Title of Regulation: 23VAC10-310. Tax on Wills and Administration (amending 23VAC10-310-20, 23VAC10-310-30).

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

Public Hearing Information: No public hearings are scheduled.

Public Comment Deadline: March 10, 2017.

Effective Date: March 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 provides that the "Tax Commissioner shall have the power to issue regulations relating to the interpretation and enforcement of the laws of this Commonwealth governing taxes administered by the Department." The authority for the current regulatory action is discretionary.

Purpose: This regulatory action amends 23VAC10-310, Tax on Wills and Administration, to update references to sections of the Code of Virginia to reflect the changes made by Chapter 614 of the 2012 Acts of Assembly, which recodified Title 64.1 of the Code of Virginia to Title 64.2. The regulation section affected by this action was promulgated prior to the enactment of Chapter 614. This regulatory action does not reflect any change in current tax policy and has no impact on the administration of any taxes.

Rationale for Using Fast-Track Rulemaking Process: The fast-track rulemaking process is intended for proposed regulations that are expected to be noncontroversial. As this regulatory action will merely correct references to sections of the Code of Virginia, this action is not expected to be controversial.

Substance: This regulatory action will amend 23VAC10-310, Tax on Wills and Administration, to update references to sections of the Code of Virginia to reflect the recodification changes made by Chapter 614 of the 2012 Acts of Assembly. Specifically, references to sections of Title 64.1 are corrected to the appropriate sections of Title 64.2.

Issues: As this regulatory action will merely correct references to sections of the Code of Virginia, 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 proposes several amendments to update references to sections of the Code of Virginia to reflect the recodification changes made by 2012 Acts of Assembly, Chapter 614.

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

Estimated Economic Impact. The proposed updating of Code of Virginia references will not affect tax rates, rules and policies, but will be beneficial by increasing clarity and reducing potential confusion for readers of the regulation.

Businesses and Entities Affected. The proposed amendments affect anyone who may potentially read the regulation. The regulation pertains to anyone who may have a will or may be the beneficiary of a will.

Localities Particularly Affected. The proposed amendments do not disproportionately affect particular localities.

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 significantly 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 references to sections of the Code of Virginia to reflect changes enacted by Chapter 614 of the 2012 Acts of Assembly, which recodified Title 64.1 of the Code of Virginia.

23VAC10-310-20. Levy.

The following are examples of the application or nonapplication of the tax:

1. The tax is imposed even if a will is probated without qualification.

2. A will, already admitted to probate and on which a tax has been paid in a Virginia court, will not be taxed in order to be recorded in any other Virginia county or city where there is real or personal property subject to the will. See § 64.1-94, 64.2-455 of the Code of Virginia.

3. The qualification of an administrator de bonis non (D.B.N.), is ordinarily not subject to tax when the tax has been paid on the original qualification of the personal representative; however, if the estate value has been determined to be in excess of the originally taxed value, the excess is taxable.

4. The filing of an affidavit with the clerk of court relating to real estate of an intestate decedent is not subject to tax. See § 64.1-135 64.2-510 of the Code of Virginia.

5. A recovery for death by wrongful act is not taxable because it does not pass property by will or by intestacy.

23VAC10-310-30. Value of estate.

A.1. Resident. Upon the probate of the will of a resident decedent who owned real, tangible and intangible personal property, the tax is measured by the value of all intangible property wherever located and the value of the real and tangible property located in Virginia. "Resident" means a decedent who was domiciled in the Commonwealth of Virginia at his death.

2. Nonresident. Upon the probate of an authenticated copy of the will of a nonresident decedent, the tax is measured only by the value of the real or tangible property located in the Commonwealth. See § 64.1-92 64.2-450 of the Code of Virginia.

3. B. The following are examples of property not included in the valuation of the estate for purposes of the tax:

a. 1. Property passing by the exercise of a power of appointment.

b. 2. Jointly held property with right of survivorship.

c. 3. Insurance proceeds, unless payable to the estate.

d. 4. Property that passes by inter vivos trust.

e. 5. Bonds payable on debt to a named beneficiary.

4. C. Assets owned as tenants in common or joint tenants without right of survivorship are included to the extent of the interest of the deceased tenant.

5. D. Where a testator owned several parcels of real estate, but only devised certain of the parcels by will, leaving other parcels to pass according to the law of descent, the tax should be based upon all the real estate in the Commonwealth owned by the decedent at the date of valuation, and not only on the value of the parcels devised by will.