Title of Regulation: 23VAC10-55. Virginia Corn Excise Tax (amending 23VAC10-55-40; repealing 23VAC10-55-50).

Statutory Authority: § 58.1-203 of the Code of Virginia.

Public Hearing Information: No public hearings are scheduled.

Public Comment Deadline: August 26, 2016.

Effective Date: September 12, 2016.

Agency Contact: Joe Mayer, Lead Policy Analyst, Department of Taxation, P.O. Box 27185, Richmond, VA 23261-7185, telephone (804) 371-2299, FAX (804) 371-2355, or email joseph.mayer@tax.virginia.gov.

Basis: Section 58.1-203 of the Code of Virginia authorizes the Tax Commissioner to issue regulations relating to the interpretation and enforcement of the laws governing taxes administered by the Department of Taxation. Section 3.2-1412 of the Code of Virginia authorizes the Tax Commissioner to administer the corn excise tax.

Purpose: The amendments are needed to update the corn excise tax rate to the rate provided in statute (one cent per bushel) and strike language that provides no guidance beyond the plain meaning of the statutes as it is not necessary to protect the public health, safety, or welfare. The regulatory action does not reflect any change in current tax policy and will have no impact on the administration of the corn excise tax.

Rationale for Using Fast-Track Process: The department is using the fast-track rulemaking process because amending Virginia Corn Excise Tax, 23VAC10-55, to update the tax rate and to repeal language that provides no guidance beyond the plain meaning of the statute is expected to be noncontroversial.

Substance: The amendments update the tax rate and repeal language that provides no guidance beyond the plain meaning of the statute. The corn excise tax is levied on corn produced in Virginia for sale. The tax is remitted quarterly and the revenues deposited into The Corn Fund. The Corn Board uses these funds to provide for programs of market development, education, publicity, research, and the promotion of the sale and use of corn. This regulatory action does not reflect any change in current tax policy and will have no impact on the administration of the corn excise tax.

Issues: The primary advantage to the public, the Department of Taxation, and the Commonwealth of this action is that it will conform Virginia Corn Excise Tax, 23VAC10-55, to a rate change in the statutory law and thereby assist taxpayers with voluntary compliance with the tax, ease administration of the tax by the Department of Taxation, and help ensure the steady flow of tax revenues to the Commonwealth. As the regulation will update the tax rate to the rate provided in statute and repeal language that provides no additional guidance to statutes that are clear and unambiguous, there are no issues or disadvantages to the public or the Commonwealth associated with this regulatory action.

Small Business Impact Review Report of Findings: This regulatory action serves as the report of the findings of the regulatory review pursuant to § 2.2-4007.1 of the Code of Virginia.

Department of Planning and Budget's Economic Impact Analysis:

Summary of the Proposed Amendments to Regulation. The Department of Taxation (Department) proposes to update the corn excise tax rate in the regulation to reflect the rate that has been in effect since 1989. The Department also proposes to amend other language for clarity.

Result of Analysis. The benefits likely exceed the costs for all proposed changes.

Estimated Economic Impact. The current regulation states that the corn excise tax rate is one-quarter cent per bushel. The Code of Virginia (§ 3.2-1405 and § 3.2-1406) establishes that the excise tax rate may be changed or eliminated by virtue of referenda of corn producers. An October 1, 1989 tax bulletin reported that "On September 7, 1989, Virginia corn producers voted 136 to 51 in favor of increasing the corn assessment from one-quarter cent to one cent per bushel of corn…" In practice, the tax has been assessed at one cent per bushel ever since. The Department proposes to amend this regulation to indicate that the tax is one cent per bushel. This amendment will be beneficial in that the regulation will reflect the actual tax rate that is assessed, significantly improving clarity.

Businesses and Entities Affected. The regulation affects corn farmers, processors, dealers, shippers, country buyers, and exporters. According to the Department, there were 63 corn excise tax payers in 2015.

Localities Particularly Affected. The regulation particularly affects localities where corn is grown and processed for profit.

Projected Impact on Employment. The proposed amendments do not affect employment.

Effects on the Use and Value of Private Property. The proposed amendments do not affect the use and value of private property.

Real Estate Development Costs. The proposed amendments do not affect real estate development costs.

Small Businesses:

Definition. Pursuant to § 2.2-4007.04 of the Code of Virginia, small business is defined as "a business entity, including its affiliates, that (i) is independently owned and operated and (ii) employs fewer than 500 full-time employees or has gross annual sales of less than $6 million."

