TITLE 58.1. TAXATION.

§§ 15.2-1104.1, 30-19.1:3, 58.1-3, 58.1-609.10, 58.1-610, 58.1-623, 58.1-623.1, 58.1-3510.1, 58.1-3510.3, and 58.1-3818 amended; § 58.1-609.11 added; §§ 30-19.05, 58.1-608.2, 58.1-609.4, 58.1-609.7, 58.1-609.8, and 58.1-609.9 repealed.
Sales and use tax; exemptions for nonprofit entities. Alters the procedures for granting sales and use tax exemptions to nonprofit entities in conformity with recommendations of the Joint Subcommittee to Study and Revise Virginia's State Tax Code (HJR 685/SJR 387, 2001; HJR 60, 2002) by giving the Department of Taxation the administrative duty to grant such exemptions according to certain broad criteria established by the bill. The bill has a delayed effective date of July 1, 2004. HB 2525; CH. 757 (effective-see bill)/SB 743; CH. 758 (effective-see bill).

§§ 58.1-3 and 58.1-4019.1. See § 18.2-340.15; SB 1278.

§ 58.1-202.1 amended.
Withholding tax filing; electronic funds transfer. Requires any firm that files withholding taxes on behalf of 100 or more taxpayers to remit such withholding payments via electronic funds transfer using automatic clearinghouse credit transactions. HB 2351; CH. 36/SB 833; CH. 39.

§ 58.1-301 amended.
Income tax; conformity of terms to the Internal Revenue Code. Selectively deconforms Virginia's tax code to the Internal Revenue Code (IRC) by advancing the fixed-date conformity by one year. Virginia will conform to all provisions of the IRC except the special 30-percent bonus depreciation and the five-year net operating loss carry-back for certain losses. HB 2455; CH. 2 (effective 2/17/03)/SB 1049; CH. 163 (effective 3/16/03).

§ 58.1-322 amended.
Individual income tax; subtraction for military death gratuity payments. Allows a subtraction for the amount of military death gratuity payments made to survivors of military personnel who are killed in the line of duty when calculating Virginia taxable income. The subtraction only applies to payments received after September 11, 2001. Such subtraction amount must be reduced by the amount that is allowed as an exclusion from federal gross income to the survivor on his federal income tax return.
Under current law, Virginia exempts $3,000 and the federal military death gratuity payment is $6,000. With this change, the additional $3,000 will be exempt. HB 1624; CH. 181.

§ 58.1-322 amended.
Income tax; foreign source income. Eliminates the subtraction for foreign source income for individuals when calculating their taxable income. Elimination of the subtraction is effective for taxable years beginning on or after January 1, 2003, except that any amount received in 2003 attributable to foreign source dividends which should have been paid in a prior taxable year pursuant to a final court order may be subtracted for the 2003 taxable year. HB 1914; CH. 980.

§§ 58.1-322 and 58.1-402 amended.
Individual income tax; subtraction for the Peanut Quota Buyout Program. Allows individuals and corporations who receive payments in accordance with the Peanut Quota Buyout Program of the Farm Security and Rural Investment Act of 2002 to subtract such payments when calculating their Virginia taxable income. The bill is retroactive to January 1, 2002, and has an emergency clause. HB 2400; CH. 209 (effective 3/16/03).

§§ 58.1-322 and 58.1-402 amended.
Income tax; subtraction for payments received by contract poultry growers and table egg producers. Allows a subtraction to contract poultry growers and table egg producers for indemnification payments received from the U.S. Department of Agriculture as a result of the depopulation of poultry flocks because of low pathogenic avian influenza in 2002. The deduction is allowed for taxable years beginning on and after January 1, 2002, but before January 1, 2005. HB 2554 and SB 1026 contain an emregency clause. HB 2554; CH. 3 (effective 2/17/03)/SB 1026; CH. 58 (effective 3/16/03).

§ 58.1-322 amended.
Virginia Individual Income Tax. Deletes obsolete language. HB 2828; CH. 807.

§ 58.1-346.8 amended.
Individual income tax; refund checkoff for Historic Resources Fund. Extends the sunset date from January 1, 2004, to January 1, 2009, for the refund checkoff for the Historic Resources Fund. HB 1913; CH. 10.

