Can a Virginia county ask the Department of Taxation for a formal advisory opinion on whether it may assess local real property tax against leaseholders of tax-exempt property?

Plain-English summary

This ruling is not a substantive tax decision — it is the Tax Commissioner explaining why the Department of Taxation could not answer the question it was asked. A Virginia county wrote to the Department seeking an advisory opinion on whether it had authority to issue local real property tax assessments, for the previous three tax years, against taxpayers who lease real property from tax-exempt entities in the county.

The Tax Commissioner responded that the Department's authority to issue advisory opinions on local tax matters is limited by statute. That authority covers the Business, Professional and Occupational License (BPOL) tax under Va. Code § 58.1-3703.1, and certain local mobile property and business taxes under Va. Code § 58.1-3983.1. Real property tax matters generally fall outside the Department's administrative appeals jurisdiction, as the Department had already concluded in P.D. 16-13 and P.D. 16-25. The Department does have appeals jurisdiction over the value or assessment of property when that valuation was made by the Department itself (P.D. 11-201), and it has specific educational and reporting duties involving local boards of equalization (P.D. 03-92) — but neither of those exceptions covered the county's question. After reviewing Title 58.1, Chapter 32 of the Code of Virginia (which governs real property tax generally), the Department found no express statutory authorization for it to issue an opinion on the subject.

Because the Department concluded it lacked the legal authority to rule, it declined to issue a formal opinion. Instead, the Tax Commissioner offered two practical alternatives: the Department's property team could informally advise the county, and the county could also seek a formal opinion from the Attorney General's Office if it still wanted one. The underlying substantive question — whether the county may assess real property tax against leaseholders of tax-exempt property for prior tax years — was never actually answered.

What this means for you

If you are a local government official

Local real property tax administration and assessment questions are generally not something the Virginia Department of Taxation can answer through a formal advisory ruling. The Department's rulings jurisdiction over local taxes is limited to BPOL tax and certain local mobile property/business taxes. For real property tax administration questions — including how to treat leaseholders of tax-exempt property — localities should look to informal guidance from the Department's property team, their own legal counsel, or a formal opinion from the Attorney General's Office.

If you are a taxpayer leasing property from a tax-exempt owner

This ruling does not resolve whether a locality can assess real property tax against you as a leaseholder of tax-exempt property. It only establishes that the Department of Taxation itself does not have the authority to issue a binding advisory opinion on that specific real property tax administration question; the answer, if any, will have to come from another source, such as the locality's own determination, the courts, or the Attorney General.

Common questions

Does this ruling say whether leaseholders of tax-exempt property can be taxed on real property?
No. The Department did not reach that question. It only explained why it could not issue an advisory opinion on the topic.

Why couldn't the Department answer the county's question?
Because its statutory authority to issue advisory opinions on local tax matters is limited to the BPOL tax (Va. Code § 58.1-3703.1) and certain local mobile property and business taxes (Va. Code § 58.1-3983.1). Real property tax is not included, and the Department found no other statute authorizing it to opine on real property tax matters.

Does the Department have any role in local real property tax matters?
A limited one. It has appeals jurisdiction over the value or assessment of property when the valuation was made by the Department itself, and it has educational and reporting responsibilities involving local boards of equalization. Neither applied to the county's question here.

What options did the Department suggest to the county?
It suggested the county contact the Department's property team informally, and noted that the Attorney General's Office may be able to issue a formal opinion on the subject if the county still wanted one.

Citations and references

• Va. Code § 58.1-3703.1 (Department's authority to issue advisory opinions on BPOL tax)
• Va. Code § 58.1-3983.1 (Department's authority to issue advisory opinions on local mobile property and certain business taxes)
• Va. Code Title 58.1, Chapter 32 (local real property tax generally)
• P.D. 16-13 (3/1/2016) — real property tax matters generally outside Department's appeals jurisdiction
• P.D. 16-25 (3/8/2016) — same
• P.D. 11-201 (12/12/2011) — Department's appeals jurisdiction over value/assessment from its own valuation
• P.D. 03-92 (11/18/2003) — Department's educational/reporting role with boards of equalization

Source

• Landing page: Virginia Laws, Rules & Decisions
• Ruling: P.D. 20-154

Original ruling text

September 1, 2020

Re: Request for Advisory Opinion

Local Real Property Tax

Dear *:

This will reply to your letter in which you (the “County”) seek an opinion regarding your authority to issue real property tax assessments to leaseholders of real property owned by tax-exempt entities.

The Code of Virginia sections and public documents cited are available on-line at www.tax.virginia.gov in the Laws, Rules and Decisions section of the Department’s web site.

FACTS

The County asks whether it has the authority to issue assessments of local real property tax for the previous three tax years against taxpayers who are leasing real property from tax-exempt entities in its jurisdiction.

OPINION

The Department’s authority to issue advisory opinions regarding local tax matters is confined to the Business Professional and Occupational License (BPOL) tax pursuant to Virginia Code § 58.1-3703.1 and local mobile property and certain business taxes under Virginia Code § 58.1-3983.1. The Department’s authority to issue such opinions thus reflects its administrative appeals jurisdiction over local tax matters, and real property tax matters are generally not within the Department’s appeals jurisdiction. See Public Document (P.D.) 16-13 (3/1/2016) and P.D. 16-25 (3/08/2016). The Department, however, does have appeals jurisdiction regarding the value or assessment of tax resulting from a valuation of property made by the Department. See P.D. 11-201 (12/12/2011). The Department also has specific educational and reporting roles involving the local real estate appeals process with boards of equalization. See P.D. 03-92 (11/18/2003).

We have also consulted Title 58.1, Chapter 32 of the Code of Virginia governing real property tax generally and can find no express authorization for the Department to issue an opinion on this subject. The Department can only act to the extent the law allows.

Although it appears that the law prevents me from addressing this matter with a formal written opinion, I have several further suggestions that might assist you. The Department’s property team may be able to advise you informally. You may contact * at *** for further assistance. In addition, the Attorney General’s Office may be able to assist you with a formal opinion on this subject, should you still wish to seek one.

If you have any further questions regarding this response, you may contact * in the Office of Tax Policy, Appeals and Rulings, at ***.

Sincerely,

Craig M. Burns

Tax Commissioner

AR/3430.M

Related Documents

03-92

11-201

16-13

16-25