Costs and Other Effects. The proposed amendments do not affect costs for small businesses.

Alternative Method that Minimizes Adverse Impact. The proposed amendments do not create adverse impact for small businesses.

Adverse Impacts:

Businesses. The proposed amendments will not adversely affect businesses.

Localities. The proposed amendments will not adversely affect localities.

Other Entities. The proposed amendments will not adversely affect other entities.

Agency's Response to Economic Impact Analysis: The Department of Taxation agrees with the Department of Planning and Budget's economic impact analysis.

Summary:

The amendments update the tax rate and repeal language that provides no guidance beyond the plain meaning of the statute. This regulatory action does not reflect any change in current tax policy and will have no impact on the administration of the corn excise tax.

23VAC10-55-40. Handler to deduct assessment from payment to farmer; report Report and payment by handler.

A. Definition. The following word or term when used in this section shall have the following meaning unless the context clearly indicates otherwise:

"Handler" means any person, firm, corporation or any other business entity that is a processor, dealer, shipper, country buyer, exporter that handles corn produced in Virginia, or farmer who sells his corn out of state or to anyone other than a "handler."

B. Generally. The handler of corn is liable for remitting the one-quarter cent $ .01 per bushel corn excise tax to the Tax Commissioner as regulated herein. If the handler purchases, from farmers, corn subject to the excise tax, the handler must deduct the excise tax from any payment made to the farmer for the corn. All corn handlers must register with the Tax Commissioner for receiving the quarterly corn excise tax returns and reporting the corn excise tax. Application for registration should be submitted to the Department of Taxation, Registration Unit, P.O. Box 1880, Richmond, VA 23282-1880.

B. Handler defined. The term "handler" means any person, firm, corporation or any other business entity who is a processor, dealer, shipper, country buyer, exporter who handles corn produced in Virginia or a farmer who sells his corn out of state or to anyone other than a "handler."

C. Examples.

Example 1: Farmer A grows corn in Virginia and sells the harvested crop for processing to Processor B located in North Carolina. Farmer A is the "handler" and responsible for remitting the Virginia Corn Excise Tax to the Virginia Department of Taxation.

Example 2: Farmer E grows corn in Virginia and sells the harvested corn for processing to Processor F located in Virginia. Processor F is the "handler" and is responsible for collecting from the farmer and remitting the Virginia Corn Excise Tax to the Virginia Department of Taxation.

Example 3: Farmer G grows corn in Virginia and sells the harvested crop for seed to Farmer H. Farmer G is the "handler" and is responsible for remitting the Virginia Corn Excise Tax to the Virginia Department of Taxation.

C. Handler return. The corn excise tax returns must be filed by the handler quarterly and are due on or before the last day of the month following the end of the period. The quarters are January 1 through March 31, April 1 through June 30, July 1 through September 30 and October 1 through December 31. Each return shall report the gross volume of corn which has been handled by the handler during the quarter. Each handler must file the return with the Department of Taxation, P.O. Box 1880, Richmond, VA 23282-1880.

D. Payment of tax by handler. Each handler must pay the corn excise tax. The return, with applicable tax payment, is due by the last day of the month following the end of each quarter. (Due dates are April 30, July 31, October 31, and January 31). The tax receipts shall be deposited by the Tax Commissioner into the State Treasury and credited to the Virginia Corn Fund.

23VAC10-55-50. Records to be kept by handlers. (Repealed.)

A. Generally. Every handler of corn subject to the corn excise tax must keep complete records on the corn handled by him. The handler must keep and preserve the records for at least three years following the date the tax is reported on such corn.

Note: While § 3.1-1045 of the Code of Virginia specifies records must be preserved for a period not less than two years from the time the corn was handled, the statute of limitations under § 58.1-1812 of the Code of Virginia provides for a three year period for assessment of deficiencies. In order to prevent any undue burden upon the taxpayer, in the event of audit, the record retention period has been extended to the same limitation as the assessment statute of limitations.

B. Examination by Commissioner. The Tax Commissioner, or his duly authorized agents, may examine during the usual business hours of the day records, books, papers, or other documents of the handler to verify the truth and accuracy of any return, statement, or other relevant information.

FORMS (23VAC10-55)

Virginia Corn Assessment Return Instructions, Form CO-AR W (rev. 5/06).

Business Registration Application, Form R-1 (rev. 3/08).

Form CO-1, Virginia Corn Assessment Return and Instructions (CO-AR W) (rev. 5/2006)

Form R-1, Business Registration Form (1501220) and Instructions (1501228) (rev. 3/2015)