Criminal Law and Procedure

Criminal Law and Procedure

Rachel L. Yates, John I. Jones IV, & Brittany Dunn-Pirio, Annual Survey of Virginia Law Criminal Law and Procedure, 54 U. Rich. L. Rev. 31 (2019).

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Rachel L. Yates *

John I. Jones, IV **

Brittany Dunn-Pirio ***

 

Introduction

This Article surveys recent developments in criminal procedure and law in Virginia. Because of space limitations, the authors have limited their discussion to the most significant appellate decisions and legislation.

I.  Criminal Procedure

A.  Continuances

In Reyes v. Commonwealth, the Supreme Court of Virginia was asked to determine whether a trial court erred in denying a defendant a continuance to prepare for sentencing with his new retained counsel pursuant to Virginia Code section 19.2-159.1.[1]At the defendant’s second sentencing date, retained counsel explained that he needed time to prepare and to explore potentially withdrawing the defendant’s guilty plea.[2]

The supreme court explained that the General Assembly enacted section 19.2-159.1 in order to minimize the burden on taxpayers to pay the cost of court-appointed counsel when a defendant could pay for his own attorney.[3] Although the statute provides that the trial court shall grant reasonable continuances to prepare for trial, the supreme court found that this was to aid the primary fiscal purpose of the act and not to confer “a new, statutory right for a criminal defendant.”[4] Reyes made no argument that the trial court’s decision impacted his constitutional right, and the supreme court otherwise determined that the defendant was not entitled to his requested remedy.[5]

B.  Jury Instructions

In Smith v. Commonwealth, the Supreme Court of Virginia addressed whether the defendant waived her arguments challenging the agreed upon jury instructions, which determined the law of the case.[6] A jury found Smith guilty of voluntary manslaughter, and following her conviction, Smith argued that the evidence was insufficient to show any intentional killing or heat of passion.[7]In her motion to set aside, she argued for the first time that her dispute with the victim was “a minor verbal argument,” and that words alone are insufficient to qualify as heat of passion.[8]

The supreme court found that Smith raised the issue that words alone are insufficient too late.[9] Because Smith agreed to jury instructions that omitted the legal principles she relied upon on appeal, those jury instructions became the law of the case, and she accordingly waived that issue.[10] The supreme court concluded the evidence was sufficient to support Smith’s conviction and affirmed the judgment of the court of appeals under the doctrine of “right result for a different reason.”[11]

In Lienau v. Commonwealth, the Court of Appeals of Virginia, sitting en banc, reversed an involuntary manslaughter conviction for the trial court’s failure to provide a self-defense jury instruction.[12] The Commonwealth argued that the defendant, originally charged with first-degree murder, never testified that he was afraid, but instead said that he was “raging” and “saw red.”[13] The court found, however, that there was sufficient credible evidence in the record, viewed in the light most favorable to Lienau, to support his right to a self-defense jury instruction.[14] The court also held that even though Lienau was acquitted of murder when the jury found him guilty of involuntary manslaughter, the error could have affected the verdict and reversed his conviction.[15]

 

C.  Appellate Procedure and Jurisdiction

In Martinez v. Commonwealth, the Supreme Court of Virginia considered an appeal from a deaf and mute inmate originally from El Salvador who was previously found incompetent to stand trial.[16] Martinez had been receiving inpatient treatment to restore his competency under Virginia Code section 19.2-169.2 in order to try him for two counts of capital murder.[17] Martinez appealed directly to the supreme court from the circuit court’s denial of two motions to dismiss the indictments, on the theory that the denials were civil in nature.[18] The supreme court found it lacked subject matter jurisdiction to hear the appeal, holding that an appeal from a competency determination is criminal in nature, and thus may not be considered by the supreme court without first being considered by the court of appeals.[19] The supreme court also declined to transfer the case to the court of appeals, because no final order had been entered in the underlying prosecution, and the court of appeals was thus without jurisdiction to hear an appeal in the matter.[20] The court dismissed the appeal without prejudice because the court found there was no final conviction and no final order.[21]

Ordinarily, an appellant’s failure to invoke the ends of justice exception to Supreme Court of Virginia Rule 5A:18’s preservation requirement precludes the Court of Appeals of Virginia from reaching an issue under that exception.[22] The court held in Merritt v. Commonwealth that even where an appellant does not invoke the ends of justice exception to Rule 5A:18, the Commonwealth may successfully do so on her behalf.[23] Merritt missed a revocation proceeding and was convicted of failure to appear in violation of section 19.2-128(C); however, she did not challenge the section’s applicability to revocation proceedings before either the trial court or the court of  appeals  (despite  the  latter  court’s explicit direction to address the issue in its order granting Merritt’s petition for appeal).[24] The Commonwealth, on brief and at oral argument, conceded that Merritt’s conduct did not fall under her statute of conviction, and contended that though Merritt had not raised the argument, the court could still reach it under the ends of justice exception to Rule 5A:18.[25] The court agreed based on its independent analysis that the Commonwealth’s concession was appropriate, applied the ends of justice exception, and reversed Merritt’s conviction.[26]

D.  Withdrawal of Guilty Pleas

In Brown v. Commonwealth, the Supreme Court of Virginia determined that the defendant failed to demonstrate a sufficient basis to allow her to withdraw a guilty plea under Virginia Code section 19.2-296.[27] The court found that although the defendant raised her motion to withdraw before the trial court entered the written sentencing order, the trial court had pronounced the sentence from the bench.[28] Consequently, the defendant needed to show that there was a “manifest injustice” in order to withdraw her guilty plea.[29] The court determined there was insufficient cause because her defense was not viable.[30] The court also found that her failure to understand the collateral consequences of her conviction did not provide a basis for setting aside a guilty plea.[31]

In Thomason v. Commonwealth, the Court of Appeals of Virginia reviewed a circuit court’s denial of a defendant’s pre-sentencing motion to withdraw his guilty pleas to second-degree murder, possession of a firearm by a convicted felon, and use of a firearm in the commission of a felony.[32] Thomason argued in his motion that he learned of the existence of an exculpatory witness, whose testimony would impeach another witness, after he accepted the plea agreement, and that this discovery constituted a material mistake of fact.[33] The court of appeals affirmed Thomason’s conviction because “potential impeachment of witness testimony does not satisfy the Parris[34] standard.”[35] The court explained that a mere discovery of a conflict of testimony does not establish a “reasonable defense” sufficient to withdraw a guilty plea.[36]

E.  Venue

In McGuire v. Commonwealth, the Court of Appeals of Virginia clarified that venue for the prosecution of making a false report regarding the commission of a crime is proper in either the jurisdiction where the report was made or where it was received.[37]McGuire made a false police report from an unknown location to the Loudoun County Sheriff’s Department, and was subsequently prosecuted for the report in Loudoun County.[38] The court of appeals held that (1) venue is proper in either the sending or receiving jurisdiction; (2) a report must both be sent by the defendant and received by an officer to complete the offense; and (3) once completed, the offense has “occurred” in part in both locations.[39]

F.   Sentencing

In Hall v. Commonwealth, the Supreme Court of Virginia clarified that a defendant’s disclosure supporting his motion for relief under the “safety valve” provision of Virginia Code section 18.2-248(C) is considered timely if it is provided at any time before the commencement of the sentencing hearing.[40] Under the “safety valve” provision, the mandatory minimum sentences provided in section 18.2-248 do not apply if the defendant meets five statutory criteria.[41] The fifth requirement provides that “[n]ot later than the time of the sentencing hearing, the person has truthfully provided to the Commonwealth all information and evidence the person has concerning the offense.”[42] Hall was convicted of three offenses subject to mandatory minimum sentences, and provided a disclosure pursuant to this requirement just before his sentencing hearing commenced.[43]

The trial court held that the disclosure was untimely, but the supreme court reversed, holding that the statute unambiguously provided a deadline of the sentencing hearing’s commencement, and that last-minute disclosures are thus timely.[44]

In Stone v. Commonwealth, the Supreme Court of Virginia clarified a different component of eligibility for the “safety valve” provision of Virginia Code section 18.2-248(C)—the requirement that “[t]he person did not . . . possess a firearm . . . in connection with the offense.”[45] Stone sold cocaine four times during a one-month period to a confidential informant; when police executed a search warrant following the fourth controlled buy, they discovered a loaded AK-47 along with cocaine in Stone’s bedroom.[46] Stone argued that he obtained the firearm for personal protection following an earlier robbery, and that he thus did not own it “in connection” with his drug distribution offenses for “safety valve” purposes.[47]

The supreme court rejected Stone’s arguments, noting that he bore the burdens of production and persuasion to show entitlement to relief under the “safety valve” provision.[48] The court held that the evidence showed Stone constructively possessed the firearm while conducting four drug sales to the confidential informant “at that location,” and that by failing to present any evidence to the contrary, Stone “plainly failed to carry his burden of establishing that he did not possess the firearm in connection with these four . . . offenses.”[49] The court further held that the evidence supported “the affirmative inference . . . that Stone in fact possessed the firearm for the protection of his illegal drug operation being conducted out of his residence.”[50]

In Botkin v. Commonwealth, the Supreme Court of Virginia (1) addressed whether the Court of Appeals of Virginia erred by holding that multiple mandatory minimum terms of imprisonment, imposed for multiple convictions of possession of a firearm within ten years of being convicted as a felon under Virginia Code section 18.2-308.2(A), were required to be served consecutively; and (2) remanded to the circuit court to impose two consecutive sentences.[51] The supreme court explained that section 18.2-308.2(A) specifically states that “[t]he mandatory minimum terms of imprisonment prescribed for violations of this section shall be served consecutively with any other sentence,” and thus Botkin’s sentences must be run consecutively.[52]

In Thomas v. Commonwealth, the Supreme Court of Virginia found that a trial court erred by adding three years, all suspended, after imposing the entire jury sentence as active incarceration.[53] The supreme court explained that the trial court had an obligation under Virginia Code section 19.2-295.2 to impose a term up to three years of post-release supervision under the review of the Parole Board, and was required under “[section] 18.2-10 to impose a linked suspended term of incarceration.”[54]Thomas’s sentencing order “as written” was unlawful, however, because it did not specify that the additional three years of suspended incarceration was imposed pursuant to sections 18.2-10 and 19.2-295.2, nor did it specify that the supervision was subject to the review of the Virginia Parole Board.[55]

In Robinson v. Commonwealth, the Court of Appeals of Virginia found no error in a trial court’s decision not to redact a defendant’s prior conviction order during the sentencing phase of a jury trial, even though it “included information about a charge for which Mr. Robinson was not convicted.”[56] The court found that the plain language of Virginia Code section 19.2-295.1 allows the Commonwealth to introduce conviction orders in their entirety.[57] The court noted that the General Assembly amended the statute in 2007 to allow presentation of a defendant’s prior criminal history, thus broadening what may be shown to the jury.[58] The court found that the statute did not require that the jury be shielded from such information, and that it was admissible regardless as part of the defendant’s criminal history.[59] As a result, the trial court did not abuse its discretion in admitting the unredacted conviction order.[60]

G.  Restitution

In Fleisher v. Commonwealth, Fleisher was ordered to pay restitution for lost cash, to replace the keys and locks on a Hyundai, and to replace the keys and reset the computer system on a Toyota after she stole the victim’s keys and drove the victim’s Hyundai, which contained the victim’s purse.[61] The Hyundai was recovered unlocked but the keys to the Hyundai and the victim’s purse, which had contained cash and keys to the Toyota, were never recovered.[62] In affirming the judgment, the Court of Appeals of Virginia found that the trial court ordered Fleisher “to pay restitution for a loss directly caused by the offense.”[63]The court explained that the new lock and key systems in both cars were not security upgrades, but rather “made the victim whole by returning her to [her] pre-crime status when she controlled access to her cars.”[64]

In Ellis v. Commonwealth, the Court of Appeals of Virginia reversed a trial court’s restitution award.[65] Ellis was initially charged with burglary, grand larceny, larceny of a firearm, and possession of a firearm by a convicted felon.[66] Ellis entered an Alford plea to receiving stolen property, which had been reduced from grand larceny, and the remaining charges were nolle prosquied.[67] The police had only recovered a $450 television from Ellis.[68] The court found the $1500 award improper because “Ellis’s conviction for receiving stolen property preclude[d] him from being deemed the thief,” and the only loss attributable to Ellis was valued  at  $450,  the  value  of  the  property  he  was  convicted of receiving.[69]

H.  Victim Impact Evidence

In Baldwin v. Commonwealth, the Court of Appeals of Virginia affirmed a trial court’s admission at sentencing of victim impact testimony referencing the defendant’s prior criminal offenses.[70] In 2012, Baldwin was sentenced to five years, with four years suspended, for making a written threat to kill his victim, M.T.; he later violated a protective order preventing him from being near her, and had his suspended sentence revoked.[71] Angry about his revocation, Baldwin wrote numerous new letters threatening to kill M.T., and pled guilty in 2016 to a new charge of making a written threat to kill M.T.[72] At his sentencing, M.T. testified regarding Baldwin’s criminal conduct toward her, past and present, explaining the impact of his threats at sentencing.[73] The court of appeals rejected Baldwin’s argument that M.T.’s testimony regarding his past crimes was inadmissible, holding that it was relevant to understanding the impact of his  present crime, and  that he had no right to sanitize the evidence of his “ongoing pattern of threatening and psychologically tormenting this particular victim.”[74]

I.   Batson Challenges

In Hamilton v. Commonwealth, the Court of Appeals of Virginia held that the trial court did not err in denying Hamilton’sBatson[75] motion.[76] At trial, Hamilton asserted that the prosecutor struck three jury pool members because they were black.[77] The court rejected Hamilton’s argument that the prosecutor’s reasoning for striking a juror for not answering any questions was pretextual, because Hamilton did not identify any non-African  American jurors who did not answer any questions.[78]

J.   Fourth Amendment Issues

In Curley v. Commonwealth, the Supreme Court of Virginia rejected the defendant’s challenge to the trial court’s denial of a suppression motion.[79] There, an officer conducted a lawful traffic stop and observed the defendant, the sole occupant of the vehicle, nervously hunched over a backpack, “shaking,” and “breathing heavily.”[80] The officer asked Curley to step out of the vehicle and obtained permission from him to search his person.[81] Officers found a digital scale with “white residue” that was “very consistent” with drug distribution based on the officers’ training, leading them to search his vehicle and find additional evidence.[82]

The supreme court found that the officers had probable cause to conduct a warrantless search of the vehicle.[83] The court held that Curley’s furtive movements, his overly nervous demeanor, and his possession of a digital scale provided sufficient justification for the vehicle’s search.[84]

In Collins v. Commonwealth, on remand from the Supreme Court of the United States, the Supreme Court of Virginia considered whether any exception to the Fourth Amendment’s warrant requirement, other than the automobile exception, justified a search of a motorcycle located within the curtilage of a residence.[85] The court found that the good-faith exception applied, noting that a reasonably well-trained officer at the time of the search could have believed that Scher v. United States[86]authorized his search of the motorcycle.[87] The court moreover held that “a considerable body of caselaw had developed that applied the automobile exception to driveways without considering whether, and if so where, the curtilage boundary might intersect with the driveway,” thereby supporting the search’s reasonableness.[88]

In Brown v. Commonwealth, the Court of Appeals of Virginia held that a trial court did not err by refusing to suppress evidence obtained by warrant, rejecting the appellant’s claim that the affidavit supporting the search warrant did not establish probable cause.[89] Brown was arrested while attempting to purchase more than five pounds of marijuana from his wife’s vehicle, with more than $5000 on his person.[90] Police applied for a warrant to search Brown’s home, representing that information from various sources (including the circumstances of Brown’s arrest) indicated that Brown was using his home as a base of operation for drug distribution activities.[91] A magistrate issued the warrant, and police found 394.55 grams of cocaine and roughly $4500 at Brown’s home.[92] Brown moved to suppress the fruits of the warrant, arguing that the information in the affidavit did not establish a nexus between Brown’s alleged activities and his home.[93] The court of appeals affirmed, finding that the affidavit established probable cause to support a search of Brown’s home.[94]

The Court of Appeals of Virginia reversed the trial court’s denial of a suppression motion on Fourth Amendment grounds in Carlson v. Commonwealth.[95] Uniformed police officers smelled marijuana in a trailer park and walked around individual trailers, sniffing at their doors and windows, until they isolated Carlson’s residence as the probable source of the odor.[96] A detective walked up to the main entrance of the residence, confirmed the odor emanating from the door, and obtained a warrant on the basis of his observations.[97] Carlson was arrested, and police discovered, among other things, a marijuana grow site, a large quantity of harvested marijuana, and a police scanner.[98] Carlson moved to suppress the fruits of the search, alleging that the detective’s presence on his property, and the resulting warrant, were the direct result of the uniformed officers’ illegal initial entry onto his property.[99] Carlson did not challenge the warrant.[100] The court of appeals found the search unlawful, holding that (1) the detective’s search was not an independent source since his presence was a direct result of the uniformed officers’ unlawful entry; (2) nothing occurred to remove the taint of the original illegality of the uniformed officers’ search; and (3) the record lacked any evidence justifying a finding of inevitable discovery.[101]

