The Revenue Resources and Economic Commission became a permanent legislative commission by act of the 1974 General Assembly. The commission was established to study the Commonwealth's tax structure and sources of revenue, to evaluate local revenue sources, and to recommend the proper division of sources of revenue between the state and local governments.

The major area of concern for the commission in 1974 has been real property tax reform. During its 1973 session, the General Assembly assigned the Governor's Office the responsibility for an in-depth study of this tax. The result was Reforming the Virginia Property Tax, a report made available to the General Assembly in 1974. This study examined the following seven topics:

(1) the assessment-sales ratio study,

(2) the roles of the state and local governments in property tax administration,

(3) property tax review and appeal procedures,

(4) property tax exemption and relief policies,

(5) assessment and taxation of public service corporation property,

(6) Virginia's constitutional debt limits for localities based on property assessments, and

(7) constitutional and statutory limitations on property tax reform.

The final recommendations emerging from this study have come under intensive review by the Revenue Resources and Economic Commission. In order to solicit citizen input, the commission sponsored in Richmond an educational seminar on property tax reform as well as public hearings in Richmond, Roanoke, Norfolk, and Alexandria. Utilizing public comment and staff research, the commission has formulated a set of property tax reform recommendations for consideration by the 1975 General Assembly. Chief among these are measures to promote public understanding of the property tax and to improve the quality of appraisal and assessment functions. In addition, the commission recommends further study of review and appeal procedures as well as general property tax relief. Details of these recommendations are contained in Part I of this report.

The commission has also concerned itself with other fiscal issues such as:

(1) changes in the inheritance and gift taxes,

(2) exclusion of retirement income from the state personal income tax,

(3) elimination of the dividend exclusion from the state personal income tax,

(4) changes in the taxation of rolling stock of motor carriers, and

(5) tax relief for the disabled.

In October, a hearing was held in Richmond at which public comment was invited on.these and other tax issues aside from the property tax. The commission's recommendations on these issues are contained in Part II of this report.

Recommendations

The Revenue Resources and Economic Commission recommends the following measures for legislative action by the 1975 General Assembly. {Proposed legislation is contained in the Appendix.)

Property Tax Reform

(1) All localities shall be required to assess at 100 percent of fair market value and to proportionately lower their nominal tax rates beginning January 1, 1976. Public service corporation property, currently assessed under the provisions of the Bemiss Bill (Section 58-512.1 of the Code of Virginia), will be assessed and taxed as a separate class of property until 1986.

(2) Each assessor shall enter the fair market value on the property record card and calculate the assessment from that figure.

(3) Each taxpayer shall have the right to examine the property record card for his or any other properties and to see the calculations upon which his own appraisal and assessment are based.

(4) Notification shall be given to taxpayers whenever an assessment is changed. The notice shall include the new appraised value of the property, the new assessment, and the local ratio upon which the assessment is based.

(5) A locality may require the submission of annual exemption applications, giving information on current property use and ownership, as a condition for retention of tax exempt status.

(6) Localities shall inventory all properties exempt or immune from inclusion in the taxable base (other than roads, streets, or highways) and report such properties on the land book with a general identifying description of the property, name and address of owner, fair market value appraisal, and the assessment and the tax as if the property were not exempt.

(7) The Department of Taxation shall be required by law to prepare assessment-sales ratio studies on an annual rather than biennial basis. ·Further, all localities shall classify the properties in their land books using classes developed by the Department of Taxation in cooperation with appropriate local officials.

(8) The Department of Taxation shall develop and administer a mandatory training program for state and local assessment personnel.

Other Tax Issues

(1) The rolling stock tax on intrastate common carriers of property shall be repealed. In its place, such vehicles will become subject to the local personal property tax along with other carriers of property. This change would redress the dual, discriminatory system presently used.

(2) A temporary ceiling shall be placed on all local license tax rates to preclude further increases in the inequity of local license taxation while study continues. This ceiling shall not allow tax rates to increase over the rates in effect on December 31, 1974 and shall last until December 31, 1976. This restriction will allow the Commission additional time to analyze the issues and to finalize its recommendations to the 1976 session of the General Assembly.