Title of Regulation: 4VAC20-1240. Fisherman Identification Program (amending 4VAC20-1240-30).

Statutory Authority: § 28.2-201 of the Code of Virginia.

Effective Date: July 26, 2018.

Agency Contact: Jennifer Farmer, Regulatory Coordinator, Marine Resources Commission, 2600 Washington Avenue, 3rd Floor, Newport News, VA 23607, telephone (757) 247-2248 or email jennifer.farmer@mrc.virginia.gov.

Summary:

The amendment removes the toll free 1-800 number for requesting a fisherman identification program number because the number no longer exists.

4VAC20-1240-30. Registration requirement; exception; procedures; confidentiality.

A. It shall be unlawful for any resident or nonresident, 16 years of age or older, to take or catch or attempt to take or catch any marine or anadromous fish species recreationally in any tidal waters of the Commonwealth without first obtaining, annually, a Fisherman Identification Program (FIP) number, except as provided in subsection B of this section.

B. Any person who purchases a Virginia saltwater recreational fishing license under Article 1.1 (§ 28.2-302.1 et seq.) of Chapter 3 of Title 28.2 of the Code of Virginia, or a saltwater recreational fishing license issued by the Potomac River Fisheries Commission, is not required to obtain a FIP number for the term of that license. Any person fishing aboard a charter boat or head boat that is licensed by the Virginia Marine Resources Commission or the Potomac River Fisheries Commission is not required to obtain a FIP number.

C. The FIP number may be obtained by the fisherman at no cost by calling a toll-free number and providing the required FIP information over the telephone or by entering the required FIP information online via an Internet access portal designated by the Marine Resources Commission for that purpose. The required FIP information shall include name, date of birth, address, and telephone number. No person shall be considered as registered under the FIP unless all of that person's FIP-required information is a part of the commission's telephone or Internet database.

D. Any person registered in the Fisherman Identification Program must be able to produce his FIP number upon request by any police officer. Failure to provide a valid FIP number for the current year shall constitute a violation of this regulation.

Title of Regulation: 12VAC30-50. Amount, Duration, and Scope of Medical and Remedial Care Services (amending 12VAC30-50-190).

Statutory Authority: § 32.1-325 of the Code of Virginia; 42 USC § 1396 et seq.

Effective Date: September 19, 2018.

Agency Contact: Emily McClellan, Regulatory Supervisor, Policy Division, Department of Medical Assistance Services, 600 East Broad Street, Suite 1300, Richmond, VA 23219, telephone (804) 371-4300, FAX (804) 786-1680, or email emily.mcclellan@dmas.virginia.gov.

Summary:

The amendment permits residents of nursing facilities to deduct the costs of limited specific dental procedures from their contributions toward the costs of their nursing facility care. Specifically, nursing facility residents are limited to deducting the following dental procedures: (i) routine exams and x-rays and dental cleaning twice yearly; (ii) full mouth x-rays once every three years; and (iii) extractions and fillings shall be permitted only if medically necessary as determined by the department.

12VAC30-50-190. Dental services.

A. Dental services shall be covered for individuals younger than 21 years of age in fulfillment of the treatment requirements under the Early and Periodic Screening, Diagnosis, and Treatment (EPSDT) Program and defined as routine diagnostic, preventive, or restorative procedures necessary for oral health provided by or under the direct supervision of a dentist in accordance with the State Dental Practice Act Chapter 27 (§ 54.1-2700 et seq.) of Title 54.1 of the Code of Virginia.

1. The state agency Department of Medical Assistance Services (DMAS) will provide any medically necessary dental service to individuals younger than 21 years of age.

2. Certain dental services, as described in the agency's DMAS Office Reference Manual (Smiles for Children, March 13, 2014), prepared by DMAS' DMAS's dental benefits administrator, require preauthorization or prepayment review by the state agency DMAS or its designee.

3. Dental services for individuals younger than the age of 21 years that do not require preauthorization or prepayment review are initial, periodic, and emergency examinations; required radiography necessary to develop a treatment plan; patient education; dental prophylaxis; fluoride treatments; routine amalgam and composite restorations; stainless steel crowns, prefabricated steel post and temporary (polycarbonate crowns) crowns, and stainless steel bands; crown recementation; pulpotomies; emergency endodontics for temporary relief of pain; pulp capping; sedative fillings; therapeutic apical closure; topical palliative treatment for dental pain; removal of foreign body; simple extractions; root recovery; incision and drainage of abscess; surgical exposure of the tooth to aid eruption; sequestrectomy for osteomyelitis; and oral antral fistula closure.

B. Dental services determined by the dental provider to be medically appropriate for an adult woman during the term of her pregnancy and through the end of the month following the 60th day postpartum shall be provided to a Medicaid-enrolled pregnant woman. The dental services that shall be covered are (i) diagnostic x-rays and exams; (ii) preventive cleanings; (iii) restorative fillings; (iv) endodontics (root canals); (v) periodontics (gum-related treatments); (vi) prosthodontics, both removable and fixed (crowns, bridges, partial plates, and dentures); (vii) oral surgery (tooth extractions and other oral surgeries); and (viii) adjunctive general services (all covered services that do not fall into specific professional categories). These services require prepayment review by the state agency DMAS or its designee.

C. For the dental services covered for Medicaid-enrolled adult pregnant women, the state agency DMAS may place appropriate limits on a service based on medical necessity, for utilization control, or both. Examples of service limitations are: examinations, prophylaxis, fluoride treatment (once/six months); space maintenance appliances; bitewing x-ray - two films (once/12 months); routine amalgam and composite restorations (once/three years); dentures (once/five years); extractions, tooth guidance appliances, permanent crowns and bridges, endodontics, patient education and sealants (once).

D. Limited oral surgery procedures, as defined and covered under Title XVIII (Medicare), are covered for all recipients, and require preauthorization or prepayment review by the state agency DMAS or its designee as described in the agency's Office Reference Manual located on the DMAS website at: http://www.dmas.virginia.gov/Content_atchs
/dnt/VA_SFC_ORM_140313.pdf http://www.dmas.virginia.
gov/#/dentalresources.

E. Residents of nursing facilities shall be permitted to deduct the costs of limited specific dental procedures from their payments toward the costs of their nursing facility care. Nursing facility residents shall be limited to deducting the following dental procedures: (i) routine exams and x-rays and dental cleaning twice yearly; (ii) full mouth x-rays once every three years; and (iii) extractions and fillings shall be permitted only if medically necessary as determined by DMAS.

Title of Regulation: 13VAC5-63. Virginia Uniform Statewide Building Code (amending 13VAC5-63-470, 13VAC5-63-485).

Statutory Authority: § 36-98 of the Code of Virginia.

Effective Date: September 4, 2018.

Agency Contact: Kyle Flanders, Policy Analyst, Department of Housing and Community Development, Main Street Centre, 600 East Main Street, Suite 300, Richmond, VA 23219, telephone (804) 786-6761, FAX (804) 371-7090, TTY (804) 371-7089, or email kyle.flanders@dhcd.virginia.gov.

Summary:

The Virginia Uniform Statewide Building Code (USBC) governs the construction, maintenance, and rehabilitation of new and existing building and structures. The USBC uses nationally recognized model building codes and standards produced by the International Code Council and other standard-writing groups as the basis for the technical provisions of the regulation. Every three years, new editions of the model codes become available. At that time, the Board of Housing and Community Development initiates a regulatory action to incorporate the newest editions of the model codes into the regulation.

Final regulations for the USBC, including 13VAC5-63-470 E and 13VAC5-63-485, were published in Volume 34, Issue 18 of the Virginia Register of Regulations on April 30, 2018 (34:18 VA.R. 1744-1961 April 30, 2018), initiating a 30-day final adoption period. During that period, a number of petitions were received concerning substantive changes made between the proposed and final regulations. The board suspended the regulatory process for 13VAC5-63-470 E and 13VAC5-63-485 (refer to 34:22 VA.R. 2140-2141 June 25, 2018) and established an additional 30-day comment period for these provisions.

On July 30, 2018, the Board of Housing and Community Development considered the public comment on 13VAC5-63-470 E and 13VAC5-63-485. The board readopted 13VAC5-63-470 E as the final regulations were published and readopted 13VAC5-63-485 with the changes from the final regulations shown in brackets below.

13VAC5-63-485 as readopted allows the code official to request legal proceedings when a property owner is served with three or more separate notices of violation for the same property within any five consecutive years for specific types of violations.

13VAC5-63-470 E (Section 103.2.3 Responsibility).

***

D. E. 103.2.3 Responsibility. The owner of a structure shall provide and maintain all buildings, structures, systems, facilities and associated equipment in compliance with this code unless it is specifically expressed or implied that it is the responsibility of the tenant or occupant.

***

13VAC5-63-485. Section 105 Violations.

105.1 Violation a misdemeanor; civil penalty. In accordance with § 36-106 of the Code of Virginia, it shall be unlawful for any owner or any other person, firm or corporation, on or after the effective date of any code provisions, to violate any such provisions. Any locality may adopt an ordinance that establishes a uniform schedule of civil penalties for violations of specified provisions of the code that are not abated or remedied promptly after receipt of a notice of violation from the local enforcement officer.