In Daniels v. Commonwealth, the Court of Appeals of Virginia affirmed the trial court’s denial of suppression motions.[102]Police investigating a heroin overdose found heroin packaged in wax paper bags stamped with the word “Miracle” in red ink.[103] After obtaining a search warrant, police found marijuana, a digital scale, and approximately $1000 in cash in Daniels’s residence.[104] Officers saw a bundle of wax paper bags with red stamps, bound together with a rubber band, in Daniels’s vehicle (which was not covered by the warrant); an investigator believed the bundle to contain heroin, and conducted a search which bore out his suspicion.[105] The court of appeals rejected Daniels’s arguments that (1) the affidavit supporting the search warrant was not filed with the circuit court by the issuing magistrate as required by Virginia Code section 19.2-54; and (2) the search of the vehicle was not a valid plain view search, finding instead that the “notice-based purpose of [section] 19.2-54 was achieved” by the officer’s filing of the affidavit with the circuit court and that the plain view exception supported the vehicle search because the officer had probable cause based on his training and experience.[106]

In Moore v. Commonwealth, Moore refused to comply with a traffic stop by continuing to drive, jumping out of the car while it was still in motion, causing the car to crash into two parked cars, and fleeing the scene.[107] Two officers pursued Moore on foot while a crowd gathered near the crash.[108] Moore had left the driver’s side door open, and a third officer found a firearm near the gas pedal in plain view.[109] He seized the firearm and placed it in his car for safekeeping.[110] The Court of Appeals of Virginia held that the seizure of the firearm did not violate Moore’s Fourth Amendment rights because exigent circumstances allowed the officer to seize the easily accessible firearm to protect officer safety and to protect the safety of officers and the gathered crowd.[111]

K.  Miranda Issues

In Secret v. Commonwealth, the Supreme Court of Virginia affirmed the appellant’s convictions of arson of an occupied dwelling and nine counts of attempted first-degree murder stemming from the appellant’s burning of the “main dormitory” of a communal living facility.[112] Secret argued that admission of evidence related to his confession violated Miranda v. Arizona,[113] as refined by Missouri v. Seibert[114] and Oregon v. Elstad,[115] and further that the evidence was insufficient to show he acted with a specific intent to commit murder.[116] Secret attempted to burn down the occupied building after being informed he was not welcome to remain in the community.[117] Secret confessed to starting the fire in an interview conducted without a Miranda warning, then continued providing inculpatory details after waiving his Miranda rights.[118]

The supreme court affirmed the trial court’s finding that police did not violate Seibert, based on (1) the investigator’s testimony that he did not administer Miranda warnings at first because he did not believe Secret to be in custody until Secret inculpated himself; (2) the lack of coercion in the pre-warning phase of the interview; and (3) the investigator’s unfamiliarity with the two-step interrogation technique.[119] The supreme court likewise rejected Secret’s Elstad-based attack, finding that the totality of the evidence demonstrated that Secret’s inculpatory statements were knowing and voluntary.[120] Finally, the court held that the evidence was sufficient to support the jury’s finding that Secret intended to kill the building’s occupants.[121]

In Tirado v. Commonwealth, the Supreme Court of Virginia considered whether an audiovisual recording of the defendant’s statements made to police officers through an interpreter was properly admitted into evidence, and whether the defendant’s waiver of rights under Miranda was knowingly and voluntarily made.[122] On appeal, Tirado asserted the evidence was insufficient to establish his waiver was knowing and voluntary because it was not in his native language, Mam, and his Spanish comprehension was limited.[123]

The supreme court held that there was an adequate foundation to admit the recording.[124] The supreme court found that the interrogator testified that the recording accurately depicted her interview and that, in and of itself, satisfied Supreme Court of Virginia Rule 2:901.[125] The court also found that Tirado’s waiver was voluntary because it was not the product of “intimidation, coercion, or deception.”[126] The supreme court focused on the fact that Tirado chose to communicate in Spanish, never spoke in Mam, said “Spanish ‘would be fine’” to discuss Miranda, chose to write an apology letter in Spanish, said he understood each Miranda right in Spanish after it was read in Spanish, and responded appropriately in Spanish to the officer’s questions.[127]

In Spinner v. Commonwealth, the Supreme Court of Virginia considered whether the trial court erred when it held that Spinner was effectively advised under Miranda.[128] Police officers approached Spinner in an open carport near a sidewalk the day after a murder to execute a search warrant to obtain a DNA sample.[129] An officer read Spinner his Miranda warnings and included, “And I always caveat that with: ‘If you’re charged with a crime.’ You can decide at any time to exercise any of these rights and stop answering questions.”[130] Later, after his arrest, Spinner was questioned after being read the same Miranda warnings and made incriminating statements.[131]

The supreme court affirmed Spinner’s convictions, holding that Spinner was not in custody the day after the murder, so Miranda warnings were not constitutionally required.[132] The court also held that the warnings read to Spinner on both days met the requirements under Miranda because “Miranda requires ‘only that the suspect be informed . . . that he has a right to an attorney before and during questioning and that an attorney would be appointed for him if he could not afford one.’”[133]

L.   Double Jeopardy

In Severance v. Commonwealth, the Supreme Court of Virginia affirmed Severance’s two convictions for capital murder.[134]Severance killed Ronald Kirby in 2013, then Ruthanne Lodato in 2014; he was convicted under Virginia Code section 18.2-31(8), which classifies the “killing of more than one person within a three-year period,” as capital murder, by killing Kirby within three years of killing Lodato, and by killing Lodato within three years of killing Kirby.[135] On appeal, Severance contended his two life sentences violated the multiple punishment prohibition under Blockburger v. United States.[136]

The supreme court affirmed Severance’s convictions, holding that Blockburger protections are limited to cases where “the same act or transaction constitutes a violation of two distinct statutory provisions.”[137] The court reasoned that the General Assembly set the appropriate unit of prosecution as one murder, and it did not set a temporal restriction on the second murder “within three years” as being before or after the murder that is the subject of a given charge; accordingly, Severance’s two punishments for two murders were permissible.[138]

II.   Criminal Law

A.  Assault and Battery

In Marshall v. Commonwealth, the Court of Appeals of Virginia examined whether all violations of Virginia Code section 18.2-57.2, assault and battery on a family or household member, must be disclosed on mandatory firearm purchase forms.[139] The trial court convicted Marshall of making a false statement on ATF Form 4473 in violation of section 18.2-308.2:2 when Marshall did not disclose that he had been convicted of a “misdemeanor crime of domestic violence,” despite his prior conviction for assault and battery against a family member.[140] The court of appeals found that any conviction under section 18.2-57.2 qualifies as a “misdemeanor crime of domestic violence,” and there was accordingly sufficient evidence to affirm Marshall’s conviction.[141] The court reasoned that domestic violence, as listed in the federal form in question, is defined by federal law, and a recent United States Supreme Court decision held that “the requirement of ‘physical force’ is satisfied . . . by ‘the degree of force that supports a common-law battery conviction.’”[142]

In Kelley v. Commonwealth, the defendant appealed his conviction for misdemeanor assault and battery in violation of Virginia Code section 18.2-57 to the Court of Appeals of Virginia. [143] Kelley contested whether there was sufficient evidence to prove that the appellant committed an assault and battery against his coworker in violation of section 18.2-57.[144] Although Kelley argued that the evidence did not show that he touched his victim or that he intended to do so in a rude manner, the factfinder found the victim’s testimony credible and found that Kelley attempted to kiss his co-worker when he knew she was uncomfortable and tried to pull away.[145] The court held that under the appropriate standard of review, the evidence was sufficient to uphold his conviction and rejected his argument that he had implied consent to touch his victim.[146] The court of appeals found that there was no legal basis to find that holding “the victim’s face against her will, while trying to kiss her, was justified or excused.”[147]

In Lewis v. Commonwealth, the Supreme Court of Virginia clarified the statutory requirements for a felony conviction of assault and battery against a family or household member under Virginia Code section 18.2-57.2(B).[148] Under this section, a defendant is guilty of a Class 6 felony if he or she commits two specified offenses within twenty years.[149] In Lewis, the court made clear that the statute did not require the defendant to have been convicted of the two predicate offenses at the time of this offense; instead,  the  defendant  must  have  been  convicted  as  of  the indictment.[150]

B.  Firearms

In Barney v. Commonwealth, Barney appealed her use of a firearm conviction to the Court of Appeals of Virginia, arguing that the evidence was insufficient and that the trial court erred when it instructed the jury on the definition of a firearm.[151] The court found that a rational trier of fact could have found that Barney had an actual firearm or possessed an object “that gave the appearance of being one” because Barney made statements and gestures to imply she had a firearm.[152] The court of appeals reversed Barney’s conviction and remanded because the jury instruction given did not require proof that Barney possessed either an actual firearm or an object that gave the appearance of an actual firearm.[153] Instead, the trial court incorrectly instructed the jury that it was not necessary for the Commonwealth to prove the item was a firearm so long as the victim reasonably perceived a threat or intimidation by a firearm.[154]

C.  Failure to Appear

In Chavez v. Commonwealth, the Court of Appeals of Virginia found that timely notice is not an element of felony failure to appear under the plain language of Virginia Code section 19.2-128.[155] The court explained that proof that a defendant failed to appear after receiving timely notice of his or her court date is simply one way to prove that the conduct was willful.[156] The court also found the evidence sufficient to sustain Chavez’s conviction because a reasonable factfinder could have determined that when his case was continued, the continuance date was clearly communicated to both Chavez and his attorney, who was present at the next court date.[157] Because there was a sufficient basis to show that Chavez received actual notice and notice through his attorney, the Commonwealth proved that his conduct was willful and the court upheld the conviction.[158]

D.  Property Crimes

In McGinnis v. Commonwealth, the Supreme Court of Virginia reviewed whether the evidence was sufficient to convict McGinnis of three counts of larceny by worthless check.[159] The supreme court held that “larceny by worthless check is not limited to checks passed as present consideration for goods and services” because the General Assembly’s 1978 amendment was intended to expand the reach of the statute to include the use of a worthless check in payment as present consideration for goods and services, rather than to limit its application.[160] The evidence was sufficient because McGinnis knew he did not have enough funds when he issued the checks in hopes of obtaining more credit for his failing business.[161]

In Pittman v. Commonwealth, the Court of Appeals of Virginia rejected the appellant’s arguments that the Commonwealth must prove (1) a fiduciary relationship between the defendant and victim; and (2) the victim’s personal ownership of the allegedly embezzled property.[162] The victim, an acquaintance of Pittman, allowed Pittman to borrow a rental car; Pittman ignored repeated requests that she return the car to the rental company, and the car was eventually towed to a body shop in New York with over $6600 of estimated damage.[163] The court of appeals found the evidence sufficient and reiterated that the Commonwealth need not prove a formal fiduciary relationship, but could rather show that the defendant was “entrusted with the property in question and that the defendant had the specific intent to deprive the rightful owner of said property.”[164] Moreover, the embezzlement statute reaches property “entrusted or delivered” to the defendant, and the car was “delivered” to Pittman regardless of whether it was also “entrusted.”[165] Because the evidence established that Pittman misappropriated the rental car with the requisite intent, the court affirmed Pittman’s conviction.[166]

E.  Forfeiture by Wrongdoing

In Cody v. Commonwealth, the Court of Appeals of Virginia considered whether the trial court violated Cody’s Sixth Amendment confrontation right when it granted the Commonwealth’s motion to admit out-of-court statements of the strangulation victim under the doctrine of forfeiture by wrongdoing.[167] The strangulation victim asserted her Fifth Amendment right against self-incrimination at trial, after Cody violated the protective order five times by calling the victim to ask her to drop the charges.[168]

The court of appeals held that the Confrontation Clause did not apply to the nontestimonial statements made to the 911 dispatcher and nurse, because their primary purpose was not for prosecution.[169] Although the statements made to the police were testimonial, the court found that the forfeiture by wrongdoing exception applied.[170] The court held that “the doctrine of forfeiture by wrongdoing properly applies where a defendant unlawfully contacts a witness with the successful intent to procure that witness’ unavailability, whether such unavailability is the witness’ physical absence from the court or through a witness’ refusal to testify by invoking the Fifth Amendment.”[171]

F.   Murder and Crimes of Violence

In Commonwealth v. Perkins, the Supreme Court of Virginia reversed the Court of Appeals of Virginia’s decision, which found insufficient evidence to support Perkins’s malicious wounding conviction.[172] Perkins hit the victim in the back of the head with a handgun while an accomplice punched the victim simultaneously.[173] The combined blows knocked the victim out and left him with multiple head injuries.[174] The supreme court held that the evidence supported the trial court’s determination that Perkins acted with malice, given Perkins’s unprovoked attack of the back of the defenseless victim’s head, and the fact that the force used was sufficient to render the victim unconscious and to inflict numerous injuries.[175]

In Jones v. Commonwealth, the Supreme Court of Virginia affirmed a conviction for shooting at an occupied vehicle where the appellant and his victim occupied the same vehicle.[176] Jones argued that the statute criminalizes “shooting into an occupied vehicle,” and that it was thus impossible to violate unless the defendant was located outside of the vehicle while shooting in its direction.[177] The court held that the plain language of the statute contains no such requirement, and that the location of the shooter is immaterial to the inquiry directed by the statute.[178]

G.  Driving-Related Crimes

In Chapman v. Commonwealth, the Supreme Court of Virginia summarily affirmed the Court of Appeals of Virginia’s earlier decision, which found no error in Chapman’s conviction of felony reckless driving.[179] Chapman was convicted under Virginia Code sections 46.2-852 and 46.2-868(B), the latter of which requires proof that “as the sole and proximate result of [the defendant’s] reckless driving, [the defendant] caused the death of another.”[180] The court of appeals had held that the victim-passenger’s failure to wear a seatbelt was not a proximate cause of his death, and that Chapman’s reckless driving was the “sole and proximate” cause of the victim’s death within the meaning of the statute.[181]

In Lambert v. Commonwealth, the Court of Appeals of Virginia considered whether the evidence was sufficient to support Lambert’s convictions of driving while intoxicated, in violation of Virginia Code section 18.2-266, and aggravated involuntary manslaughter, in violation of section 18.2-36.1.[182] Lambert was driving a pickup truck shortly after leaving a methadone clinic when he collided with a car driving in the other direction, resulting in the passenger’s death.[183] Forensic evidence showed Lambert was under the influence of methadone, alprazolam (Xanax), and nordiazepam.[184] Lambert claimed on appeal that the Commonwealth failed to prove that (1) the drugs in his blood were “self-administered,” relying on Jackson v. Commonwealth;[185] and (2) he had not consumed the drugs after the time of the accident.[186] The court found that Lambert’s admission that he had visited a methadone clinic shortly before the accident, after he initially denied taking any drugs before driving, entitled the factfinder to conclude that Lambert “had taken the drugs and initially lied about not consuming them to conceal his guilt.”[187]The court further found that circumstantial evidence excluded the possibility that Lambert ingested the drugs found in his blood after the time of the accident, since Lambert was not left unattended from shortly after the accident until his blood was drawn, and since his symptoms throughout that time corresponded with the depressant effects of the drugs in his system.[188]

H.  Probation Violations

In Green v. Commonwealth, the Court of Appeals of Virginia reviewed whether the circuit court had jurisdiction to revoke the appellant’s suspended sentence.[189] In 1993, Green pled guilty to felony arson and was sentenced to ten years of incarceration with nine years suspended in addition to a period of active supervised probation.[190] Green later moved to dismiss a show cause issued for conduct in 2015 on the grounds that his period of suspension had already expired, even though he was in custody for the majority of the time in question due to serving an active sentence for an unrelated crime until his release in 2014.[191]

The court of appeals reversed Green’s violation, finding that the period of suspension was not tolled by his incarceration.[192]The court additionally noted that even though the order provided that supervised probation would not commence until Green’s release from custody, there was no authority to revoke his suspended sentence because the period of probation cannot exceed the period of suspension.[193]

In Johnson v. Commonwealth, the Supreme Court of Virginia was asked to apply the tests outlined in Henderson v. Commonwealth[194] for the admissibility of hearsay in revocation proceedings.[195] The trial court admitted hearsay testimony from two young women who reported that Johnson, who was a sex offender, made inappropriate contact with them.[196] The defendant challenged the veracity of the girls’ allegations, asserting that his Confrontation Clause and Due Process rights were violated.[197]

The supreme court noted that defendants are generally entitled to cross-examine adverse witnesses at revocation proceedings unless there is good cause for not allowing confrontation.[198] Courts are to consider two overlapping tests in order to find the requisite good cause: a reliability test and a balancing test.[199] The supreme court held that the challenged statements were admissible in Johnson because there was sufficient corroboration—there were text messages to and from the defendant, Johnson worked where the girls indicated he did, and he matched their descriptions.[200]