§§ 58.1-346.21, 58.1-346.22, and 58.1-346.23 added.
Income tax; voluntary contribution of tax refund to Virginia Federation of Humane Societies, and others. Creates three additional income tax checkoffs beginning January 1, 2004, and ending January 1, 2009, for individuals to contribute all or part of their income tax refunds to the Virginia Federation of Humane Societies, the Tuition Assistance Grant Fund, and the Spay and Neuter Fund. HB 1635; CH. 636.

§ 58.1-346.21 added.
Income tax; voluntary contribution of tax refund to the Virginia Commission for the Arts. Creates an additional income tax checkoff beginning January 1, 2004, and ending January 1, 2009, for individuals to contribute all or part of their income tax refunds to the Virginia Commission for the Arts. SB 1096; CH. 878.

§§ 58.1-348 and 58.1-452 amended.
Fraudulent tax return; penalty. Changes the penalty from a Class 1 misdemeanor to a Class 6 felony for an individual who, with the intent to defraud the Commonwealth, makes a false statement on an income tax return and for an officer of a corporation who makes a fraudulent return or statement with intent to evade the payment of taxes. HB 1576; CH. 180.

§ 58.1-441 amended.
Change in filing date; nonprofit corporations. Changes the income tax report filing date for nonprofit corporations with unrelated business taxable income from the fifteenth day of the fourth month following the close of the taxable year to the fifteenth day of the sixth month following the close of the taxable year. Applies to taxable years beginning on or after January 1, 2003. SB 935; CH. 376.

§ 58.1-442 amended.
Income tax returns of affiliated corporations. Provides that a group of affiliated corporations may change from filing (i) a consolidated return to separate returns or (ii) separate or combined returns to a consolidated return, provided that the affiliated group has filed on the same basis for at least the preceding 20 years. Permission shall be granted if (a) for the taxable year immediately preceding the taxable year of such change, there would have been no decrease in tax liability computed under the proposed change and (b) the affiliated group or corporations agrees to file returns computing its income tax liability under both the new filing method and the former method and to pay the greater of the two amounts for the taxable year in which such change is effective and for the immediately succeeding taxable year. SB 1125; CH. 166.

§§ 58.1-609.1 and 58.1-3506. See § 2.2-203; HB 1774/SB 1092.

§§ 58.1-609.3 and 58.1-3660 amended.
Property tax; certified pollution control equipment and facilities. Adds any equipment used to grind, chip, or mulch trees, tree stumps, underbrush, and other vegetative cover for reuse as mulch, compost, or fuel to the definition of certified pollution control equipment and facilities for property tax classification purposes. Such equipment shall not be exempt from sales and use taxes unless the equipment has been certified by the proper state authority as pollution control equipment. HB 2726; CH. 859.

§§ 58.1-609.4, 58.1-609.6, 58.1-609.7, and 58.1-609.9 amended.
Sales and use tax exemptions; omnibus extension bill. Extends the sunset date for numerous sales and use tax exemptions. HB 1754; CH. 911/SB 742; CH. 916.

§ 58.1-611.1 amended.
Sales and Use Tax; Food Tax Reduction Program. Eliminates a fund that was never used and provisions that were enacted because the Northern Virginia and Hampton Roads sales tax for transportation referendums are now unnecessary. HB 2827; CH. 806.
§ 58.1-615. See Budget Bill; HB 1400.

§§ 58.1-641 and 58.1-642. See § 10.1-1418.2; SB 965.

§§ 33.1-221.1:3 and 58.1-815.1 amended. Northern Virginia Transportation District Program. Designates one additional project to be financed by bonds authorized to be issued for certain projects in the Northern Virginia Transportation District Program and reduces the funding for another project by an equal amount. HB 2799; CH. 337.

§ 58.1-1015 amended; §§ 18.2-246.6 through 18.2-246.15 added.
Sales of cigarettes; penalties. Revises and graduates penalties for the illegal use of Virginia cigarette revenue stamps. The bill allows seizure and forfeiture of counterfeit cigarettes, stamps and related equipment and property and authorizes enforcement of the provisions by the Attorney General. The bill also imposes requirements for delivery sales to consumers. The requirements relate to minimum age verification, disclosure, shipping, registration and reporting and tax collection. The Attorney General is authorized to enforce the delivery sale requirements, and the penalties are fines, forfeitures and, if the violation is made knowingly, civil penalties of up to $50,000. SB 956; CH. 1010.