Note: See the full text of § 36-106 of the Code of Virginia for additional requirements and criteria pertaining to legal action relative to violations of the code.

105.2 Notices, reports and orders. Upon findings by the code official that violations of this code exist, the code official shall issue a correction notice or notice of violation to the owner or the person responsible for the maintenance of the structure. Work done to correct violations of this code subject to the permit, inspection and approval provisions of the VCC shall not be construed as authorization to extend the time limits established for compliance with this code.

105.3 Correction notice. The correction notice shall be a written notice of the defective conditions. The correction notice shall require correction of the violation within a reasonable time unless an emergency condition exists as provided under the unsafe building provisions of Section 106. Upon request, the correction notice shall reference the code section that serves as the basis for the defects and shall state that such defects shall be corrected and reinspected in a reasonable time designated by the code official.

105.4 Notice of violation. If the code official determines there are violations of this code a written notice of violation may be issued to the owner or the person responsible for the maintenance or use of the building or structure in lieu of a correction notice as provided for in Section 105.3. In addition, the code official shall issue a notice of violation for any uncorrected violation remaining from a correction notice established in Section 105.3. The code official shall provide the section numbers to the owner for any code provisions cited in the notice of violation. The notice shall require correction of the violation within a reasonable time. The owner or person to whom the notice of violation has been issued shall be responsible for contacting the code official within the timeframe established for any reinspections to assure the violations have been corrected. The code official will be responsible for making such inspection and verifying the violations have been corrected. In addition, the notice of violation shall indicate the right of appeal by referencing the appeals section of this code.

Exceptions:

1. Notices issued and legal proceedings or emergency actions taken under Section 106 for unsafe structures, unsafe equipment, or structures unfit for human occupancy.

2. Notices issued for failing to maintain buildings and structures as required by Section 103.2, as evidenced by multiple or repeated violations on the same property are not required to include a compliance deadline for correcting defects.

105.5 Coordination of inspections. The code official shall coordinate inspections and administrative orders with any other state or local agencies having related inspection authority and shall coordinate those inspections required by the Virginia Statewide Fire Prevention Code (13VAC5-51) for maintenance of fire protection devices, equipment, and assemblies so that the owners and occupants will not be subjected to numerous inspections or conflicting orders.

Note: The Fire Prevention Code requires the fire official to coordinate such inspections with the code official.

105.6 Further action when violation not corrected. If the responsible party has not complied with the notice of violation, the code official may request the legal counsel of the locality to institute the appropriate legal proceedings to restrain, correct or abate the violation or to require the removal or termination of the use of the building or structure involved. In cases where the locality or legal counsel so authorizes, the code official may issue or obtain a summons or warrant. [ Compliance with a notice of violation notwithstanding, the code official may request legal proceedings be instituted for prosecution when a person, firm or corporation is served with three or more notices of violation for the same property.

105.6.1 Further action for corrected violations: Compliance with a notice of violation notwithstanding, the code official may request legal proceedings be instituted for prosecution when a responsible party is served with three or more separate notices of violation for the same property within any five consecutive years. Legal proceedings shall not be instituted under this section for violation notices issued pursuant to the initial inspection of the property. Legal proceedings for violations that have been abated in residential rental dwelling units within a multifamily apartment development may only be instituted for such violations that affect safe, decent or sanitary living conditions.

Exception: Legal proceedings shall not be instituted for violations that have been abated on owner-occupied single family dwellings. ]

105.7 Penalties and abatement. Penalties for violations of this code shall be as set out in § 36-106 of the Code of Virginia. The successful prosecution of a violation of the code shall not preclude the institution of appropriate legal action to require correction or abatement of a violation.

Title of Regulation: 18VAC130-20. Real Estate Appraiser Board Rules and Regulations (amending 18VAC130-20-10).

Statutory Authority: § 54.1-2013 of the Code of Virginia.

Effective Date: October 1, 2018.

Agency Contact: Christine Martine, Executive Director, Real Estate Appraiser Board, 9960 Mayland Drive, Suite 400, Richmond, VA 23233, telephone (804) 367-8552, FAX (804) 527-4298, or email reappraisers@dpor.virginia.gov.

Summary:

Section 1110 of Title XI of the Financial Institutions Reform, Recovery and Enforcement Act of 1989 (12 USC § 3339) requires that real estate appraisals be performed in accordance with and reviewed for compliance with generally accepted standards as evidenced by the appraisal standards promulgated by the Appraisal Standards Board (ASB) of the Appraisal Foundation, which are known as the Uniform Standards of Professional Appraisal Practice (USPAP). The ASB updates USPAP every two years and has issued the 2018-2019 edition, which is effective from January 1, 2018, through December 31, 2019. The amendments update the edition in the definition of "USPAP" and as incorporated by reference.

Part I
General

18VAC130-20-10. Definitions.

The following words and terms when used in this chapter, unless a different meaning is provided or is plainly required by the context, shall have the following meanings:

"Accredited colleges, universities, junior and community colleges" means those accredited institutions of higher learning approved by the State Council of Higher Education for Virginia or listed in the Transfer Credit Practices of Designated Educational Institutions, published by the American Association of Collegiate Registrars and Admissions Officers or a recognized international equivalent.

"Adult distributive or marketing education programs" means those programs offered at schools approved by the Virginia Department of Education or any other local, state, or federal government agency, board or commission to teach adult education or marketing courses.

"Analysis" means a study of real estate or real property other than the estimation of value.

"Appraisal Foundation" means the foundation incorporated as an Illinois Not for Profit Corporation on November 30, 1987, to establish and improve uniform appraisal standards by defining, issuing, and promoting such standards.

"Appraisal subcommittee" means the designees of the heads of the federal financial institutions regulatory agencies established by the Federal Financial Institutions Examination Council Act of 1978 (12 USC § 3301 et seq.), as amended.

"Appraiser" means an individual who is expected to perform valuation services competently and in a manner that is independent, impartial, and objective.

"Appraiser classification" means any category of appraiser, which the board creates by designating criteria for qualification for such category and by designating the scope of practice permitted for such category.

"Appraiser Qualifications Board" means the board created by the Appraisal Foundation to establish appropriate criteria for the certification and recertification of qualified appraisers by defining, issuing, and promoting such qualification criteria; to disseminate such qualification criteria to states, governmental entities, and others; and to develop or assist in the development of appropriate examinations for qualified appraisers.

"Appraiser trainee" means an individual who is licensed as an appraiser trainee to appraise those properties which that the supervising appraiser is permitted to appraise.

"Business entity" means any corporation, partnership, association, or other business entity under which appraisal services are performed.

"Certified general real estate appraiser" means an individual who meets the requirements for licensure that relate to the appraisal of all types of real estate and real property and is licensed as a certified general real estate appraiser.

"Certified instructor" means an individual holding an instructor certificate issued by the Real Estate Appraiser Board to act as an instructor.

"Certified residential real estate appraiser" means an individual who meets the requirements for licensure for the appraisal of or the review appraisal of any residential real estate or real property of one to four residential units regardless of transaction value or complexity. Certified residential real estate appraisers may also appraise or provide a review appraisal of nonresidential properties with a transaction value or market value as defined by the Uniform Standards of Professional Appraisal Practice up to $250,000, whichever is the lesser.

"Classroom hour" means 50 minutes out of each 60-minute segment. The prescribed number of classroom hours includes time devoted to tests which are considered to be part of the course.

"Distance education" means an educational process based on the geographical separation of provider and student (i.e., CD-ROM, online learning, correspondence courses, etc.).

"Experience" as used in this chapter includes but is not limited to experience gained in the performance of traditional appraisal assignments, or in the performance of the following: fee and staff appraisals, ad valorem tax appraisal, review appraisal, appraisal analysis, real estate consulting, highest and best use analysis, and feasibility analysis/study analysis or study.

For the purpose of this chapter, experience has been divided into four major categories: (i) fee and staff appraisal, (ii) ad valorem tax appraisal, (iii) review appraisal, and (iv) real estate consulting.

1. "Fee/staff "Fee and staff appraiser experience" means experience acquired as either a sole appraiser, as a cosigner, or through disclosure of assistance in the certification in accordance with the Uniform Standards of Professional Appraisal Practice.

Sole appraiser experience is experience obtained by an individual who makes personal inspections of real estate, assembles and analyzes the relevant facts, and by the use of reason and the exercise of judgment forms objective opinions and prepares reports as to the market value or other properly defined value of identified interests in said real estate.

Cosigner appraiser experience is experience obtained by an individual who signs an appraisal report prepared by another, thereby accepting full responsibility for the content and conclusions of the appraisal.

To qualify for fee/staff fee and staff appraiser experience, an individual must have prepared written appraisal reports after January 30, 1989, that comply with the Uniform Standards of Professional Appraisal Practice in the edition in effect at the time of the reports' preparation, including Standards 1 and 2.

2. "Ad valorem tax appraisal experience" means experience obtained by an individual who assembles and analyzes the relevant facts, and who correctly employs those recognized methods and techniques that are necessary to produce and communicate credible appraisals within the context of the real property tax laws. Ad valorem tax appraisal experience may be obtained either through individual property appraisals or through mass appraisals as long as applicants under this category of experience can demonstrate that they are using techniques to value real property similar to those being used by fee/staff fee and staff appraisers and that they are effectively utilizing the appraisal process.