I.   Perjury

In Gerald v. Commonwealth, the Supreme Court of Virginia determined that the evidence was sufficient to support the defendants’ perjury convictions and that Albemarle County Circuit Court was a proper venue.[201] At trial before the general district court, the Commonwealth proved that one co-defendant drove the vehicle when it got into an accident, and the other drove from the scene of the crime.[202] The Commonwealth also proved that shortly after the accident, they told a police officer that one had been driving on a suspended license.[203] However, under oath in their defense, both defendants testified that neither drove the car nor told the police officer that they had been driving or had suspended licenses.[204]

The court affirmed their convictions because

[i]n light of the detailed nature of the evidence of [the defendants’] driving with reference to the accident, it would be unreasonable to conclude that the Geralds’ denials of driving were in response to ambiguous questioning or an inquiry into their driving at a time or place other than what the Commonwealth actually sought to prove.[205]

The court also held that venue was proper because the City of Charlottesville and Albemarle County have joint jurisdiction over county property located within the City of Charlottesville, which is where the crime of perjury was committed.[206]

J.   Sex Offenders

In Turner v. Commonwealth, the Supreme Court of Virginia issued an order clarifying who must register as a sexually violent offender based on an out-of-state conviction.[207] Virginia Code section 9.1-902(F)(ii) classifies an individual as sexually violent for “any offense for which registration in a sex offender and crimes against minors registry is required under the laws of the jurisdiction where the offender was convicted.”[208] Despite Turner’s argument that the legislature did not intend to classify all out-of-state offenders as “violent,” the court found the statutory language clear and unambiguous.[209] The court affirmed his conviction and made clear that all persons convicted of such offenses out-of-state are properly classified as sexually violent within the meaning of the statute.[210]

K.  Sex Crimes

In Commonwealth v. Murgia, the Supreme Court of Virginia explained Virginia Code section 18.2‑374.3(D) requires the intent to use a communications device “for ‘the purpose of soliciting, with lascivious intent, any child [the defendant] knows or has reason to believe is at least’” fifteen, but less than eighteen, years old “‘to knowingly and intentionally’ commit one of the proscribed acts.”[211] The victim and her track coach, Murgia, communicated via text message on three different occasions.[212]During two of the texting conversations, the victim requested assistance from Murgia to improve her high jump, and Murgia responded with sexual references.[213] In the last conversation, Murgia texted her about a graphic dream he had involving her in great detail.[214] The supreme court found the evidence sufficient to show Murgia used a communications device for the purpose of soliciting the victim under those facts.[215]

In Hillman v. Commonwealth, the Court of Appeals of Virginia affirmed Hillman’s conviction for taking indecent liberties with a child.[216] Hillman, a twenty-two-year-old youth pastor, asked A.F., a fourteen-year-old youth group member, to send him a photo of her nude upper body via Snapchat, an “image messaging mobile phone application,” which automatically deletes messages shortly after they are viewed by the recipient.[217] A.F. sent Hillman the requested photo, and in return, Hillman sent A.F. photos of his erect penis via Snapchat.[218] The trial court admitted photographs taken from Hillman’s iPad of male genitalia after A.F. authenticated them as being “similar” to the photos she had received from Hillman via Snapchat.[219] Hillman challenged his indecent liberties conviction, arguing that the trial court abused its discretion by admitting the photographs, and that the evidence did not support a finding that he had exposed himself to A.F. (1) in her physical presence; and (2) contemporaneous (or “live and in real time”) with such physical presence.[220] The court rejected these arguments, finding that the law did not require either physical presence or a contemporaneous exposure, and held that any error in admitting the photos was harmless given A.F.’s testimony, Hillman’s confession, and the properly admitted text messages corroborating the Snapchat conversation.[221]

In Carr v. Commonwealth, Carr challenged the sufficiency of the evidence for his convictions of sex trafficking, conspiracy to commit trafficking, abduction, conspiracy to commit abduction, and the use of a firearm in the commission of an abduction.[222]The Court of Appeals of Virginia held that Carr was a principal in the second degree to abduction because the crime was complete when Carr and his co-conspirators forced the human trafficking victim to return under duress to the hotel.[223] Carr participated in abduction by confronting the victim and encouraging another co-conspirator to threaten her.[224] The court held that the evidence was sufficient to convict Carr of sex trafficking because he benefited from prostitution by knowingly staying in a room paid for by the proceeds of prostitution.[225]

Carr’s convictions for conspiracy to commit abduction and sex trafficking were affirmed because the evidence established that three men, including Carr, went to the hotel room armed with a handgun, confronted and castigated the victim, and forced her to return to the house.[226] The evidence also supported Carr’s conspiracy to commit sex trafficking conviction when he stayed with the group in the hotel room rented with the prostitution earnings, the men told her that “she couldn’t live for free,” the co-conspirators set up the prostitution advertisement, and Carr confronted the victim when she left prostitution and told a co-conspirator to threaten to pistol-whip her.[227] Finally, in affirming the use of a firearm in the commission of an abduction conviction, the court of appeals noted that “it is not necessary for a defendant to physically possess a firearm to be convicted . . . if the defendant was acting in concert with the gunman to commit the underlying felony.”[228]

In Cabral v. Commonwealth, the Court of Appeals of Virginia considered whether a Taser constituted a dangerous weapon under Virginia Code section 18.2-67.3.[229] Cabral used a Taser three times to attack and sexually assault a female jogger causing her injuries.[230] Relying on the plain language of the statute, the court of appeals held that the Taser was a dangerous weapon under the statute and rejected Cabral’s argument that the Commonwealth had to prove the Taser was a deadly weapon.[231]

L.   Felony Child Neglect and Endangerment

In Camp v. Commonwealth, the Court of Appeals of Virginia held that a mother’s decision to drive with her children in her vehicle while she had a blood alcohol content in excess of .25 was sufficient to support a finding that she had “committed a ‘willful act or omission in the care of [her children that] was so gross, wanton, and culpable as to show a reckless disregard for human life,’” supporting her convictions for felony child neglect under Virginia Code section 18.2-371.1(B).[232]

M.  Attempts

In Jones v. Commonwealth, the Court of Appeals of Virginia reversed an attempted robbery conviction for insufficient evidence.[233] Police observed an individual leave a car parked in a housing complex, and then observed two other men exit the car a few minutes later.[234] The individuals fled when the police identified themselves, but were ultimately apprehended.[235]Police recovered a ski mask in the car and another in a street Jones had traveled before being stopped.[236] Police also found a sawed-off shotgun where they saw Jones running.[237] Jones admitted going to the housing complex to make sure that the co-defendant “didn’t get hurt” while he “rob[bed] a known drug dealer.”[238]

The court found that the Commonwealth failed to prove an act in furtherance of criminal intent.[239] The Commonwealth must prove “a direct, but ineffectual, act to accomplish the crime.”[240] Such an act must reach “far enough toward the accomplishment of the desired result to amount to the commencement of the consummation,” or, in other words, an “action that begins (commences) the execution (consummation) of one or more elements of a crime but does not complete all of them.”[241]The court rejected the Commonwealth’s argument that any slight act done in furtherance of a defendant’s criminal intent would be sufficient.[242] The majority found that the overt act, however slight, must still implicate one or more elements of the offense in order to sustain an attempt conviction.[243]

N.  Evidence

In Melick v. Commonwealth, the Court of Appeals of Virginia delineated who may authenticate business records as a hearsay exception.[244] Melick argued that records stored on an online database were improperly admitted.[245] The court found that information stored by an entity other than the one which created it does not alter the “nature of the records.”[246] The character of the information does not change simply because the business records in question were uploaded onto a database, so the creator of the record could still authenticate it.[247] Although the record did not show precisely who uploaded the information or when, the court concluded that there was sufficient evidence that the information came from the clerk who conducted the transaction and there were guarantees of trustworthiness surrounding the information to satisfy the contemporaneousness requirement of the hearsay exception.[248] The court also explained that a custodian of records was not needed for authentication so long as the supporting witness was “qualified.”[249]

O.  Miscellaneous

In Brown v. Commonwealth, the Court of Appeals of Virginia reviewed a defendant’s convictions for use of a firearm, attempted murder, capital murder, and attempted capital murder.[250] Although Brown argued that the trial court erred in denying him access to preceding years’ grand jury lists, the court of appeals determined any error was harmless because a finding of guilt renders harmless any defect in the composition of a grand jury, absent structural constitutional errors.[251] The court explained that no authoritative tribunal has yet held that a defendant may make a Sixth Amendment fair-cross-section challenge against a state’s grand jury procedures, and he otherwise had no right to the information.[252] Moreover, Brown made no attempt to limit or tailor his request to his indictment year, given the valid privacy concerns at play.[253] As a result, given that Brown had no right to receive the information and the relevant issues at trial, the court reasoned that the trial court did not abuse its discretion in denying Brown’s motion.[254]

The court of appeals also affirmed the trial court’s denial of Brown’s motion to change venue, finding that the defendant did not overcome the presumption that he would receive a fair trial in the county he was tried in.[255] The trial court also did not err in denying Brown’s motion to strike prospective jurors for cause because any tentative opinions formed by the jurors were that the appellant shot the victim—which was not a fact in controversy.[256] The court additionally rejected Brown’s argument that the evidence was insufficient to determine that the appellant murdered his victim, a law enforcement officer, with the purpose of interfering with the performance of his official duties.[257] The court further found that there was no error in the denial of Brown’s proffered instruction on second-degree murder  because  “no  evidence . . . support[ed] a finding that appellant acted without willfulness, deliberation, or premeditation.”[258] The court also made clear that criminal discovery requires disclosure of volunteered statements or confessions made to law enforcement only in response to police questions, and not those to a police officer made in open court that the officer only happens to hear.[259]

P.   Affirmative Defenses

In Davis v. Commonwealth, the Court of Appeals of Virginia decided whether a juvenile and domestic relations judge’s statement could give rise to an affirmative defense of reasonable reliance.[260] Davis was the subject of a protective order, which he and his wife believed had been dismissed based on an order dismissing “all petitions.”[261] Later, Davis was stopped while transporting a firearm and was charged with possessing a firearm while subject to a protective order in violation of Virginia Code section 18.2-308.1:4(B).[262] The court reversed the trial court’s decision not to provide a reasonable reliance jury instruction, finding that judges qualify as government officials and have a “duty to interpret and apply the law and therefore their statements can implicate the reasonable reliance defense.”[263]

III.  Legislation

A.  Venue

The 2019 General Assembly expanded venue for the prosecution of certain credit card offenses in Virginia Code section 18.2-198.1 to include the jurisdiction where the cardholder victim resides.[264] The General Assembly also expanded venue for forgery prosecutions to include “any county or city . . . where an issuer, acquirer, or account holder sustained a financial loss.”[265]

The General Assembly additionally modified the transferability of juvenile delinquency cases to the juvenile’s home jurisdiction to allow courts to transfer cases after a finding of “facts sufficient” for a finding of delinquency.[266]

B.  Sex Offenses

The General Assembly passed legislation creating a Class 1 misdemeanor for a travel agent to knowingly promote travel services for the purposes of prostitution or certain sexually violent offenses.[267]

C.  Expungement

The 2019 General Assembly passed new legislation providing for automatic expungement when someone is absolutely pardoned for a crime that he or she has been found to be actually innocent of.[268] The Secretary of the Commonwealth is required to forward a copy of any such absolute pardon to the circuit court where the person was originally convicted.[269]

D.  Bail

The General Assembly passed a bill to address bail determinations on appeal.[270] If a higher court decides bail, the bail determination is to be remanded to the court in which the case is pending for any subsequent enforcement and modification.[271]The lower court, upon remand, may not modify the bail decision of the higher court absent a change in circumstances.[272]Further, if the matter is pending in a court not of record, bond modifications should first be heard in that court unless: (i) the bail decision is on appeal; (ii) the charge has been transferred to a circuit court; or (iii) such charge has been certified by a district court.[273]

E.  Grand Juries

The 2019 General Assembly made clear that any person granted permission to make notes or copy evidence in a multi-jurisdiction grand jury “shall maintain the secrecy of all information obtained” from it, except for necessary disclosures for use in a criminal investigation or proceeding.[274] Prosecutors must notify a defendant indicted by the multi-jurisdiction grand jury that it was used to obtain evidence.[275]

F.   Protective Orders

The 2019 General Assembly created an “acts of god” exception to the requirement that preliminary protective orders be heard within fifteen days of the issuance of the preliminary order, providing that the order shall remain in effect until another protective order is entered.[276] The General Assembly also created a requirement for courts to state the basis for the issuance of preliminary protective orders arising out of ex parte hearings in certain circumstances.[277]

G.  Homicide

The General Assembly created new legislation requiring that anyone who was an adult on their offense date who commits capital murder of a law enforcement officer or certain other public safety officials shall be sentenced to a mandatory minimum term of imprisonment for life.[278]

H.  Traffic Offenses and Driving Under the Influence

The 2019 General Assembly created another class of felony, a Class 6 felony, for when a defendant is guilty of maiming while driving under the influence, and it results in “serious bodily injury.”[279] The act provides that if the driver acts in a manner which is “so gross, wanton, and culpable as to show a reckless disregard for human life,” the individual is guilty even if he or she does not intentionally cause the injury.[280] Serious bodily injury is defined as “bodily injury that involves substantial risk of death, extreme physical pain, protracted and obvious disfigurement, or protracted loss or impairment of the function of a bodily member, organ, or mental faculty.”[281]

New legislation makes it unlawful to use a personal communications device when a driver holds such a device in his hand while driving in a highway work zone.[282] A new law also makes a driver’s failure to yield the closest lane to, or slow down for, a stationary vehicle on a shoulder either a traffic infraction or a criminal reckless driving offense.[283]

I.   Drug Offenses

The 2019 General Assembly repealed the requirement that an individual “substantially cooperate” in a criminal investigation in order to be eligible for the affirmative defense for possession crimes under Virginia Code section 18.2-251.03.[284]

The General Assembly also amended several laws governing the minimum age to purchase, possess, or sell tobacco products, nicotine vapor products, and alternative nicotine products, raising the minimum age from eighteen to twenty-one.[285] The amendments exempt active duty military personnel who are eighteen or older from the increased minimum age.[286]

J.   Drones

The 2019 General Assembly added a new subpart to the statute criminalizing drone trespass, making it a Class 1 misdemeanor to take off or land in violation of federal regulations.[287]

The General Assembly also amended the law governing when police officers must obtain a warrant to use a drone, allowing police to use drones without a warrant to (a) aerially survey the primary residence of the subject of an arrest warrant to formulate a plan to execute an existing arrest warrant or capias; or (b) locate a person sought for arrest when law enforcement remains in hot pursuit of the person following their flight.[288]

K.  Animal Cruelty and Related Legislation

The 2019 General Assembly passed several laws protecting animals. It expanded the Class 6 felony for animal abuse to include abuse of a companion animal when the animal is seriously injured but does not die.[289] Additionally, animal control officers are now allowed to confiscate any tethered cock or any other animal that they determine has been used in animal fighting.[290]

L.   Miscellaneous Crimes

The 2019 General Assembly created a misdemeanor for any person who, with the intent to defraud, intimidate, or harass, causes a telephone to ring and engages in conduct resulting in the display of false caller identification information.[291]

The General Assembly added health care workers to the class of victims outlined in Virginia Code section 18.2-60.[292] That section provides that where a person makes an oral threat to kill or cause bodily injury to both school employees and health care workers engaged in the course of their official duties, he or she is guilty of a Class 1 misdemeanor.[293]

The General Assembly also modified the definition of gambling outlined in section 18.2‑325.[294] Illegal gambling now includes betting or wagering of any “consideration” made in exchange for a “chance to win a prize, stake, or other consideration or thing of value” by operating a gambling device “regardless of whether the chance to win such prize, stake, or other consideration or thing of value may be offered in the absence of a purchase.”[295]

Under new legislation, it is a Class 1 misdemeanor to simulate a crime in public, with the intent to mislead police, causing someone who is unaware the crime is fake to call in a report to police.[296]

A new law specifies that failure to appear to court for a criminal offense is punishable under section 18.2-456 and is not punishable under section 16.1-69.24.[297]

M.  Sex Offenders and Registration

The 2019 General Assembly passed a statute prohibiting any person required to register on the Sex Offender and Crimes Against Minors Registry (or its federal equivalent) from operating a taxicab for the transportation of passengers for hire.[298]

 

The General Assembly also changed the timeframe for the re-registration of sex offenders, requiring offenders to re-register according to categories assigned by their birth month and last name.[299]

N.  Sex Crimes

Virginia Code section 18.2-386.2, criminalizing the dissemination of certain nude videos or pictures of another with the intent to coerce, harass, or intimidate, now includes people who modify photos  and  videos  with  the intent  to  depict  the  subject  of  the image.[300]

O.  Child Victims and Abuse

The legislature passed a law adding ministers, priests, rabbis, imam, and other clergy members to the list of people required to report suspected child abuse or neglect, unless the clergy member is required by the doctrine of the religious organization to keep that information confidential, or the information would be subject to certain evidentiary exemptions.[301]

The General Assembly also confirmed child victims of commercial sex trafficking or prostitution will be allowed to testify by a two-way, closed-circuit television.[302]

P.   Elder Abuse

The 2019 General Assembly clarified that the informed consent exemption to elder abuse requires that the incapacitated adult must have given the consent when the adult had capacity.[303]

Q.  Testing

Finally, the 2019 General Assembly created a tracking system for Physical Evidence Recovery Kits (“PERK”).[304] Health care providers are required to inform sexual assault victims of their unique identification numbers and to provide them with information regarding the system, which is otherwise confidential and not subject to disclosure under the Freedom of Information Act.[305]

 


*   Assistant Attorney General, Criminal Appeals Section, Office of the Attorney General, Commonwealth of Virginia. J.D., 2013, University of Richmond School of Law; B.A., 2009, University of Virginia.