§§ 58.1-1712 and 58.1-1714. See § 8.01-606; HB 1921.

§ 58.1-1825 amended.
Tax administration; application to court for correction of state tax assessment. Eliminates the current requirement that a taxpayer must pay the assessment in order to appeal to the circuit court. The Tax Commissioner would be authorized to petition the court to require the taxpayer to pay upon a showing that the Department is likely to prevail on the merits of the case. If the court grants such motion by the Tax Commissioner, the taxpayer must pay the assessment, post a bond, or offer a letter of credit. HB 2538; CH. 908.

§ 58.1-1840.1 added.
Virginia Tax Amnesty Program. Authorizes the State Tax Commissioner to operate a tax amnesty program during the 2004 fiscal year. The program would be open to any individual, corporation, estate, trust or partnership required to but that has failed to file a return or to pay any tax administered by the Department of Taxation. All civil or criminal penalties assessed or assessable and one-half of the interest assessed or assessable, resulting from nonpayment, underpayment, nonreporting or underreporting of tax liabilities will be waived upon payment of the taxes and interest. HB 2454; CH. 52/SB 1030; CH. 24.

§§ 58.1-2201, 58.1-2204, 58.1-2212, 58.1-2218, 58.1-2225, 58.1-2230, 58.1-2238, 58.1-2242, and 58.1-2259 amended; §§ 58.1-2221 and 58.1-2264 repealed.
Motor fuels tax. Makes several technical changes relating to licensees and their reporting/filing requirements with the Department of Motor Vehicles. HB 1577; CH. 781.

§§ 58.1-2261 and 58.1-2262 amended.
Virginia Fuels Tax Refunds. Requires the Department of Motor Vehicles to provide an explanation to the applicant if the refund amount requested differs from the amount actually paid. HB 2456; CH. 325.

§ 58.1-2403 amended.
Motor vehicle sales and use tax. Provides an exemption from the motor vehicle sales and use tax for vehicles titled in the name of a deceased person and transferred to the spouse or heir, or under the will, of such deceased person. SB 809; CH. 278.

§ 58.1-2405 amended.
Motor vehicle sales and use tax; casual sales. Allows, in the case of a sale of a motor vehicle, which is not a new motor vehicle, between individuals who are not required to be licensed as dealers or salespersons, the Commissioner to collect the motor vehicle sales tax on the basis of the total sales price as established by evidence required by the Commissioner. However, if the auto is no more than five years old and is listed in a recognized pricing guide, then the trade-in value listed in such guide less $1,500 shall be used unless the purchaser executes an affidavit stating a lesser value, which shall be used for sales tax purposes. HB 2537; CH. 328.

§ 58.1-2423 amended.
Refund of taxes erroneously collected or paid. Allows a refund to a claimant who pays a tax, either for the claimant or for the benefit of another on whose behalf the tax is paid, if he makes a sufficient showing that the tax was erroneously collected by providing an affidavit that (i) the vehicle identification information provided on the Application for Certificate of Title and Registration, the certificate of origin, manufacturer's statement of origin, or title was incorrect, or (ii) the transaction would have been exempt from taxation. HB 1630; CH. 837.

§§ 58.1-2500 and 58.1-2507 amended.
Gross premium license tax on insurance companies. Specifies that penalties owed for failure to pay license taxes timely are due within 14 days of the date of the notice to the delinquent insurer. If such additional amounts are not paid when due, the State Corporation Commission may suspend or revoke the insurer's license. The measure also provides for refunds of overpayments of penalties, and defines the terms "preceding year's tax" and "tax." SB 854; CH. 372.

§ 58.1-2660. See § 56-265.4:4; HB 2721.

§ 58.1-3118 amended.
Certain duties of the commissioner of the revenue and treasurer; extensions to complete work. Allows the Department of Taxation to extend the time of delivery of personal property books by the commissioner of revenue for good cause and upon written notice to the county or city treasurer and local governing body. HB 1767; CH. 8.

