Virginia Republicans have introduced legislation that would provide income tax relief to landlords and working families amid the COVID-19 pandemic.
S.B. 5102, filed August 18 — the first day of the special session — by Sen. A. Benton “Ben” Chafin (R), would create a temporary, nonrefundable income tax credit of up to $250,000 for landlords of residential property for rent forgone during the pandemic. The credit would be effective for tax years beginning on January 1, 2020 but before January 1, 2025. Any excess could be carried over for three tax years or until the total amount of the credit has been used, whichever is sooner.
According to the bill, the credit would “be allowed only for rent that was paid, either in part or in full, and for which the landlord has no alternative legal method of recovery.” If landlords receive rent for which they obtained the credit, they would be required to return the credit within 90 days of receiving the rent.
The credit could not be claimed “for rent forgone by a landlord of commercial, industrial, or any similar type of real estate,” according to the bill.
The bill was referred to the Senate Committee on Finance and Appropriations. Chafin did not respond to a request for comment by press time.
Another measure (S.B. 5092), introduced August 18 by Sen. Siobhan S. Dunnavant (R), would provide a refundable state income tax credit for the 2020 tax year equal to a percentage of the federal tax credit for "household and dependent care services needed for gainful employment" under IRC section 21.
Dunnavant did not respond to a request for comment by press time.
The federal credit under IRC section 21 provides up to 35 percent of the taxpayer's "employment related expenses." The amount of the credit is reduced to 20 percent in 1 percentage point increments for each $2,000 (or fraction thereof) by which the taxpayer's adjusted gross income for the tax year exceeds $15,000. The credit is available to individuals who have one or more dependents who are under the age of 13 or dependents who are physically or mentally incapable of caring for themselves and have lived in the same home as the taxpayer for more than half of the tax year. The credit is also available for taxpayers whose spouse is physically unable to care for themselves and ha lived in the same home for more than half of the tax year.
S.B. 5092 would provide a credit of 100 percent for single filers with AGI of up to $50,000; 75 percent for AGI of up to $100,000; 50 percent for AGI up to $250,000; and 0 percent for AGI over $250,000. The credit amounts would double for married taxpayers filing jointly.
The bill was also referred to the Senate Committee on Finance and Appropriations.
H.B. 5077, introduced August 18 by Del. Carrie Coyner (R), would provide an income tax credit similar to that of S.B. 5092.
Under H.B. 5077, the credit would be available for tax years beginning on and after January 1, 2020, but before January 1, 2022, to individuals and married taxpayers filing jointly. Like S.B. 5092, the credit would be refundable, but the percentage of the credit would not be limited by AGI.
Coyner told Tax Notes August 19 that her bill will be changed to become identical to Dunnavant's bill. She said the proposal, which is meant to help working families, stems from her work as a member of the Chesterfield County School Board.
"I know how many families are having to seek child care right now because of virtual schools and COVID," Coyner said.
Chris Wodicka, policy analyst at the Commonwealth Institute for Fiscal Analysis, told Tax Notes August 19 that the household and dependent income tax credit seems like a "decent idea."
Virginia offers a state-level deduction. "Replacing the existing deduction with a refundable credit would be a good way to help families with lower income afford child care," Wodicka said.
However, Wodicka said he is unsure that the proposal would provide enough immediate help for people because the tax credits wouldn't be available until next filing season.
Virginia ended fiscal 2020 with a $234 million shortfall, and state officials are projecting a $2.7 billion shortfall for the next fiscal biennium. Gov. Ralph Northam (D) proposed restoring some spending that was frozen in April to help address the public health crisis.
Noting that the tax credits would affect the budget, Wodicka said it is more important to have the revenue available to meet immediate spending needs for things like teacher salaries than to provide tax credits for the future.