Title of Regulation: 23VAC10-300. Estate Tax (repealing 23VAC10-300-20 through 23VAC10-300-90).

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

Public Hearing Information: No public hearings are scheduled.

Public Comment Deadline: February 10, 2017.

Effective Date: February 27, 2017.

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.

Purpose: As a result of a periodic review of the Virginia Estate Tax regulation (23VAC10-300) initiated by the Department of Taxation on May 30, 2016, and completed June 20, 2016, the Department of Taxation has determined that the regulation should be repealed because it provides no guidance beyond the plain meaning of the statutes to which it applies, and it is not necessary to protect the public health, safety, or welfare. A regulation that is not necessary to interpret the law or to protect the public health, safety, or welfare violates the general principles set forth in Governor Terence R. McAuliffe's Executive Order 17 signed June 30, 2014.

Repeal of the regulation does not reflect any change in current tax policy. Repeal of the regulation will have no impact on the administration of the Virginia estate tax.

Rationale for Using Fast-Track Rulemaking Process: The department is using the fast-track rulemaking process because the repeal of the Virginia Estate Tax regulation (23VAC10-300) is expected to be noncontroversial because the regulation provides no guidance beyond the plain meaning of the statutes to which it applies. No comments were received during the periodic review of the regulation.

Substance: The action repeals the Virginia Estate Tax regulation (23VAC10-300). Since 1980 Virginia imposed a "pick-up" estate tax that was equal to the maximum amount of the federal credit for state death taxes as it existed on January 1, 1978. Congress eliminated the federal credit for state death taxes in 2005, but the freeze to 1978 preserved the revenue from the Virginia estate tax. In 2006 the General Assembly struck the language tying the tax to the 1978 amount of the federal credit, which effectively repealed the Virginia estate tax; see Chapters 4 and 5 of the 2006 Acts of Assembly, Special Session I. Because the Virginia Estate Tax (§ 58.1-900 et seq., of the Code of Virginia) no longer imposes a tax on the estates of decedents there is no longer a need for the Virginia Estate Tax regulation. Repeal of the regulation will have no impact on the administration of the Virginia estate tax.

Issues: As the law no longer imposes a Virginia estate tax, the regulation pursuant to that law is unnecessary. Accordingly, its repeal poses no disadvantages to the public or the Commonwealth.

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 repeal the Estate Tax regulation.

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

Estimated Economic Impact. Chapters 4 and 5 of the 2006 Special Session Acts of Assembly¹ effectively eliminated the Commonwealth's estate tax for estates of persons who died on or after July 1, 2007. Thus the Estate Tax regulation is obsolete. The proposed repeal of the regulation would have no impact on applicable rules and requirements, but nonetheless would be beneficial in that it would eliminate the possibility that readers of the regulation would be misled concerning the law in effect.

Businesses and Entities Affected. Since Virginia's estate tax was effectively repealed via legislation in 2006,² repealing this regulation does not affect any businesses or entities beyond potential readers of the regulation who may have been misled concerning the law in effect.

Localities Particularly Affected. The proposed repeal of the regulation does not disproportionately affect particular localities.

Projected Impact on Employment. The proposed repeal of the regulation does not affect employment.

Effects on the Use and Value of Private Property. The proposed repeal of the regulation does not affect the use and value of private property.

Real Estate Development Costs. The proposed repeal of the regulation does 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 repeal of the regulation does not affect costs for small businesses.

Alternative Method that Minimizes Adverse Impact. The proposed repeal of the regulation does not adversely affect small businesses.

Adverse Impacts:

Businesses. The proposed repeal of the regulation does not adversely affect businesses.

Localities. The proposed repeal of the regulation does not adversely affect localities.

Other Entities. The proposed repeal of the regulation does not adversely affect other entities.

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¹ See http://leg1.state.va.us/cgi-bin/legp504.exe?062+ful+CHAP0004 and http://leg1.state.va.us/cgi-bin/legp504.exe?062+ful+CHAP0005

² Ibid

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

Summary:

Pursuant to Chapters 4 and 5 of the 2006 Acts of Assembly, Special Session I, and a periodic review of the regulation, completed June 20, 2016, the action repeals the Virginia Estate Tax regulation (23VAC10-300). Repeal of the regulation does not reflect any change in current tax policy and has no impact on the administration of the Virginia estate tax.