When did Virginia's 2016 pickup truck personal-property tax exemption start applying, and did the timing create unconstitutional unequal taxation?

Plain-English summary

Two Virginia commissioners of the revenue asked how a newly enacted personal-property tax exemption for certain pickup and panel trucks worked in localities that prorate. The exemption took effect July 1, 2016, expanding the statutory definition of "pickup or panel truck" in § 46.2-100 to include personal-use vehicles with a registered gross weight between 7,500 and 10,000 pounds. Trucks in that weight band became eligible for the Personal Property Tax Relief Act benefits under § 58.1-3524 starting that date.

Attorney General Mark R. Herring gave them three answers:

For trucks sited in the locality on January 1, 2016 (the statewide "tax day" under § 58.1-3515), the new exemption did not apply for any part of 2016. The tax day statute fixes the status of taxpayers for the year as of January 1. Those vehicles were already fully taxable for 2016, and reading the exemption to relieve them on July 1 would amount to a retroactive tax benefit, which is disfavored unless the statute is explicit.

For trucks acquiring a situs in the locality after January 1, 2016, the exemption did apply, starting July 1. In pro-rata localities, § 58.1-3516 mandates that the tax status of such vehicles is determined on a monthly basis from the time they acquire situs.

That split treatment, the AG concluded, did not violate the uniformity-of-taxation clause in Article X, § 1 of the Virginia Constitution. The Supreme Court of Virginia held in Alderson v. County of Alleghany, 266 Va. 333 (2003), that the standard is not absolute equality, only an even and equitable distribution of the tax burden "so far as is practical." The General Assembly's authority to set tax day under § 58.1-3515 and to mandate pro-rata treatment under § 58.1-3516 produces a different outcome for these two groups, but both rules come straight from the legislature, and statutes are presumed constitutional.

Currency note

This opinion was issued in 2016. Subsequent statutory amendments, court decisions, or later AG opinions may have changed the analysis. Treat this page as historical context, not current legal advice. Verify current law before relying on any specific rule, deadline, or remedy mentioned here.

The 2016 transitional question is no longer live. The opinion's reasoning about tax day and proration still illuminates how Virginia handles mid-year personal-property tax exemptions, but anyone facing a current question about a vehicle tax exemption should consult current statutes and current Department of Taxation guidance. Virginia personal property tax rules and PPTRA reimbursement formulas have been adjusted multiple times since 2016.

Background and statutory framework

The Personal Property Tax Relief Act, codified at §§ 58.1-3523 et seq., relieves the local personal property tax on "qualifying vehicles," reimbursing the locality from a state fund. A "qualifying vehicle" includes any pickup or panel truck "as those terms are defined in § 46.2-100." Section 46.2-100 sets vehicle definitions for Title 46.2 purposes; before 2015, only pickup or panel trucks with registered gross weight up to 7,500 pounds met the statutory definition.

The 2015 General Assembly amended § 46.2-100 (2015 Va. Acts ch. 764) to expand the "pickup or panel truck" definition to include personal-use vehicles with a registered gross weight between 7,500 and 10,000 pounds. The change took effect July 1, 2016. The practical result: a class of larger personal-use pickups and panel trucks became eligible for PPTRA tax relief starting that date.

Section 58.1-3515 is the long-standing "tax day" statute. Subject to specified exceptions (chiefly § 58.1-3010 and locally adopted proration), tangible personal property is returned for taxation "as of January 1 of each year," and "[t]he status of all persons, firms, corporations and other taxpayers liable for taxation ... shall be fixed as of the date aforesaid." Once a vehicle's tax status is fixed on January 1, it stays fixed for the year unless one of the named exceptions applies.

Section 58.1-3516 is the proration statute. It mandates that pro-rata localities apply proration to vehicles acquiring situs after tax day. The use of "shall" makes proration mandatory in pro-rata localities (Andrews v. Shepard, 201 Va. 412, 414 (1959)).