To qualify for ad valorem tax appraisal experience for individual property appraisals, an individual must have prepared written appraisal reports after January 30, 1989, that comply with the Uniform Standards of Professional Appraisal Practice in the edition in effect at the time of the reports' preparation.

To qualify for ad valorem tax appraisal experience for mass appraisals, an individual must have prepared mass appraisals or have documented mass appraisal reports after January 30, 1989, that comply with the Uniform Standards of Professional Appraisal Practice in the edition in effect at the time of the reports' preparation, including Standard 6.

In addition to the preceding, to qualify for ad valorem tax appraisal experience, the applicant's experience log must be attested to by the applicant's supervisor.

3. "Reviewer experience" means experience obtained by an individual who examines the reports of appraisers to determine whether their conclusions are consistent with the data reported and other generally known information. An individual acting in the capacity of a reviewer does not necessarily make personal inspection of real estate, but does review and analyze relevant facts assembled by fee/staff fee and staff appraisers, and by the use of reason and exercise of judgment forms objective conclusions as to the validity of fee/staff fee and staff appraisers' opinions. Reviewer experience shall not constitute more than 1,000 hours of total experience claimed, and at least 50% of the review experience claimed must be in field review wherein the individual has personally inspected the real property which is the subject of the review.

To qualify for reviewer experience, an individual must have prepared written reports after January 30, 1989, recommending the acceptance, revision, or rejection of the fee/staff fee and staff appraiser's opinions that comply with the Uniform Standards of Professional Appraisal Practice in the edition in effect at the time of the reports' preparation, including Standard 3.

Signing as "Review Appraiser" on an appraisal report prepared by another will not qualify an individual for experience in the reviewer category. Experience gained in this capacity will be considered under the cosigner subcategory of fee/staff fee and staff appraiser experience.

4. "Real estate consulting experience" means experience obtained by an individual who assembles and analyzes the relevant facts and by the use of reason and the exercise of judgment forms objective opinions concerning matters other than value estimates relating to real property. Real estate consulting experience includes, but is not necessarily limited to, the following:

Absorption Study
Ad Valorem Tax Study
Annexation Study
Assemblage Study
Assessment Study
Condominium Conversion Study
Cost-Benefit Study
Cross Impact Study
Depreciation/Cost Study
Distressed Property Study
Economic Base Analysis
Economic Impact Study
Economic Structure Analysis
Eminent Domain Study
Feasibility Study
Highest and Best Use Study
Impact Zone Study
Investment Analysis Study
Investment Strategy Study
Land Development Study
Land Suitability Study
Land Use Study
Location Analysis Study
Market Analysis Study
Market Strategy Study
Market Turning Point Analysis
Marketability Study
Portfolio Study
Rehabilitation Study
Remodeling Study
Rental Market Study
Right of Way Study
Site Analysis Study
Utilization Study
Urban Renewal Study
Zoning Study

To qualify for real estate consulting experience, an individual must have prepared written reports after January 30, 1989, that comply with the Uniform Standards of Professional Appraisal Practice in the edition in effect at the time of the reports' preparation, including Standards 4 and 5. Real estate consulting shall not constitute more than 500 hours of experience for any type of appraisal license.

"Inactive license" means a license that has been renewed without meeting the continuing education requirements specified in this chapter. Inactive licenses do not meet the requirements set forth in § 54.1-2011 of the Code of Virginia.

"Licensed residential real estate appraiser" means an individual who meets the requirements for licensure for the appraisal of or the review appraisal of any noncomplex, residential real estate or real property of one to four residential units, including federally related transactions, where the transaction value or market value as defined by the Uniform Standards of Professional Appraisal Practice is less than $1 million. Licensed residential real estate appraisers may also appraise or provide a review appraisal of noncomplex, nonresidential properties with a transaction value or market value as defined by the Uniform Standards of Professional Appraisal Practice up to $250,000, whichever is the lesser.

"Licensee" means any individual holding an active license issued by the Real Estate Appraiser Board to act as a certified general real estate appraiser, certified residential real estate appraiser, licensed residential real estate appraiser, or appraiser trainee as defined, respectively, in § 54.1-2009 of the Code of Virginia and in this chapter.

"Local, state or federal government agency, board or commission" means an entity established by any local, federal or state government to protect or promote the health, safety and welfare of its citizens.

"Proprietary school" means a privately owned school offering appraisal or appraisal related courses approved by the board.

"Provider" means accredited colleges, universities, junior and community colleges; adult distributive or marketing education programs; local, state or federal government agencies, boards or commissions; proprietary schools; or real estate appraisal or real estate related organizations.

"Real estate appraisal activity" means the act or process of valuation of real property or preparing an appraisal report.

"Real estate appraisal" or "real estate related organization" means any appraisal or real estate related organization formulated on a national level, where its membership extends to more than one state or territory of the United States.

"Reciprocity agreement" means a conditional agreement between two or more states that will recognize one another's regulations and laws for equal privileges for mutual benefit.

"Registrant" means any corporation, partnership, association, or other business entity which that provides appraisal services and which that is registered with the Real Estate Appraiser Board in accordance with § 54.1-2011 E of the Code of Virginia.

"Reinstatement" means having a license or registration restored to effectiveness after the expiration date has passed.

"Renewal" means continuing the effectiveness of a license or registration for another period of time.

"Sole proprietor" means any individual, but not a corporation, partnership, or association, who is trading under his own name, or under an assumed or fictitious name pursuant to the provisions of §§ 59.1-69 through 59.1-76 of the Code of Virginia.

"Substantially equivalent" means any educational course or seminar, experience, or examination taken in this or another jurisdiction which is equivalent in classroom hours, course content and subject, and degree of difficulty, respectively, to those requirements outlined in this chapter and Chapter 20.1 (§ 54.1-2009 et seq.) of Title 54.1 of the Code of Virginia for licensure and renewal.

"Supervising appraiser" means any individual holding a license issued by the Real Estate Appraiser Board to act as a certified general real estate appraiser or certified residential real estate appraiser who supervises any unlicensed individual acting as a real estate appraiser or an appraiser trainee as specified in this chapter.

"Transaction value" means the monetary amount of a transaction which may require the services of a certified or licensed appraiser for completion. The transaction value is not always equal to the market value of the real property interest involved. For loans or other extensions of credit, the transaction value equals the amount of the loan or other extensions of credit. For sales, leases, purchases and investments in or exchanges of real property, the transaction value is the market value of the real property interest involved. For the pooling of loans or interests in real property for resale or purchase, the transaction value is the amount of the loan or the market value of real property calculated with respect to each such loan or interest in real property.

"Uniform Standards of Professional Appraisal Practice" means the 2016-2017 2018-2019 edition of those standards promulgated by the Appraisal Standards Board of the Appraisal Foundation for use by all appraisers in the preparation of appraisal reports.

"Valuation" means an estimate or opinion of the value of real property.

"Valuation assignment" means an engagement for which an appraiser is employed or retained to give an analysis, opinion or conclusion that results in an estimate or opinion of the value of an identified parcel of real property as of a specified date.

"Waiver" means the voluntary, intentional relinquishment of a known right.

DOCUMENTS INCORPORATED BY REFERENCE (18VAC130-20)

Uniform Standards of Professional Appraisal Practice, 2016–2017 Edition, Appraisal Standards Board, Appraisal Foundation

Uniform Standards of Professional Appraisal Practice, 2018-2019 Edition, Appraisal Standards Board, The Appraisal Foundation

Title of Regulation: 18VAC160-40. Onsite Sewage System Professionals Licensing Regulations (amending 18VAC160-40-10).

Statutory Authority: §§ 54.1-201 and 54.1-2301 of the Code of Virginia.

Effective Date: September 19, 2018.

Agency Contact: Trisha Henshaw, Executive Director, Board for Waterworks and Wastewater Works Operators and Onsite Sewage System Professionals, 9960 Mayland Drive, Suite 400, Richmond, VA 23233, telephone (804) 367-8595, FAX (866) 350-5354, or email waterwasteoper@dpor.virginia.gov.

Summary:

Pursuant to Chapter 830 of the 2018 Acts of Assembly, the amendments conform the definition of "maintenance" in regulation to statute to (i) include in-kind replacement of sewer lines, conveyance lines, distribution boxes, and header lines that do not require a construction permit for adjustment and replacement, unless local ordinance provides otherwise; and (ii) clarify that, notwithstanding any local ordinance, onsite system maintenance does not include replacement of tanks, drainfield piping, subsurface drainfields, or work requiring a construction permit or installer licensure and that, unless prohibited by local ordinance, a licensed conventional or alternative installer may perform maintenance work limited to in-kind replacement of light bulbs, fuses, filters, pumps, sewer lines, conveyance lines, distribution boxes, and header lines.

Part I
Definitions

18VAC160-40-10. Definitions.

A. Section 54.1-2300 of the Code of Virginia provides definitions of the following terms and phrases as used in this chapter:

"Board"

"Onsite sewage system"

"Operator"

"Wastewater works"

B. The following words, terms, and phrases when used in this chapter shall have the following meanings unless the context clearly indicates otherwise:

"Alternative onsite sewage system" means a treatment works that is not a conventional onsite sewage system and does not result in a point source discharge.

