CITY OF CHARLOTTESVILLE, VIRGINIA
                 CITY COUNCIL AGENDA




  Agenda Date:          June 21, 2022

  Action Required:      Approval of Refund of Business License Tax Payments

  Presenter:            Todd Divers, Commissioner of the Revenue

  Staff Contacts:       Todd Divers, Commissioner of the Revenue
                        Lisa Robertson, City Attorney
                        Jason Vandever, City Treasurer

  Title:                Refund of Business License Taxes


Background

The Supreme Court of Virginia recently determined that the City’s Business License Ordinance
Classification of “any other repair, personal or business service not specifically included in any
other subclassification under this section” does not apply to a particular activity engaged in by a
specific business entity conducting business in the City. Further, the Supreme Court ruled that
the City’s Business License Ordinance does not contain a suitable alternative license category for
that specific business activity. Therefore, the Court ruled that the City had erroneously assessed
and collected license tax from this business. The City is therefore required to refund this entity
for taxes paid in error for tax years 2015 through 2018. The amount of the refund totals
$3,304.21, including interest.

In addition to the refund for the above-referenced entity, we expect that a number of other
entities engaged in the same business activity will come forward requesting refunds. The
Commissioner of the Revenue has tried to identify any other similarly licensed entities engaged
in the same activity in anticipation of refund requests from those entities. He has identified
roughly twenty-five businesses that may be engaged in a similar business activity. Since the
license classification in question is a catch-all provision, it is sometimes difficult to tell with
precision the exact nature of a business’s activities. Further inquiries would be made upon any
application for correction to determine whether the Court’s ruling applies to the entity in
question. The Commissioner anticipates refund requests from all affected business entities
totaling less than $50,000, including interest. Some refunds will be greater than $2,500.

The City is required to refund business license taxes paid in error with interest per Code of
Virginia 58.1-3703.1 (A) (2) (e). In addition, Code of Virginia 58.1-3703.1(A)(2)(e) states:
“Interest shall be paid on the refund of any BPOL tax from the date of payment or due date,
whichever is later, whether attributable to an amended return or other reason. Interest on any
refund shall be paid at the same rate charged under 58.1-3916.”
Discussion

City Code requires Council approval for any tax refunds resulting from an erroneous assessment
in excess of $2,500 (City Code Sec. 30-6b). Payment of interest at the same rate charged by the
City is also required in accordance with Section 14-12(g) of the Charlottesville City Code and
§58.1-3703.1(A)(2)(e) of the Code of Virginia.

Per City Code Sec. 30-6(b), the Commissioner of the Revenue has provided to the City Attorney
information necessary to enable her to consent to the determination of the Commissioner of the
Revenue that the taxes paid by certain entities subject to the Court’s ruling were erroneous and
should therefore be refunded. He has also provided her with information about the above-
mentioned entities who may subsequently come forward requesting a refund, and whose eligibility
for such refund will be made on a case by case basis.

The total for all refunds, including interest, is expected to be less than $50,000. Should more
qualifying entities come forward such that the total refunded amount exceeds, $50,000, a separate
request will be made for Council approval.

Alignment with City Council’s Vision and Strategic Plan

n/a

Budgetary Impact

The total of all refunds will reduce current year Business License Tax revenue (GL 410150) by
no more than $50,000.

Alternatives

None.

Recommendation

Approve refund of $3,304.21 for the entity that was the subject of litigation, and approve further
refunds determined by the Commissioner of Revenue to be required by Virginia Code totaling no
more than $46,695.79 (for a total of $50,000) for similar entities that are determined to be
eligible on a case by case basis by the Commissioner of Revenue, acting pursuant to Virginia
Code §58.1-3980, with the concurrence of the City Attorney that such entities are engaged in the
same activity as the business who prevailed in the Supreme Court case.

Suggested Motion: “I move the RESOLUTION establishing a pool of funds in the amount of
$50,000, to be used for payment of refunds to licensed City businesses engaged in the same
business activity as that considered by the Virginia Supreme Court on June 9, 2022 in Record
Number 210414.”

Attachment (1)
    Proposed Resolution
                                      RESOLUTION
Establishing a pool of funds in the amount of $50,000, to be used for payment of refunds to
 licensed City businesses engaged in the same business activity as that considered by the
           Virginia Supreme Court on June 9, 2022 in Record Number 210414
        WHEREAS, the Supreme Court of Virginia has determined that City’s Business License
Ordinance Classification of “any other repair, personal or business service not specifically
included in any other subclassification under this section” does not apply to a specific business
activity engaged in by one particular business entity located within the City; and
       WHEREAS, the Supreme Court of Virginia determined that the City’s current Business
License Ordinance does not contain a suitable alternative license category for the specific
business activity in question; and
        WHEREAS, on the basis of the Supreme Court’s ruling, the Commissioner of the
Revenue has determined that a specific business entity conducting business in Charlottesville
paid 2015, 2016, 2017, and 2018 Business License Tax to the City of Charlottesville in error, and
that the Commissioner is required to correct the assessment pursuant to Virginia Code
§58.1-3980; and
       WHEREAS, the business entity that prevailed in the Court proceedings has requested a
refund of the amount paid in error; and
        WHEREAS, the Commissioner of the Revenue has certified that a refund of taxes paid is
due to that entity in the amount of $3,304.21; and
       WHEREAS, other similar entities may come forward requesting refunds on the basis of
the Court’s ruling, some of which will exceed $2,500; and
       WHEREAS, City Code Section 30-6(b) requires City Council approval for any tax
refund exceeding $2,500.00; now, therefore,
       BE IT RESOLVED by the Council for the City of Charlottesville, Virginia, that the City
Council hereby authorizes the City Treasurer to issue a refund of $3,304.21 to the entity that was
the subject of the Supreme Court decision rendered June 9, 2022 (Record Number 210414); and
        BE IT FURTHER RESOLVED that City Council hereby approves refunds to be issued
to other business entities located in the City, who are determined by the Commissioner of
Revenue, with the concurrence of the City Attorney to be, or to have been, engaged in the same
business activity as that considered by the Supreme Court in Record Number 210414, without
presenting each such matter to City Council, so long as, collectively, the additional refunds do
not exceed $46,695.79. When approved in this manner, the Treasurer shall be authorized to issue
any additional refund(s) corrected by the Commissioner of Revenue, with the concurrence of the
City Attorney, contemplated by this Resolution.