By Mason Brown
Capital News Service
RICHMOND – The House and Senate seem headed in different directions on whether to give businesses relief from the machinery and tools tax levied by local governments.
The Senate has passed a bill to give businesses grants to offset the tax on newly purchased equipment for the first two years. Under the latest version of Senate Bill 549, businesses would pay the tax to their city, county or town but then get reimbursed by a state grant. The bill passed last week, 28-12.
The tax is levied by localities on machinery used in manufacturing, mining, water well drilling, processing, broadcasting, dairy, dry cleaning and laundry businesses.
Originally, SB 549 would have eliminated the machinery and tools tax on equipment less than four years old. But local governments protested, saying the tax is a significant source of revenue to fund local public services.
So senators came up with the grant program as an alternative.
The grants established by the revised bill would require funding in the state budget that the General Assembly is now crafting.
“If it is not approved in the budget, it will have no effect,” said the bill’s sponsor, Sen. Frank Wagner, R-Virginia Beach.
He said funding the program would ultimately benefit Virginia as well as industries.
“It is the cost of businesses expanding,” Wagner said. And as businesses expand, they will generate tax revenues in other ways: “It will be a multiple of what we spent.”
SB 549 now goes to the House for consideration. What the House will do is uncertain.
Last week, delegates rejected House Bill 512, which was similar to the original version of SB 549. It would have exempted from taxation machinery and tools for three years after they’ve been purchased.
The House voted 35-65 against the bill, which was sponsored by Delegate Bob Purkey, R-Virginia Beach.
Purkey said the machinery tax is too harsh on business: “It is a job killer, noncompetitive, and dissuades innovation.”
Delegate Riley Ingram, R-Hopewell, voted against HB 512. He said the city of Hopewell “is strapped for cash.” In 2010, local governments in Virginia received more than $221 million from the machinery and tools tax.
Ingram said he would support the Senate’s proposed grant program.
“If we can find the money to reimburse the industries, I am 100 percent for that,” he said.
Delegate Mike Watson, R-Williamsburg, was a co-patron of HB 512 and voted for the bill. He said he probably would support the grant program if money could be found.
Watson said his manufacturing and business experience shaped his perspective on the issue. He was formerly employed in Hopewell by AlliedSignal, which became Honeywell after a merger between the companies. He currently is president of Control Automation Technologies Corp.
Watson said relief from the machinery and tools tax would “decrease uncertainty” in companies that want to invest in Virginia.
“If you talk to anybody in business, the No. 1 reason companies are not investing is uncertainty. They are uncertain about regulations, tax codes and the economy. They say, ‘Let’s hold back until we are more certain,’” Watson said.
How They Voted
Here is how the Senate voted Feb. 14 on “SB 549 Machinery and Tools Investment Grant Program; created.”
Floor: 02/14/12 Senate: Passed Senate (28-Y 12-N)
YEAS – Barker, Black, Blevins, Colgan, Ebbin, Favola, Garrett, Hanger, Herring, Marsden, Martin, McDougle, McWaters, Miller, J.C., Newman, Norment, Northam, Obenshain, Petersen, Reeves, Ruff, Smith, Stanley, Stosch, Stuart, Vogel, Wagner, Watkins – 28.
NAYS – Carrico, Deeds, Edwards, Howell, Locke, Lucas, Marsh, McEachin, Miller, Y.B., Puckett, Puller, Saslaw – 12.
Here is how the House voted Feb. 14 on “HB 512 Intangible personal property tax; classification of certain machinery and tools.”
Floor: 02/14/12 House: VOTE: DEFEATED (35-Y 65-N)
YEAS – Albo, Anderson, Bell, Richard P., Bell, Robert B., Byron, Cline, Cole, Comstock, Dudenhefer, Englin, Fariss, Garrett, Gilbert, Greason, Head, Hodges, Hugo, Iaquinto, Joannou, Keam, Knight, LeMunyon, Lewis, Loupassi, Marshall, R.G., Massie, Miller, Pogge, Purkey, Putney, Ramadan, Tata, Villanueva, Watson, Mr. Speaker – 35.
NAYS – Alexander, BaCote, Brink, Bulova, Carr, Cosgrove, Cox, J.A., Cox, M.K., Crockett-Stark, Dance, Edmunds, Farrell, Filler-Corn, Habeeb, Helsel, Herring, Hope, Howell, A.T., Ingram, James, Johnson, Jones, Kilgore, Kory, Landes, Lingamfelter, Lopez, Marshall, D.W., May, McClellan, McQuinn, Merricks, Minchew, Morefield, Morris, Morrissey, O’Bannon, O’Quinn, Orrock, Peace, Plum, Poindexter, Ransone, Robinson, Rush, Rust, Scott, E.T., Scott, J.M., Sherwood, Sickles, Spruill, Stolle, Surovell, Torian, Toscano, Tyler, Ward, Ware, O., Ware, R.L., Watts, Webert, Wilt, Wright, Yancey, Yost – 65.
Delegate Peace was recorded as nay. Intended to vote yea.