§ 58.1-3131 amended.
Local warrant books; limits on release of information. Allows treasurers to limit the information released from the list of warrants only for use in establishing the status of a claim previously reported as paid when a person legally entitled to the funds provides evidence that such claim has not been paid. HB 2656; CH. 931.

§ 58.1-3221.1 amended.
City of Roanoke real estate tax rates. Authorizes the City of Roanoke to impose a tax rate on improvements to real property that is equal to or less than the City's tax rate on the land upon which the improvements are located. The City of Fairfax has been given this same authority effective July 1, 2003. SB 1095; CH. 164.

§ 58.1-3233 amended.
Special land use assessment. Permits localities to make land used for aquaculture or specialty crops eligible for local-option agriculture land use assessment even if such land is less than the five acre minimum ordinarily applicable to agricultural or horticultural property. HB 2056; CH. 356.

§§ 15.2-717, 58.1-3256, 58.1-3260, 58.1-3374, 58.1-3378, 58.1-3379, 58.1-3380, 58.1-3384, and 58.1-3984 amended
. Real estate appeals to Boards of Equalization and circuit court. Makes several changes to the current process for appealing real estate assessments. For purposes of appeals to a board of equalization, the bill provides that there shall be a presumption that the valuation of real estate as determined by the local assessing officer is correct, and the taxpayer must produce substantial evidence that the valuation of his real estate is erroneous and was not arrived at in accordance with generally accepted appraisal practice in order to receive relief from the board. The bill does not change current law in regard to the burden of proof and standard of proof that a taxpayer must produce in circuit court.
The bill permits taxpayers to make fair market value appeals to a board of equalization. It also limits to nine the number of years of consecutive service that a person may sit as a member of a board of equalization. Thirty percent of the members of boards of equalization shall be commercial or residential real estate appraisers, other real estate professionals, builders, developers, or legal or financial professionals, and at least one member shall sit in all appeals involving commercial, industrial or multi-family residential property, unless waived by the taxpayer. The bill also requires each member of a board of equalization to take continuing education instruction at least once in every four years of service as a member of such board.
The bill provides a three-year statute of limitations for appealing real estate tax assessments to all circuit courts. In general, there is a three-year statute of limitations under current law; however, in some localities there is a one-year statute of limitations pursuant to specific law. In those localities with the one-year statute of limitations, the new three-year requirement will be phased in over several years. The bill has an effective date of January 1, 2004. HB 2503; CH. 1036.

§ 58.1-3274 amended.
Departments of real estate; Goochland County. Authorizes Goochland County to establish a department of real estate. Under current law, departments of real estate are required to assess all real estate within the locality on an annual or biennial basis. SB 1333; CH. 474.

§ 58.1-3292.1 amended.
Assessment of substantially completed buildings. Allows the City of Fairfax (described by population) to provide by ordinance that all new buildings shall be assessed when substantially completed or fit for use and occupancy, regardless of the date of completion or fitness. This authority currently applies only to Fairfax County. HB 1673; CH. 6.

§ 58.1-3292.1 amended.
Local real estate assessments; buildings substantially completed or fit for use and occupancy. Authorizes Arlington County, Loudoun County, Prince William County, and the Cities of Alexandria, Falls Church, Fairfax, Manassas, and Manassas Park to assess real estate tax on new buildings when substantially complete or fit for use and occupancy, regardless of the date of completion or fitness. Under current law, (i) any county, city, or town may assess real estate tax on new buildings that are substantially complete or fit for use and occupancy prior to November 1 of the tax year, and (ii) Fairfax County may assess real estate tax on new buildings when substantially complete or fit for use and occupancy, regardless of the date of completion or fitness. SB 1285; CH. 581.

§ 58.1-3511 amended.
Personal property tax; situs for assessment of motor vehicles. Clarifies that the situs for assessment purposes of business vehicles with a weight of 10,000 pounds or less is the locality in which the business owner has a definite place of business and in which he directs or controls the use of such vehicles, provided he has sufficient evidence that he has paid the tax to such locality. HB 2323; CH. 34/SB 1033; CH. 43.