"Alternative onsite sewage system installer" means an individual licensed by the board to construct, install, and repair conventional and alternative onsite sewage systems.

"Alternative onsite sewage system operator" means an individual licensed by the board to operate and maintain conventional and alternative onsite sewage systems.

"Alternative onsite soil evaluator" means an individual licensed by the board to evaluate soils and soil properties in relationship to the effect of these properties on the use and management of these soils as the locations for conventional and alternative onsite sewage systems, to certify in accordance with applicable state regulations and local ordinances that sites are suitable for conventional and alternative onsite sewage systems, and to design conventional and alternative onsite sewage systems suitable for the soils.

"Applicant" means an individual who submits an application with the appropriate fee and other required documentation.

"Application" means a completed, board-prescribed form submitted with the appropriate fee and other required documentation.

"Authorized onsite soil evaluator" means an individual holding an authorized onsite soil evaluator certification issued by the Virginia Department of Health that was valid on June 30, 2009.

"Category" means journeyman or master as applicable to the professionals under the board's purview.

"Class" means conventional or alternative as applicable to the professionals under the board's purview.

"Contact hour" means 50 minutes of participation in a structured training activity.

"Conventional onsite sewage system" means a treatment works consisting of one or more septic tanks with gravity, pumped, or siphoned conveyance to a gravity distributed subsurface drainfield.

"Conventional onsite sewage system installer" means an individual licensed by the board to construct, install, and repair conventional onsite sewage systems.

"Conventional onsite sewage system operator" means an individual licensed by the board to operate and maintain conventional onsite sewage systems.

"Conventional onsite soil evaluator" means an individual licensed by the board to evaluate soils and soil properties in relationship to the effects of these properties on the use and management of these soils as the locations for conventional and alternative onsite sewage systems, to certify in accordance with applicable state regulations and local ordinances that sites are suitable for conventional and alternative onsite sewage systems, and to design conventional onsite sewage systems suitable for the soils.

"Department" means the Virginia Department of Professional and Occupational Regulation.

"Direct supervision" means being immediately available and fully responsible for the provision of onsite sewage system services regulated pursuant to Chapter 23 (§ 54.1-2300 et seq.) of Title 54.1 and this chapter.

"Interim license" refers to the initial issuance of professional licenses during the implementation of the onsite sewage system professionals licensure program. Such licenses were limited to four years and not renewable.

"Journeyman" means an individual who possesses the minimum skills and competency to install or maintain onsite sewage systems or assist in the evaluation of soil sites as suitable for conventional and alternative onsite sewage systems and to design onsite sewage systems under the direct supervision of a master licensee.

"Licensee" means an individual holding a valid license issued by the board.

"Licensure" means a method of regulation whereby the Commonwealth, through the issuance of a license, authorizes a person possessing the character and minimum skills to engage in the practice of a profession or occupation that is unlawful to practice without such license.

"Maintenance" or "maintain" means, unless otherwise provided in local ordinance, (i) performing adjustments to equipment and controls and or (ii) in-kind replacement of normal wear and tear parts that do not require a construction permit for adjustment or replacement of the component, such as light bulbs, fuses, filters, pumps, motors, sewer lines, conveyance lines, distribution boxes, header lines, or other like components. Maintenance includes pumping the tanks or cleaning the building sewer on a periodic basis. Maintenance shall Notwithstanding any local ordinance, "maintenance" does not include replacement of tanks, drainfield piping, or distribution boxes subsurface drainfields, or work requiring a construction permit and a licensed onsite sewage system installer. Unless otherwise prohibited by local ordinance, a conventional onsite sewage system installer or an alternative onsite sewage system installer may perform maintenance work limited to in-kind replacement of light bulbs, fuses, filters, pumps, sewer lines, conveyance lines, distribution boxes, and header lines.

"Master" means an individual who possess possesses the minimum skills and competency to install or maintain onsite sewage systems or evaluate soil sites as suitable for conventional and alternative onsite sewage systems and to design conventional and alternative onsite sewage systems.

"Operate" means the act of (i) placing into or taking out of service a unit process or unit processes or (ii) making or causing adjustments in the operation of a unit process at a treatment works.

"Profession" means the practice of onsite soil evaluation, onsite sewage system installation, and onsite sewage system operation.

"Professional" means an onsite sewage system installer, onsite sewage system operator, or onsite soil evaluator who is licensed pursuant to the provisions of this chapter and is in good standing with the board to practice his profession in this Commonwealth.

"Renewal" means the process and requirements for periodically approving the continuance of a license.

"Sewage" means water-carried and nonwater-carried human excrement or kitchen, laundry, shower, bath, or lavatory wastes separately or together with such underground, surface, storm, or other water and liquid industrial wastes as may be present from residences, buildings, vehicles, industrial establishments, or other places.

"Training credit" means a unit of board-approved training or formal education completed by an individual that may be used to substitute for experience when applying for a license.

"Treatment works" means any device or system used in the storage, treatment, disposal, or reclamation of sewage or combinations of sewage and industrial wastes including pumping power and other equipment and appurtenances, septic tanks and any works, including land, that are or will be (i) an integral part of the treatment processes or (ii) used for ultimate disposal or residues or effluent resulting from such treatment.

"VDH" means the Virginia Department of Health.

Titles of Regulations: 23VAC10-110. Individual Income Tax (adding 23VAC10-110-145).

23VAC10-120. Corporation Income Tax (adding 23VAC10-120-103).

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

Public Hearing Information: No public hearings are scheduled.

Public Comment Deadline: October 19, 2018.

Effective Date: November 3, 2018.

Agency Contact: Matthew Huntley, Lead Tax Policy Analyst, Department of Taxation, 600 East Main Street, 15th Floor, Richmond, VA 23219, telephone (804) 786-2010, or email matthew.huntley@tax.virginia.gov.

Basis: Chapter 762 of the 2017 Acts of Assembly requires the Department of Taxation to promulgate regulations regarding the newly established individual and corporate income tax subtraction for income attributable to an investment in a Virginia venture capital account prior to December 31, 2017. To the extent that this regulatory action sets forth the process that an investment fund will use to apply for certification as a Virginia venture capital account, the authority for this regulatory action is mandatory.

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." To the extent that this regulatory action will define terms that were left undefined by the legislation, the authority for this regulatory action is discretionary.

Purpose: Chapter 762 of the 2017 Acts of Assembly establishes an individual and corporate income tax subtraction for income attributable to an investment in an investment fund that has been certified by the department as a Virginia venture capital account. This subtraction was codified in § 58.1-322.02 of the Code of Virginia for individual income tax purposes and in § 58.1-402 of the Code of Virginia for corporate income tax purposes.

To be certified as a Virginia venture capital account for purposes of this subtraction, an investment fund must first register with the department prior to December 31, 2023. As part of such registration, the investment fund must (i) indicate that it intends to invest at least 50% of the capital committed to its fund in qualified portfolio companies and (ii) provide documentation that it employs at least one investor who has at least four years of professional experience in venture capital investment or substantially equivalent experience.

Once the investment fund actually invests at least 50% of the capital committed to its fund in qualified portfolio companies, it must notify the department. The department is then required to certify such investment fund as a Virginia venture capital account.

The second enactment clause of Chapter 762 requires the department to promulgate regulations prior to December 31, 2017, establishing procedures regarding (i) registration of an investment fund as a Virginia venture capital account; (ii) provision of documentation regarding an investor's training, education, or experience; and (iii) certification of an investment fund as a Virginia venture capital account by the department.

This regulatory action establishes such procedures regarding the individual and corporate income tax subtraction for income attributable to an investment in a Virginia venture capital account, and, based on §§ 58.1-322.02 and 58.1-402 of the Code of Virginia, provides definitions essential to those procedures. Government must have predictable and adequate revenue to provide for the health, safety, and welfare of citizens. Tax regulations enhance customer service and voluntary compliance. The interpretations, examples, and other guidance in tax regulations ensure uniform application of the tax laws to taxpayers. Business taxpayers in particular find regulations essential in predicting the tax consequences of transactions and avoiding unanticipated tax assessments as the result of audits. Tax regulations also ensure that audits and other compliance activity result in the assessment and collection of the correct amount of tax.

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 establishes the process that an investment fund will be required to utilize to apply for certification as a Virginia venture capital account and defines certain terms for purposes of providing guidance to taxpayers regarding the subtraction, this action is not expected to be controversial.

Substance: This regulatory action requires that every investment fund desiring to be certified by the department as a Virginia venture capital account for purposes of the subtraction first register with the department by submitting an application indicating that it intends to invest at least 50% of the capital committed to its fund in qualified portfolio companies and employs at least one investor who has at least four years of professional experience in venture capital investment or substantially equivalent experience.

