With only a few days remaining in the 2025 regular session, legislative action on many tax- and finance-related bills is complete, although several bills are headed to conference committees. Following is an update on the status of several bills of interest to local governments.
Affordable housing assessment: As reported earlier in the session, HB 2245 (Callsen) was improved over the course of discussions with the patron and proponents of the legislation. The bill, which has now passed both chambers, requires property operated as affordable housing under certain specified federal programs that is generating income to be assessed using an income approach based on certain specified data points; however, if the information needed for this analysis is not provided by the property owner or is not available on relevant databases, the income approach would not be required. Language regarding the owner’s submission of income and expense information on a standard form was revised to ensure that the information would have to be complete and accurate in order to satisfy the owner’s existing statutory obligation to report this information. The Department of Taxation is charged with developing a standardized income and expense reporting form, in consultation with stakeholders.
Property tax exemptions for disabled veterans and surviving spouses: Several bills regarding property tax exemptions for disabled veterans and their surviving spouses and the surviving spouses of servicemembers who die in the line of duty were introduced this session; only one is moving forward.
- HB 1868 (Feggans), which has passed the House, clarifies that the real property exemption available to a surviving spouse of a servicemember who died in the line of duty extends to deaths as a result of suicide. This bill has passed the House and is headed to the Senate floor after being reported from the Senate Finance and Appropriations Committee with a technical amendment last night.
- HB 2737 (Tata), SB 895 (Rouse), and SB 900 (DeSteph), which would have would have established a local option to provide for a more extensive exemption for property owned by surviving spouses of servicemembers who die in the line of duty, failed prior to crossover. Current law provides that for the real property tax exemption for the surviving spouse of a servicemember who died in the line of duty, dwellings qualify for a full exemption if they do not exceed the average assessed value of a dwelling that is situated on property that is zoned as single family residential. If the value of the dwelling exceeds the average assessed value, the portion of the assessed value that exceeds the average assessed value is taxable. SB 895, SB 900, and HB 2737 would have allowed a local option to provide for a total exemption for dwellings situated on property that is zoned as single family residential. A subcommittee of Senate Finance and Appropriations opted not to take action on SB 895 and SB 900, and to refer them for further study, and HB 2737 was left in House Finance.
- HB 2404 (Scott) would have specified that the real property tax exemption for disabled veterans and their surviving spouses and for the surviving spouses of servicemembers who die in the line of duty applies to driveways used to access the tax-exempt property. This bill was passed by indefinitely in Senate Finance and Appropriations.
- SB 1312 (McPike), a helpful measure that VACo supported, was introduced at the request of Stafford County and would have required the Commonwealth to reimburse 50 percent of lost revenue associated with the property tax exemptions for disabled veterans or their surviving spouses and the surviving spouses of members of the armed forces who are killed in the line of duty, if at least one percent of real property was exempt from real property taxes in tax year 2022. The bill narrowly failed to report in Senate Finance and Appropriations.
Other 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 both chambers and is headed to the Governor.
- 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 Constitutionally-mandated 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, but remains in the House version. These bills are headed to a conference committee.
- 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. The bills also 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. Both bills are awaiting action by the Governor.
- HB 2302 (Sickles) has passed both chambers and is headed to the Governor’s desk. The bill 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.
Sales of tax-delinquent property/tax collections: HB 1792 (Orrock), which relates to a local treasurer’s ability to sell certain tax-delinquent property at public auction, has passed both chambers. 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. HB 2362 (Mundon King) establishes certain process improvements for tax sales of delinquent property that are administered through the courts; this bill is on the Senate floor.
HB 1979 (Hernandez) would have capped 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 was passed by indefinitely in Senate Finance and Appropriations.
Tangible personal property classifications: HB 1939 (Reid), which has passed both chambers, 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 in the House, 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 both chambers; similar legislation passed the General Assembly last year, but was vetoed by the Governor.
VACo Contact: Katie Boyle