Combining those: vehicles sited as of January 1, 2016 were locked in as taxable for the year under § 58.1-3515. Applying the July 1 exemption to them would effectively make the exemption retroactive, contrary to the presumption against retroactivity in Berner v. Mills, 265 Va. 408, 413 (2003). Vehicles acquiring situs after January 1 weren't locked in by tax day; the mandatory proration of § 58.1-3516 governs their tax status month by month, and the new exemption was in effect from July 1 onward.

On uniform taxation, the AG cited Alderson v. County of Alleghany, 266 Va. 333, 339-40 (2003). That case involved an independent city's reversion to town status mid-year. The transitional tax scheme produced different burdens for similarly situated residents. The Supreme Court of Virginia upheld it, holding that the constitutional uniformity standard is "even and equitable distribution of tax burdens 'so far as is practical,'" not rigid equality. The Court reaffirmed that "the determination of situs and 'tax day' is within the power of the General Assembly." The AG also cited R. Cross, Inc. v. City of Newport News, 217 Va. 202 (1976), upholding different effective tax rates on different categories of tangible personal property, and Marshall v. NVTA, 275 Va. 419, 427 (2008), for the presumption of constitutionality.

Common questions

Q: I owned a qualifying pickup truck on January 1, 2016. Did the new exemption help me that year?
A: The AG concluded no. Vehicles taxable as of January 1, 2016 remained fully taxable for the year. The exemption did not apply to them until 2017.

Q: I bought a qualifying pickup in March 2016. Did the exemption apply to me?
A: The AG concluded yes, starting July 1, 2016. In pro-rata localities, the tax status of vehicles acquiring situs after January 1 is mandatorily prorated, and the new exemption was in effect from July 1.

Q: Why doesn't the new exemption help vehicles that were already taxable on January 1?
A: Section 58.1-3515 fixes tax status as of January 1 each year. Applying the exemption retroactively to vehicles already locked in would effectively grant a retroactive tax exemption, and Virginia law presumes statutes operate prospectively unless the General Assembly says otherwise.

Q: Does it violate the Virginia Constitution to tax similar vehicles differently this way?
A: The AG concluded no. The Supreme Court of Virginia held in Alderson v. County of Alleghany, 266 Va. 333 (2003), that uniformity means even and equitable distribution "so far as is practical," not rigid equality. The General Assembly has broad authority over tax day and proration.

Q: What if my locality doesn't prorate?
A: This opinion specifically addresses pro-rata localities. In a locality that does not prorate, the tax-day rule controls without the § 58.1-3516 overlay, and the analysis for newly-sited vehicles would differ. Consult your commissioner of the revenue.

Q: Did the General Assembly cure this transitional gap in later legislation?
A: This opinion does not analyze any later legislation. By 2017 the transitional question was moot.

Citations and references

Virginia statutes:
- Va. Code Ann. § 46.2-100 (vehicle definitions)
- Va. Code Ann. § 58.1-3010 (city ordinance exception)
- Va. Code Ann. § 58.1-3515 (tax day)
- Va. Code Ann. § 58.1-3516 (mandatory proration for newly-sited vehicles)
- Va. Code Ann. § 58.1-3523 (qualifying vehicles for PPTRA)
- Va. Code Ann. § 58.1-3524 (vehicle tax relief)
- Va. Code Ann. § 2.2-505 (AG advisory opinion authority)
- 2015 Va. Acts ch. 764 (amending § 46.2-100)

Virginia Constitution:
- Va. Const. art. X, § 1 (uniformity of taxation)

Cases:
- Berner v. Mills, 265 Va. 408 (2003)
- Andrews v. Shepard, 201 Va. 412 (1959)
- Alderson v. County of Alleghany, 266 Va. 333 (2003)
- R. Cross, Inc. v. City of Newport News, 217 Va. 202 (1976)
- Marshall v. Northern Virginia Transportation Authority, 275 Va. 419 (2008)

Source

• Landing page: https://www.oag.state.va.us/annual-reports-opinions/official-opinions
• Original PDF: https://www.oag.state.va.us/files/Opinions/2016/16-031-Mugler-Wilson-issued.pdf

Original opinion text

COMMONWEALTH of VIRGINIA
Office of the Attorney General
Mark R. Herring
Attorney General

September 1, 2016

The Honorable Ross A. Mugler
City of Hampton Commissioner of the Revenue
Post Office Box 636
Hampton, Virginia 23669-0636

The Honorable Graham P. Wilson
City of Poquoson Commissioner of the Revenue
500 City Hall Avenue
Poquoson, Virginia 23662

Dear Mr. Mugler and Mr. Wilson:

I am responding to your request for an official advisory Opinion in accordance with § 2.2-505 of the Code of Virginia.