This regulatory action (i), for purposes of the experienced investor requirement, requires an investment fund to include with its registration application documentation of the investor's work experience, training, and education demonstrating that such individual meets the experienced investor requirement; (ii) requires the department to, upon approval of an investment fund's registration application, provide certification to the investment fund stating that such application has been approved, and such certification will only be valid for the calendar year for which it is issued; (iii) provides that, once an investment fund has met the experienced investor requirement actually invests at least 50% of the capital committed to its fund in qualified portfolio companies, it may apply to the department for certification as a Virginia venture capital account; (iv) requires the investment fund to provide documentation demonstrating that it has met the investment requirement; (v) may require the investment fund to provide certain information regarding its investors as determined by the department; (vi) requires the department to, upon approval of an investment fund's application for certification as a Virginia venture capital account, provide certification to the investment fund stating that it is a Virginia venture capital account for purposes of the subtraction, and such certification will only be valid for the calendar year for which it is issued; (vii) requires an investment fund to submit both applications to the department and all necessary attachments no later than January 31 of the calendar year following the calendar year for which the investment fund is applying for certification as a Virginia venture capital account; and (viii) defines terms essential to the clarity of the provisions, some of which are based on definitions in §§ 58.1-322.02 and 58.1-402 of the Code of Virginia.

Issues: This regulatory action establishes procedures regarding the individual and corporate income tax subtraction for income attributable to an investment in a Virginia venture capital account and defines certain terms for purposes of providing guidance to taxpayers regarding the subtraction. Therefore, it will provide advantages to investment funds desiring certification as a Virginia venture capital account and to individual and corporate taxpayers eligible to claim the subtraction. Establishing such procedures will enhance the efficiency of the application process and of the overall administration of the subtraction. This regulatory action will result in no apparent disadvantages to the public or to the Commonwealth.

Department of Planning and Budget's Economic Impact Analysis:

Summary of the Proposed Amendments to Regulation. As required by Chapter 762 of the 2017 Acts of Assembly,¹ the Department of Taxation (Department) proposes to establish procedures regarding how an investment fund may apply for certification as a Virginia venture capital account.

Result of Analysis. Benefits likely outweigh costs for all proposed changes.

Estimated Economic Impact. In 2017, Chapter 762, which allows a subtraction from individual or corporate taxable income for qualifying investments in certified Virginia venture capital accounts, became law. Chapter 762 specifies that investment funds must meet certain criteria in order to qualify for certification as a Virginia venture capital account and further specifies that only investments made in Virginia venture capital accounts that were certified between January 1, 2018, and December 31, 2023, will qualify for the allowed taxable income subtraction.²

The Department now proposes this regulatory action to implement the certification program for Virginia venture capital accounts. The proposed regulatory requirements are substantially identical to those in the authorizing legislation but for two areas. The Department added several definitions that will tend to clarify these requirements and, as the legislation was silent on the mechanics of certification, the Department added a requirement that "every investment fund desiring to be certified…must first register with the Department."³

This proposed regulation, and its underlying statute, allow but do not require certification of certain investments. Because of this, no investment fund is likely to pursue certification unless they judge that the extra benefit that may accrue to their fund on account of the allowable subtraction those investments will generate will outweigh any costs that they may incur to become certified. Those costs would likely include time and other costs associated with the application process as well as time spent keeping required records.

Businesses and Entities Affected. This regulatory action will affect all investment funds who apply for certification as a Virginia venture capital account, individuals and businesses who administer such accounts and individual and corporate taxpayers who invest in qualified accounts.

Localities Particularly Affected. No locality will be particularly affected by this regulatory action.

Projected Impact on Employment. These proposed regulatory changes are unlikely to affect employment in the Commonwealth.

Effects on the Use and Value of Private Property. These proposed regulatory changes are unlikely to affect the use or value of private property in the Commonwealth.

Real Estate Development Costs. These proposed regulatory changes are unlikely to affect real estate development costs in the Commonwealth.

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. No small businesses are likely to incur any additional costs on account of these proposed regulatory changes.

Alternative Method that Minimizes Adverse Impact. No small businesses are likely to incur any additional costs on account of these proposed regulatory changes.

Adverse Impacts:

Businesses. No businesses are likely to incur any additional costs on account of these proposed regulatory changes.

Localities. Localities in the Commonwealth are unlikely to see any adverse impacts on account of these proposed regulatory changes.

Other Entities. No other entities are likely to be adversely affected by these proposed changes.

_________________________________________________

¹http://lis.virginia.gov/cgi-bin/legp604.exe?171+ful+CHAP0762.

²Individuals and corporate entities that make qualifying investments will be able to take advantage of the income subtractions allowed for as many years as they hold the qualifying investment so qualifying taxable income subtractions will likely continue past 2023.

³The Department will be using the same certification process that it currently uses for qualified equity tax credits.

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

Summary:

Pursuant to Chapter 762 of the 2017 Acts of Assembly, which establishes individual and corporate income tax subtractions for income attributable to an investment in a Virginia venture capital account, the regulatory action establishes procedures regarding the process an investment fund must use to apply for certification as a Virginia venture capital account and provides definitions of terms essential to understanding the certification process.

23VAC10-110-145. Subtraction for income attributable to an investment in a Virginia venture capital account.

A. To the extent included in federal adjusted gross income, any income, including investment services partnership interest income, attributable to an investment made in a Virginia venture capital account on or after January 1, 2018, but before December 31, 2023, shall be subtracted from federal adjusted gross income in determining Virginia taxable income. If such income was partially excluded or deducted in determining federal adjusted gross income, it shall be subtracted from federal adjusted gross income only to the extent included therein. If such income has already been excluded from Virginia taxable income, it shall not be subtracted again pursuant to this section.

B. The following words and terms when used for purposes of this section shall have the following meanings, unless the context clearly indicates otherwise:

"Affiliated" means a direct or indirect ownership interest of at least 80% in an entity. An indirect ownership interest includes direct ownership interests held by a taxpayer's family members or an entity affiliated with such taxpayer or family members, or any combination of these.

"Department" means the Virginia Department of Taxation.

"Family member" means, when applied with respect to an individual taxpayer, (i) spouse, (ii) children, (iii) grandchildren, (iv) parents, (v) spouse's parents, and (vi) grandparents.

"Investment services partnership interest income" means income from an investment partnership treated as carried interest income for federal income tax purposes.

"Professional experience" means full-time employment involving venture capital investment.

"Qualified portfolio company" means the same as that term is defined in subdivision 27 of § 58.1-322.02 of the Code of Virginia.

"Substantially equivalent experience" means an undergraduate degree from an accredited college or university in economics, finance, or a similar field of study or a combination of professional experience totaling less than four years, professional training, and undergraduate education from an accredited college or university in economics, finance, or a similar field of study demonstrating competency in venture capital investing.

"Virginia venture capital account" means the same as that term is defined in subdivision 27 of § 58.1-322.02 of the Code of Virginia.

C. The subtraction may not be claimed for an investment in a company that is owned or operated by a family member or an affiliate of the individual. The subtraction may not be claimed for an investment that was used to claim the subtraction for certain long-term capital gains allowed pursuant to subdivision 24 of § 58.1-322.02 of the Code of Virginia, or the qualified equity and subordinated debt investments tax credit allowed pursuant to § 58.1-339.4 of the Code of Virginia.

D. 1. Every investment fund desiring to be certified by the department as a Virginia venture capital account for purposes of this subtraction must first register with the department by submitting an application indicating that it intends to invest at least 50% of the capital committed to its fund in qualified portfolio companies and currently employs at least one investor who has at least four years of professional experience in venture capital investment or substantially equivalent experience.

2. Each investment fund must include with its registration application documentation of the investor's work experience, training, and education adequately demonstrating that such individual meets the professional experience or substantially equivalent experience requirement. Such documentation may include proof of employment, certifications, and transcripts.

3. The registration application required by this subsection must be submitted before or at the time the application required by subsection E of this section is submitted.

4. Once the department determines that an investment fund intends to invest at least 50% of the capital committed to its fund in qualified portfolio companies, has at least one investor who has at least four years of professional experience in venture capital investment or substantially equivalent experience, and has submitted the required attachments, it will provide certification to the investment fund stating that the registration application has been approved. Such certification shall be valid only for the calendar year for which it was issued. An investment fund may reapply for certification each calendar year.

E. 1. An investment fund that has invested at least 50% of the capital committed to its fund in qualified portfolio companies may then submit an application for certification as a Virginia venture capital account.

2. Each investment fund must include with its application documentation that it has invested at least 50% of the capital committed to its fund in qualified portfolio companies.

3. To receive certification for this subtraction, each investment fund may be required to submit certain information regarding its investors as required by the department.

4. Once the department determines that an investment fund has actually invested at least 50% of the capital committed to its fund in qualified portfolio companies and has submitted the required attachments, it will provide certification to the investment fund stating that it is a Virginia venture capital account for purposes of this subtraction. Such certification shall be valid only for the calendar year for which it was issued.

F. The applications in subsections D and E of this section and any necessary attachments must be made on the form prescribed by the department, postmarked no later than January 31 of the calendar year following the calendar year in which the investment fund is applying for certification as a Virginia venture capital account.

FORMS (23VAC10-110)

Virginia Consumers Use Tax Return for Individuals, Form CU-7 (eff. 9/1993).

Virginia Individual Resident Income Tax Return (Booklet - Instructions for Form 760 and 760S), Form 760 and 760S.

