Do Virginia community services boards and behavioral health authorities pay state and local utility consumption taxes on electricity and natural gas?

Plain-English summary

The State Corporation Commissioner asked whether Virginia's community services boards (CSBs) and behavioral health authorities (BHAs) have to pay the state's electric utility and natural gas consumption taxes, and whether the exemption (if any) extends to the local portion remitted to localities.

The Attorney General said both entities are exempt, on the state portion and on the local portion. Code § 58.1-2900(B) exempts "use by divisions or agencies of federal, state and local governments" from the electric consumption tax. Code § 58.1-2904(D) does the same for the natural gas tax. The key question was whether CSBs and BHAs count as "divisions or agencies of local government."

CSBs are established under Code § 37.2-500 by each county and city (or by combinations of localities) to provide public mental health, developmental, and substance abuse services. They function either as a department of the local government or as an agency of it. Behavioral health authorities are an alternative form authorized by Code §§ 37.2-600 to -615 for the cities of Virginia Beach and Richmond and the County of Chesterfield (only Richmond has actually established a BHA). The statutory framework describes a BHA as "a public instrumentality, exercising public and essential governmental functions" with a board appointed by the governing body of the host locality. The AG concluded that both qualify as divisions or agencies of local government for the consumption-tax exemption, and that the exemption applies to both the state share and the local share of the taxes.

Currency note

This opinion was issued in 2018. 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.

Background and statutory framework

Virginia's electric utility consumption tax (Code § 58.1-2900) and natural gas consumption tax (Code § 58.1-2904) appear as separate line items on customer bills. Electric service providers, pipeline distribution companies, and gas utilities collect the taxes from consumers and remit the state portion to the State Corporation Commission and the local portion to the locality where the consumption occurred. The taxes also include a "special regulatory tax" piece that is remitted to the SCC and follows the same exemption rules.

Both statutes carry an identical exemption: the tax does not apply to "use by divisions or agencies of federal, state and local governments." Municipalities' own use also gets a separate exemption under the electricity tax. The natural-gas statute does not include the explicit municipality-use language but reaches the same place through the "divisions or agencies of local government" phrasing.

Community services boards are creatures of statute. Every county and city must establish a CSB (alone or in combination with neighboring localities) unless it establishes a BHA instead. CSBs serve as "the single point of entry into publicly funded mental health, developmental, and substance abuse services." The Department of Behavioral Health and Developmental Services' overview describes CSBs as either departments or agencies of the city or county government that created them. A 2004 AG opinion had already concluded that CSBs are "agencies or instrumentalities of local government."

Behavioral health authorities take a slightly different form. The statute says a BHA "shall be deemed to be a public instrumentality, exercising public and essential governmental functions" and that its board is "appointed by and accountable to the governing body of the city or county that established it." On the test of whether the BHA is an "agency of local government," the AG's answer was yes.

Common questions

What exactly is a community services board?
A CSB is a local public body created by a county or city (or by a combination of localities) to provide public mental health, developmental disability, and substance abuse services. It functions either as a department of the local government or as a freestanding agency of it. There are currently many CSBs across the state, and the General Assembly has required every locality to have one (or to establish a behavioral health authority instead).

How is a behavioral health authority different from a CSB?
A BHA performs a similar role but with additional powers and duties that the statute does not delegate to CSBs. The statute authorizes only Virginia Beach, Richmond, and Chesterfield County to establish BHAs, and at the time of this opinion only Richmond had done so. The BHA is "deemed to be a public instrumentality, exercising public and essential governmental functions."

Does the exemption cover both the state and local portions of the tax?
Yes. The AG concluded the exemption statute "applies to both the state portion of these taxes and the portion payable to the locality." The same logic carries to the special regulatory tax piece.

Are CSBs and BHAs the same as state agencies for this exemption?
No. They are local-government agencies, not state agencies, for purposes of the exemption. But the consumption-tax exemption covers "federal, state and local governments," so the practical result is the same: the use is exempt.

Does the exemption apply if the CSB rents space and the utilities are billed to the CSB?
The opinion does not address landlord/tenant questions directly. The exemption operates on the use by the exempt entity, with the utility responsible for not collecting the tax on covered usage. In practice, exemption claims usually require coordination with the utility's billing department and may require documentation of the CSB's status.

What happens if a CSB has been paying the tax all along?
The opinion does not address refund procedures. Anyone seeking refunds for past tax remittances should review the relevant administrative refund procedures for state and local consumption taxes and consult with tax counsel about applicable statutes of limitations.

Citations

• Va. Code § 58.1-2900; § 58.1-2904 (consumption-tax exemptions)
• Va. Code § 37.2-500; § 37.2-504 (CSBs)
• Va. Code § 37.2-600; § 37.2-601; § 37.2-605 (BHAs)
• 2004 Op. Va. Att'y Gen. 159 (CSBs as local government agencies)
• Va. Dep't of Behavioral Health and Developmental Services, 2015 Overview of Community Services in Virginia

Source

• Landing page: https://www.oag.state.va.us/annual-reports-opinions/official-opinions
• Original PDF: https://www.oag.state.va.us/files/opinions/2018/17-027-Jagdmann-issued.pdf

Original opinion text

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

June 15, 2018

The Honorable Judith Williams Jagdmann
Commissioner, State Corporation Commission
Post Office Box 1197
Richmond, Virginia 23218-1197

Dear Commissioner Jagdmann:

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 ask whether community services boards and behavioral health authorities are exempt from
state electric utility and natural gas consumption taxes under §§ 58.1-2900 and -2904 of the Code of
Virginia. You further inquire whether the exemption extends to the portion of those taxes remitted to
localities.

