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2004 SESSION

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SB 635 Tax reform; changes for income, sales & use, estate, local license and motor fuels taxes, etc.

Introduced by: John H. Chichester | all patrons    ...    notes | add to my profiles

SUMMARY AS PASSED SENATE: (all summaries)

Omnibus tax bill. Makes several changes to the taxes and fees of the Commonwealth as follows:

Corporate income tax: the bill tightens certain corporate income tax provisions.

Sales and use tax: the bill increases the state sales tax from 3.5 percent to 4.5 percent and dedicates a portion of the revenues generated to the Virginia Water Quality Improvement Fund and the Virginia Land Conservation Fund; reduces the state sales tax on food to one percent; eliminates the current sales tax exemption benefiting certain trucking companies; and eliminates provisions requiring vendors to make accelerated sales and use tax payments.

Individual income tax: the bill adds new tax brackets of 6.25 percent for income between $100,000 and $150,000 and 6.5 percent for income above $150,000; increases the standard deduction for single taxpayers to $3,500 and to $7,000 for married taxpayers; increases the personal exemption amount to $1,000; increases the filing threshold for married taxpayers to conform to the new level of standard deduction and personal exemption; applies a means test to the age deduction tax preference, but includes conditional grandfathering provisions for taxpayers at least age 62 as of December 31, 2003; and in tax year 2004, eliminates eligibility for the $6,000 age deduction for those born after December 31, 1941.

Estate tax: Eliminates the estate tax on estates (i) of $10 million or less and (ii) where the majority of the assets of the total estate are an interest in a closely held business or a working farm.

Insurance license tax: The bill repeals current law dedicating one-third of all insurance license taxes to the Priority Transportation Fund.

Recordation tax, titling tax, fuels tax, and motor vehicle registration fees: Increases the recordation tax from 15 cents to 30 cents per $100 and dedicates $80 million of the revenues from the increase, in both Fiscal Year 2005 and Fiscal Year 2006, to the Rainy Day Fund; and beginning in Fiscal Year 2007, all revenues from the increase are dedicated to the General Fund. The bill increases the daily rental tax on motor vehicles from four percent to six percent and dedicates the revenues from the increase to the General Fund.

The bill also increases the titling tax on motor vehicles from three percent to 4.5 percent; increases motor vehicle registration fees by $10 annually; increases the gasoline tax by three cents per gallon and the tax on diesel fuel by 4.5 cents per gallon; and imposes an additional 5.5 percent wholesale tax on gasoline and diesel fuel. The revenues from these increases are dedicated to the Transportation Trust Fund.


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