Four successful bills heading for Governor Ralph Northam’s desk may combine into a measurable shift in Virginia’s condemnation laws in favor of the targeted landowners. They may also spark a race to the courthouse between now and when some go into effect July 1.
The biggest financial impact may come from Senator Frank Ruff’s Senate Bill 1256, which eliminates state tax on any capital gain resulting from the forced sale. The subtraction for any capital gain applies to both individual and corporate landowners and applies to any transaction after January 1 of this year. Too bad if you took that check in December.
The fiscal impact statement on the bill merely notes “unknown negative General Fund revenue impact.” In the short run the impact may depend on whether two contested natural gas pipelines crossing the state complete construction and take all the needed private property. Ruff confirmed in an interview that a constituent in the path of the pipeline suggested the bill, saying if the General Assembly couldn’t stop it, it could at least improve the financial outcome of the takings.
However, the bill applies to all condemnations under state or federal law by any authorized agency for any reason from that day forward. If the property has been held for a long time, a large portion of the price could be a capital gain, taxed at about 6 percent at the state level.
Unlike most tax recent bills creating tax exemptions, credits or subtractions, this bill sailed through with no sunset clause.
The three other bills may work to increase the amount of that now tax-free gain (at least, state tax free.) They passed with House-added language to make it clear they do not affect any condemnation efforts filed before July 1, These bills deal only with takings by eminent domain under state law by the government or a public service company. (The pipeline condemnations are in federal courts.)
The most comprehensive is Senator Mark Obenshain’s Senate Bill 1421, which oddly is not accompanied by a fiscal impact statement even though may change what state and local governments pay to condemn land. The bill changes the rules for notice before the property is entered or surveyed and changes some of the considerations used by the court for determining the final value.
It makes is easier for the owner to get a set of expert witnesses equal to the number used by the agency or company seeking to take the land, at that petitioner’s expense. This phrase may prove significant: “Nothing in this subsection shall make evidence of tax assessments admissible as proof of value in an eminent domain proceeding.”
Obenshain indicated many of the changes to the statute merely reflect actual practice in Virginia courts. The most significant, he thinks, protects the landowner when the agency seeking the land changes its petition, abandoning it in full or in part. It will be easier for the landowner to recover costs in those cases under this change.
Senator Chap Petersen has two less-comprehensive bills, both likely to increase costs for the agency or company seeking to take the land. Senate Bill 1403 makes it easier for the landowner to recover costs from a public service corporation if the landowner takes the matter to court and wins a higher payment. Senate Bill 1404 puts the condemnor on the hook for additional costs in certain court proceedings.
The session hasn’t been all victories for opponents of eminent domain. One measure aimed directly at the pipelines, a constitutional amendment proposed by Senator Creigh Deeds, was killed early in the session on a party-line vote in a Senate committee. The pipelines being federally-approved, it is doubtful such a state measure would have stopped them.
Eminent domain is always controversial, but used properly it support projects with a public purpose. The successful process bills could raise the costs for future Virginia public works projects by utilities, railroads, localities or the state, costs which ultimately flow to ratepayers or taxpayers.
Ruff’s bill can also be seen (for those who think that way) as a cost to taxpayers, perhaps a large one. Note it does not cover the other possibility; it does not prohibit somebody from claiming a loss on their taxes if the price paid represents a major deterioration of a property’s value.
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