  **     Assistant Attorney General, Criminal Appeals Section, Office of the Attorney General, Commonwealth of Virginia. J.D., 2015, Regent University School of Law; B.S., 2009, Central Christian College of Kansas.

***     Assistant Attorney General, Criminal Appeals Section, Office of the Attorney General, Commonwealth of Virginia. J.D., 2016, Washington & Lee University School of Law; B.A., 2013, University of Notre Dame.

        [1].    297 Va. 133, 135–36, 823 S.E.2d 243, 245–46 (2019).

        [2].    Id. at 136–37, 823 S.E.2d at 246.

        [3].    Id. at 140, 823 S.E.2d at 248.

        [4].    Id. at 140–41, 823 S.E.2d at 248.

        [5].    Id. at 141–42, 823 S.E.2d at 249.

        [6].    296 Va. 450, 459, 821 S.E.2d 543, 548 (2018).

        [7].    Id. at 458, 821 S.E.2d at 547–48.

        [8].    Id. at 458–59, 821 S.E.2d at 547–48.

        [9].    Id. at 462, 821 S.E.2d at 549.

      [10].    Id. at 462, 821 S.E.2d at 549.

      [11].    Id. at 463, 821 S.E.2d at 549.

      [12].    69 Va. App. 780, 780–81, 823 S.E.2d 43, 44 (2019) (en banc); Lienau v. Commonwealth, 69 Va. App.  254, 260, 818 S.E.2d 58, 60–61 (2018).

      [13].    Lienau, 69 Va. App. at 263, 268, 818 S.E.2d at 62, 64–65.

      [14].    Id. at 268–69, 818 S.E.2d at 65.

  [15].    I  d. at 269–70, 273, 275, 818 S.E.2d at 65, 67–68.

      [16].    296 Va. 387, 387, 821 S.E.2d 529, 530 (2018).

      [17].    Id. at 387, 821 S.E.2d at 530.

      [18].    Id. at 388, 821 S.E.2d at 530.

      [19].    Id. at 388–89, 821 S.E.2d at 530–31.

      [20].    Id. at 390, 821 S.E.2d at 531.

      [21].    Id. at 390, 821 S.E.2d at 531.

      [22].    See Merritt v. Commonwealth, 69 Va. App. 452, 459–61, 820 S.E.2d 379, 382–83 (2018) (citing Va. Sup. Ct. R. 5A:18 (Repl. Vol. 2019)).

      [23].    Id. at 461, 820 S.E.2d at 383.

      [24].    Id. at 455–56, 820 S.E.2d at 380–81 (citing Lawson v. Commonwealth, 38 Va. App. 93, 561 S.E.2d 775 (2002)).

      [25].    Id. at 456–57, 461, 820 S.E.2d at 381, 383.

      [26].    Id. at 461–62, 820 S.E.2d at 383–84.

      [27].    826 S.E.2d 883, 886, 888 (2019).

      [28].    Id. at 886.

      [29].    Id.

      [30].    Id. at 887.

      [31].    Id. at 887–88.

      [32].    69 Va. App. 89, 92, 815 S.E.2d 816, 817 (2018). The Court also considered whether Thomason’s sentencing was an abuse of discretion and held there was no abuse of discretion because the sentence was within the statutory limitations. Id. at 98–99, 815 S.E.2d at 820.

      [33].    Id. at 93, 815 S.E.2d at 817–18.

      [34].    Parris v. Commonwealth, 189 Va. 321, 52 S.E.2d 872 (1949).

      [35].    Thomason, 69 Va. App. at 96, 99, 815 S.E.2d at 819, 820–21.

      [36].    Id. at 96, 815 S.E.2d at 819 (discussing Williams v. Commonwealth, 59 Va. App. 238, 717 S.E.2d 837 (2011)).

      [37].    68 Va. App. 736, 740–41, 813 S.E.2d 552, 554 (2018).

      [38].    Id. at 738–39, 813 S.E.2d at 553–54.

      [39].    Id. at 741–45, 813 S.E.2d at 555–57.

      [40].    296 Va. 577, 580, 583, 586, 821 S.E.2d 921, 923–24, 926 (2018).

      [41].    Id. at 580, 821 S.E.2d at 923.

      [42].    Id. at 580, 821 S.E.2d at 923 (emphasis omitted).

      [43].    Id. at 580–81, 821 S.E.2d at 923.

      [44].    Id. at 583, 586–88, 821 S.E.2d at 924, 926–27. The court cautioned, however, that trial courts may consider a disclosure’s last-minute nature as an indication that it is not truthful or complete. Id. at 586–88, 821 S.E.2d at 926–27.

      [45].    297 Va. 100, 100–01, 823 S.E.2d 241, 241–42 (2019).

      [46].    Id. at 102, 823 S.E.2d at 243.

      [47].    Id. at 102–03, 823 S.E.2d at 243.

      [48].    Id. at 101–03, 823 S.E.2d at 242–43.

      [49].    Id. at 103, 823 S.E.2d at 243.

      [50].    Id. at 103, 823 S.E.2d at 243.

      [51].    296 Va. 309, 311–13, 318, 819 S.E.2d 652, 653, 656 (2018).

      [52].    Id. at 314–16, 819 S.E.2d at 654–55 (emphasis omitted).

      [53].    296 Va. 301, 303, 819 S.E.2d 437, 438 (2018).

      [54].    Id. at 306–07, 819 S.E.2d at 439–40.

      [55].    Id. at 307, 819 S.E.2d at 440.

      [56].    68 Va. App. 602, 604–05, 811 S.E.2d 861, 862–63.

      [57].    Id. at 607, 811 S.E.2d at 864.

      [58].    Id. at 608, 811 S.E.2d at 864.

      [59].    Id. at 609, 811 S.E.2d at 865.

      [60].    Id. at 609, 811 S.E.2d at 865.

      [61].    69 Va. App. 685, 687–88, 822 S.E.2d 679, 680–81 (2019).

      [62].    Id. at 687, 882 S.E.2d at 680–81.

      [63].    Id. at 690, 882 S.E.2d at 682.

      [64].    Id. at 691, 882 S.E.2d at 682–83.

      [65].    68 Va. App. 706, 708, 813 S.E.2d 16, 17 (2018).

      [66].    Id. at 708, 813 S.E.2d at 17.

      [67].    Id. at 708, 813 S.E.2d at 17.

      [68].    Id. at 709, 710 n.2, 813 S.E.2d at 18, 18 n.2.

      [69].    Id. at 715–16, 813 S.E.2d at 21.

      [70].    69 Va. App. 75, 78–79, 815 S.E.2d 809, 810–11 (2018).

      [71].    Id. at 78, 815 S.E.2d at 810.

      [72].    Id. at 79–80, 815 S.E.2d at 810–11.

      [73].    Id. at 80–81, 815 S.E.2d at 811–12.

      [74].    Id. at 84–89, 815 S.E.2d at 813–16.

      [75].    Batson v. Kentucky, 476 U.S. 79 (1986).

      [76].    69 Va. App. 176, 181, 197–98, 817 S.E.2d 343, 345–46, 354 (2018). The court also considered whether the evidence was sufficient to convict Hamilton of obstruction of justice and whether the trial court erred in issuing a jury instruction. The court held the evidence was sufficient and Hamilton invited error when he requested the jury instruction. Id. at 198, 817 S.E.2d at 354.

      [77].    Id. at 182, 817 S.E.2d at 346.

      [78].    Id. at 190, 817 S.E.2d at 350.

      [79].    295 Va. 616, 618, 816 S.E.2d 587, 588 (2018).

      [80].    Id. at 619, 816 S.E.2d at 588.

      [81].    Id. at 619, 816 S.E.2d at 588.

      [82].    Id. at 619–20, 816 S.E.2d at 588–89.

      [83].    Id. at 623, 816 S.E.2d at 591.

      [84].    Id. at 623, 816 S.E.2d at 590–91.

      [85].    297 Va. 207, 211, 824 S.E.2d 485, 487 (2019) (citing Collins v. Virginia, 138 S. Ct. 1663, 1668 (2018)).

      [86].    305 U.S. 251 (1938).

      [87].    Collins, 297 Va. at 219–20, 224–25, 824 S.E.2d at 491–92, 494–95.

      [88].    Id. at 225, 824 S.E.2d at 495.

      [89].    68 Va. App. 517, 520, 810 S.E.2d 905, 907 (2018).

      [90].    Id. at 521, 810 S.E.2d at 907.

      [91].    Id. at 520–22, 810 S.E.2d at 907–08.

      [92].    Id. at 520–21, 810 S.E.2d at 907.

      [93].    Id. at 520, 810 S.E.2d at 907.

      [94].    Id. at 528–29, 810 S.E.2d at 911. The court of appeals did not make a finding as to whether the good faith exception applied, which was the rationale used by the lower court. Id. at 528–29, 810 S.E.2d at 911.

      [95].    69 Va. App. 749, 753, 823 S.E.2d 28, 30–31 (2019).

      [96].    Id. at 754, 823 S.E.2d at 31.

      [97].    Id. at 754–55, 823 S.E.2d at 31.

      [98].    Id. at 755, 823 S.E.2d at 31.

      [99].    Id. at 755–56, 823 S.E.2d at 31–32.

    [100].    Id. at 755, 823 S.E.2d at 31–32.

    [101].    Id. at 760–65, 823 S.E.2d at 34–36. The court also held that the evidence presented at trial was sufficient to support Carlson’s conviction, and that he was thus entitled to remand for a new trial without the tainted evidence rather than a final judgment of acquittal. Id. at 765–67, 823 S.E.2d at 36–37.

    [102].    69 Va. App. 422, 437, 819 S.E.2d 870, 877 (2018).

    [103].    Id. at 426–27, 819 S.E.2d at 872.

    [104].    Id. at 427, 819 S.E.2d at 872.

    [105].    Id. at 427–28, 819 S.E.2d at 872–73.

    [106].    Id. at 431–36, 819 S.E.2d at 874–77.

    [107].    69 Va. App. 30, 34, 813 S.E.2d 916, 917–18 (2018).

    [108].    Id. at 34, 813 S.E.2d at 918.

    [109].    Id. at 34, 813 S.E.2d at 918.

    [110].    Id. at 35, 813 S.E.2d at 918.

    [111].    Id. at 42, 813 S.E.2d at 921–22.

    [112].    296 Va. 204, 208–09, 819 S.E.2d 234, 237 (2018).

    [113].    384 U.S. 436 (1966).

    [114].    542 U.S. 600 (2004).

    [115].    470 U.S. 298 (1985).

    [116].    Secret, 296 Va. at 208–09, 810 S.E.2d at 237.

    [117].    Id. at 209–12, 810 S.E.2d at 237–39.

    [118].    Id. at 212, 810 S.E.2d at 238–39.

    [119].    Id. at 224, 810 S.E.2d at 245–46.

    [120].    Id. at 225–27, 810 S.E.2d at 246–47.

    [121].    Id. at 227–31, 810 S.E.2d at 247–50.

    [122].    296 Va. 15, 18, 817 S.E.2d 309, 310–11 (2018).

    [123].    Id. at 20, 27, 817 S.E.2d at 312, 316.

    [124].    Id. at 27, 817 S.E.2d at 316.

    [125].    Id. at 27, 817 S.E.2d at 315.

    [126].    Id. at 28–30, 817 S.E.2d at 317.

    [127].    Id. at 29–30, 817 S.E.2d at 317.

    [128].    827 S.E.2d 772, 775 (2019).

    [129].    Id. at 774.

    [130].    Id.

    [131].    Id.

    [132].    Id. at 776.

    [133].    Id. at 777 (quoting Duckworth v. Eagan, 492 U.S. 195, 204 (1989)).

    [134].    295 Va. 564, 567, 816 S.E.2d 277, 278 (2018).

    [135].    Id. at 567–68, 816 S.E.2d at 278.

    [136].    284 U.S. 299, 304 (1932); Severance, 295 Va. at 568, 816 S.E.2d at 278–79.

    [137].    Severance, 295 Va. at 567, 570–71, 816 S.E.2d at 278, 280.

    [138].    Id. at 568, 576, 816 S.E.2d at 279, 283.

    [139].    69 Va. App. 648, 650, 822 S.E.2d 389, 391 (2019).

    [140].    Id. at 650–51, 822 S.E.2d at 391.

    [141].    Id. at 658, 822 S.E.2d at 394–95.

    [142].    Id. at 656–57, 822 S.E.2d at 393–94 (quoting United States v. Castleman, 572 U.S. 157, 168 (2014)).

    [143].    69 Va. App. 617, 621, 822 S.E.2d 375, 377 (2019).

    [144].    Id. at 621, 822 S.E.2d at 377.

    [145].    Id. at 623, 627, 822 S.E.2d at 378–80.

    [146].    Id. at 626, 631–32, 822 S.E.2d at 379–82.

    [147].    Id. at 631, 822 S.E.2d at 381.

    [148].    295 Va. 454, 458, 813 S.E.2d 732, 733 (2018).

    [149].    Va. Code Ann. § 18.2-57.2(B) (Repl. Vol. 2014).

    [150].    Lewis, 295 Va. at 461, 831 S.E.2d at 735.

    [151].    69 Va. App. 604, 606, 822 S.E.2d 368, 369 (2019).

    [152].    Id. at 613–15, 822 S.E.2d at 373–74.

    [153].    Id. at 613, 822 S.E.2d at 373.

    [154].    Id. at 613, 822 S.E.2d at 373.

    [155].    69 Va. App. 149, 156–57, 817 S.E.2d 330, 334 (2018).

    [156].    Id. at 159, 817 S.E.2d at 335 (relying on Thomas v. Commonwealth, 48 Va. App. 605, 609, 633 S.E.2d 229, 231 (2006); Edmonds v. Commonwealth, 43 Va. App. 197, 200, 597 S.E.2d 210, 211 (2004); Hunter v. Commonwealth, 15 Va. App. 717, 721–22, 427 S.E.2d 197, 200 (1993) (en banc)).

    [157].    Id. at 165–66, 817 S.E.2d at 338.

    [158].    Id. at 166, 817 S.E.2d at 338–39.

    [159].    296 Va. 489, 493–94, 821 S.E.2d 700, 702 (2018).

    [160].    Id. at 507, 821 S.E.2d at 709.

    [161].    Id. at 507–08, 821 S.E.2d at 709–10.

    [162].    69 Va. App. 632, 635–36, 638–39, 822 S.E.2d 382, 384–85 (2019).

    [163].    Id. at 633–34, 822 S.E.2d at 383.

    [164].    Id. at 635–36, 638, 822 S.E.2d at 384–85 (citing Rooney v. Commonwealth, 27 Va. App. 634, 644, 500 S.E.2d 830 (1998)).

    [165].    Id. at 636–37, 822 S.E.2d at 384–85 (emphasis omitted).

    [166].    Id. at 638, 822 S.E.2d at 385.

    [167].    68 Va. App. 638, 644, 812 S.E.2d 466, 469 (2018).

    [168].    Id. at 647–51, 812 S.E.2d at 470–72.

    [169].    Id. at 657–62, 812 S.E.2d at 475–78.

    [170].    Id. at 665–72, 812 S.E.2d at 479–83.

    [171].    Id. at 671, 812 S.E.2d at 482.

    [172].    295 Va. 323, 323, 812 S.E.2d 212, 214 (2018) (per curiam).

    [173].    Id. at 325, 812 S.E.2d at 215.

    [174].    Id. at 325, 812 S.E.2d at 215.

    [175].    Id. at 330–33, 812 S.E.2d at 218–19.

    [176].    296 Va. 412, 414, 821 S.E.2d 540, 541 (2018).

    [177].    Id. at 415, 821 S.E.2d at 542.

    [178].    Id. at 415–17, 821 S.E.2d at 542–43.

    [179].    296 Va. 386, 386, 820 S.E.2d 611, 611 (2018).

    [180].    Chapman v. Commonwealth, 68 Va. App. 131, 133–34, 804 S.E.2d 326, 327–38 (2017).

    [181].    Id. at 145, 804 S.E.2d at 333.

    [182].    70 Va. App. 54, 57, 824 S.E.2d 18, 20 (2019).

    [183].    Id. at 57–59, 824 S.E.2d at 20–21.

    [184].    Id. at 59, 824 S.E.2d at 21.

    [185].    274 Va. 630, 652 S.E.2d 111 (2007).

    [186].    Lambert, 70 Va. App. at 63, 65, 824 S.E.2d at 24.

    [187].    Id. at 64, 824 S.E.2d at 24.