§ 58.1-3651 added; §§ 30-19.04 and 30-19.1:2 repealed.
Property tax exemptions. Specifies the process localities must follow to exempt from real or personal property taxes the property of certain charitable and other related organizations. The legislation stemmed from the constitutional amendment that took effect on January 1, 2003, giving localities the authority to grant such exemptions subject to restrictions and conditions set by the General Assembly. The bill has an emergency effective date of January 1, 2003. HB 1750; CH. 1032 (effective 5/1/03)

§ 58.1-3724. See § 19.2-152.1; HB 1905.

§ 58.1-3812 amended.
Local consumer utility tax. Allows the local governing bodies of the Towns of Gordonsville, Colonial Beach and Montross to impose the local consumer utility tax by adopting a local ordinance on or after July 1, 2003. When such ordinance is adopted, the county in which such town is located may no longer impose the tax within the limits of the respective town. HB 1558; CH. 179.

§§ 56-484.12 and 58.1-3812 amended.
Telecommunications taxes; taxation of bundled transactions. Allows nontaxable services to continue to be nontaxable when bundled with taxable communications services if the provider can identify the nontaxable portion from its books and records. In addition, if the services are taxable at different rates, they will not be taxed at the highest rate if the provider again can identify the services subject to a lower rate from its books and records. SB 858; CH. 160.

§ 58.1-3819 amended.
Transient occupancy tax. Authorizes Cumberland County, King George County, and Prince Edward County to levy a transient occupancy tax at the rate of five percent. Any revenues attributable to the portion of the tax greater than two percent shall be spent for promoting tourism, travel or business that generates tourism or travel in the county. SB 722; CH. 939.

§ 58.1-3833 amended.
Food and beverage tax and meals tax; embezzlement. Provides that the wrongful and fraudulent use of collected food and beverage tax or meals tax constitutes embezzlement under the criminal embezzlement statute. HB 2089; CH. 792.

§ 58.1-3840 amended.
Local taxation; lower rate for admissions tax on certain events. Allows any city or town that imposes the admissions tax to impose the tax at a lower rate on any event held in facilities that are not owned by the city or town than that which is imposed on events held in city- or town-owned civic facilities. HB 2045; CH. 12.

§ 58.1-3940 amended.
Collection of local taxes. Provides for an extension of time on the local treasurer's administrative remedies (lien, distress) where the tax due has been reduced to judgment. Currently, the time limitations do not effect a judgment lien so the local treasurer may continue to collect during the time the lien is valid. HB 2659; CH. 214.

§ 58.1-3958 amended.
Local taxes; administrative fees to collect delinquent taxes or other delinquent charges. Increases the fees that may be charged by local governments for administrative costs incurred in collecting delinquent taxes or other delinquent charges. The fees are increased from $20 to $30 for delinquent taxes and other charges collected before judgment is taken, and from $25 to $35 for such taxes and charges collected subsequent to a judgment. SB 1227; CH. 170.

§ 58.1-3965 amended.
Real property tax; installment agreements to pay delinquent taxes. Eliminates the requirement under current law for the recording of installment agreements between local officers and owners of real property for the payment of delinquent real estate taxes. SB 1183; CH. 168.

§ 58.1-3970.1 amended.
Conveyance of real estate for delinquent taxes or certain liens. Provides that real estate for which there are delinquent taxes may be conveyed to the locality if the real estate has a value of $20,000 or less and such taxes alone exceed 25 percent of the value of the real estate. HB 2277; CH. 16/ SB 735; CH. 156.

§ 58.1-3983.1 amended.
Local business taxes; appeals. Requires the Tax Commissioner to determine within 30 days whether he has jurisdiction to hear an appeal of certain local business taxes, and restricts to 60 days the additional time (i.e., in addition to 90 days from the receipt of the appeal) within which the Tax Commissioner must make a final determination on the merits of the appeal when he does have jurisdiction; unless additional time is needed because an affected party fails to supply necessary information, in which case, the Tax Commissioner shall issue his determination within 60 days of receipt of such information. HB 1932; CH. 196.

§ 58.1-4013 amended; § 58.1-4020.1 added.
Lottery; voluntary assignment of prizes or pledge as collateral. Allows winners of the lottery to assign or pledge as collateral for a loan lottery prizes that are payable in installments over time, excluding prizes payable for the winner's life. HB 1564; CH. 924.

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