Underpayment of Estimated Tax by Individuals, Estates and Trusts, Form 760 C.

Virginia Tentative Tax Return an Application for Extension of Time to File Individual or Fiduciary Income Tax Return, Form 760E (eff. 8/1993).

Virginia Estimated Individual Income Tax Declaration and Forms for Individuals, Estates and Trusts (Booklet - Instructions for Form 760ES), Form 760ES.

Underpayment of Estimated Tax by Farmers and Fishermen, Form 760F.

Virginia Part-Year Resident Individual Income Tax Return (Booklet - Instructions for Form 760PY), Form 760PY.

Short Individual Resident Income Tax Return (Booklet - Instructions for Form 760 and 760S), Form 760S.

Virginia Nonresident Individual Income Tax Return (Booklet - Instructions for Form 763), Form 763.

Virginia Special Nonresident Claim for Individual Income Tax Withheld, Form 763-S.

Credit Computation Schedule, Schedule CR, Form 760.

Schedule for Computing the Age Deduction for Taxpayers 62 and Over, Out-of-State Tax Credit or State of Residence and the Addition to Tax, Penalty and Interest, Schedule NPY, Forms 760PY and 763.

Enterprise Zone Credit, Form 301 (eff. 9/1992).

Computation of ACRS Subtraction, Form 302 (eff. 8/1992).

Application for Designation as a Qualified Business for the Qualified Equity and Subordinated Debt Investments Tax Credit, Form QBA, 2601695, with instructions (eff. 1/2001).

Taxpayer Application for Qualified Equity and Subordinated Debt Investments Tax Credit, Form EDC, 2601154, with instructions (eff. 7/2000).

Instructions for Virginia Venture Capital Account Investment Fund Registration and Certification Forms (rev. 2/2018)

Venture Capital Account Investment Fund Registration Application, Form VEN-1 (rev. 1/2018)

Venture Capital Account Investment Fund Confirmation Application, Form VEN-2 (rev.1/2018)

Venture Capital Account Investment Fund Investor Information Report, Form VEN-3 (rev. 2/2018 )

23VAC10-120-103. Subtraction for income attributable to an investment in a Virginia venture capital account.

A. To the extent included in federal taxable income, any income, including investment services partnership interest income, attributable to an investment made in a Virginia venture capital account on or after January 1, 2018, but before December 31, 2023, shall be subtracted from federal taxable income in determining Virginia taxable income. If such income was partially excluded or deducted in determining federal taxable income, it shall be subtracted from federal taxable income only to the extent included therein. If such income has already been excluded from Virginia taxable income, it shall not be subtracted again pursuant to this section.

B. The following words and terms when used for purposes of this section shall have the following meanings, unless the context clearly indicates otherwise:

"Affiliated" means a direct or indirect ownership interest of at least 80% in an entity. An indirect ownership interest includes direct ownership interests held by a taxpayer's family members or an entity affiliated with such taxpayer or family members, or any combination of these.

"Department" means the Virginia Department of Taxation.

"Investment services partnership interest income" means income from an investment partnership treated as carried interest income for federal income tax purposes.

"Professional experience" means full-time employment involving venture capital investment.

"Qualified portfolio company" means the same as that term is defined in subdivision C 25 of § 58.1-402 of the Code of Virginia.

"Substantially equivalent experience" means an undergraduate degree from an accredited college or university in economics, finance, or a similar field of study or a combination of professional experience totaling less than four years, professional training, and undergraduate education from an accredited college or university in economics, finance, or a similar field of study demonstrating competency in venture capital investing.

"Virginia venture capital account" means the same as that term is defined in subdivision C 25 of § 58.1-402 of the Code of Virginia.

C. The subtraction may not be claimed for an investment in a company that is owned or operated by an affiliate of the corporation. The subtraction may not be claimed for an investment that was used to claim the subtraction for certain long-term capital gains allowed pursuant to subdivision C 24 of § 58.1-402 of the Code of Virginia.

D. 1. Every investment fund desiring to be certified by the department as a Virginia venture capital account for purposes of this subtraction must first register with the department by submitting an application indicating that it intends to invest at least 50% of the capital committed to its fund in qualified portfolio companies and currently employs at least one investor who has at least four years of professional experience in venture capital investment or substantially equivalent experience.

2. Each investment fund must include with its registration application documentation of the investor's work experience, training, and education adequately demonstrating that such individual meets the professional experience or substantially equivalent experience requirement. Such documentation may include proof of employment, certifications, and transcripts.

3. The registration application required by this subsection must be submitted before or at the time the application required by subsection E of this section is submitted.

4. Once the department determines that an investment fund intends to invest at least 50% of the capital committed to its fund in qualified portfolio companies, has at least one investor who has at least four years of professional experience in venture capital investment or substantially equivalent experience, and has submitted the required attachments, it will provide certification to the investment fund stating that the registration application has been approved. Such certification shall be valid only for the calendar year for which it was issued. An investment fund may reapply for certification each calendar year.

E. 1. An investment fund that has invested at least 50% of the capital committed to its fund in qualified portfolio companies may then submit an application for certification as a Virginia venture capital account.

2. Each investment fund must include with its application documentation that it has invested at least 50% of the capital committed to its fund in qualified portfolio companies.

3. To receive certification for this subtraction, each investment fund may be required to submit certain information regarding its investors as required by the department.

4. Once the department determines that an investment fund has actually invested at least 50% of the capital committed to its fund in qualified portfolio companies and has submitted the required attachments, it will provide certification to the investment fund stating that it is a Virginia venture capital account for purposes of this subtraction. Such certification shall be valid only for the calendar year for which it was issued.

F. The applications in subsections D and E of this section and any necessary attachments must be made on the form prescribed by the department, postmarked no later than January 31 of the calendar year following the calendar year in which the investment fund is applying for certification as a Virginia venture capital account.

FORMS (23VAC10-120)

Virginia Corporation Income Tax Return (Booklet-Instructions for Form 500), Form 500 (eff. 9/1993).

Schedule A-Multistate Corporation-Allocation and Apportionment of Income.

Underpayment of Virginia Estimated Tax by Corporations, Form 500C.

Application for Extension of Time, Form 500E (eff. 9/1993).

Declaration of Estimated Income Tax for Corporations, Form 500V (eff. 9/1993).

Virginia Corporation Income Tax Extension Payment Voucher, Form 500EV (eff. 9/1993).

Corporation Application for Refund, Form 500-NOLD (eff. 9/1993).

Virginia Small Business Corporation Return of Income, Form 500-S (eff. 9/1993).

Telecommunications Companies Minimum Tax and Credit Schedule (Instructions for Form 500T), Form 500-T (eff. 2/1992).

Corporation Income Tax Voucher.

Amended Virginia Corporation Income Tax Return, Form 500X (eff. 9/1993).

Combined Registration Application, Form R-1 (eff. 10/1989).

Instructions for Completing Combined Registration, Form R-4 (eff. 10/1989).

Instructions for Virginia Venture Capital Account Investment Fund Registration and Certification Forms (rev. 2/2018)

Venture Capital Account Investment Fund Registration Application, Form VEN-1 (rev. 1/2018)

Venture Capital Account Investment Fund Confirmation Application, Form VEN-2 (rev. 1/2018)

Venture Capital Account Investment Fund Investor Information Report, Form VEN-3 (rev. 2/2018)

Titles of Regulations: 23VAC10-110. Individual Income Tax (adding 23VAC10-110-145).

23VAC10-120. Corporation Income Tax (adding 23VAC10-120-103).

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

Public Hearing Information: No public hearings are scheduled.

Public Comment Deadline: October 19, 2018.

Effective Date: November 3, 2018.

Agency Contact: Matthew Huntley, Lead Tax Policy Analyst, Department of Taxation, 600 East Main Street, 15th Floor, Richmond, VA 23219, telephone (804) 786-2010, or email matthew.huntley@tax.virginia.gov.

Basis: Chapter 762 of the 2017 Acts of Assembly requires the Department of Taxation to promulgate regulations regarding the newly established individual and corporate income tax subtraction for income attributable to an investment in a Virginia venture capital account prior to December 31, 2017. To the extent that this regulatory action sets forth the process that an investment fund will use to apply for certification as a Virginia venture capital account, the authority for this regulatory action is mandatory.

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." To the extent that this regulatory action will define terms that were left undefined by the legislation, the authority for this regulatory action is discretionary.

Purpose: Chapter 762 of the 2017 Acts of Assembly establishes an individual and corporate income tax subtraction for income attributable to an investment in an investment fund that has been certified by the department as a Virginia venture capital account. This subtraction was codified in § 58.1-322.02 of the Code of Virginia for individual income tax purposes and in § 58.1-402 of the Code of Virginia for corporate income tax purposes.

To be certified as a Virginia venture capital account for purposes of this subtraction, an investment fund must first register with the department prior to December 31, 2023. As part of such registration, the investment fund must (i) indicate that it intends to invest at least 50% of the capital committed to its fund in qualified portfolio companies and (ii) provide documentation that it employs at least one investor who has at least four years of professional experience in venture capital investment or substantially equivalent experience.

Once the investment fund actually invests at least 50% of the capital committed to its fund in qualified portfolio companies, it must notify the department. The department is then required to certify such investment fund as a Virginia venture capital account.

