bill 749 (Chapter 784) amends Va. Code § 58.1-3713 to change the name of the "Local Coal and Gas Road Improvement Tax" to the "Local Coal and Gas Road Improvement and Virginia Coalfield Economic Development Authority Tax." It also specifies that in those localities which comprise the Virginia Coalfield Economic Development Authority, three-fourths of the revenue collected from the tax will be paid to the local Coal and Gas Road Improvement Fund to be used for improvements to public roads and one-fourth will be paid to the Virginia Coalfield Economic Development Fund. Effective date: July 1, 1988.
Printing or Publishing
House Bill 646 (Chapter 499) amends Va. Code § 58.1-3703 to prohibit a locality from levying a local license tax on the printing or publishing of newspapers, magazines, newsletters or other publications if they are issued daily or regularly at average intervals not exceeding three months, and if the publication's subscription sales are exempt from the state sales tax. Effective date: July 1, 1988.
MERCHANTS' CAPITAL TAX
Daily Rental Equipment
House Bill 687 (Chapter 729) delays until July 1, 1989, the effective date of the 1987 legislation (Chapters 572 and 591) which classifies daily rental equipment as merchants' capital. The effective date was originally July 1, 1988.
REAL PROPERTY TAX
Board of Assessors
Senate Bill 281 (Chapter 896) amends Va. Code § 58.1-3275 to allow any board of assessors, appointed by a county or city to make a general reassessment, to consist of not fewer than three members nor more than one member from each magisterial district. Effective date: July 1, 1988.
Cooperative Apartment Units
House Bill 355 (Chapter 412) amends Va. Code § 55-428 by requiring individual units in cooperative apartment complexes to be individually assessed and taxed in the same manner as condominium units and by allowing the assessors to require the declarants, associations, master associations and proprietary lessees' associations to furnish upon request a statement listing all transfers of the units over a period of time and a statement listing all owners. Such statements must be held in confidence by the assessors. Multi-unit cooperative apartment complexes which have been continually in use as such since December 1, 1967, are specifically excluded from these provisions. Effective date: July 1, 1988.
Land and Improvements Assessed Separately
House Bill 716 (Chapter 280) amends Va. Code § 58.1-3282 to provide that when a public service corporation or a political subdivision of the Commonwealth does not own the land and the improvements thereon, the land and the improvements may be assessed separately. Improvements include leasehold improvements owned by the lessee which are to be removed by the lessee at the end of the lease term. Previously land and improvements were assessed separately only when the land was owned by a public service corporation or a political subdivision of the Commonwealth and the improvements were owned by another entity. Effective date: Tax years beginning on or after January 1, 1988.
Land Use (Special Assessment for Land Preservation)
House Bill 165 (Chapter 462) amends Va. Code § 58.1-3233 to provide that the minimum acreage requirements for special classification of real estate shall be determined by adding together the total area of contiguous real estate, excluding recorded subdivision lots, titled in the same ownership and that properties separated only by a public right of way are considered contiguous. Effective date: July 1, 1988.
House Bill 480 (Chapter 422) amends Va. Code § 58.1-3237 to provide that roll-back taxes shall be assessed and paid only if the amount of tax exceeds $2.00. Effective date: July 1, 1988.
Senate Bill 181 (Chapter 695) amends the following sections of the Code of Virginia:
§ 58.1-3230 - Adds land used for the public interest and consistent with local land-use plan to "real estate devoted to open-space use."
§ 58.1-3231 - Automatically extends use-value assessment to qualifying land in an agricultural or forestal district as well as to land in an agricultural and forestal district.
§ 58.1-3233(2)(iii) - Extends the two-acre minimum for land in the open-space class to parcels adjacent to a scenic river, a scenic highway, a Virginia Byway or public property in the Virginia Outdoor Recreation System and to any real estate in any county or town having a density of population greater than 5,000 per square mile. Formerly the two-acre minimum applied only to real estate in cities of the required population density.
§ 58.1-3233(3) - Adds the provision that land devoted to open-space use may include land in agricultural and/or forestal districts, land subject to a recorded perpetual easement held by a public body and land subject to a recorded commitment for a period of not less than four nor more than ten years made by the owner with the local governing body subject to uniform standards prescribed by the Director of the Department of Conservation and Natural Resources.
