23VAC10-350 Forest Products Tax Regulations

REGULATIONS

Vol. 33 Iss. 6 - November 14, 2016

TITLE 23. TAXATION

DEPARTMENT OF TAXATION

Chapter 350

Fast-Track Regulation

Title of Regulation: 23VAC10-350. Forest Products Tax Regulations (repealing 23VAC10-350-10 through 23VAC10-350-40).

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

Public Hearing Information: No public hearings are scheduled.

Public Comment Deadline: January 17, 2017.

Effective Date: February 1, 2017.

Agency Contact: Joe Mayer, Lead Policy Analyst, Department of Taxation, P.O. Box 27185, Richmond, VA 23261-7185, telephone [phone], FAX [phone], or email [e-mail].

Basis: Section 58.1-203 of the Code of Virginia authorizes the Tax Commissioner to issue regulations relating to the interpretation and enforcement of the laws governing taxes administered by the Department of Taxation. Section 3.2-1612 of the Code of Virginia authorizes the Tax Commissioner to administer the forest products tax.

Purpose: As a result of a periodic review of the Forest Products Tax Regulation initiated by the Department of Taxation on April 28, 2016, and completed June 20, 2016, the Department of Taxation has determined that the regulation should be repealed because the statutes imposing the forest products tax were substantially amended effective July 1, 2015, and the regulation provides no guidance on the new statutes. Additionally, the new law was drafted with the participation of the forest products industry and no guidance beyond the plain meaning of the forest products tax statutes is necessary at this time. Therefore, the regulation is not necessary to protect the public health, safety, or welfare. A regulation that is not necessary to interpret the law or to protect the public health, safety, or welfare violates the general principles set forth in Governor Terence R. McAuliffe's Executive Order 17 signed June 30, 2014.

Repeal of the regulation does not reflect any change in current tax policy. Repeal of the regulation will have no impact on the administration of the forest products tax.

Rationale for Using Fast-Track Rulemaking Process: The department is using the fast-track rulemaking process because the repeal of the Forest Products Tax Regulation is expected to be noncontroversial because the statutes imposing the forest products tax were substantially amended effective July 1, 2015, and the regulation provides no guidance on the new statutes. No comments were received during the periodic review of the regulation.

Substance: This action will repeal the Forest Products Tax Regulations. Effective July 1, 2015, the forest products tax is imposed on the first manufacturer using, consuming, or processing forest products unless the tax has been previously paid by the severer of the forest products. The forest products tax also is imposed on the first manufacturer storing forest products for sale or shipment out of state unless the tax has been previously paid by the severer of the forest products. If there is no manufacturer, or the manufacturer is not registered for the tax, then the tax is levied on the severer of the forest products. The forest products tax revenues are dedicated to the protection and development of forest resources and the reforestation of timberlands.

Because the statutes imposing the forest products tax were recently rewritten, and the regulation provides no guidance on the new statutes, repeal of the regulation does not reflect any change in current tax policy. Repeal of the regulation will have no impact on the administration of the forest products tax.

Issues: As the new statutes imposing the forest products tax are clear and unambiguous, and the regulation provides no guidance on the new statutes, the regulation is unnecessary. Accordingly, its repeal poses no disadvantages to the public or the Commonwealth.

Small Business Impact Review Report of Findings: This fast-track regulatory action serves as the report of the findings of the regulatory review pursuant to § 2.2-4007.1 of the Code of Virginia.

Department of Planning and Budget's Economic Impact Analysis:

Summary of the Proposed Amendments to Regulation. The Department of Taxation (Department) proposes to repeal the Forest Products Tax Regulations.

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

Estimated Economic Impact. Chapter 170 of the 2015 Acts of Assembly substantially amended the statutes that impose and delineate the forest products tax. The regulation does not provide guidance beyond the statutes and no longer accurately reflects the current statutes. When statutes and regulations are in conflict, the statutes apply. Thus the repeal of this regulation would not affect legal requirements. Nonetheless the proposed repeal would be beneficial in that readers of the regulation would not be misled concerning legal rules and requirements.

Businesses and Entities Affected. The forest products tax is imposed on the first manufacturer using, consuming, or processing forest products unless the tax has been previously paid by the severer¹ of the forest products. The forest products tax also is imposed on the first manufacturer storing forest products for sale or shipment out of state unless the tax has been previously paid by the severer of the forest products. If there is no manufacturer or the manufacturer is not registered for the tax, then the tax is levied on the severer of the forest products. In fiscal year 2015, 205 taxpayers filed forest products tax returns.

Localities Particularly Affected. The proposed repeal of the regulation does not disproportionately affect localities.

Projected Impact on Employment. The proposed repeal of the regulation does not affect employment.

Effects on the Use and Value of Private Property. The proposed repeal of the regulation does not affect the use and value of private property.

Real Estate Development Costs. The proposed repeal of the regulation does not affect real estate development costs.

Small Businesses:

Definition. Pursuant to § 2.2-4007.04 of the Code of Virginia, small business is defined as "a business entity, including its affiliates, that (i) is independently owned and operated and (ii) employs fewer than 500 full-time employees or has gross annual sales of less than $6 million."

Costs and Other Effects. The repeal of the regulation does not significantly affect costs for small businesses.

Alternative Method that Minimizes Adverse Impact. The proposed repeal of the regulation does not adversely affect small businesses.

Adverse Impacts:

Businesses. The proposed repeal of the regulation does not adversely businesses.

Localities. The proposed repeal of the regulation does not adversely localities.

Other Entities. The proposed repeal of the regulation does not adversely other entities.

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¹ "Severer" is defined as any person in this Commonwealth who fells, cuts, or otherwise separates timber or any other such forest product from the soil.

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

Summary:

The regulatory action repeals the regulation because the regulation provides no guidance beyond the plain meaning of the statutes imposing the forest products tax, which were substantially amended effective July 1, 2015. Repeal of the regulation does not reflect any change in current tax policy and has no impact on the administration of the forest products tax.

VA.R. Doc. No. R17-4840; Filed October 17, 2016, 3:13 p.m.