    [188].    Id. at 65–67, 824 S.E.2d at 24. The court also rejected Lambert’s argument that the trial court erred by excluding impeachment evidence regarding a police witness’s unspecified criminal charge and suspension from the Virginia State Police (he was subsequently convicted of soliciting a prostitute and dismissed from the force), on the grounds that the proffered evidence was expressly prohibited by Virginia Supreme Court Rule 2:608(b). Id. at 60–62, 824 S.E.2d at 21–22.

    [189].    69 Va. App. 99, 101, 815 S.E.2d 821, 822 (2018).

    [190].    Id. at 102, 815 S.E.2d at 822.

    [191].    Id. at 101–02, 815 S.E.2d at 822.

    [192].    Id. at 104–05, 815 S.E.2d at 823.

    [193].    Id. at 104–05, 815 S.E.2d at 823.

    [194].    285 Va. 318, 327–28, 736 S.E.2d 901, 906 (2013).

    [195].    296 Va. 266, 270, 274, 819 S.E.2d 425, 427, 429 (2018).

    [196].    Id. at 269–70, 819 S.E.2d at 426–27.

    [197].    Id. at 270, 819 S.E.2d at 427.

    [198].    Id. at 275, 819 S.E.2d at 430 (citing Black v. Romano, 471 U.S. 606, 612 (1985)).

    [199].    Id. at 275–76, 819 S.E.2d at 430 (citing Henderson, 285 Va. at 327–28, 736 S.E.2d at 906).

    [200].    Id. at 279, 819 S.E.2d at 432.

    [201].    295 Va. 469, 486, 813 S.E.2d 722, 731–32 (2018).

    [202].    Id. at 480, 813 S.E.2d at 727.

    [203].    Id. at 480, 813 S.E.2d at 727–28.

    [204].    Id. at 480, 813 S.E.2d at 727–28.

    [205].    Id. at 481–82, 813 S.E.2d at 728.

    [206].    Id. at 483–85, 813 S.E.2d at 729–31.

    [207].    826 S.E.2d 307, 308 (2019).

    [208].    Va. Code Ann. § 9.1-902(F)(ii) (Cum. Supp. 2019).

    [209].    Turner, 826 S.E.2d at 309.

    [210].    Id. at 310.

    [211].    827 S.E.2d 377, 383 (2019) (quoting Va. Code Ann. § 18.2-374.3(D) (Repl. Vol. 2014)).

    [212].    Id. at 380.

    [213].    Id.

    [214].    Id. at 380–81.

    [215].    Id. at 384.

    [216].    68 Va. App. 585, 589, 811 S.E.2d 853, 855 (2018).

    [217].    Id. at 589–91 & 589 n.1, 811 S.E.2d at 855–56 & 855 n.1 (quoting State v. Bariteau, 884 N.W.2d 169, 172 n.1 (S.D. 2016)).

    [218].    Id. at 590, 811 S.E.2d at 856. Hillman and A.F. exchanged additional photos and videos showing both persons nude. Id. at 590, 811 S.E.2d at 856.

    [219].    Id. at 590–91, 811 S.E.2d at 856.

    [220].    Id. at 594, 600, 811 S.E.2d at 857, 861.

    [221].    Id. at 594–99, 601–02, 811 S.E.2d at 858–61.

    [222].    69 Va. App. 106, 110, 816 S.E.2d 591, 593–94 (2018).

    [223].    Id. at 115, 816 S.E.2d at 596.

    [224].    Id. at 114–15, 816 S.E.2d at 596.

    [225].    Id. at 117, 816 S.E.2d at 597.

    [226].    Id. at 117–19, 816 S.E.2d at 597–98.

    [227].    Id. at 119–20, 816 S.E.2d at 598.

    [228].    Id. at 120–21, 816 S.E.2d at 599.

    [229].    69 Va. App. 67, 69–70, 815 S.E.2d 805, 806 (2018).

    [230].    Id. at 69–70, 815 S.E.2d at 806.

    [231].    Id. at 72–74, 815 S.E.2d at 808–09.

    [232].    68 Va. App. 694, 701–02, 705­–06, 813 S.E.2d 10, 14, 16 (2018) (quoting Va. Code Ann. § 18.2-371.1(B)(1) (Cum. Supp. 2016)). The court distinguished Camp’s conduct from the result in Coomer v. Commonwealth, finding that while Coomer’s blood alcohol content level (between .09 and .11) did not support conviction standing alone, “[Camp’s] level of intoxication was more than three times the legal limit . . . and approximately two and a half times the level in Coomer” and therefore “sufficient to support [Camp]’s convictions.” Id. at 704–06, 813 S.E.2d at 15–16 (referencing Coomer v. Commonwealth, 67 Va. App. 537, 797 S.E.2d 787 (2017)).

    [233].    70 Va. App. 307, 334, 826 S.E.2d 908, 922 (2019) (en banc).

    [234].    Id. at 312, 826 S.E.2d at 911.

    [235].    Id. at 312, 826 S.E.2d at 911.

    [236].    Id. at 312–13, 826 S.E.2d at 911.

    [237].    Id. at 313, 826 S.E.2d at 911.

    [238].    Id. at 313, 826 S.E.2d at 911.

    [239].    Id. at 331, 826 S.E.2d at 920.

    [240].    Id. at 318, 826 S.E.2d at 914 (quoting Pitt v. Commonwealth, 260 Va. 692, 695, 539 S.E.2d 77, 79 (2000)).

    [241].    Id. at 319, 826 S.E.2d at 914 (quoting Jay v. Commonwealth, 275 Va. 510, 526, 659 S.E.2d 311, 320 (2008)).

    [242].    Id. at 325, 826 S.E.2d at 917.

    [243].    Id. at 326, 826 S.E.2d at 917–18. While the concurrence would also have found the evidence insufficient, it disagreed with the overt act definition provided by the majority, asserting it runs counter to Supreme Court of Virginia precedent. Id. at 335–36, 826 S.E.2d at 922–23.

    [244].    69 Va. App. 122, 135, 816 S.E.2d 599, 605 (2018). The Court also rejected Melick’s sufficiency argument, finding that the victim’s testimony that the stolen items were valued at more than $200 was sufficient. Id. at 147, 816 S.E.2d at 611.

    [245].    Id. at 133, 816 S.E.2d at 605.

    [246].    Id. at 135, 816 S.E.2d at 606.

    [247].    Id. at 135–36, 816 S.E.2d at 606.

    [248].    Id. at 137–39, 816 S.E.2d at 607.

    [249].    Id. at 141–42, 816 S.E.2d at 609.

    [250].    68 Va. App. 746, 757, 813 S.E.2d 557, 562 (2018).

    [251].    Id. at 770, 813 S.E.2d at 568.

    [252].    Id. at 774–75, 813 S.E.2d at 570–71.

    [253].    Id. at 775, 813 S.E.2d at 571.

    [254].    Id. at 776, 813 S.E.2d at 571.

    [255].    Id. at 776, 813 S.E.2d at 571.

    [256].    Id. at 783–86, 813 S.E.2d at 575–76.

    [257].    Id. at 786, 813 S.E.2d at 576.

    [258].    Id. at 789, 791, 813 S.E.2d at 578.

    [259].    Id. at 792–93, 813 S.E.2d at 579–80. The court also found there was no error in the trial court’s denial of Brown’s motion to set aside because the jury was entitled to disbelieve the defense’s expert testimony that he was legally insane at the time of the offense. Id. at 794–95, 813 S.E.2d at 580.

    [260].    68 Va. App. 725, 728, 813 S.E.2d 547, 548 (2018).

    [261].    Id. at 728–29, 813 S.E.2d at 548–49 (emphasis omitted).

    [262].    Id. at 728–29, 813 S.E.2d at 548–49.

    [263].    Id. at 733–34, 813 S.E.2d at 551.

    [264].    Act of Feb. 27, 2019, ch. 177, 2019 Va. Acts __, __ (codified as amended at Va. Code Ann. § 18.2-198.1 (Cum. Supp. 2019)). Previously, venue only lay where any act in furtherance of the crime occurred or where an issuer, acquirer, or an agent sustained a financial loss. Va. Code Ann. § 18.2-198.1 (Repl. Vol. 2017).

    [265].    Act of Feb. 19, 2019, ch. 46, 2019 Va. Acts __, __ (codified as amended at Va. Code Ann. § 19.2-245.1 (Cum. Supp. 2019)).

    [266].    Act of Mar. 5, 2019, ch. 235, 2019 Va. Acts __, __ (codified as amended at Va. Code Ann. § 16.1-243 (Cum. Supp. 2019)).

    [267].    Act of Mar. 18, 2019, ch. 458, 2019 Va. Acts __, __ (codified as amended at Va. Code Ann. § 18.2-348.1 (Cum. Supp. 2019)).

    [268].    Act of Feb. 27, 2019, ch. 181, 2019 Va. Acts __, __ (codified as amended at Va. Code Ann. §§ 2.2-402, 19.2-392.2 (Cum. Supp. 2019)). Previously, an individual had to petition for expungement. Va. Code Ann. § 2.2-402 (Repl. Vol. 2017); id. § 19.2-392.2 (Cum. Supp. 2016).

    [269].    Ch. 181, 2019 Va. Acts at __.

    [270].    Act of Mar. 19, 2019, ch. 616, 2019 Va. Acts __, __ (codified as amended at Va. Code Ann. §§ 19.2-124, -130, -132 (Cum. Supp. 2019)).

    [271].    Id. ch. 616, 2019 Va. Acts at __.

    [272].    Id. ch. 616, 2019 Va. Acts at __.

    [273].    Id. ch. 616, 2019 Va. Acts at __.

    [274].    Act of Mar. 18, 2019, ch. 522, 2019 Va. Acts __, __ (codified as amended at Va. Code Ann. § 19.2-215.9 (Cum. Supp. 2019)).

    [275].    Id. ch. 522, 2019 Va. Acts at __.

    [276].    Act of Mar. 5, 2019, ch. 197, 2019 Va. Acts __, __ (codified as amended at Va. Code Ann. §§ 16.1-253.1, 19.2-152.9 (Cum. Supp. 2019)).

    [277].    Act of Mar. 21, 2019, ch. 718, 2019 Va. Acts __, __ (codified as amended at Va. Code Ann. §§ 16.1-112, -253.1, -296, 19.2-152.9 (Cum. Supp. 2019)). If the petition is filed without an affidavit or a form completed by a law enforcement officer which includes the basis for the order, and is instead based upon sworn testimony, the order must state the basis on which it was entered, including a summary of the allegations made and the court’s findings. Id. ch. 718, 2019 Va. Acts at __. The bill further provides that an appeal of a permanent protective order must be docketed within two business days of receipt of such an appeal. Id. ch. 718, 2019 Va. Acts at __.

    [278].    Act of Mar. 21, 2019, ch. 717, 2019 Va. Acts __, __ (codified as amended at Va. Code Ann. § 18.2-31 (Cum. Supp. 2019)). This legislation modified the law following the Supreme Court of Virginia’s holding in Jones v. Commonwealth, which found that courts had the discretion to suspend any or all of the life sentence referenced in Virginia Code section 18.2-31. See 293 Va. 29, 795 S.E.2d 705 (2017).

    [279].    Act of Mar. 18, 2019, ch. 465, 2019 Va. Acts __, __ (codified as amended at Va. Code Ann. §§ 18.2-51.4 to -51.5 (Cum. Supp. 2019)).

    [280].    Id. ch. 465, 2019 Va. Acts at __.

    [281].    Id. ch. 465, 2019 Va. Acts at __.

    [282].    Act of Apr. 29, 2019, ch. 849, 2019 Va. Acts. __, __ (codified as amended at Va. Code Ann. § 46.2-1078.1 (Cum. Supp. 2019)).

    [283].    Act of Apr. 29, 2019, ch. 850, 2019 Va. Acts. __, __ (codified at Va. Code Ann. § 46.2-861.1 (Cum. Supp. 2019)).

    [284].    Act of Mar. 19, 2019, ch. 626, 2019 Va. Acts __, __ (codified as amended at Va. Code Ann. § 18.2-251.03 (Cum. Supp. 2019)). The statute provides an affirmative defense for individuals whose possession crimes were only discovered as a result of the individual seeking or obtaining emergency medical attention under certain conditions. Id. § 18.2-251.03 (Cum. Supp. 2019).

    [285].    Act of Feb. 21, 2019, ch. 90, 2019 Va. Acts __, __ (codified as amended at Va. Code Ann. §§ 18.2-246.8, -246.10, -371.2 (Cum. Supp. 2019)).

    [286].    Id. ch. 90, 2019 Va. Acts at __.

    [287].    Act of Mar. 19, 2019, ch. 612, 2019 Va. Acts __, __ (codified as amended at Va. Code Ann. § 18.2-121.3 (Cum. Supp. 2019)).

    [288].    Act of Mar. 22, 2019, ch. 781, 2019 Va. Acts __, __ (codified as amended at Va. Code Ann. § 19.2-60.1 (Cum. Supp. 2019)).

    [289].    Act. of Mar. 18, 2019, ch. 537, 2019 Va. Acts __, __ (codified as amended at Va. Code Ann. § 3.2-6570 (Cum. Supp. 2019)).

    [290].    Act. of Mar. 12, 2019, ch. 345, 2019 Va. Acts __, __ (codified as amended at Va. Code Ann. § 3.2-6571 (Cum. Supp. 2019)).

    [291].    Act of Mar. 18, 2019, ch. 476, 2019 Va. Acts __, __ (codified as amended at Va. Code Ann. § 18.2-429.1 (Cum. Supp. 2019)).

    [292].    Act of Mar. 18, 2019, ch. 506, 2019 Va. Acts __, __ (codified as amended at Va. Code Ann. § 18.2-6-60 (Cum. Supp. 2019)).

    [293].    Va. Code. Ann. § 18.2-6-60 (Cum. Supp. 2019).

    [294].    Act of Mar. 21, 2019, ch. 761, 2019 Va. Acts __, __ (codified as amended at Va. Code Ann. § 18.2-325) (Cum. Supp. 2019)).

    [295].    Id. ch. 761, 2019 Va. Acts at __.

    [296].    Act. of Mar. 18, 2019, ch. 471, 2019 Va. Acts __, __ (codified as amended at Va. Code Ann. § 18.2-461 (Cum. Supp. 2019)).

    [297].    Act. of Mar. 31, 2019, ch. 708, 2019 Va. Acts __, __ (codified as amended at Va. Code Ann. §§ 16.1-69.24, 18.2-456 (Cum. Supp. 2019)).

    [298].    Act of Mar. 18, 2019, ch. 480, 2019 Va. Acts __, __ (codified as amended at Va. Code Ann. § 46.2-2011.33 (Cum. Supp. 2019)).

    [299].    Act of Mar. 19, 2019, ch. 613, 2019 Va. Acts __, __ (codified at Va. Code Ann. § 9.1-904 (Cum. Supp. 2019)). Previously, offenders registered a specified number of days following their initial registration. Va. Code Ann. § 9.1-904 (2018). This is scheduled to go into effect on July 1, 2020. Ch. 613, 2019 Va. Acts at __.

    [300].    Act of Mar. 18, 2019, ch. 490, 2019 Va. Acts __, __ (codified as amended at Va. Code Ann. § 18.2-386.2 (Cum. Supp. 2019)).

    [301].    Act. of Mar. 18, 2019, ch. 414, 2019 Va. Acts __, __ (codified as amended at Va. Code Ann. § 63.2-1509 (Cum. Supp. 2019)).

    [302].    Act. of Feb. 22, 2019, ch. 146, 2019 Va. Acts __, __ (codified as amended at Va. Code Ann. § 18.2-67.9 (Cum. Supp. 2019)).

    [303].    Act. of Mar. 5, 2019, ch. 234, 2019 Va. Acts __, __ (codified as amended at Va. Code Ann. § 18.2-369 (Cum. Supp. 2019)).

    [304].    Act of Mar. 18, 2019, ch. 473, 2019 Va. Acts __, __ (codified as amended at Va. Code Ann. § 19.2-11.13 (Cum. Supp. 2019)).

[305].    Id. ch. 473, 2019 Va. Acts at __.


Corporate and Business Law

Corporate and Business Law

Laurence V. Parker Jr., Annual Survey of Virginia Law Corporate and Business Law, 54 U. Rich. L. Rev. 73 (2019).

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Laurence V. Parker, Jr. *

Introduction

This year there were a number of significant legislative changes to the Virginia Stock Corporation Act (“VSCA”) and the Virginia Limited Liability Company Act. Part I discusses certain statutory changes related to Virginia Corporations. Part II summarizes the changes to VSCA, including changes related to ratification of defective corporate acts, appraisal rights in asset sale transactions, multiple changes related to interspecies transactions, improving and making the effect of merger, domestication, and conversion language more uniform, refining the process for abandoning fundamental transactions, regulating the second step merger following a tender offer, modifying the corporate opportunity doctrine, allowing for a court to remove directors, permitting officer reliance, revising provisions related to officer and director indemnification, simplifying the voting information required in documents filed with the State Corporation Commission (“SCC”), regulating the use of forum selection clauses in governance documents, modifying cumulative voting, and modifying shareholder information rights. Part III describes the Uniform Protected Series Act, which Virginia adopted this year as an amendment to its Limited Liability Company Act. Part IV reviews a Supreme Court of Virginia case addressing the statutory safe harbor permitting an asset sale without shareholder approval and the ability to amend that safe harbor.

