Tax Exemption Ordinance



Public hearing to consider adoption of an ordinance amending Chapter 15, Taxation, Article X, Real Estate, to grant certain property tax exemptions.




Tucker, White, Davis, Herrick, Wiggans, Woodzell






September 1, 2004


ACTION:    X                    INFORMATION:   



  ACTION:                       INFORMATION:   











In a November 2002 referendum, Virginia voters approved an amendment to the Virginia Constitution that shifted the responsibility for granting most property tax exemptions from the General Assembly to the localities.  Since then, the General Assembly has enacted Virginia Code § 58.1-3651 to outline the circumstances and procedures under which localities may grant property tax exemptions.  Though Virginia Code § 58.1-3651 effectively grandfathers property tax exemptions existing as of January 1, 2003 (when the Constitutional amendment took effect), it does not address properties seeking exemption after that date.  Unless a property is Constitutionally exempt (such as government, religious, cemetery, or educational property), any and all post - January 1, 2003 exemptions must be granted at the local level, either by designation (specifically naming the organization and property) or by classification (exempting the general class or use of property).



4.2: Fund County Services in a fair, efficient manner and provide needed public facilities and infrastructure.



In responding to this shift in tax-exempting authority, the Board has at least three options.  The first option within the Board’s discretion is to do nothing.  Localities are not required to adopt new tax exemption ordinances.  The state Constitution would continue to exempt some, but not all, of the same types of properties currently enjoying exemption.  For example, the state Constitution would continue to exempt church or religious property used “for religious worship or for the residences of their ministers.”  However, without a local ordinance, other types of new church-owned property (such as new church vans), and other new property not named in the state Constitution would be taxed.


A second option is to adopt a local ordinance to address how properties desiring tax-exempt status may become exempt.  The attached draft ordinance would adopt the classification standards of the Virginia Code that applied prior to January 1, 2003, and extend those same exemptions to new post-2003 properties.  Without such a local ordinance, unless Constitutionally exempt, all properties that were not exempt as of December 31, 2002 would automatically be taxed.  For example, fraternal lodges exempt as of December 31, 2002 would remain exempt; but without a classification ordinance, any new lodges would be taxed, simply because they were not exempt at the time that the General Assembly’s exemptions were grandfathered, and the County has not yet established that all fraternal lodges, by classification, will be exempt.


A third option would be to adopt some but not all of the pre-existing classifications.  This would eliminate tax-exempt status for properties in the eliminated classes lacking exemption on January 1, 2003 unless the Board granted tax exempt status by designation.


Staff recommends the second option: the adoption of an ordinance to exempt all classifications of property that previously existed on the state level.  This approach maintains a continuity of how properties are treated for tax-exempt purposes, and allows new property obtained by owners who would have qualified for tax-exempt status in 2002 by classification to qualify for tax-exempt status for the newly-acquired property.


Following the General Assembly’s own enabling legislation, the suggested local ordinance has an effective date of January 1, 2003.  This effective date is designed to address the tax-exempt status of properties during tax years 2003 and 2004, from the time the state Constitutional amendment became effective.  Without a 2003 effective date, taxes for the years 2003 and 2004 would technically be due on those properties that the Board chose to exempt by classification after January 1, 2003.  The 2003 effective date would close any gap for properties that were not exempt prior to January 1, 2003, but would be tax-exempt if the attached ordinance were adopted.


The proposed ordinance would not affect the Board’s current policy of declining special requests for exemption by designation for property that does not otherwise qualify by classification.  While properties meeting the ordinance’s objective criteria to qualify by classification would qualify for exemption, the ordinance does not designate any new entity (not otherwise meeting the classification criteria) as exempt.  The ordinance, however, does outline the procedures required by state law for considering any future special designation requests.  Such requests could be approved or denied by the Board at its discretion.




Staff recommends that the Board adopt the attached ordinance after the public hearing.


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