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2006 SESSION

062605832
SENATE BILL NO. 258
Offered January 11, 2006
Prefiled January 10, 2006
A BILL to amend and reenact §§ 58.1-3507, 58.1-3508.1, and 58.1-3518 of the Code of Virginia, relating to machinery and tools tax; valuation based on depreciated basis for federal income tax purposes.
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Patrons-- Wagner, Watkins and Williams; Delegates: Nixon and Purkey
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Referred to Committee on Finance
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Be it enacted by the General Assembly of Virginia:

1.  That §§ 58.1-3507, 58.1-3508.1, and 58.1-3518 of the Code of Virginia are amended and reenacted as follows:

§ 58.1-3507. Certain machinery and tools segregated for local taxation only; notice prior to change in valuation, hearing.

A. Machinery and tools, except machinery and equipment used by farm wineries as defined in § 4.1-100, used in a manufacturing, mining, water well drilling, processing or reprocessing, radio or television broadcasting, dairy, dry cleaning or laundry business shall be listed and are hereby segregated as a class of tangible personal property separate from all other classes of property and shall be subject to local taxation only. The rate of tax imposed by a county, city or town on such machinery and tools shall not exceed the rate imposed upon the general class of tangible personal property.

B. Machinery and tools segregated for local taxation pursuant to subsection A, other than energy conservation equipment of manufacturers, shall be valued by means of depreciated cost or a percentage or percentages of original total capitalized cost excluding capitalized interest; however, if the owner of the machinery or tools placed in service on or after July 1, 2006, depreciates the value thereof for federal income taxation purposes in a manner authorized under the Internal Revenue Code of 1986, then the machinery or tools shall be valued at the depreciated basis of the machinery or tools for federal income tax purposes as of the assessment date, as reflected on the income tax return of the owner filed for the period that includes the assessment date. If the owner of machinery or tools placed in service prior to July 1, 2006, depreciates the value thereof for federal income taxation purposes in a manner authorized under the Internal Revenue Code of 1986, then the machinery or tools shall be valued:

1. For years in which the assessment date is on or after July 1, 2006, but before July 1, 2007, the machinery or tools shall be valued at the sum of (i) four-fifths of the property's value obtained by the means that was in effect on January 1, 2006, and (ii) one-fifth of the depreciated basis of the machinery or tools for federal income tax purposes as of the assessment date, as reflected on the income tax return of the owner filed for the period that includes the assessment date;

2. For years in which the assessment date is on or after July 1, 2007, but before July 1, 2008, the machinery or tools shall be valued at the sum of (i) three-fifths of the property's value obtained by the means that was in effect on January 1, 2006, and (ii) two-fifths of the depreciated basis of the machinery or tools for federal income tax purposes as of the assessment date, as reflected on the income tax return of the owner filed for the period that includes the assessment date;

3. For years in which the assessment date is on or after July 1, 2008, but before July 1, 2009, the machinery or tools shall be valued at the sum of (i) two-fifths of the property's value obtained by the means that was in effect on January 1, 2006, and (ii) three-fifths of the depreciated basis of the machinery or tools for federal income tax purposes as of the assessment date, as reflected on the income tax return of the owner filed for the period that includes the assessment date;

4. For years in which the assessment date is on or after July 1, 2009, but before July 1, 2010, the machinery or tools shall be valued at the sum of (i) one-fifth of the property's value obtained by the means that was in effect on January 1, 2006, and (ii) four-fifths of the depreciated basis of the machinery or tools for federal income tax purposes as of the assessment date, as reflected on the income tax return of the owner filed for the period that includes the assessment date; and

5. For years in which the assessment date is on or after July 1, 2010, the machinery or tools shall be valued at the depreciated basis of the machinery or tools for federal income tax purposes as of the assessment date, as reflected on the income tax return of the owner filed for the period that includes the assessment date.

Whenever the commissioner of the revenue proposes to change the means of valuing machinery and tools, excluding any change resulting in the valuation of machinery and tools at their depreciated basis for federal income tax purposes, such proposed change shall be published in a newspaper having general circulation in the affected locality at least 30 days before the proposed change would take effect and the citizens of the locality shall be allowed to submit written comments, during the 30-day period, to the commissioner of the revenue regarding the proposed change.

C. All motor vehicles which are registered pursuant to § 46.2-600 with the Department of Motor Vehicles and owned by persons engaged in those businesses set forth in subsection A shall be taxed as tangible personal property by the county, city or town in accordance with the provisions of this chapter. All other motor vehicles and delivery equipment owned by persons engaged in those businesses set forth in subsection A shall be included in and taxed as machinery and tools.

§ 58.1-3508.1. Separate classification of machinery and tools used in semiconductor manufacturing.

Machinery and tools used in semiconductor manufacturing shall constitute a classification for local taxation separate from other classifications of machinery and tools as defined in § 58.1-3507. The governing body of any county, city or town may levy a tax on such classification of property at a different rate from the tax levied on other machinery and tools. The rate of tax and the rate of assessment shall not exceed that applicable generally to machinery and tools. Machinery and tools used in semiconductor manufacturing shall be valued as provided in subsection B of § 58.1-3507.

§ 58.1-3518. Taxpayers to file returns.

Every taxpayer owning any of the property subject to taxation under this chapter on January 1 of any year shall file a return thereof with the commissioner of the revenue for his county or city on the appropriate forms; however, the commissioner of the revenue may elect not to require such a return from any taxpayer who owns such property which does not have sufficient value to generate a tax assessment. Every person who leases any of such property from the owner thereof on such date shall file a return with the commissioner of the revenue of the county or city wherein such property is located giving the name and address of the owner, except any person leasing a motor vehicle which is subject to the tax imposed under § 58.1-2402. Such returns shall be filed on or before May 1 of each year, except as otherwise provided by ordinance authorized by § 58.1-3916.

Every fiduciary shall file the returns mentioned in this chapter with the commissioner of revenue having jurisdiction. Every taxpayer owning machinery and tools or business personal property, if requested by the commissioner of the revenue, shall include on his annual return of such property information as to the total of original cost by year of purchase and information regarding the depreciated basis of the machinery or tools for federal income tax purposes. The cost should be the original capitalized cost or the cost that would have been capitalized if the expense deduction in lieu of depreciation was elected under § 179 of the Internal Revenue Code.

2.  That the provisions of this act shall be effective for taxable years beginning on or after January 1, 2007.