Issues Presented

You inquire regarding the application of a recently-enacted personal property tax exemption for certain motor vehicles (the "new tax exemption law"), which became effective July 1 of this year, and how it should be applied in localities that pro rate personal property taxes. You ask first whether the exemption applies for any portion of this year to qualifying vehicles that were sited within the locality as of January 1 of this year; second, whether it applies for any portion of this year to qualifying vehicles that acquired a situs within the locality on a date after January 1 of this year; and third, if the constitutional requirement of uniform taxation would be violated if the exemption applies this year to some vehicles but not to others, based solely on the date the vehicle first came to be sited within the locality.

As requested, the analysis and conclusions of this opinion pertain to application of the exemption this year in localities that pro rate taxes.

Background

Virginia Code § 58.1-3524 provides certain personal property tax relief for "qualifying vehicles." A "qualifying vehicle" under the Code includes "any ... pickup or panel truck ... as those terms are defined in § 46.2-100," subject to certain additional restrictions.[1] The new tax exemption law amended the definition of "pickup or panel truck" in § 46.2-100 so that it now includes "every motor vehicle registered for personal use, designed to transport property on its own structure independent of any other vehicle, and having a registered gross weight in excess of 7,500 pounds but not in excess of 10,000 pounds."[2] That class of vehicle was not previously included in the statutory definition and thus did not previously qualify for personal property tax relief. In short, beginning on July 1, 2016, the new tax exemption law provides certain personal property tax relief for pickup or panel trucks within certain weight limits.

Applicable Law and Analysis

I. Qualifying vehicles sited within the taxing jurisdiction as of January 1, 2016

Virginia Code § 58.1-3515 addresses your question of whether the new tax exemption law applies to qualifying vehicles that were sited within a pro rata taxation locality as of January 1, 2016. In relevant part, it provides:

Except as provided under § 58.1-3010, and except as provided by ordinance or special act in localities authorized to tax certain property on a proportional monthly or quarterly basis, tangible personal property, machinery and tools and merchants' capital shall be returned for taxation as of January 1 of each year, which date shall be known as the effective date of assessment or the tax day. The status of all persons, firms, corporations and other taxpayers liable for taxation on any of such property shall be fixed as of the date aforesaid in each year and the value of all such property shall be taken as of such date[ ....][3]

This long-established statute fixes the status of all taxpayers liable for taxation as of January 1 of each year. It makes that date "tax day." Because the new tax exemption law does not amend it, the "tax day" statute remains in effect, and thus the new statute does not allow vehicles that were made taxable for the entire year as of this past January 1 to become tax exempt beginning July 1, 2016.[4]

I therefore conclude that the new tax exemption law does not apply for any portion of 2016 to qualifying vehicles that were taxable in the locality as of January 1, 2016. Those vehicles remain fully taxable for the entire remainder of calendar year 2016 during which they remain sited in the locality.[5]

II. Qualifying vehicles not sited within the taxing jurisdiction until some date after January 1, 2016

Your next question is whether the new exemption law applies to a qualifying vehicle that acquires a situs within the locality some date after January 1, 2016.

Authority to pro rate taxes is provided by § 58.1-3516. That statute allows localities "to provide by ordinance for the levy and collection of personal property tax on motor vehicles ... which have acquired a situs within such locality after the tax day for the balance of the tax year. Such tax shall be prorated on a monthly basis."[6] The use of the word "shall" in a statute generally indicates that the procedures are mandatory, rather than permissive.[7]

Because your second question involves qualifying vehicles that acquire a situs within the locality after January 1, the "tax day" statute does not apply. Rather, a locality that pro rates personal property taxes is required by the mandatory language of § 58.1-3516 to determine such a vehicle's tax status on a pro rata basis, starting with the month the vehicle acquired a situs there. Thus, qualifying vehicles acquiring a situs within the locality after January 1, 2016 are entitled to the new tax exemption, beginning on July 1, 2016, the date the exemption became effective.