§ 58.1-3234 - Provides that when an application is required due to a change in acreage, no application fee may be required when the change in acreage occurs solely as a result of a conveyance necessitated by governmental action or condemnation of a portion of any land now subject to use-value assessment. The revalidation fee, when required, may equal but not exceed the current application fee rather than the original application fee charged. Also provides that use-value taxation may now continue without the imposition of the roll-back tax when the use of a parcel shifts to another qualifying use.
§ 58.1-3237(B) - Defines the roll-back tax as the sum of the deferred tax for each of the five most recent complete tax years including simple interest on such roll-back taxes at a rate set by the governing body for each of the five years. The tax for the year in which the change in use or zoning occurs shall be based on fair market value not on use-value.
§ 58.1-3237(C) - Provides that if a roll-back tax becomes delinquent, the treasurer shall impose a penalty and interest on the amount of the roll-back tax which includes the interest for prior years.
§ 58.1-3237(D) - Provides that real property rezoned to a more intensive use at the request of the owner or his agent on and after July 1, 1988, shall be subject to the roll-back tax at the time the zoning is changed rather than at the time the use is changed. Neither the roll-back tax nor the loss of eligibility for use-value assessment and taxation of such rezoned property applies if the rezoning is required for the establishment, continuation or expansion of a qualifying use.
The amendments to subsection D of § 58.1-3237 is effective July 1, 1988; and the other provisions of this bill are effective for tax years beginning on and after January 1, 1989.
Notice of Sale for Delinquent Taxes
House Bill 391 (Chapter 306) amends Va. Code § 58.1-3965 to require that an additional notice of sale for delinquent taxes be sent to the owner at the address of the property if this address is different from the owner's last known address, but only if the property is listed with the post office by a numbered and named street address. Effective date: July 1, 1988.
Release of Liens
House Bill 639 (Chapter 277) amends Va. Code § 58.1-3226.1 to allow the treasurer as well as an individual to apply to the commissioner of the revenue to determine the amount of tax or assessment properly charged against the portion of real estate purchased or acquired by the individual for the purpose of releasing the tax lien on such portion of real estate. Effective date: July 1, 1988.
Tax Increment Financing
House Bill 240 (Chapter 776) adds Va. Code §§ 58.1-3245 through 58.1-3245.5 to authorize localities to use tax increment financing as a method of financing economic development projects. Localities would designate a blighted area as a development project area. They would determine the "base assessed value" of real estate within the area. Each year, the local assessing officer would determine the "current assessed value" of real estate in the development project area. The "tax increment" would be the amount by which the "current assessed value" exceeds the "base assessed value." Real estate taxes attributable to the increased value between the "current assessed value" of any parcel of real estate and the "base assessed value" of such real estate would be paid into a special fund called the "Tax Increment Financing Fund." Money from the fund would be used to pay the principal and interest on bonds, loans or other debts incurred to finance the development project costs. Effective date: July 1, 1988.
Tax Relief for the Elderly and Handicapped
House Bill 201 (Chapter 334) amends Va. Code § 58.1-3213 to allow the governing body of any locality to establish by ordinance the requirements for applying for tax relief for the elderly and handicapped and to provide that such ordinance may include a procedure for late filing of affidavits. These requirements, however, are subject to the requirements in § 58.1-3211 which deal with restrictions and conditions of combined income and financial worth of the owners and occupants. Effective date: July 1, 1988.
House Bill 204 (Chapter 463) amends Va. Code § 58.1-3211 to allow a local government to exclude the value of household furnishings from the computation of combined financial worth in qualifying for real estate tax relief. Household furnishings are defined as furniture, household appliances and other items typically used in a home. Effective date: July 1, 1988.
House Bill 357 (Chapter 466) amends Va. Code § 58.1-3211 to allow a locality to exclude up to $7,500 of income for an owner who is permanently disabled in the combined income computation used for qualifying for tax relief. Currently up to $7,500 of income received by the owner as compensation for permanent disability can be excluded. Effective date: July 1, 1988.
RECORDATION TAXES
Churches
House Bill 628 (Chapter 429) amends Va. Code § 58.1-811 to exempt from the grantor's tax a deed conveying real estate from a church or religious body. Effective date: July 1, 1988.
Collection of Local Taxes
House Bill 460 (Chapter 421) amends Va. Code §§ 58.1-812, 58.1-3801 and 58.1-3803 to clarify the procedure for collecting local recordation taxes when property is located in more than one Virginia locality. The clerk in the first jurisdiction in which the deed is recorded will collect all of the state recordation taxes. The clerks of each jurisdiction in which the deed is recorded will collect only the local taxes imposed by the local governing body in proportion to the value of the property within the locality. Effective date: July 1, 1988.