 I. Certain Statutory Changes Related to Corporations

 A. Ratification

In 2014, Delaware added section 204 to the Delaware General Corporation Law, which permits a Delaware Corporation to ratify past actions that may not have been approved in the prescribed manner under the Delaware General Corporation Law or the corporation’s articles of incorporation or bylaws.[1] This year Virginia followed suit and adopted a provision similar to Delaware.

Virginia now has enabling language in VSCA that permits a corporation to ratify any defective corporate action, which includes, “(i) any corporate action purportedly taken that is, and at the time such corporate action was purportedly taken would have been, within the power of the corporation, but is void or voidable due to a failure of authorization, or (ii) an over-issuance of shares.”[2] Over-issuances include issuances in excess of the authorized number of shares, or shares of an unauthorized class.[3]In order to ratify a defective corporate action, the board must adopt a resolution stating:

  1.  The defective corporate action to be ratified and, if the defective corporate action involved the issuance of putative shares, the number and type of putative shares purportedly issued;
  2. The date of the defective corporate action;
  3. The nature of the failure of authorization with respect to the defective corporate action to be ratified; and
  4. That the board of directors approves the ratification of the defective corporate action.[4]

Ratifying defective corporate actions that would have otherwise required shareholder approval also requires shareholder approval under the new Article 1.1 of VSCA (the new Ratification Article).[5]

A defective corporate action that required a filing with the SCC, like an amendment to the articles, a merger, conversion, domestication or dissolution, may also be ratified, and a ratification statement may then be filed with the SCC indicating such action has been ratified.[6] A portion of the ratification statement filed with the SCC includes a description of what has happened, including: (1) the description of the defective corporate action; (2) the date of the defective corporate action; (3) how the authorization failed; and (4) “[a] statement that the defective corporate action was ratified in accordance with section 13.1-614.3. . . .”[7] The remainder of the ratification statement is more specific to the particular defective corporate action and requires specific information: (1) if there was a filing at the time of the defective corporate action and that filing does not need to be corrected; (2) if there was a filing at the time of the defective corporate action and that filing needs to be corrected; or (3) if there was not a filing at the time of the defective corporate action.[8] Where a correction to a prior filing is needed or where no filing was previously made, the filing must include “a statement that a filing containing all of the information required to be included under the applicable section or sections of [VSCA] to give effect  to  such  defective  corporate  action  is  attached  as  an  exhibit . . . .”[9]

How the SCC interprets this somewhat vague language when accepting ratification statement filings will be interesting to see. For example, in the case of a merger, does this just require articles and a plan of merger, i.e., the documents necessary to be filed to bring about the defective corporate action, or does it also require the long form merger agreement, the board resolution, and the shareholder resolution needed to approve the merger originally, along with those needed to ratify it, i.e., the other documents arguably needed to give effect to the defective corporate action?

 B. Appraisal Rights Following Sale of Substantially All Assets

This year Virginia significantly narrowed the availability of appraisal rights following a sale of all, or substantially all, assets. Previously, appraisal rights were available in a sale of substantially all assets if the proceeds, less reasonable reserves, were not entirely distributed to the shareholders pro rata in accordance with their shares within one year.[10] Now, appraisal rights are only available if a corporation consummates a sale of substantially all assets and that transaction is an interested transaction.[11] In this case an “interested transaction” is a sale of all or substantially all assets with an “interested person.”[12] For purposes of appraisal rights, “interested person” means a person who, except in the case of a tender offer within the last year, holds twenty percent of the voting power, has the power to elect more than twenty-five percent of the directors of the corporation, or is a senior executive officer or director receiving a benefit not generally available to shareholders (excluding certain employment and/or retirement benefits put in place  separate  from  the  transaction,  similar  to  what  the  officer had  in  place  before  the  transaction  or  board  position  with  the acquirer).[13]

 C. Interest Holder Liability, Amendments, Mergers, Domestications, and Conversions with Eligible Entities

Significant changes were made throughout VSCA to define the parameters of a Virginia corporation’s ability to engage in interspecies transactions, including amendments to articles of incorporation, mergers, conversions, and domestications. The “eligible entities” that may be parties to these transactions, such as domestic or foreign corporations, nonstock corporations, partnerships, limited liability companies, limited partnerships, or business trusts have not changed,[14] but language was added throughout VSCA to address issues that may arise in connection with these interspecies transactions.

An amendment to a corporation’s articles of incorporation can include “new interest holder liability,” a partnership-like concept where liability is imposed on a shareholder by virtue of the amendment, but only if each shareholder signs a written consent to become subject to the new interest holder liability.[15] This new interest holder liability only applies with respect to liabilities that arise after the date of the amendment, and an amendment does not discharge any prior interest holder liabilities.[16]

New sections 13.1-718(I), 13.1-722.3(7), and 13.1-722.11(B) deal with new interest holder liability incurred in a merger, domestication, or conversion similar to the way the amendment provisions deal with this issue.[17] Each shareholder who becomes bound by a new interest holder liability by virtue of a merger, domestication, or conversion, must sign a written consent to be bound by that new interest holder liability.[18] New sections 13.1-721(C), 13.1-722.7:1(C), and 13.1-722.13(C) to (D), also clarify that following a merger, domestication, or conversion, new interest holder liability only applies with respect to liabilities that arise after the date of the transaction, and a transaction does not discharge any prior interest holder liabilities.[19]

 D. Effect of Merger, Domestication, and Conversion

Significant changes were made to VSCA’s language regarding the effect of merger. Notably, with regard to assignment of contracts, the language arguably forbidding a transfer of a contract by merger where the “assignment would violate a contractual prohibition on assignment by operation of law” was deleted, and language was added clarifying that a merger is not a transfer.[20]Now section 13.1-721(A)(3) reads: “[a]ll property owned by, and every contract right possessed by, each domestic or foreign corporation or eligible entity that merges into the survivor is vested in the survivor without transfer, reversion, or impairment.”[21] Similarly, language was added making clear that  the survivor retains all rights previously held, and all other rights, privileges, franchises, and immunities held by the merging corporations become rights, privileges, franchises, and immunities of the survivor.[22] This change may be an attempt to further clarify that a merger does not bring about a transfer by operation of law and the General Assembly’s intent to overturn caselaw that suggested that certain government-issued franchises may not transfer via merger.[23]

A new section addressing the effect of a domestication and the revisions to the effect-of-conversion statute are largely identical to section 13.1-721(A)(3), except the word “transfer” is strangely omitted from the effect-of-conversion statute.[24]

 E. Abandonment of Fundamental Transactions

Virginia modified VSCA provisions regarding abandonment of a merger before the effective time designated in the certificate of merger,[25] and adopted similar abandonment provisions with respect to amendments to articles of incorporation,[26] the plan of domestication,[27] and the plan of conversion.[28] A merger can be abandoned before the effective time designated in the certificate of merger if a statement signed by all parties is filed prior to the effective time.[29] This statement must include the name of the corporation, the date of the original filing, the original requested effective date, and a statement that the transaction is being abandoned.[30] A similar filing can be made to abandon amendments to articles of incorporation, conversions, or domestications.[31]

 F. Merger Following a Tender Offer

Virginia rewrote VSCA section 13.1-718(G), which had permitted a merger without a shareholder vote following a tender offer.[32] The target corporation no longer has to be a public corporation, at least under VSCA.[33] Several of the previous conditions to not holding a shareholder vote to consummate a merger following a tender offer were rewritten so a purchaser may tender to purchase all shares (other than those held by the purchaser, its parent, subsidiaries, or by the target corporation, which do not need either to be purchased or to receive merger consideration), and if: (1) it acquires enough shares (including those it or its parent or subsidiaries previously held) to approve a merger; (2) the merger offers the same consideration as is offered in the tender offer; and (3) the merger will be consummated promptly following the offeror’s acquisition of a sufficient number of shares via the tender offer.[34] Two new conditions were added: (1) the offer must be held open for ten business days; and (2) the offeror must purchase all tendered shares that are not withdrawn.[35]

 G. Limitations on the Corporate Opportunity Doctrine

Virginia added express enabling language to VSCA that permits a corporation, in its articles of incorporation, to eliminate the duty of a director, or any other person, to present business opportunities to the corporation.[36] For these concepts to apply to officers, the board must approve its application to the specific officer, and the board may  limit  the  application  of  the  provision  to  one  or  more officers.[37]

 H. Court Removal of Directors

Virginia added section 13.1-681.1 to VSCA, which allows a corporation or shareholders in a derivative proceeding to seek the removal of a director if the court finds that:

(i) the director engaged in fraudulent conduct with respect to the corporation or its shareholders, grossly abused the position of director, or intentionally inflicted harm on the corporation and (ii) considering the director’s course of conduct and the inadequacy of other available remedies, removal would be in the best interest of the corporation.[38]

 I. Officer Reliance

Section 13.1-694(B) was added to VSCA to allow officers the ability to rely on others in a similar, but not identical, fashion to the way directors may rely on others under section 13.1-690.B.[39] Officers, but not directors, may rely on responsibilities properly delegated to or information, opinions, reports, or statements made by one or more employees “whom the officer believes in good faith to be reliable and competent” in performing the responsibilities delegated or providing the applicable information, opinions, reports, or statements.[40] Like a director, an officer may rely on information, opinions, reports, or statements from legal counsel, public accountants, or other persons retained by the corporation.[41] However, the officer may only do so if he believes in good faith that the matters are within the person’s professional or expert competence, similar to those directors or those to which the particular person merits confidence, which is different from the director’s standard.[42]

 J. Director and Officer Indemnification

While it was previously clear that for a Virginia corporation, an amendment to its articles of incorporation or bylaws could not alter the corporation’s obligation to indemnify for matters arising prior to the amendment, revisions to VSCA this year made it clear that board or shareholder resolutions also cannot alter the corporation’s obligation to indemnify for matters arising prior to the adoption of those resolutions.[43] In addition, subsection E was added to regulate the indemnification obligations of the survivor of a merger with respect to officers and directors of the non-surviving entity: namely, unless expressly provided otherwise, the survivor is obligated to indemnify the nonsurviving entity’s officers and directors as provided in the nonsurviving entity’s articles of incorporation and bylaws  and not  under  the  survivor’s  articles  of  incorporation  and bylaws.[44]

 K. Voting Information in Filed Documents

Virginia revised provisions of VSCA to simplify and harmonize how shareholder approvals are described in various documents filed with the SCC, including amendments to articles of incorporation, amended and restated articles of incorporation, articles of merger, articles of domestication, articles of conversion, or articles of dissolution.[45] In all instances, filings now require a simple statement that the shareholders approved the action either by unanimous consent or in the manner required by the applicable article, versus the previous requirement, in some instances, to list the total number of shares entitled to be cast by each voting group and either the total votes cast for the transaction by each voting group, or a statement that the votes cast in favor by each voting group were sufficient for approval by that voting group.[46]

 L. Forum Selection

Virginia expanded, or at least clarified, the scope of claims that can be covered in a forum selection bylaw to include all claims that may be brought under the “internal affairs doctrine”; all claims that may be brought under VSCA; a corporation’s articles or bylaws, not just those against the corporation or current or former directors or officers; and claims brought by shareholders regarding any breach of duty.[47] The language also clarified that a bylaw may not confer jurisdiction on any court that did not already have jurisdiction over such claim. So, for example, a forum selection clause requiring all claims to be adjudicated in federal district court, would not always be enforceable as written.[48] If a bylaw provides jurisdiction in a Virginia court that does not have personal or subject matter jurisdiction, the claim may be brought in another court in the Commonwealth that does have personal and subject matter jurisdiction, even if not specified in the bylaw.[49] Finally, a provision in the articles of incorporation or bylaws cannot prohibit an internal corporate claim from being brought in Virginia courts or mandate that such a claim be determined by arbitration.[50]

 M. Cumulative Voting

Cumulative voting for directors, even if authorized by the articles of incorporation or bylaws, is not permitted unless the meeting notice or proxy statement accompanying the notice states conspicuously that cumulative voting will be permitted.[51]

 N. Shareholder Information Rights and Confidentiality Obligations

Virginia corporations may impose reasonable restrictions on the confidentiality, use, or distribution of the subset of records that a shareholder is entitled to receive only if he or she (1) has been a shareholder for more than six months or owns more than five percent of the outstanding shares, (2) makes a demand in good faith and for a proper purpose, and (3) in the demand describes the requested documents with reasonable particularity.[52] Similarly, a Virginia court can impose reasonable restrictions on the confidentiality, use, or distribution of the same category of records.[53] Finally, a court may order that a corporation pay a shareholder’s attorneys fees and other expenses if it determines the corporation imposed unreasonable restrictions on the confidentiality, use, or distribution of demanded records, or refused inspection without a reasonable basis.[54]

 II. Certain Statutory Changes Related to Limited Liability Companies

 A. Series LLCs

In the 2019 General Assembly session, Virginia adopted its version of the Uniform Protected Series Act (the “Series LLC Act”).[55] Most laws passed in the 2019 General Assembly session became effective July 1, 2019; however, the Series LLC Act will not become effective until July 1, 2020.[56] The delayed effective date is likely to give practitioners more time to understand the Series LLC Act and to give the SCC more time to study how it will accept filings under the Series LLC Act. The Series LLC Act roughly tracks the organization of the Uniform Protected Series Act:

  • Sections 13.1-1088 to -1094 correspond to Article 1 of the Uniform Protected Series Act (including Definitions, Nature, Powers, Duration, and Governing Law);
  • Sections 13.1-1095 to -1099 correspond to Article 2 of the Uniform Protected Series Act (Protected Series Designation and Amendment, Name, Registered Office and Registered Agent, Service of Process, Notice or Demand, and Effectiveness of Notice);
  • Sections 13.1-1099.2 to -1099.6 correspond to Article 3 of the Uniform Protected Series Act;
  • Sections 13.1-1099.7 to -1099.10 correspond to Article 4 of the Uniform Protected Series Act;
  • Sections 13.1-1099.11 to -1099.13 correspond to Article 5 of the Uniform Protected Series Act;
  • Sections 13.1-1099.14 to -1099.20 correspond to Article 6 of the Uniform Protected Series Act;
  • Sections 13.1-1099.21 to -1099.24 correspond to Article 7 of the Uniform Protected Series Act; and
  • Sections 13.1-1099.25 to -1099.27 correspond to Article 8 of the Uniform Protected Series Act.[57]

By rough analogy, a “Series LLC” is a Virginia limited liability company that as a parent entity (a Series Limited Liability Company under the Series LLC Act)[58] can form subsidiary limited liability companies (“Protected Series” under the Series LLC Act)[59] that are treated as separate entities for purposes of liability and the allocation of economic rights but that are treated as part of the parent for other purposes (like annual state filing fees).[60] A Series LLC can house multiple Protected Series within one entity that for state law purposes at least are very similar to separate subsidiaries as it relates to liability.[61] The members of the Series LLC can own differing percentages of each Protected Series, and each Protected Series is a separate tax partnership.[62] The advantages of forming a Series LLC over an actual subsidiary LLC are the lack of a separate entity fee and filing requirements for each Protected Series and more flexibility as to some of the limited liability company formalities associated with managing separate entities. The disadvantages include the complexity and uncertainty as to the tax treatment of Series LLCs and their Protected Series, very specific asset-based record keeping requirements,[63] the inability to sell a Protected Series, the inability to merge into another entity, and the inability to engage in any transaction where the result is separation from its parent Series LLC (except a merger with a second Series LLC where the second Series LLC is the survivor).[64]

It is important to note that the National Conference of Commissions on Uniform State Laws designed the Uniform Protected Series Act to function in concert with the applicable state’s Limited Liability Company Act, so for key provisions it “extrapolates” from the underlying Limited Liability Company Act.[65] In other words, the Uniform Protected Series Act draws analogies to the Limited Liability Company Act so, for example, a Protected Series is treated as if it were a separate limited liability company.[66]Since a Series LLC is an entirely new form of business entity and has the potential to be much more complicated than other entity forms, some of the more routine provisions of the Series LLC Act, like the definitions, the nature of a protected series, the powers and duration of a protected series, and the governing law, are more important than usual.