The second enactment clause of Chapter 762 requires the department to promulgate regulations prior to December 31, 2017, establishing procedures regarding (i) registration of an investment fund as a Virginia venture capital account; (ii) provision of documentation regarding an investor's training, education, or experience; and (iii) certification of an investment fund as a Virginia venture capital account by the department.

This regulatory action establishes such procedures regarding the individual and corporate income tax subtraction for income attributable to an investment in a Virginia venture capital account, and, based on §§ 58.1-322.02 and 58.1-402 of the Code of Virginia, provides definitions essential to those procedures. Government must have predictable and adequate revenue to provide for the health, safety, and welfare of citizens. Tax regulations enhance customer service and voluntary compliance. The interpretations, examples, and other guidance in tax regulations ensure uniform application of the tax laws to taxpayers. Business taxpayers in particular find regulations essential in predicting the tax consequences of transactions and avoiding unanticipated tax assessments as the result of audits. Tax regulations also ensure that audits and other compliance activity result in the assessment and collection of the correct amount of tax.

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 establishes the process that an investment fund will be required to utilize to apply for certification as a Virginia venture capital account and defines certain terms for purposes of providing guidance to taxpayers regarding the subtraction, this action is not expected to be controversial.

Substance: This regulatory action requires that every investment fund desiring to be certified by the department as a Virginia venture capital account for purposes of the subtraction first register with the department by submitting an application indicating that it intends to invest at least 50% of the capital committed to its fund in qualified portfolio companies and employs at least one investor who has at least four years of professional experience in venture capital investment or substantially equivalent experience.

This regulatory action (i), for purposes of the experienced investor requirement, requires an investment fund to include with its registration application documentation of the investor's work experience, training, and education demonstrating that such individual meets the experienced investor requirement; (ii) requires the department to, upon approval of an investment fund's registration application, provide certification to the investment fund stating that such application has been approved, and such certification will only be valid for the calendar year for which it is issued; (iii) provides that, once an investment fund has met the experienced investor requirement actually invests at least 50% of the capital committed to its fund in qualified portfolio companies, it may apply to the department for certification as a Virginia venture capital account; (iv) requires the investment fund to provide documentation demonstrating that it has met the investment requirement; (v) may require the investment fund to provide certain information regarding its investors as determined by the department; (vi) requires the department to, upon approval of an investment fund's application for certification as a Virginia venture capital account, provide certification to the investment fund stating that it is a Virginia venture capital account for purposes of the subtraction, and such certification will only be valid for the calendar year for which it is issued; (vii) requires an investment fund to submit both applications to the department and all necessary attachments no later than January 31 of the calendar year following the calendar year for which the investment fund is applying for certification as a Virginia venture capital account; and (viii) defines terms essential to the clarity of the provisions, some of which are based on definitions in §§ 58.1-322.02 and 58.1-402 of the Code of Virginia.

Issues: This regulatory action establishes procedures regarding the individual and corporate income tax subtraction for income attributable to an investment in a Virginia venture capital account and defines certain terms for purposes of providing guidance to taxpayers regarding the subtraction. Therefore, it will provide advantages to investment funds desiring certification as a Virginia venture capital account and to individual and corporate taxpayers eligible to claim the subtraction. Establishing such procedures will enhance the efficiency of the application process and of the overall administration of the subtraction. This regulatory action will result in no apparent disadvantages to the public or to the Commonwealth.

Department of Planning and Budget's Economic Impact Analysis:

Summary of the Proposed Amendments to Regulation. As required by Chapter 762 of the 2017 Acts of Assembly,¹ the Department of Taxation (Department) proposes to establish procedures regarding how an investment fund may apply for certification as a Virginia venture capital account.

Result of Analysis. Benefits likely outweigh costs for all proposed changes.

Estimated Economic Impact. In 2017, Chapter 762, which allows a subtraction from individual or corporate taxable income for qualifying investments in certified Virginia venture capital accounts, became law. Chapter 762 specifies that investment funds must meet certain criteria in order to qualify for certification as a Virginia venture capital account and further specifies that only investments made in Virginia venture capital accounts that were certified between January 1, 2018, and December 31, 2023, will qualify for the allowed taxable income subtraction.²

The Department now proposes this regulatory action to implement the certification program for Virginia venture capital accounts. The proposed regulatory requirements are substantially identical to those in the authorizing legislation but for two areas. The Department added several definitions that will tend to clarify these requirements and, as the legislation was silent on the mechanics of certification, the Department added a requirement that "every investment fund desiring to be certified…must first register with the Department."³

This proposed regulation, and its underlying statute, allow but do not require certification of certain investments. Because of this, no investment fund is likely to pursue certification unless they judge that the extra benefit that may accrue to their fund on account of the allowable subtraction those investments will generate will outweigh any costs that they may incur to become certified. Those costs would likely include time and other costs associated with the application process as well as time spent keeping required records.

Businesses and Entities Affected. This regulatory action will affect all investment funds who apply for certification as a Virginia venture capital account, individuals and businesses who administer such accounts and individual and corporate taxpayers who invest in qualified accounts.

Localities Particularly Affected. No locality will be particularly affected by this regulatory action.

Projected Impact on Employment. These proposed regulatory changes are unlikely to affect employment in the Commonwealth.

Effects on the Use and Value of Private Property. These proposed regulatory changes are unlikely to affect the use or value of private property in the Commonwealth.

Real Estate Development Costs. These proposed regulatory changes are unlikely to affect real estate development costs in the Commonwealth.

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. No small businesses are likely to incur any additional costs on account of these proposed regulatory changes.

Alternative Method that Minimizes Adverse Impact. No small businesses are likely to incur any additional costs on account of these proposed regulatory changes.

Adverse Impacts:

Businesses. No businesses are likely to incur any additional costs on account of these proposed regulatory changes.

Localities. Localities in the Commonwealth are unlikely to see any adverse impacts on account of these proposed regulatory changes.

Other Entities. No other entities are likely to be adversely affected by these proposed changes.

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¹http://lis.virginia.gov/cgi-bin/legp604.exe?171+ful+CHAP0762.

²Individuals and corporate entities that make qualifying investments will be able to take advantage of the income subtractions allowed for as many years as they hold the qualifying investment so qualifying taxable income subtractions will likely continue past 2023.

³The Department will be using the same certification process that it currently uses for qualified equity tax credits.

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

Summary:

Pursuant to Chapter 762 of the 2017 Acts of Assembly, which establishes individual and corporate income tax subtractions for income attributable to an investment in a Virginia venture capital account, the regulatory action establishes procedures regarding the process an investment fund must use to apply for certification as a Virginia venture capital account and provides definitions of terms essential to understanding the certification process.

23VAC10-110-145. Subtraction for income attributable to an investment in a Virginia venture capital account.

A. To the extent included in federal adjusted gross income, any income, including investment services partnership interest income, attributable to an investment made in a Virginia venture capital account on or after January 1, 2018, but before December 31, 2023, shall be subtracted from federal adjusted gross income in determining Virginia taxable income. If such income was partially excluded or deducted in determining federal adjusted gross income, it shall be subtracted from federal adjusted gross income only to the extent included therein. If such income has already been excluded from Virginia taxable income, it shall not be subtracted again pursuant to this section.

B. The following words and terms when used for purposes of this section shall have the following meanings, unless the context clearly indicates otherwise:

"Affiliated" means a direct or indirect ownership interest of at least 80% in an entity. An indirect ownership interest includes direct ownership interests held by a taxpayer's family members or an entity affiliated with such taxpayer or family members, or any combination of these.

"Department" means the Virginia Department of Taxation.

"Family member" means, when applied with respect to an individual taxpayer, (i) spouse, (ii) children, (iii) grandchildren, (iv) parents, (v) spouse's parents, and (vi) grandparents.

"Investment services partnership interest income" means income from an investment partnership treated as carried interest income for federal income tax purposes.

"Professional experience" means full-time employment involving venture capital investment.

"Qualified portfolio company" means the same as that term is defined in subdivision 27 of § 58.1-322.02 of the Code of Virginia.

"Substantially equivalent experience" means an undergraduate degree from an accredited college or university in economics, finance, or a similar field of study or a combination of professional experience totaling less than four years, professional training, and undergraduate education from an accredited college or university in economics, finance, or a similar field of study demonstrating competency in venture capital investing.

"Virginia venture capital account" means the same as that term is defined in subdivision 27 of § 58.1-322.02 of the Code of Virginia.

C. The subtraction may not be claimed for an investment in a company that is owned or operated by a family member or an affiliate of the individual. The subtraction may not be claimed for an investment that was used to claim the subtraction for certain long-term capital gains allowed pursuant to subdivision 24 of § 58.1-322.02 of the Code of Virginia, or the qualified equity and subordinated debt investments tax credit allowed pursuant to § 58.1-339.4 of the Code of Virginia.

D. 1. Every investment fund desiring to be certified by the department as a Virginia venture capital account for purposes of this subtraction must first register with the department by submitting an application indicating that it intends to invest at least 50% of the capital committed to its fund in qualified portfolio companies and currently employs at least one investor who has at least four years of professional experience in venture capital investment or substantially equivalent experience.

