Update on Virginia Proposed Tax Reform: The Art of Punting
It looks like “Punt” is the name of the game with Virginia tax reform. In a January 5, 2010 blog post and a January 20, 2010 blog post, I discussed four tax reform proposals – all of which the General Assembly has managed to put off until a later date.
Apparently, HB 57 got the most traction. This was the bill proposing to prohibit any locality that had not already imposed a BPOL tax from doing so and prohibiting any increase in BPOL tax rates. The House passed that bill with a resounding 88 to 8 vote, but the Senate referred the bill to the Committee on Finance and continued a vote on the bill until 2011.
The other three votes never even made it to a vote by the House. HB 2 recommended a tax credit for small business taxpayers equal to 10% of eligible investments in personal property and real estate improvements. HB 47 proposed tax credits for companies with telecommuting employees. HB 110 would have allowed localities to decide whether to impose BPOL taxes on a taxpayer’s business’s gross receipts or on its Virginia taxable income. All three of these bills got stuck in the House Committee on Finance and were continued to 2011 by voice vote.
I have to admit that, of the four bills, I had the highest hopes for HB 110. I'm sorry to see the General Assembly has put off voting on what would have been a welcome amendment to the BPOL tax statute. Hopefully the General Assembly will agree in 2011!
Here is a piece of good news for Virginia taxpayers and Delegate Mark Cole, who sponsored both HB 57 and HB 110. Delegate Cole also sponsored HB 17, which proposed to reduce the limitation period for collection of state taxes from 20 years to 10 years. HB17 passed in both the House and the Senate, and was just approved by the Governor last week. This law will take effect on July 1, 2010.
Tim
Thanks for the update. I have to say, I didn't know that my local municipality was charging me every year on gross receipts due to a VA statute! I just assumed they based it on that because it suited their purpose to tie their revenue to a less sliding figure than VA Taxable Income (i.e. profit). After the past couple of years of smaller profits as a builder, I have to say I am sad that HB110 has been "punted," but also recognize that the "choice" element would probably favor a status quo result, or maybe result in creating a means of achieving higher tax revenue from businesses by applying a higher tax rate to the Taxable Income figure than the Gross Receipts figure. If the tax rate were applied to equal gross receipts now, it stands to reason that as the economy recovered, the revenue over time would have a tendency of increasing due to the presumably higher profit margins of businesses in better economic times. In Northern VA, it doesn't appear that taxes do anything but remain the same or grow, as evidenced by Fairfax County's annual property value assessments going down in the past three years, yet property taxes remaining the same or growing due to the adjustment of the tax rate (at least in my own personal experience). Government, it seems, exists to perpetuate itself, and I for one am doubtful that any change in the tax code will result in a savings for business owners. I'd love it to happen, but I don't think our municipalities have the discipline or vision to choose to give businesses a break in order to given them a better chance of success. I hope I'm wrong.
Thanks again for another great comment Matt - Heidi has been tied up with a case so I told her I would pinch hit on responding.
Your business definitely implicates one of the bigger issues which is that the tax is based on gross receipts. This definitely hits folks at the top of multi-tier chains, like general contractors and architects who are retaining consultants.
I for one am skeptical that we will see significant relief given the current budget woes in Richmond.