  1. Definitions, Nature, Powers, Duration, Governing Law, Non-Waivable Provisions of the Operating Agreement, and Limitations on the Operating Agreement

Key definitions include “associated asset,” “associated member,” “non-associated asset,” “protected series,” “series limited liability company,” and “protected series membership interest.” An “associated asset” is an asset that has been associated with a Protected Series by satisfying the record keeping requirements in section 13.1-1099.2 of the Series LLC Act.[67] This concept is key to protecting an asset from vertical creditors of the parent Series LLC or horizontal claims by creditors of other Protected Series LLCs parented by the same Series LLC.[68]

An “associated member” is a member of a Series LLC who has a protected series membership interest in a Protected Series.[69] This is one of the most important concepts in the Series LLC Act, allowing the members of the Series LLC to have varying economic rights in the Protected Series.[70] For example, a Series LLC may have varying ownership across the parent Series LLC and its subsidiary Protected Series similar to the table below:

 

Members Ownership In Series LLC Ownership

In Protected Series-1

Ownership

In Protected Series-2

Ownership In Protected Series-3
Member A 33.33% 20% 40% 0%
Member B 33.33% 40% 40% 50%
Member C 33.33% 40% 20% 50%

 

Importantly, you cannot have a member of a Protected Series who is not also a member of the parent Series LLC.[71] As you might expect, a nonassociated asset is an asset that is not associated with either the Series LLC or any Protected Series.[72] As discussed above, a “protected series” is a “person” in the legal sense “established under [section] 13.1-1095” of the Series LLC Act;[73] roughly similar to a subsidiary of its Series LLC parent. A Protected Series is separate from its Series LLC parent and has the capacity to contract in its own name, to sue and be sued in its own name, and the like.[74] In addition to personhood, the Protected Series has all other powers of a Virginia limited liability company, except that it ceases to exist when the parent Series LLC ceases to exist (so, except in the case of a merger, it cannot exist separate from its Series LLC parent), it cannot be a member of its own parent Series LLC, and it cannot establish its own subsidiary Protected Series.[75] Finally, “Series limited liability company” is a Virginia limited liability company with at least one protected series.[76] So, until a Series LLC forms at least one Protected Series, it is no different from any other Virginia limited liability company.

To give the greatest chance that the allocation of vertical liability between the Series LLC and its Protected Series and horizontal liability between the various Protected Series parented by a Series LLC are respected, the Series LLC Act is very specific about how the common law “internal affairs” doctrine should apply.[77] The Series LLC Act specifies that Virginia law governs the internal affairs of a Protected Series.[78] Since a Protected Series is a new concept, the Series LLC Act goes on to provide that its internal affairs include relations between a Series LLC and its various Protected Series; a Protected Series and its associated members; relations between the associated members of a Protected Series, relations among the Protected Series, its manager, its associated members, or associated member assignees (analogous to an assignee under section 13.1-1039(A)); the rights and duties of the manager of a Protected Series; governance of the Protected Series; and the process to become an associated member of a Protected Series.[79] Virginia law governs the relationship between a Series LLC and its Protected Series, its members, the members and managers of its Protected Series, assignees of the Series LLC and of the associated members of its Protected Series.[80] Virginia law governs the liability of a manager, protected series manager, member, associated member, assignee, associated member assignee, or a Protected Series, in such capacities, for any debt or liability of another Protected Series.[81] Virginia law governs the liability of a Series LLC for its Protected Series solely because its Protected Series was formed or modified, by acting as its manager, having a Protected Series act as its manager or owning an interest in a Protected Series.[82] Finally, Virginia law governs the liability of a Protected Series arising from the Protected Series being a Protected Series of its parent Series LLC, acting as a manager of its Series LLC or any other Protected Series, being owned by its Series LLC.[83] The governing law provisions are reinforced by section 13.1-1092, which provides that the Series LLC’s operating agreement governs the internal affairs of the Series LLC and its Protected Series.[84]

Unlike in a typical limited liability company, where the freedom of contract reigns,[85] a Series LLC’s operating agreement is subject to very specific nonwaivable provisions of the Series LLC Act. According to the Series LLC Act:

A. An operating agreement shall not vary the effect of:

  1. Section 13.1-1093 (listing non-waivable provisions);
  2. Section 13.1-1089 (nature of protected series);
  3. Subsection A of § 13.1-1090 (powers and duration of protected series);
  4. Subsection B of § 13.1-1090 to provide a protected series a power in addition to the powers provided to a limited liability company under the other articles of this chapter;
  5. The limitations stated in subsection C or D of § 13.1-1090;
  6. Section 13.1-1091 (governing law);
  7. Section 13.1-1092 (relation of operating agreement, this article, and the other articles of this chapter);
  8. Section 13.1-1094 (rules for applying other articles of this chapter to specified provisions of this article);
  9. Section 13.1-1095 (protected series designation; amendment), except to vary the manner in which a limited liability company approves establishing a protected series;
  10. Section 13.1-1096 (name);
  11. Section 13.1-1099.2 (associated assets);
  12. Section 13.1-1099.3 (associated members);
  13. Subsection A or B of § 13.1-1099.4 (protected series membership interests);
  14. Subsection C, F, or G of § 13.1-1099.5 (management);
  15. Section 13.1-1099.7 (limitations on liability), except to decrease or eliminate a limitation of liability stated in § 13.1-1099.7;
  16. Section 13.1-1099.8 (claim seeking to disregard limitation of liability);
  17. Section 13.1-1099.9 (remedies of judgment creditor of associated member or protected series assignee);
  18. Section 13.1-1099.10 (enforcement of claim against non-associated asset);
  19. Subdivisions 1, 4, and 5 of § 13.1-1099.11 (events causing the dissolution of protected series);
  20. Section 13.1-1099.12 (winding up dissolved protected series; cancellation), except to designate a different person to manage winding up;
  21. Section 13.1-1099.13 (waiver of cancellation upon dissolution; reinstatement of series limited liability company);
  22. Sections 13.1-1099.14 through 13.1-1099.20 (merger);
  23. Sections 13.1-1099.21, 13.1-1099.22, and 13.1-1099.23 (foreign series LLCs);
  24. Sections 13.1-1099.25 (uniformity and construction) and 13.1-1099.26 (effect on certain actions); or
  25. A provision of this article pertaining to:

a. A registered office or registered agent; or

b. The Commission, including provisions pertaining to records authorized or required to be delivered to the Commission for filing under this article or chapter.

B. An operating agreement shall not unreasonably restrict the duties and rights under § 13.1-1099.6 but may impose reasonable restrictions on the availability and use of information obtained under § 13.1-1099.6 and may provide appropriate remedies, including liquidated damages, for a breach of any reasonable restriction on use.[86]

 

These provisions are nonwaivable because a Series LLC, its powers, its governing law, the nature of its interests, and the vertical and horizontal liability protection under state law are all interdependent and permitting the modification of these provisions would, at best, incredibly complicate the interpretation of Series LLC operating agreements and, at worst, defeat the purpose of the Series LLC in the first place.

  1. Protected Series Designation and Amendment, Name, Registered Office and Registered Agent, Service of Process, Notice or Demand, and Effectiveness of Notice

Section 13.1-1095 of the Series LLC Act provides that any Virginia limited liability company may establish a Protected Series by unanimous consent of the Members;[87] however, the unanimous consent requirement can be modified by the Company’s operating agreement.[88] This section also addresses the filing requirements for the series designation and the way in which a series designation can be amended.[89] A series designation functions similarly to the articles of organization for an LLC on behalf of the Protected Series—it gives birth to the Protected Series, defines its name, and the principal office address.[90]However, the registered agent must be the registered agent for the parent Series LLC that formed the Protected Series.[91]

Any Protected Series must include specific identifiers in its name, either “protected series,” or the abbreviations “P.S.” or “PS.”[92] In addition, the Protected Series must include its parent Series LLC’s name in the Protected Series name.[93] So the naming convention could be as follows:

SERIES LLC NAME: Newco, LLC

PROTECTED SERIES NAME: Newco, LLC, PS 1

To keep service and notice simple, sections 13.1-1098 and -1099 provide that service upon or notice to the parent Series LLC or its registered agent                    is service or notice to each of its subsidiary Protected Series.[94] This was intended to avoid disputes about whether or not service on a Protected Series was effective.[95]

  1. Associated Assets, Associated Members, Protected Series Membership Interests, Management, and Rights of Person Not Associated Member of Protected Series to Information Concerning Protected Series

The associated assets and associated member provisions are the guts of the Protected Series LLC Act. The sections dealing with associated assets defines the universe of assets “owned” by a Protected Series and thus reachable by creditors of that Protected Series under state law.[96] This section also defines the universe of assets “owned” by a parent Series LLC and thus reachable by creditors of the Series LLC under state law.[97] For an asset to be an “associated asset” of a Protected Series, the Protected Series must: create and maintain records that identify the asset and distinguish it from other assets of the Protected Series, determine the parent Series LLC, or other Protected Series; determine when and from whom the Protected Series acquired the asset; and, if the asset came from the Series LLC or another Protected Series, determine the consideration paid.[98] Similar record keeping requirements apply to the parent Series LLC with regard to its associated assets.[99] The record keeping requirements are important because any asset that is not an associated asset becomes a non-associated asset, reachable by all creditors of either the Series LLC or its Protected Series, and the burden of proving an asset is an associated asset rests with the applicable Series LLC or Protected Series.[100]

The concept of “associated members” is similarly critical to a Protected Series. This concept allows a person, if a member of the parent Series LLC, to be associated with the subsidiary Protected Series as provided in the operating agreement of the Series LLC, or a procedure established by that document.[101] It also allows for differing percentages to be held in each subsidiary Protected Series, as described above.[102]

Section 13.1-1099.5 creates a management construct for a Protected Series. If there are no associated members, the parent Series LLC is the Protected Series’ manager. It also makes clear that the manager of a Protected Series only owes duties to that Protected Series and its associated members or their assignees.[103] In addition, this section deals with the voting and agency rights of associated members of a Protected Series—they are essentially the same as members of a typical limited liability company.[104]

Section 13.1-1099.6 deals with information rights for a Series LLC. A member of a Series LLC that is not an associated member of the Protected Series has the same information rights, with respect to that Protected Series, as a member of a typical LLC.[105] A former associated member of a Protected Series has the same information rights as a dissociated member of a typical LLC.[106] The personal representative of a deceased associated member of a Protected Series has the same rights as the personal representative of a deceased member of a typical LLC.[107] A manager of a Protected Series has the same information rights as a manager of a typical LLC.[108] However, these information rights can be modified, but only reasonably, by the operating agreement.[109]

  1. Limitations on Liability, Claim Seeking to Disregard Limitation on Liability, Remedies for Judgment Creditor of Associated Member or Protected Series Assignee, and Enforcement of Claim Against Non-Associated Asset

The provisions that describe limitations on liability create roughly the same liability construct as a parent LLC would have with regard to the subsidiary LLCs it forms.[110] The parent Series LLC, its members, its manager, the associated members, and Protected Series manager are not liable solely by virtue of their status for the obligations of its Protected Series.[111] Similarly, one Protected Series is not liable solely by virtue of its status for the obligations of another Protected Series parented by the same Series LLC.[112] However, one substantial difference between the series construct and actual parent and separate subsidiary LLCs is that subsidiary LLCs can avail themselves of bankruptcy protection separate from their parent LLCs while, because the Series LLC Act is an entirely new creature of state law, it is unclear whether a Protected Series can seek bankruptcy protection separate from its parent Series LLC.[113]

Because the Series LLC Act creates a unique entity form, it directly addresses piercing-the-veil-type claims. Section 13.1-1099.8 analogizes Protected Series to subsidiary LLCs and provides that a legal or equitable claim, like a piercing the veil claim against a Protected Series seeking recovery from its parent Series LLC, should be governed by the same principles as a similar claim by creditors of a subsidiary LLC seeking to recover from its parent LLC.[114]

Like a judgment creditor of a member of an LLC, a judgment creditor of an associated member of a Protected Series has only the rights of an assignee.[115] Similarly, a judgment creditor of a Series LLC that is an associated member of its Protected Series only has the rights of an assignee.[116]

Section 13.1-1099.10 reflects the desire to prevent the use of Series LLCs as a way to defraud creditors, and as such, includes the penalties for failing to keep good records identifying assets as “associated assets” of either a Series LLC or a particular Protected Series it parented.[117]  As mentioned above, any asset that is not documented as an “associated asset” becomes a “non-associated asset.”[118] Non-associated assets can be realized upon by the creditors of the parent Series LLC or any Protected Series.[119] Timing is important; an entity cannot simply document an asset as an associated asset after a claim is made or a judgment is entered.[120] On the contrary, any asset that is not an associated asset on the date a Series LLC or Protected Series incurred the applicable liability (presumably, the date the breach of contract, tort, or other claim giving rise to liability arose) or the date the applicable judgment is enforced is protected from enforcement by a creditor.[121] As mentioned above, the party seeking to claim an asset is an associated asset bears the burden of proof.[122]

  1. Events Causing Dissolution of Protected Series, Winding Up Dissolved Protected Series, Voluntary Cancellation, Waiver of Cancellation Upon Dissolution, and Reinstatement of Series Limited Liability Company

A Protected Series is dissolved if its parent Series LLC is dissolved, if any trigger provided in the Series LLC’s operating agreement occurs, if all members consent, if a court orders dissolution on application by an associated member or manager (same grounds are available to a member for an LLC), if a court orders dissolution on application by the Series LLC, if the Protected Series is engaged in illegal conduct, if a court orders dissolution on application by the Series LLC or a member of the Series LLC, or if the Protected Series or its parent Series LLC is automatically or involuntarily cancelled.[123] A Protected Series can voluntarily wind up its affairs or have a court-supervised wind up in the same way as an ordinary LLC.[124] Once its voluntary or court-supervised wind up is completed, a Protected Series files a statement of designation cancellation to terminate its existence.[125] A Protected Series that has dissolved can be reinstated in a similar way that a typical LLC can be reinstated.[126] However, it is important to note, unlike a typical LLC, a Protected Series cannot exist separate from its parent Series LLC; if the parent Series LLC terminates or dissolves, the Protected Series ceases to exist.[127]

  1. Entity Transactions and Merger

Unlike most other entities, a Protected Series cannot engage in most fundamental transactions. For example, a Protected Series may not be a party to a merger, convert to a different entity type, redomesticate, or engage in any similar transaction.[128] A Series LLC is also constrained from engaging in several fundamental transactions.[129] A Series LLC cannot convert to a different type of entity, redomesticate, or be a party to a merger with any form of entity other than a limited liability company.[130]

  1. Foreign Series LLCs

Sections 13.1-1099.21 to -1099.24 cover in detail how Virginia law will apply to Series LLCs formed in other states. In particular, Virginia will apply the laws of the state of formation to the internal affairs of a foreign Series LLC.[131] Virginia will require foreign Series LLCs and Protected Series transacting business in Virginia to register in the Commonwealth.[132]However, the activity of a particular Protected Series will not confer jurisdiction over or require the parent Series LLC or other Protected Series to register to do business in Virginia, and the activity of the parent Series LLC will not confer jurisdiction over or require its subsidiary Protected Series to register to do business in Virginia.[133]

III. Selected Case Affecting Corporate and Business Law

 A. May v. R.A. Yancey Lumber Corporation

In May v. R.A. Yancey Lumber Corp., the Supreme Court of Virginia addressed whether a corporation can modify the safe harbor in section 13.1-724(A) of VSCA in its bylaws.[134]

R.A. Yancey Lumber Corporation (“Yancy Lumber”) was a Virginia corporation that owned 2500 acres of real estate containing timber (the “Timber Business”) and a mill business that processed raw lumber into a finished product (the “Mill Business”).[135] In its bylaws, Yancy Lumber attempted to modify the safe harbor in section 13.1-724(A) of VSCA (italicized below):

A. A sale, lease, exchange or other disposition of the corporation’s assets, other than a disposition described in § 13.1-723, requires approval of the corporation’s shareholders if the disposition would leave the corporation without a significant continuing business activity. Unless the articles of incorporation or a shareholder-approved bylaw otherwise provide, if a corporation retains a business activity that represented at least 20 percent of total assets at the end of the most recently completed fiscal year, and 20 percent of either (i) income from continuing operations before taxes or (ii) revenues from continuing operations for that fiscal year, in each case of the corporation and any of its subsidiaries that are consolidated for purposes of federal income taxes, the corporation will conclusively be deemed to have retained a significant continuing business activity.[136]

This language is frequently referred to as the “safe harbor” language—if it fits within the safe harbor, the transaction does not require approval of shareholders holding two-thirds of the outstanding shares.[137] The board of Yancey Lumber included the following provision in its bylaws which was approved by shareholders holding a majority of the shares outstanding on December 16, 2015:

Notwithstanding anything herein or any non-mandatory provisions of the [Virginia Stock Corporation Act] to the contrary, either the Mill Business or the Timber Business alone, without the other or any other business activity, shall constitute a significant continuing business activity in the event such business is retained by the Corporation following the sale, lease, exchange or other disposition of the Corporation’s other assets if the fair market value of the retained business assets constitutes at least twenty-five percent (25%) of the fair market value of all of the Corporation’s assets in the aggregate prior to such sale, lease, exchange or other disposition, excluding for all purposes hereunder cash and cash equivalents. For purposes hereunder, the most recent assessed value for local tax purposes of real property owned by the Corporation shall be considered its fair market value, absent the existence of a fair market value determination by a qualified real estate appraiser made within one year prior to the relevant determination date, in which case the most recent of such determinations shall be used to establish fair market value. This Article XII is intended to operate in lieu of the definition of “significant continuing business activity” set forth in Section 13.1-724(A) of the Code of Virginia (which statutory definition is provided for use in the absence of a defined term in the applicable articles of incorporation or bylaws).[138]

