Translate[Archived] Question #41: What would be the revenue impact of lowering the threshold set by the Business License Tax for Rental of Dwelling Units to those who rent 5 or more units, or eliminating it altogether?
Question:
Sec. 9-1-88 of the City Code limits the applicability of the Business License Tax for Rental of Dwelling Units to those who rent 5 or more units. What would be the revenue impact of lowering that threshold or eliminating it altogether?
Response:
The ability of localities, including chartered cities, to tax this type of activity is governed by Virginia Code § 58.1-3703(C)(7). Most localities in Virginia are unable to levy a tax on this activity, as it is specifically exempted by statute unless an ordinance was adopted prior to 1974. The City adopted its ordinance prior to 1974, and the City therefore has grandfathered authority to levy this tax. Any changes to the existing ordinance could violate the existing grandfather clause and call into question our ability to legally continue to levy this tax.
Because of the potential for violating this grandfather clause, staff strongly recommends against making any changes to these BPOL categories, as this could jeopardize our ability to assess and collect nearly $5 million in current revenue.
With regard to amending the existing threshold that limits the residential tax to those renting more than four separate dwelling units, staff also recommends against this change for the same reasons stated in Budget Question 43: Provide the revenue impact of increasing the BPOL rates for Renting of Residential Property and Renting of Commercial Property up to the state maximum.. Beyond this, staff has no data on the number of units currently rented below the existing threshold.