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Car Tax Reform Implementation for 2006 W orkshop

Car Tax Reform Implementation for 2006 W orkshop. Workshop Overview. Description of Program New Payment Plan The Phase-out of the Old Program (Brief Break) Apportioning Relief Questions & Answers. Personal Property Tax Relief Act of 1998. How we got here:

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Car Tax Reform Implementation for 2006 W orkshop

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  1. Car Tax Reform Implementationfor 2006Workshop

  2. Workshop Overview Description of Program New Payment Plan The Phase-out of the Old Program (Brief Break) Apportioning Relief Questions & Answers

  3. Personal Property Tax Relief Act of 1998 How we got here: • In 2004, the General Assembly instituted legislative changes that put into motion the program phase-out. • Local officials voiced concerns about the changes. • The Secretary of Finance worked closely with local officials and developed recommendations to address the issues, and where possible tried to resolve them in favor of the localities. • Language modifying the parameters of the program was included in Governor Warner’s introduced budget and was adopted in the 2005 session.

  4. Personal Property Tax Relief Act of 1998 As of January 1, 2006, all statutes are repealed, except those relating to: • Definitions (§ 58.1-3523) • Tangible personal property tax relief Program Description (§ 58.1-3524) • Exchange of information between TAX and Commissioners (§ 58.1-3534) • Exchange of information between Commissioners and Treasurers (§ 58.1-3535)

  5. Changes to Definitions(§58.1-3523) Deleted: • Commissioner of the Department of Motor Vehicles • Percentage Level • Reimbursable Amount Amended: • Effective Tax Rate • Value Added: • Tax Year

  6. Tangible Personal Property Tax Relief Program Description (§58.1-3524) Deleted: • Paragraphs A through E relating to the current reimbursement program. Added: • New paragraphs A through E outlining the Tax Relief Program to be effective January 1, 2006.

  7. Classifications for Tangible Personal Property (§§58.1-3506 & 58.1-3506.1) Added : • In § 58.1-3506 a new class of property was established concerning qualified vehicles Amended: • § 58.1-3506.1 to expand the new class of property concerning qualifying vehicles to relief for the elderly program participants

  8. Appropriations ActItem 503 Budget Item 503, as approved by the 2005 General Assembly, establishes payment and tax assessment procedures for local governments.

  9. The Commonwealth’s Payments to Localities • The Commonwealth will pay a total of $950 million per year to localities for Car Tax Relief. • Payments to localities will occur after July 1, 2006 for tax year 2006 reimbursements.

  10. PPTR Reimbursement Schedule • Each locality’s payment would be based on the following: • Locality’s actual state reimbursement for tax year 2004 based on reimbursement request submitted on or before Dec. 31, 2005. • Converted to a percentage of the total statewide distribution for 2004. • Auditor of Public Accounts will certify the percentages no later than March 1, 2006. • Percentage is applied to the $950 million for distribution in 2006 and beyond.

  11. PPTR Reimbursement Schedule • “Spring Billers” (37 localities, including ones with multiple due dates) • On July 31 each year, localities will receive same proportion of total payment historically received through June 30. • Balance of reimbursement (after July payment): 40% on August 15 60% on November 15 • This will minimize any lost investment income potential.

  12. PPTR Reimbursement Schedule • Counties/Cities receiving more than $20 million (other than Spring Billers) • 50% on August 15 • 45% on November 15 • 3% on February 15 • 2% on May 15

  13. PPTR Reimbursement Schedule • Counties/Cities receiving less than $20 million (other than Spring Billers) • 5% on August 15 • 75% on November 15 • 15% on February 15 • 5% on May 15

  14. PPTR Reimbursement Schedule • Towns (other than Spring Billers) • 100% on August 15 • Secretary of Finance authorized to make an advance payment to a “town” if the post July 1 payment would result in a financial hardship for the town.

  15. Phase Out of 1998 PPTRA • Balance Billing (Appropriations Act, Item 503, D.1) • Current property tax relief for qualifying vehicles for tax year 2005 and all prior tax years shall expire on September 1, 2006. • Tax bills may be issued for the full amount of any taxes, penalty and interest for tax year 2005 and prior tax years that remain due and owing as of September 1, 2006 or such earlier date if funding is no longer available. • What Happens to Bills in the Pipeline? (Appropriations Act, Item 503, D.3) • $24,000,000 in the second year of the biennium is provided to reimburse counties, cities, and towns for personal property taxes paid for qualifying vehicles for tax year 2005 and earlier which would normally have been paid on or after July 1, 2006. 

  16. Phase Out of 1998 PPTRA • Sample language for statement for tax bill (this is a local decision) • Sample language for tax notice (this is a local decision) • Rules for handling supplemental assessments

  17. Model Ordinance & Resolution(Ultimately A Local Decision) • Notice Given to Public • Criteria for allocation of payments included in one of the following: • Ordinance (rate structured) • Resolution • Budget Resolution • Tax bills must contain general description of criteria

  18. Apportioning Relief • Reduced Rate Method • Locality may set one or more reduced rates for qualifying vehicles • As vehicle fleet value grows, rate must be adjusted annually • Specific Relief Method • Locality calculates a percentage relief to apply to each vehicle • Tax bill shows the specific dollar amount of relief for each vehicle

  19. Methodology • Input historical data for the years you have available (up to five), and the model will calculate historical growth rates for you. Enter data in the yellow cells only. • Model is intended to help with the decision-making process to determine the allocation of PPTRA money on 2006 tax bills. Can provide some benchmark against which to weigh your own estimate. • You are not required to use this model. This is nothing more than a projection tool intended to help analyze PPTRA data. The decision on the use of that data is a local one.

  20. Methodology • As shown on the last page of the spreadsheet, this can be used to help develop a trend line projection for tax year 2006, based on your latest estimate for tax year 2005 (presumably made around December). • Historical trend line analysis is not a perfect predictor of the future. Consider for example the swing in last year’s NADA car values. If you have a better forecast of trends in 2006, instead, you can enter this information into the ‘Single Estimate’ spreadsheet.

  21. Car Tax Reform ImplementationWorking Group of Local Officials Commissioners of the Revenue Mar Vita Flint, City of Buena Vista Ross D’Urso, Fauquier County Nancy Horn, Roanoke County June Hosaflook, City of Harrisonburg Ray Hunley, Mathews County Mitch Nuckles, City of Lynchburg Ann Thomas, York County   Treasurers Beth Curran, Caroline County Richard Cordle, Chesterfield County Steve Moloney, City of Fairfax Bill Orndoff, Frederick County Directors of Finance Kevin Greenlief, Fairfax County Susan Layne, Henrico County Ed Trice, Henrico County Robert Walters, Albemarle County

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