Small businesses may get break on state tax penalties under bill passed by House Wednesday

By Tyler Woodall – Capital News Service

New small businesses that fall behind on their state taxes would get a break under a bill passed by the House of Delegates on Wednesday.

SB 793 would waive the penalties for small businesses that are in arrears in paying their taxes during their first two years in operation.

The legislation was introduced by Republican Sens. Glen Sturtevant and Amanda Chase, both of Chesterfield. It would waive any penalties related to taxes administered by the Virginia Department of Taxation as long as the small business has signed an installment agreement to complete payment of its taxes.

The Senate unanimously passed the bill in January, and on Wednesday, the House voted 94-5 to approve it as well. However, the House amended the bill so that the tax penalty waiver would expire on June 30, 2022. The measure now goes back to the Senate.

The legislation defines a small business as “an independently owned and operated business that has been organized pursuant to Virginia law or maintains a principal place of business in Virginia and has 10 or fewer employees.”

Small businesses with 10 or fewer employees made up nearly 72 percent of the businesses in the commonwealth in 2012, according to the fiscal impact statement accompanying the bill.

Delegates argued briefly about the sunset amendment, which was offered by Del. James Massie, R-Henrico.

Del. Lee Ware, R-Powhatan, asked why the change had not been proposed earlier when the House Finance Committee held a hearing on the bill.

Del. Sam Rasoul, D-Roanoke, questioned whether the amendment was needed. He said the House could pass the bill in its original form and eliminate the tax penalty waiver program later on if it’s not beneficial to the commonwealth.

But Del. David Toscano, D-Charlottesville, supported the amendment. He fears that a business may get behind on its taxes, enter into an installment plan, get the tax penalty waived but never finish paying its taxes.

Toscano said the bill “doesn’t say ‘complete’ — it says ‘enters into.’ So you have this situation where a person can enter into their agreement but never perform it, and then the taxpayer is on the hook.”