III. The Constitutional requirement of equal taxation

As discussed above, the new tax exemption law does not apply for any portion of 2016 to qualifying vehicles that were sited within the locality as of January 1, 2016, but it does apply, effective July 1, 2016, to qualifying vehicles that acquired a situs within the locality after that date. Your final question is whether this result violates the constitutional requirement of equal taxation.

The equal taxation requirement is contained in Article 10, Section 1 of the Constitution of Virginia:

All taxes shall be levied and collected under general laws and shall be uniform upon the same class of subjects within the territorial limits of the authority levying the tax .... The General Assembly may define and classify taxable subjects.

This requirement was discussed by the Supreme Court of Virginia in Alderson v. County of Alleghany.[8] That case involved an independent city that had reverted to town status. During the transitional year, an Act of Assembly provided that city residents would have two "short tax years": for the first half of the year, they would pay personal property taxes to the city; for the second half of the year, they would pay personal property taxes to the county and also to the town. County residents who were not within the new town would continue to have a single tax year, with taxes payable only to the county. Certain town residents asserted that this Act of Assembly was an unconstitutional imposition of unequal taxation.

In upholding the transitional taxation scheme, the Court cited an earlier decision for the proposition that "[t]he dominant purpose of [this constitutional provision] is to distribute the burden of taxation, so far as is practical, evenly and equitably."[9] The standard applied by the Court was not rigid, absolute equality of taxation, but even and equitable distribution of tax burdens "so far as is practical."[10] The Court in Alderson also noted, "It is clear that the determination of situs and 'tax day' is within the power of the General Assembly."[11] Here, the General Assembly has determined that 'tax day' for determining tax status is January 1.

The conclusion I have reached for vehicles sited in a locality as of January 1 is mandated by § 58.1-3515. The different conclusion I have reached for vehicles acquiring a situs in a locality after that date is mandated by § 58.1-3516. All statutes enacted by the General Assembly are presumed to be constitutional.[12] Because the standard for uniformity of taxation is not rigid or absolute, but must be applied only "so far as is practical," I conclude that the different outcomes imposed by these two different statutes do not violate the constitutional requirement of uniformity of taxation.

Conclusion

Accordingly, it is my opinion that the new tax exemption law does not apply for any portion of 2016 to qualifying vehicles that were taxable in the locality as of January 1, 2016. Those vehicles remain fully taxable for the entire portion of this year during which they remain within the locality. However, the exemption applies beginning July 1, 2016 to any qualifying vehicle that acquired a situs within the locality on some date after January 1, 2016. Applying the new exemption law in this manner does not violate the constitutional requirement of equal taxation.

With kindest regards, I am

Very truly yours,

Mark R. Herring
Attorney General

[1] VA. CODE ANN. § 58.1-3523 (Supp. 2016).

[2] 2015 Va. Acts ch. 764 (amending § 46.2-100).

[3] Emphasis added.

[4] Because the vehicles in question became fully taxable for the entire year on January 1, interpreting the new statute so as to have these vehicles become tax exempt beginning July 1 would effectively grant a retroactive tax exemption. "Retroactive laws are not favored, and a statute is always construed to operate prospectively, unless a contrary legislative intent is manifest." Berner v. Mills, 265 Va. 408, 413 (2003).

[5] See generally § 58.1-3516 (2013) (prescribing procedures for the pro rating of personal property taxes).

[6] Emphasis added.

[7] Andrews v. Shepard, 201 Va. 412, 414 (1959).

[8] 266 Va. 333, 341 (2003).

[9] Id. at 339.

[10] Id.

[11] Id. at 340. See also R. Cross, Inc. v. City of Newport News, 217 Va. 202 (1976) (holding that it was not unconstitutional unequal taxation for a locality to assess car rental businesses at a different and higher effective tax rate than other tangible personal property).

[12] Marshall v. Northern Virginia Transportation Authority, 275 Va. 419, 427 (2008).