As the 2025 session approaches the crossover deadline for bills to emerge from their chambers of origin, several finance-related bills of interest have advanced, as outlined below:
Property tax exemptions: HB 1896 (Willett) relates to certain property that is tax-exempt by classification (such as property owned by the Commonwealth or by religious institutions, or nonprofit or public cemeteries) and provides that real and personal property owned by a single member limited liability company whose sole member is an organization whose property would otherwise be tax-exempt qualifies for the exemption. This bill has passed the House.
HB 1970 (Watts) and SB 1202 (Deeds) respond to a specific case in the City of Winchester. As introduced, both bills would clarify that the Constitutional property tax exemption for property owned by “institutions of learning not conducted for profit, so long as such property is primarily used for literary, scientific, or educational purposes or purposes incidental thereto” includes institutions licensed by the Department of Education that provide special education and related services pursuant to the federal Individuals with Disabilities Education Act. As introduced, both bills also included an enactment clause stipulating that the General Assembly would be overturning the holdings of the Circuit Court in the Winchester case. The enactment clause was removed from the Senate version of the bill, which has passed the Senate, but remains in the House version, which is on the House floor.
HB 2029 (Hernandez) and SB 816 (Rouse) are intended to improve awareness and use of real estate tax relief programs that are offered to the elderly and residents with disabilities at local option. The bills allow a locality to require that a taxpayer must meet certain qualifications to participate in a local exemption or deferral program, which may include paying all delinquent taxes, penalties, and interest assessed prior to becoming eligible for an exemption or deferral; entering into an agreement with the locality for the payment of delinquent taxes in installments; securing the treasurer’s agreement to settle for less than the taxes owed (under existing authority for the treasurer to compromise and settle the amount due and payable, with the consent of the governing body, when the treasurer determines that the collection of the entire amount due and owing is in substantial doubt and the best interests of the locality will be served by such compromise); or a combination of these approaches. The bills allow information about a local real estate tax exemption or deferral program to be provided in the notice of change in assessment (currently, notice must be provided with the real estate tax bill), and add language to the existing statutory requirement for the treasurer to “employ any other reasonable means necessary to notify residents” about the exemption or deferral program to include posting program information on the locality’s website. The bills also allow a locality to provide for a prorated exemption or deferral for the portion of the taxable year during which the taxpayer would have qualified for the exemption or deferral, but had not applied. HB 2029 has passed the House and SB 816 has passed the Senate. VACo reviewed drafts of these bills prior to the session and encouraged the inclusion of information in the assessment notice to be optional and not mandatory.
HB 2302 (Sickles) relates to the Constitutional exemption for real and personal property owned by churches and religious bodies and stipulates that property on which a new structure is being built to replace or rebuild a church or other building for religious worship qualifies for the exemption. The bill contains certain guardrails, including a requirement for the taxpayer to demonstrate to the locality’s satisfaction that the property was exempt prior to the rebuilding or replacement of the structure, that construction will commence no later than six months after discontinuation of the property’s previous use, that there is a reasonable timeline for completion of the structure and the property will be used for no other purpose during the construction, and that after completion, the property will be used for religious worship or for the residence of the minister of any church or religious body. This bill is on the House floor.
Sales of tax-delinquent property/tax collections: HB 1792 (Orrock) relates to a local treasurer’s ability to sell certain tax-delinquent property at public auction. Under current law, such property may be sold in this manner if it is assessed at $10,000 or less and the taxes are delinquent after three years; is assessed at more than $10,000 but less than $25,000 under certain circumstances; or is assessed at more than $25,000 but less than $40,000 under certain circumstances. The bill increases the thresholds by $5,000 (except for the $40,000 cap). This statute is intended to allow an expedited process for returning certain small pieces of tax-delinquent property to the tax rolls. This bill has passed the House. HB 2362 (Mundon King), which has also passed the House, establishes certain process improvements for tax sales of delinquent property that are administered through the courts.
HB 1979 (Hernandez) caps the amount of an individual’s wages that may be garnished for delinquent taxes and charges owed to the state or a local government at 25 percent of disposable earnings for a workweek (currently this cap applies to garnishments by other creditors, but not to state or local taxes). This bill is on the House floor.
Tangible personal property classifications: HB 1939 (Reid), which has passed the House, adds certain electric-powered landscaping equipment employed in a trade or business to the list of separate classes of tangible personal property on which a locality may impose a rate of tax that is different from the rate imposed on the general class of property. The rate imposed on this class of property would not be allowed to exceed the rate imposed on the general class of tangible personal property. Loudoun County Supervisor Juli Briskman spoke in support of this bill during its subcommittee hearing, explaining that the measure could serve as an incentive to landscaping companies to use electric equipment rather than gas-powered tools.
Plastic bag tax: HB 1764 (Martinez) requires any county imposing a disposable plastic bag tax to distribute a portion to any town located within the county, based on the local sales tax distribution formula. Towns would be limited to the same uses for the funds that are prescribed for the county (environmental cleanup, educational programs, pollution mitigation, and providing reusable bags to SNAP or WIC beneficiaries). This bill has passed the House. Similar legislation passed the General Assembly last year, but was vetoed by the Governor.
Failed tax legislation of interest
HB 1561 (McNamara) would have extended to all localities certain provisions that currently apply only in several cities that declare improvements to real property as a separate class of property and allow the locality to impose a tax on the improvements to the property at a different rate than the tax imposed on the land (provided that this rate does not exceed the rate imposed on the land). This bill was tabled in a subcommittee of House Finance.
HB 2488 (Green) would have allowed any locality to impose a tax on the sale or use of nicotine vapor products, up to a maximum tax rate of 10 percent of the wholesale price or five cents ($0.05) per milliliter, whichever was lesser. This bill failed to advance from a subcommittee of House Finance.
HJ 457 (Obenshain) would have phased out the car tax by requiring the General Assembly to exempt 20 percent of the local tax rate imposed on tangible personal property per year until the exemption reached 100 percent. This proposal was not heard prior to crossover.
VACo Contact: Katie Boyle