The Virginia General Assembly’s second 2021 special session is scheduled for August 2. One of the top priorities for the legislators will be allocating American Rescue Plan Act (ARPA) funds. Although Virginia has already received the money, it can’t be spent until the legislators allocate it.
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Virginia is on track for a revenue surplus of $500 million, according to presentations Secretary of Finance Aubrey Layne gave to legislators in the General Assembly this week. Layne was cautiously optimistic when describing Virginia’s financial situation, saying that many jobs have come back, and the housing market is booming.
“This all adds up to a very good performance for the first ten months of the year,” he said in a Tuesday presentation to the Senate Finance and Appropriations Committee. “We’re going to have a surplus that’s at least half a billion dollars and I think there’s an upward bias.”
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The deadline for filing and paying individual income taxes in Virginia has been extended until May 17, 2021 to coincide with the federal government’s extension on the same date, Gov. Ralph Northam’s office announced Friday.
“Aligning Virginia’s filing and payment deadline with the federal government will provide additional flexibility and simplify the process for taxpayers,” Northam said in a statement. “Even with this extended deadline, we encourage Virginians to file as soon as possible so we can get people the refunds they are entitled to while also protecting the Commonwealth’s strong fiscal footing.”
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The General Assembly will probably have another special session in 2021, which is necessary to allow the legislature to allocate federal funds granted to the Commonwealth in the $1.9 trillion American Rescue Plan (ARP) passed by Congress and signed by President Biden Thursday.
Virginia Secretary of Finance Aubrey Layne said, “It will require another session, but it probably will be sometime in the future weeks or possibly months because the Governor has made no decision. But part of that is because we have not received a specific certification on the actual monies yet from the Feds.”
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The General Assembly has so far failed to find middle ground for tax breaks on forgiven Paycheck Protection Plan (PPP) loans, and will now form a committee of three senators and three delegates to reconcile differences between the two chambers.
While a Senate bill calls for a $100,000 cap on income deductions claimed under PPP expenditures, the House of Delegates bill calls for only a $25,000 cap. When the two chambers considered each other’s bills, the House modified SB 1146 to a $25,000 cap, while the Senate amended HB 1935 to a $100,000 cap. After passing the modified versions, both chambers then rejected the modified versions of their original bills. On Friday, the two chambers agreed to form a conference committee to work together to create a bill that can pass both chambers.
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Despite a double-digit percentage drop in payroll taxes in January and a dip in overall General Fund collections, Virginia Gov. Ralph Northam said the state’s revenue remains stable.
The state’s January 2021 revenue report showed payroll withholding taxes down 12.6% for the month compared with last January, but the state said the decrease was expected because of one less deposit day compared with a year ago. The report said collections of the sales and use taxes, showing December sales, rose 5.6% in January, and the combined December and January receipts rose 5.4% over the same time from a year ago.
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The Virginia General Assembly is moving forward with legislation that would effectively make employers who received Paycheck Protection Plan (PPP) loans liable for state taxes. Bills that would practically exempt all income from the forgiven loans have been replaced with legislation that caps how much of the loan is exempt. Business advocates warn that the taxes could surprise the struggling businesses that the PPP loans were meant to help.
The bills bring Virginia’s tax code into conformity with the IRS; Virginia’s tax law doesn’t automatically change to match federal law, so state legislators pass tax conformity bills.
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Virginia Governor Ralph Northam’s administration has recommended to the General Assembly that the state not conform its tax code to specific provisions included in the recently-signed federal emergency relief bill that gives businesses who received Paycheck Protection Program (PPP) loans a significant tax benefit.
Under the provisions of the Consolidated Appropriations Act (CAA), signed into law by President Donald Trump in late December, businesses in the Commonwealth that got forgivable PPP loans would not be taxed on that income and could deduct their business expenses covered by the federal payment.
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