2. Each investment fund must include with its registration application documentation of the investor's work experience, training, and education adequately demonstrating that such individual meets the professional experience or substantially equivalent experience requirement. Such documentation may include proof of employment, certifications, and transcripts.

3. The registration application required by this subsection must be submitted before or at the time the application required by subsection E of this section is submitted.

4. Once the department determines that an investment fund intends to invest at least 50% of the capital committed to its fund in qualified portfolio companies, has at least one investor who has at least four years of professional experience in venture capital investment or substantially equivalent experience, and has submitted the required attachments, it will provide certification to the investment fund stating that the registration application has been approved. Such certification shall be valid only for the calendar year for which it was issued. An investment fund may reapply for certification each calendar year.

E. 1. An investment fund that has invested at least 50% of the capital committed to its fund in qualified portfolio companies may then submit an application for certification as a Virginia venture capital account.

2. Each investment fund must include with its application documentation that it has invested at least 50% of the capital committed to its fund in qualified portfolio companies.

3. To receive certification for this subtraction, each investment fund may be required to submit certain information regarding its investors as required by the department.

4. Once the department determines that an investment fund has actually invested at least 50% of the capital committed to its fund in qualified portfolio companies and has submitted the required attachments, it will provide certification to the investment fund stating that it is a Virginia venture capital account for purposes of this subtraction. Such certification shall be valid only for the calendar year for which it was issued.

F. The applications in subsections D and E of this section and any necessary attachments must be made on the form prescribed by the department, postmarked no later than January 31 of the calendar year following the calendar year in which the investment fund is applying for certification as a Virginia venture capital account.

FORMS (23VAC10-110)

Virginia Consumers Use Tax Return for Individuals, Form CU-7 (eff. 9/1993).

Virginia Individual Resident Income Tax Return (Booklet - Instructions for Form 760 and 760S), Form 760 and 760S.

Underpayment of Estimated Tax by Individuals, Estates and Trusts, Form 760 C.

Virginia Tentative Tax Return an Application for Extension of Time to File Individual or Fiduciary Income Tax Return, Form 760E (eff. 8/1993).

Virginia Estimated Individual Income Tax Declaration and Forms for Individuals, Estates and Trusts (Booklet - Instructions for Form 760ES), Form 760ES.

Underpayment of Estimated Tax by Farmers and Fishermen, Form 760F.

Virginia Part-Year Resident Individual Income Tax Return (Booklet - Instructions for Form 760PY), Form 760PY.

Short Individual Resident Income Tax Return (Booklet - Instructions for Form 760 and 760S), Form 760S.

Virginia Nonresident Individual Income Tax Return (Booklet - Instructions for Form 763), Form 763.

Virginia Special Nonresident Claim for Individual Income Tax Withheld, Form 763-S.

Credit Computation Schedule, Schedule CR, Form 760.

Schedule for Computing the Age Deduction for Taxpayers 62 and Over, Out-of-State Tax Credit or State of Residence and the Addition to Tax, Penalty and Interest, Schedule NPY, Forms 760PY and 763.

Enterprise Zone Credit, Form 301 (eff. 9/1992).

Computation of ACRS Subtraction, Form 302 (eff. 8/1992).

Application for Designation as a Qualified Business for the Qualified Equity and Subordinated Debt Investments Tax Credit, Form QBA, 2601695, with instructions (eff. 1/2001).

Taxpayer Application for Qualified Equity and Subordinated Debt Investments Tax Credit, Form EDC, 2601154, with instructions (eff. 7/2000).

Instructions for Virginia Venture Capital Account Investment Fund Registration and Certification Forms (rev. 2/2018)

Venture Capital Account Investment Fund Registration Application, Form VEN-1 (rev. 1/2018)

Venture Capital Account Investment Fund Confirmation Application, Form VEN-2 (rev.1/2018)

Venture Capital Account Investment Fund Investor Information Report, Form VEN-3 (rev. 2/2018 )

23VAC10-120-103. Subtraction for income attributable to an investment in a Virginia venture capital account.

A. To the extent included in federal taxable income, any income, including investment services partnership interest income, attributable to an investment made in a Virginia venture capital account on or after January 1, 2018, but before December 31, 2023, shall be subtracted from federal taxable income in determining Virginia taxable income. If such income was partially excluded or deducted in determining federal taxable income, it shall be subtracted from federal taxable income only to the extent included therein. If such income has already been excluded from Virginia taxable income, it shall not be subtracted again pursuant to this section.

B. The following words and terms when used for purposes of this section shall have the following meanings, unless the context clearly indicates otherwise:

"Affiliated" means a direct or indirect ownership interest of at least 80% in an entity. An indirect ownership interest includes direct ownership interests held by a taxpayer's family members or an entity affiliated with such taxpayer or family members, or any combination of these.

"Department" means the Virginia Department of Taxation.

"Investment services partnership interest income" means income from an investment partnership treated as carried interest income for federal income tax purposes.

"Professional experience" means full-time employment involving venture capital investment.

"Qualified portfolio company" means the same as that term is defined in subdivision C 25 of § 58.1-402 of the Code of Virginia.

"Substantially equivalent experience" means an undergraduate degree from an accredited college or university in economics, finance, or a similar field of study or a combination of professional experience totaling less than four years, professional training, and undergraduate education from an accredited college or university in economics, finance, or a similar field of study demonstrating competency in venture capital investing.

"Virginia venture capital account" means the same as that term is defined in subdivision C 25 of § 58.1-402 of the Code of Virginia.

C. The subtraction may not be claimed for an investment in a company that is owned or operated by an affiliate of the corporation. The subtraction may not be claimed for an investment that was used to claim the subtraction for certain long-term capital gains allowed pursuant to subdivision C 24 of § 58.1-402 of the Code of Virginia.

D. 1. Every investment fund desiring to be certified by the department as a Virginia venture capital account for purposes of this subtraction must first register with the department by submitting an application indicating that it intends to invest at least 50% of the capital committed to its fund in qualified portfolio companies and currently employs at least one investor who has at least four years of professional experience in venture capital investment or substantially equivalent experience.

2. Each investment fund must include with its registration application documentation of the investor's work experience, training, and education adequately demonstrating that such individual meets the professional experience or substantially equivalent experience requirement. Such documentation may include proof of employment, certifications, and transcripts.

3. The registration application required by this subsection must be submitted before or at the time the application required by subsection E of this section is submitted.

4. Once the department determines that an investment fund intends to invest at least 50% of the capital committed to its fund in qualified portfolio companies, has at least one investor who has at least four years of professional experience in venture capital investment or substantially equivalent experience, and has submitted the required attachments, it will provide certification to the investment fund stating that the registration application has been approved. Such certification shall be valid only for the calendar year for which it was issued. An investment fund may reapply for certification each calendar year.

E. 1. An investment fund that has invested at least 50% of the capital committed to its fund in qualified portfolio companies may then submit an application for certification as a Virginia venture capital account.

2. Each investment fund must include with its application documentation that it has invested at least 50% of the capital committed to its fund in qualified portfolio companies.

3. To receive certification for this subtraction, each investment fund may be required to submit certain information regarding its investors as required by the department.

4. Once the department determines that an investment fund has actually invested at least 50% of the capital committed to its fund in qualified portfolio companies and has submitted the required attachments, it will provide certification to the investment fund stating that it is a Virginia venture capital account for purposes of this subtraction. Such certification shall be valid only for the calendar year for which it was issued.

F. The applications in subsections D and E of this section and any necessary attachments must be made on the form prescribed by the department, postmarked no later than January 31 of the calendar year following the calendar year in which the investment fund is applying for certification as a Virginia venture capital account.

FORMS (23VAC10-120)

Virginia Corporation Income Tax Return (Booklet-Instructions for Form 500), Form 500 (eff. 9/1993).

Schedule A-Multistate Corporation-Allocation and Apportionment of Income.

Underpayment of Virginia Estimated Tax by Corporations, Form 500C.

Application for Extension of Time, Form 500E (eff. 9/1993).

Declaration of Estimated Income Tax for Corporations, Form 500V (eff. 9/1993).

Virginia Corporation Income Tax Extension Payment Voucher, Form 500EV (eff. 9/1993).

Corporation Application for Refund, Form 500-NOLD (eff. 9/1993).

Virginia Small Business Corporation Return of Income, Form 500-S (eff. 9/1993).

Telecommunications Companies Minimum Tax and Credit Schedule (Instructions for Form 500T), Form 500-T (eff. 2/1992).

Corporation Income Tax Voucher.

Amended Virginia Corporation Income Tax Return, Form 500X (eff. 9/1993).

Combined Registration Application, Form R-1 (eff. 10/1989).

Instructions for Completing Combined Registration, Form R-4 (eff. 10/1989).

Instructions for Virginia Venture Capital Account Investment Fund Registration and Certification Forms (rev. 2/2018)

Venture Capital Account Investment Fund Registration Application, Form VEN-1 (rev. 1/2018)

Venture Capital Account Investment Fund Confirmation Application, Form VEN-2 (rev. 1/2018)

Venture Capital Account Investment Fund Investor Information Report, Form VEN-3 (rev. 2/2018)