Can a Virginia county or city create a tax credit (real estate, personal property, or otherwise) for parents who homeschool or send their kids to private school?

Subject

Under the Dillon rule of strict construction, a locality does not have the authority to issue tax credits to citizens who choose to homeschool or send their children to private school.

Plain-English summary

Senator Travis Hackworth asked the Attorney General whether a Virginia county or city could enact a tax credit for parents who homeschool their children or send them to private school. He pointed to a 2012 AG opinion (from then-AG Cuccinelli) that had said the General Assembly could constitutionally enact such credits at the state level. The question Senator Hackworth posed: if the state could, can a locality?

The answer is no. Virginia is a Dillon Rule state. Local governments have only those powers (1) expressly granted by the General Assembly, (2) necessarily or fairly implied from those express powers, or (3) essential to the declared objects and purposes of the municipality. None of those categories cover this proposed credit. The General Assembly has not authorized localities to grant tax credits to families based on homeschooling or private-school enrollment. Without that grant of authority, localities cannot create the credit.

The Senator's request mentioned § 58.1-439.25 (the Education Improvement Scholarships Tax Credits program), but that's a state program for donations to qualified scholarship foundations and doesn't authorize the kind of locality-level credit the question contemplated.

What this means for you

For Virginia county boards of supervisors and city councils

The opinion holds that under the Dillon Rule a locality lacks authority to issue a tax credit for homeschooling or private-school families, because no Virginia statute expressly grants that power, it is not necessarily implied from the power to levy local tax, and it is not essential to the locality's purposes. It holds that the authority to create or authorize such a credit rests with the General Assembly.

For homeschooling and private-school families

The opinion holds that there is no Virginia local tax credit for choosing to homeschool or send a child to private school, and that a locality cannot create one absent action by the General Assembly. It notes the 2012 Cuccinelli opinion addressed the General Assembly's authority to enact state-level credits, not local authority.

For school choice advocates

The opinion holds that the Dillon Rule forecloses a locality from creating school-choice tax credits without a state grant of authority; only the General Assembly can create such credits or authorize localities to do so.

For local government attorneys advising on tax policy

The opinion holds that a locality's taxing authority is bounded by the Dillon Rule, so a proposed credit requires an express, necessarily implied, or essential grant from the General Assembly; absent that grant the locality lacks the power, even where the credit might be permissible at the state level.

Common questions

What is Virginia's Dillon Rule?
A rule of statutory construction holding that local governments have only the powers expressly granted by the state legislature, those necessarily or fairly implied from express powers, and those essential to the declared objects and purposes of the municipality. Powers are construed strictly. The rule is named for Iowa Supreme Court Justice John Forrest Dillon, who articulated it in the 19th century.

Why can't a county create whatever tax credit its supervisors want?
Because counties in Virginia are creatures of the state. Their taxing authority is delegated from the General Assembly. If the General Assembly hasn't authorized a particular credit, the locality lacks the power to create it.

Could the General Assembly authorize this kind of credit?
The 2012 Cuccinelli opinion concluded that the General Assembly could constitutionally authorize state-level tax credits for contributions to private schools and homeschool support, under certain conditions. That opinion was about the General Assembly's authority, not local authority.

What about the Education Improvement Scholarships Tax Credit program?
Va. Code § 58.1-439.25 et seq. creates a state-level tax credit for donations to qualified "scholarship foundations" (nonstock nonprofits approved by the Department of Education that provide financial aid to eligible students). It doesn't authorize localities to grant credits for parents who homeschool or pay private-school tuition directly.

Could a Virginia school division give vouchers instead?
A different question with a different analytical frame, also limited by Dillon Rule. Localities and school divisions can do only what the state authorizes.

Does this opinion bind a Virginia court?
No. AG opinions are persuasive but not binding. A court applying Dillon Rule to a locally-enacted credit would do its own analysis. But the AG opinion previews the legal challenge any locality enacting such a credit would face.

Background and statutory framework

The Dillon Rule survives in Virginia. The Supreme Court reaffirmed its vitality in AGCS Marine Ins. Co. v. Arlington Cty., 293 Va. 469, 484 (2017), and applied the three-part test in Dumfries-Triangle Rescue Squad, Inc. v. Bd. of County Supervisors, 299 Va. 226, 233 (2020): expressly granted powers, necessarily or fairly implied powers, and essential powers.