Background
Sections 58.1-2900 and -2904 of the Code of Virginia establish a tax on the consumption of
electricity and natural gas, respectively.[1] Both taxes include a portion due the Commonwealth and a
portion due the locality in which the electricity or natural gas was consumed. You relate that electric
service providers, pipeline distribution companies, and gas utilities collect these consumption taxes from
consumers as a line item on the consumers' monthly service bills.[2] The businesses then remit the state
portion of the taxes to the State Corporation Commission and the local portion to the appropriate locality.[3]

Applicable Law and Discussion
Section 58.1-2900(B) establishes that the electric utility consumption tax "shall not apply to
municipalities' own use or to use by divisions or agencies of federal, state and local governments."
Similarly, § 58.1-2904(D) provides that the "[natural gas consumption] tax shall not apply to use by
divisions or agencies of federal, state and local governments." Thus, if the use of electricity or natural gas
is by a division or agency of local government, it is exempt from these taxes.

Section 37.2-500 of the Code provides that every county and city in the Commonwealth "shall
establish a community services board by itself or in any combination with other cities and counties, unless
it establishes a behavioral health authority" pursuant to §§ 37.2-600 to -615.[4] A community services
board is the local entity "responsible for providing public mental health, developmental, and substance
abuse services" to residents.[5] Each community services board functions either as a department (i.e., a
"division") or an agency of the local government that established the board.[6]

A behavioral health authority fulfills a similar role, although it possesses certain additional
powers and duties not delegated to community services boards.[7] The statutory framework for a
behavioral health authority provides that it shall be established by its host locality[8] and that it "shall be
deemed to be a public instrumentality, exercising public and essential governmental functions."[9] Thus,
for purposes of the tax exemption, a behavioral health authority is an agency of local government.[10]

Because each of these entities is a division or agency of local government, I conclude that each is
exempt from the electric utility and natural gas consumption taxes in question. The exemption statute
applies to both the state portion of these taxes and the portion payable to the locality.

Conclusion
Accordingly, it is my opinion that community services boards are divisions or agencies of local
government for purposes of §§ 58.1-2900 and -2904 of the Code of Virginia. Behavioral health
authorities are agencies of local government for purposes of these same statutes. As such, both
community services boards and behavioral health authorities are exempt from the state share and the local
share of electric utility and natural gas consumption taxes.
With kindest regards, I am,

Very truly yours,

Mark R. Herring
Attorney General

[1] VA. CODE ANN. §§ 58.1-2900, -2904 (2017).

[2] See §§ 58.1-2901, -2905 (2017).

[3] See §§ 58.1-2901, -2905. A portion known as the special regulatory tax is also remitted to the State Corporation Commission. See §§ 58.1-2900 to -2903 (2017), and §§ 58.1-2904 to -2907 (2017). The conclusions set forth in this opinion also apply to the special regulatory tax portion of the electric utility and natural gas consumption taxes.

[4] VA. CODE ANN. § 37.2-500(A) (Supp. 2017). "The governing body of the Cities of Virginia Beach or Richmond or the County of Chesterfield may establish a behavioral health authority ...." Section 37.2-601 (Supp. 2017). However, only the City of Richmond has done so. See Va. Dep't of Behavioral Health and Developmental Services, 2015 Overview of Community Services in Virginia at 11 [hereinafter DBHDS, 2015 Overview of Community Services], available at http://www.dbhds.virginia.gov/library/community%20contracting/occ-csb-overview.pdf. There are currently thirty-nine community services boards and one behavioral health authority in Virginia. See Va. Dep't of Behavioral Health and Developmental Services, Community Service Boards (CSBs), http://www.dbhds.virginia.gov/community-services-boards-csbs (last visited June 13, 2018).

[5] DBHDS, 2015 Overview of Community Services, supra note 4, at 18; see also § 37.2-500(D) (providing that a community services board shall "function as the single point of entry into publicly funded mental health, developmental, and substance abuse services").

[6] See § 37.2-504 (2014) (establishing the powers and duties of community services boards); DBHDS, 2015 Overview of Community Services, supra note 4, at 11-12 (explaining how some community services boards function as departments of city or county government, while others function as agencies of city or county government); see also 2004 Op. Va. Att'y Gen. 159, 161 (community services boards are agencies or instrumentalities of local government).

[7] See § 37.2-605 (2014); DBHDS, 2015 Overview of Community Services, supra note 4, at 11.

[8] See § 37.2-601 (Supp. 2017); see also supra note 4.

[9] Section 37.2-605.

[10] See § 37.2-600 (2014) (providing that the board of directors of a behavioral health authority is "appointed by and accountable to the governing body of the city or county that established it").