Corporate Reorganizations
House Bill 806 (Chapter 738) amends Va. Code §§ 58.1-811 and 58.1-812 to exempt a deed conveying real estate to a corporation in exchange for the corporation's stock when the transaction qualifies as a reorganization under Internal Revenue Code § 368(a)(1)(C). Clerks of the circuit courts are also authorized to require an affidavit concerning the qualification of a deed for any exemption claimed. Effective date: July 1, 1988.
Escheat Proceedings
House Bill 67 (Chapter 377) amends Va. Code §§ 55-172, 55-175, 55-186 and 55-200 relating to proceedings to escheat real estate on which local taxes have not been paid. Among other provisions, § 55-186 is amended to exempt grants in escheat proceedings from all state and local recordation taxes. Effective date: July 1, 1988.
Local Portion of Grantor's Tax
Senate Bill 399 (Chapter 200) amends Va. Code § 58.1-802 to provide that the local portion of the tax on property which is located in more than one jurisdiction shall be collected by the clerk in proportion to the value of the property located in each such locality when recorded therein. Effective date: July 1, 1988.
TANGIBLE PERSONAL PROPERTY TAX
Classification of Vans
House Bill 306 (Chapter 822) amends Va. Code § 58.1-3506 by setting out as a separate classification for local taxation privately owned vans with a seating capacity of 12 or more persons used exclusively pursuant to a ride-sharing arrangement as defined in § 46.1-556 of the Code of Virginia. Vans owned or leased to transport persons for profit shall be classified as automobiles. Effective date: July 1, 1988.
Minimum Tax
House Bill 661 (Chapter 430) amends Va. Code § 58.1-3001 to allow the governing body of any locality to provide that if an assessment of tangible personal property would result in a tax of less than $5.00, it may be omitted from the personal property book and no assessment of tax be made. Currently the amount of tax must be less than $1.00. Effective date: July 1, 1988.
Proration
Senate Bill 65 (Chapter 466) and House Bill 386 (Chapter 726) amend Va. Code § 58.1-3516 to add the county of Rockingham and the city of Fairfax to the list of localities which may provide by ordinance for the proration of personal property tax on motor vehicles, trailers and boats. Effective date: January 1, 1988.
TAX ON WILLS AND ADMINISTRATION (PROBATE)
Change in Rate Structure
Senate Bill 324 (Chapter 292) amends Va. Code § 58.1-1712 to increase the amount of an estate which is subject to the flat $1.00 tax on wills and administration (also referred to as the "probate tax"). Estates under $500 will continue to be exempt from tax; estates from $500 to $5,000 will be subject to a tax of $1.00; and estates of more than $5,000 will be subject to a tax of $1.00 plus 10 per $100. Effective date: July 1, 1988.
LOCAL TAXES - GENERAL
Correction of Erroneous Assessments
House Bill 792 (Chapter 282) amends Va. Code § 58.1-3984 to change the statute of limitation for appeal of local tax assessment to allow a taxpayer to file an appeal to the circuit court within three years from the last day of the year in which the assessment is made rather than three years from the last day of the year for which the assessment is made. Effective date: July 1, 1988.
Exemption by Designation
House Bill 190 (Chapter 257) amends Va. Code § 30-19.04 to require the local governing body to publish a notice of public hearing in a newspaper notifying the public of its proposal to adopt a resolution to exempt property from local taxation and to allow the governing body to charge the organization requesting the exemption for the cost of publishing the notice in the newspaper. Effective date: July 1, 1988.
Payment by Credit Card
House Bill 640 (Chapter 278) amends Va. Code § 58.1-3013 to allow the governing body of any locality to adopt an ordinance authorizing the treasurer of such locality to accept payment of other fees as well as local taxes by credit card and to limit the service charge which localities may add to the tax to the amount charged to the locality. Effective date: July 1, 1988.
Publication of Delinquent Taxpayer List
Senate Bill 370 (Chapter 699) amends Va. Code § 58.1-3924 by adding the provision that the publication costs of the delinquent taxpayer list shall be paid by the taxpayers listed. The sum payable by each is to be determined by dividing the total cost incurred per thirty-day period by the number of delinquent taxpayers listed per thirty-day period. Effective date: July 1, 1988.
Rulings of the Tax Commissioner