A tax credit for homeschool or private-school enrollment doesn't fit any of the three categories absent a state-level grant. There's no express authorization in any current Virginia statute. It cannot be necessarily implied from a general power to levy local property tax, because granting credits to a defined class is a discretionary policy choice, not an inherent feature of property taxation. It's not essential to the operation of a county or city government.

The 2012 AG opinion (2012 Op. Va. Att'y Gen. 54) addressed whether the General Assembly could constitutionally enact state-level credits for contributions to sectarian or nonprofit organizations or private schools not controlled by the Commonwealth. That opinion concluded such credits would not violate the Establishment Clause or the Virginia Constitution's no-aid provisions if structured properly. But that conclusion was about the legislature's power, not the localities'.

The Education Improvement Scholarships Tax Credit program (§§ 58.1-439.25 to -439.28) does not include homeschool or direct private-school tuition support. It provides state-level credit to donors to qualifying scholarship foundations.

Citations

• Va. Code § 2.2-505 (AG advisory opinions)
• Va. Code § 58.1-439.25 et seq. (Education Improvement Scholarships Tax Credits)
• Va. Code § 58.1-439.27 (Department of Education approval of scholarship foundations)
• AGCS Marine Ins. Co. v. Arlington Cty., 293 Va. 469 (2017)
• Dumfries-Triangle Rescue Squad, Inc. v. Bd. of County Supervisors, 299 Va. 226 (2020)
• 2012 Op. Va. Att'y Gen. 54

Source

• Landing page: https://www.oag.state.va.us/annual-reports-opinions/official-opinions
• Original PDF: http://www.oag.state.va.us/files/Opinions/2021/21-086-Hackworth-Issued.pdf

Original opinion text

Office of the Attorney General
Mark R. Herring
Attorney General

202 North Ninth Street
Richmond, Virginia 23219
804-786-2071
Fax 804-786-1991
Virginia Relay Services
800-828-1120
7-1-1

December 17, 2021

The Honorable T. Travis Hackworth
Member, Senate of Virginia
1515 2nd Street
Richlands, Virginia 24641

Dear Senator Hackworth:

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

Issue Presented

You ask whether it is constitutional for localities to provide tax credits to its citizens who homeschool or send their children to private schools. You further inquire if the answer to that question is yes, whether a locality could then allow a tax credit for real and personal property tax and if so, what requirements would need to be in place to affect that program.

Applicable Law and Discussion

In your request, you rely on a 2012 opinion of then-Attorney General Cuccinelli that opined it would be constitutional for the General Assembly to enact statutes that allow tax credits for Virginia taxpayers for making contributions to sectarian entities and/or nonprofit organizations not controlled by the Commonwealth or to private schools not owned or controlled by the Commonwealth or a locality. I am unaware of any statutes authorizing a locality to grant a tax credit for citizens who homeschool their children or send their children to private schools.

Much like sovereign immunity, the Dillon Rule of strict construction is "alive and well" in Virginia. Under the Dillon Rule, local governing bodies "have only those powers that are (1) expressly granted by the General Assembly, (2) necessarily or fairly implied from those express powers, and (3) essential to the declared objects and purposes of the municipality." Therefore, because there are no statutes that authorize a locality to grant tax credits for citizens who choose to homeschool or send their children to private schools, it is my opinion that a locality does not have the authority to issue such a tax credit.

You mention § 58.1-439.25 et seq. (Education Improvement Scholarships Tax Credits) in your request, however, those statutes provide state guidelines for certain scholarship foundations and state issued tax credits. A review of the definitions provided in § 58.1-439.25 could not include homeschool or private schools under this state tax credit program unless they met the requirements of a "scholarship foundation." A scholarship foundation is defined as

a nonstock, nonprofit corporation that is (i) exempt from taxation under § 501(c)(3) of the Internal Revenue Code of 1954, as amended or renumbered; (ii) approved by the Department of Education in accordance with the provisions of § 58.1-439.27; and (iii) established to provide financial aid for the education of students or eligible students with a disability residing in the Commonwealth.

Regardless, those provisions of the tax code do not authorize a locality to establish a tax credit program like the one envisioned in your request.

Conclusion

Accordingly, it is my opinion that a locality may not issue tax credits to citizens who choose to homeschool or send their children to private school.

With kindest regards, I am,
Very truly yours,

Mark R. Herring
Attorney General