House Joint Resolution No. 361 (Appendix A), agreed to during the 1991 Session of the General Assembly, established a joint subcommittee to study the issues related to the imposition of a business license tax on nonprofit hospitals, colleges, and universities. The subcommittee was directed in the resolution's resolve clause to:

• Determine the impact of payment of such taxes on the availability and affordability of health care and of higher education; and

• Assess the contributions, financially and otherwise, currently made by the nonprofit institutions to the communities which they serve.

The joint subcommittee consisted of five members of the House of Delegates, appointed by the Speaker of the House, and three members of the Senate, appointed by the Senate Committee on Privileges and Elections.

The business, professional and occupational license (BPOL) tax has been a controversial tax for many years. The tax is levied against a business' gross receipts which is no indicator of a business' profitability. This is the major criticism of the BPOL tax. However, the tax is an important part of local tax revenues and the third largest single tax source for Virginia's counties and cities.

As with most state and local taxes, there are exemptions from the BPOL tax in the Code of Virginia. While nonprofit hospitals, colleges, and universities generally have enjoyed exemptions from income and property taxes, no specific exemption existed for these entities prior to 1991. During the same session in which House Joint Resolution 361 was introduced, so was legislation (HB 1492) which added the exemption from the BPOL tax for nonprofit hospitals, colleges, and universities. The legislation contained a sunset date of July 1, 1993, to give the joint subcommittee examining the issues time to complete its study.

The subcommittee met once in 1991 and twice in 1992 to consider the issues enumerated in HJR 361. Testimony by representatives for the nonprofit hospitals, colleges, and universities as well as for the counties, cities, and towns was heard during the meetings.

At the end of its third and final meeting, the subcommittee deliberated about whether to (i) allow the exemption to expire, (ii) make it a permanent exemption or (iii) extend the sunset date. The subcommittee chose the final option and recommended that the exemption for nonprofit hospitals, colleges, and universities be extended for four more years until July 1, 1997.