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Virginia Income Tax Relief Bills Stall in Special Session

Posted on Sep. 8, 2020

Legislation that would provide income tax relief in Virginia amid the COVID-19 pandemic appears to be dead for the remainder of the special session. 

Two bills — S.B. 5102 and S.B. 5092 — were “passed by indefinitely” September 2 in the Senate Finance and Appropriations Committee

S.B. 5102, introduced by Sen. A. Benton “Ben” Chafin Jr. (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 or after 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. 

Some Democrats expressed concerns about the cost of the bill. Sen. Janet Howell (D), chair of the Finance and Appropriations Committee, noted that the bill would cost $250,000 per taxpayer, per year.

During the September 2 committee hearing, Chafin noted that the Virginia Supreme Court granted Democratic Gov. Ralph Northam’s request to temporarily halt eviction proceedings through September 7, which the governor has asked to be extended until October 1. Lawmakers are debating an eviction moratorium in the state. 

Chafin said that while he supports “helping those who are facing an eviction and out of work and unable to have the money to afford housing for themselves and their families,” he doesn’t think government should ask businesses to forgo the collection of rents.

If banks foreclose on properties because the landlords can no longer pay their mortgages, who will pick up the pieces, Chafin wondered. 

“I think that this is a government function — not a business function, but a government function — to cover these costs,” Chafin said, adding, “Essentially, if we go on with this [eviction moratorium] program, we’re picking the landlords to be losers.”

An aide in Chafin’s office confirmed September 4 that the bill is dead for the rest of the special session. 

S.B. 5092, introduced 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 necessary for gainful employment" under IRC section 21. 

During the committee hearing, Dunnavant said the intent behind the bill is to help families with children who are trying to get back to work during the pandemic. 

The measure would provide a credit of 100 percent for single filers with AGI of up to $50,000 ($100,000 for married taxpayers filing jointly); 75 percent for AGI of up to $100,000 ($200,000 for joint filers); and 50 percent for AGI of up to $250,000 ($500,000 for joint filers). Taxpayers whose AGI is over $250,000 (over $500,000 for joint filers) would not be eligible for the credit. 

However, Howell said the estimated general fund losses under the bill would be between $131 million and $221 million over two years. “I really doubt we’re in any position to afford that,” she said. 

Dunnavant did not respond to a request for comment by press time.

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