Subsequently, the board recommended that the third sentence above be amended to read as follows:

For purposes hereunder, the most recent . . . gross land and improvement values determined by local tax authority for local . . . taxation of real property owned by the Corporation, irrespective of any land use deferral, shall be considered . . . such real estate’s fair market value, absent the existence of a fair market value determination by a qualified real estate appraiser made within one year prior to the relevant determination date, in which case the most recent of such determinations shall be used to establish fair market value.[139]

A pair of minority shareholders, Sarah Yancey May and her ex-husband, Bill May, who collectively owned slightly more than one-third of the stock, voted against the first amendment.[140] Sarah also objected in writing to the first amendment.[141] Bill, along with all shareholders other than Sarah, agreed to the second amendment on March 25, 2016, so the second amendment technically received approval of shareholders holding two-thirds of the outstanding shares.[142]

In May  2017, Yancey Lumber executed a letter of intent to sell the assets of the Mill Business.[143] Sarah objected to the letter of intent and a subsequent amendment that added a $250,000 break up fee in the event the sale of the Mill Business did not close.[144] On August 11, 2017, Sarah filed a complaint in the Circuit Court of Albemarle County seeking a declaratory judgment that the first amendment and second amendment could not modify section 13.1-724.A of VSCA, and thus, the sale of the Mill Business required shareholder approval.[145]

The trial court, relying on the following phrase, “unless the articles of incorporation or a shareholder-approved bylaw otherwise provide,” found that the bylaw amendments could modify section 13.1-724.A of VSCA, noting the statute did not say a bylaw approved by two-thirds of the shareholders, and entered judgment in favor of the Corporation.[146] Sarah appealed, and the Supreme Court of Virginia granted four assignments of error, one of which was

[t]he trial court erred in granting the Company’s Special Plea in Bar and entering judgment against Sarah on the ground that a mere majority of the Company’s shareholders may not amend or redefine the statutory safe harbor of [Virginia] Code § 13.1-724, nor create its own safe harbor, through the amendment of the Company’s bylaws.[147]

Yancey Lumber argued the position that a bylaw approved by shareholders, holding a majority of the shares present, was sufficient to modify the safe harbor given that the introductory language to the safe harbor appeared to allow modification and did not require a vote of two-thirds of the outstanding shares.[148] In its analysis, the court stated:

The plain language of the statute does not support the Corporation’s claim that the exception in the safe harbor provision permits a corporation to adopt a bylaw that redefines the meaning of “significant continuing business activity” to be anything that the majority designates it to be. The safe harbor provision simply states a default threshold, and the plain language of the statutory exception to the application of that threshold only allows a corporation to accept or reject that threshold.[149]

The court reasoned that another interpretation could render the requirement that two-thirds of the outstanding shares approve a sale of substantially all assets meaningless.[150] The court noted that section 13.1-724(E) of VSCA only permits a modification of the two-thirds vote requirement in the articles of incorporation.[151]

Yancey Lumber also argued that because Bill May approved the second amendment, he implicitly approved the first amendment, and thus the applicable bylaw amendment was approved by two-thirds of the outstanding shares.[152] The court found that argument flawed, reasoning that the two-thirds vote requirement only applies to the asset sale, and that a vote for the second amendment could not ratify the entire bylaws.[153]

It is possible following this case that a corporation cannot modify the safe harbor in its articles of incorporation or bylaws, even to make it harder for the corporation to satisfy, for example, by increasing the percentage of total assets and either income or revenue to be maintained. Courts may end up interpreting this case to permit a corporation to make the safe harbor harder to satisfy with an amendment to its articles of incorporation that is approved by shareholders holding at least two-thirds of the outstanding shares. The case does make it clear that an amendment to the bylaws or articles of incorporation may approve or reject the safe harbor.[154] Perhaps the legislature will clarify whether the safe harbor can be modified, and if so, the vote necessary to do so.

Conclusion

The General Assembly made notable changes to VSCA and the Virginia Limited Liability Company Act this year. In VSCA this included addressing myriad issues from ratification of defective corporate acts, to improving and making the effect of merger, domestication, and conversion language more uniform. Virginia also this year became one of the earliest states to adopt the Uniform Protected Series Act, a fascinating innovation in business entity law. Finally, the Supreme Court of Virginia interpreted the safe harbor in section 13.1-724(A), which if satisfied, permits a sale of assets outside the ordinary course of business without a shareholder vote.


*  Shareholder, Williams Mullen, Richmond, Virginia. J.D., 2003, University of Richmond School of Law; M.B.A., 2003, The Robins School of Business, University of Richmond; B.A., 1995, University of Virginia.

[1].    Del. Code Ann. tit. 8, § 204 (2017); 79 Del. Laws ch. 72, § 22 (2013).

        [2].    Act of Mar. 21, 2019, ch. 734, 2019 Va. Acts __, __ (codified at Va. Code Ann. § 13.1-614.1 (Cum. Supp. 2019)).

        [3].    Id. ch. 734, 2019 Va. Acts at __.

        [4].    Id. ch. 734, 2019 Va. Acts at __ (codified at Va. Code Ann. § 13.1-614.3(A) (Cum. Supp. 2019)).

        [5].    Id. ch. 734, 2019 Va. Acts at __ (codified at Va. Code Ann. §§ 13.1-614.3(C), -614.4 (C)–(D) (Cum. Supp. 2019)).

        [6].    Id. ch. 734, 2019 Va. Acts at __ (codified at Va. Code Ann. § 13.1-614.7(A) (Cum. Supp. 2019)). Amendments to the articles, a merger, conversion, domestication, and dissolution are only some of the actions that require a filing with the SCC. See Va. Code Ann. §§ 13.1-710, -720, -722.5, -722.12, -743 (Cum. Supp. 2019).

        [7].    Ch. 734, 2019 Va. Acts at __ (codified at Va. Code Ann. § 13.1-614.7(B)(1)–(4) (Cum. Supp. 2019)).

        [8].    Id. ch. 734, 2019 Va. Acts at __ (codified at Va. Code Ann. § 13.1-614.7(C)(1)–(3) (Cum. Supp. 2019)).

        [9].    Id. ch. 734, 2019 Va. Acts at __ (codified at Va. Code Ann. § 13.1-614.7(C)(3) (Cum. Supp. 2019)).

      [10].    Va. Code Ann. § 13.1-730(A)(3) (Repl. Vol. 2016).

      [11].    Ch. 734, 2019 Va. Acts at __ (codified as amended at Va. Code Ann. § 13.1-730(A)(3) (Cum. Supp. 2019)).

      [12].    Id. ch. 734, 2019 Va. Acts at __ (codified at Va. Code Ann. § 13.1-729 (Cum. Supp. 2019)).

      [13].    Id. ch. 734, 2019 Va. Acts at __ (codified as amended at Va. Code Ann. § 13.1-729 (Cum. Supp. 2019)).

      [14].    Compare id. ch. 734, 2019 Va. Acts at __ (codified at Va. Code Ann. § 13.1-603 (Cum. Supp. 2019)), with Va. Code Ann. § 13.1-603 (Repl. Vol. 2016).

      [15].    Ch. 734, 2019 Va. Acts at __ (codified as amended at Va. Code Ann. § 13.1-707(E)–(F) (Cum. Supp. 2019)).

      [16].    Id. ch. 734, 2019 Va. Acts at __; id. ch. 734, 2019 Va. Acts at __ (codified at Va. Code Ann. §§ 13.1-721(C), -722.7:1(C), -722.13(C)–(D) (Cum. Supp. 2019)).

      [17].    Ch. 734, 2019 Va. Acts at __ (codified as amended at  Va.  Code  Ann.  §§  13.2-718(I), -722.3(7), -722.11(B) (Cum. Supp. 2019)).

      [18].    Id. ch. 734, 2019 Va. Acts at __ (codified as amended at Va. Code Ann. §§ 13.1-718(I), -722.11(7), -722.11(B) (Cum. Supp. 2019)).

      [19].    Id.  ch.  734,  2019  Va.  Acts   at __   (codified   at   Va.  Code    Ann.   §§  13.1-721(C),  -722.7:1(C), -722.13(C)–(D) (Cum. Supp. 2019)).

      [20].    Id. ch. 734, 2019 Va. Acts at __ (codified as amended at Va. Code Ann. § 13.1-721 (Cum. Supp. 2019)).

      [21].    Id. ch. 734, 2019 Va. Acts at __ (codified as amended at Va. Code Ann. § 13.1-721(A)(3) (Cum. Supp. 2019)).

      [22].    Id. ch. 734, 2019 Va. Acts at __ (codified at Va. Code Ann. § 13.1-721(A)(9)–(10) (Cum. Supp. 2019)); see also id. ch. 734, 2019 Va. Acts at __ (codified at Va. Code Ann. § 13.1-721(F) (Cum. Supp. 2019)) (stating that a merger does not trigger a dissolution, liquidation, or winding up of the nonsurviving corporation).

      [23].    See, e.g., Metro Van & Storage Co. v. Commonwealth, 216 Va. 544, 221 S.E.2d 127 (1976) (holding that a merger caused the nonsurviving entity to cease to legally exist, requiring revocation of a government-issued certificate).

      [24].    Compare ch. 734, 2019 Va. Acts at __ (codified at Va. Code Ann. § 13.1-722.7:1 (Cum. Supp. 2019)) (“All property owned by, and every contract right possessed by, the domesticating corporation are the property and contract rights of the domesticated corporation without transfer, reversion, or impairment.”), with ch. 734, 2019 Va. Acts at __ (codified as amended at Va. Code Ann. § 13.1-722.13 (Cum. Supp. 2019)) (“All property owned by, and every contract right possessed by, the converting entity remains the property and contract rights of the converted entity without reversion or impairment.”).

      [25].    Id. ch. 734, 2019 Va. Acts at __ (codified as amended at Va. Code Ann. § 13.1-721.1 (Cum. Supp. 2019)).

      [26].    Id. ch. 734, 2019 Va. Acts at __ (codified at Va. Code Ann. § 13.1-712.1 (Cum. Supp. 2019)).

      [27].    Id. ch. 734, 2019 Va. Acts at __ (codified at Va. Code Ann. § 13.1-722.6(B)–(C) (Cum. Supp. 2019)).

      [28].    Id. ch. 734, 2019 Va. Acts at __ (codified as amended at Va. Code Ann. § 13.1-722.12:1(B)–(C) (Cum. Supp. 2019)).

      [29].    Id. ch. 734, 2019 Va. Acts at __ (codified as amended at Va. Code Ann. § 13.1-718(G) (Cum. Supp. 2019)).

      [30].    Id. ch. 734, 2019 Va. Acts at __.

      [31].    See supra notes 26–28 and accompanying text.

      [32].    Va. Code Ann. § 13.1-718(G) (Repl. Vol. 2016).

      [33].    Ch. 734, 2019 Va. Acts at __ (codified as amended at Va. Code Ann. § 13.1-718(G) (Cum. Supp. 2019)) (deleting “[t]he corporation is a public corporation”). Whether a tender offer is feasible under state and federal securities laws is beyond the scope of this Article.

      [34].    Id. ch. 734, 2019 Va. Acts at __.

      [35].    Id. ch. 734, 2019 Va. Acts at __.

      [36].    Id. ch. 734, 2019 Va. Acts at __ (codified at Va. Code Ann. § 13.1-619(B)(5) (Cum. Supp. 2019)).

      [37].    Id. ch. 734, 2019 Va. Acts at __.

      [38].    Id. ch. 734, 2019 Va. Acts at __ (codified at Va. Code Ann. § 13.1-681.1(A) (Cum. Supp. 2019)).

      [39].    Id. ch. 734, 2019 Va. Acts at __ (codified at Va. Code Ann. § 13.1-694(B) (Cum. Supp. 2019)).

      [40].    Id. ch. 734, 2019 Va. Acts at __ (codified at Va. Code Ann. § 13.1-694(B)(1)–(2) (Cum. Supp. 2019)).

      [41].    Id. ch. 734, 2019 Va. Acts at __.

      [42].    Id. ch. 734, 2019 Va. Acts at __.

      [43].    Id. ch. 734, 2019 Va. Acts at __ (codified at Va. Code Ann. § 13.1-704(D) (Cum. Supp. 2019)). Delaware adopted a similar provision in title 8, section 145(g) of the Delaware General Corporation Law in 2009 after Schoon v. Troy Corp., 948 A.2d 1157 (Del. Ch. 2008). See Del. Code Ann. tit. 8, § 145(g) (2019).

      [44].    Id. ch. 734, 2019 Va. Acts at __ (codified as amended at Va. Code Ann. § 13.1-704(E) (Cum. Supp. 2019)).

      [45].    Id. ch. 734, 2019 Va. Acts at __ (codified as amended at Va. Code Ann. §§ 13.1-710(A)(5), -710(A)(5), -711(C)(6)–(8), -720(A)(3), -722.5(A)(4), -722.12(A)(4), -743(A)(3) (Cum. Supp. 2019)).

      [46].    Id. ch. 734, 2019 Va. Acts at __.

      [47].    Id. ch. 734, 2019 Va. Acts at __ (codified as amended at Va. Code Ann. § 13.1-624(C)(2) (Cum. Supp. 2019)).

      [48].    See id. ch. 734, 2019 Va. Acts at __ (codified at Va. Code Ann. § 13.1-624(D) (Cum. Supp. 2019)).

      [49].    Id. ch. 734, 2019 Va. Acts at __.

      [50].    Id. ch. 734, 2019 Va. Acts at __.

      [51].    Id. ch. 734, 2019 Va. Acts at __ (codified as amended at Va. Code Ann. § 13.1-669 (Cum. Supp. 2019)) (deleting clause giving shareholders the right to opt into cumulative voting outside of the meeting notice).

      [52].    Id. ch. 734, 2019 Va. Acts at __ (codified as amended at Va. Code Ann. § 13.1-771(D)–(E) (Cum. Supp. 2019)).

      [53].    Id. ch. 734, 2019 Va. Acts at __ (codified as amended at Va. Code Ann. § 13.1-773(C) (Cum. Supp. 2019)).

      [54].    Id. ch. 734, 2019 Va. Acts at __.

      [55].    Act of Mar. 19, 2019, 2019, ch. 636, 2019 Va. Acts __, __ (codified at Va. Code Ann. §§ 13.1-1088 to 1099.27 (Cum. Supp. 2019)); see also Nat’l Conference of Comm’rs on Unif. State Laws 2017, Unif. Protected Series Act, https://www.uniformlaws.org/HigherLog ic/System/DownloadDocumentFile.ashx?DocumentFileKey=2ddffb95-cb77-2bfb-f952-bdc26  0051563&forceDialog=0 [https://perma.cc/N4XE-Y5LS].

      [56].    Ch. 636, 2019 Va. Acts at __.

      [57].    See supra note 55.

      [58].    Ch. 636, 2019 Va. Acts at __ (codified at Va. Code Ann. § 13.1-1002 (Cum. Supp. 2019)).

      [59].    Id. ch. 636, 2019 Va. Acts at __.

      [60].    Id. ch. 636, 2019 Va. Acts at __ (codified at Va. Code Ann. § 13.1-1089 (Cum. Supp. 2019)).

      [61].    See Jay Adkisson, Understanding the Protected Series Act: Liability Limitations and Claims, Forbes (Oct. 21, 2018, 12:38 PM), https://www.forbes.com/sites/jayadkisson/2018/ 10/21/understanding-the-protected-series-act-liability-limitations-and-claims/#bfc358946a d6 [https://perma.cc/57WD-JBQM].

      [62].    See ch. 636, 2019 Va. Acts at __ (codified at Va. Code Ann. §§ 13.1-1089, -1099(A), -1099.5(C) (Cum. Supp. 2019)); see also Terence Floyd Cuff, Delaware Series LLCs and Transactional Practice—Part I, 38 Real Est. Tax’n 118, 120–21, 124 (2011); Allen Sparkman, Tax Aspects of Series LLCs, Bus. L. Today (Feb. 28, 2013), https://www.american bar.org/groups/business_law/publications/blt/2013/02/03_sparkman/ [https://perma.cc/K4 72-N7RX].

      [63].    See Cuff, supra note 62, at 119–20.

      [64].    Unif. Protected Series Act, supra note 55, at § 104(6) cmt.

      [65].    Id. at Prefatory Note pt. 6(A).

      [66].    Id.

      [67].    Ch. 636, 2019 Va. Acts at __ (codified at Va. Code Ann. § 13.1-1088 (Cum. Supp. 2019)).

      [68].    See id. ch. 636, 2019 Va. Acts at __ (codified at Va. Code Ann. § 13.1-1099.10(B) (Cum. Supp. 2019)).

      [69].    Id. ch. 636, 2019 Va. Acts at __ (codified at Va. Code Ann. § 13.1-1088 (Cum. Supp. 2019)); id. ch. 636, 2019 Va. Acts at __ (codified at Va. Code Ann. § 13.1-1099.3 (Cum. Supp. 2019)).

      [70].    Id. ch. 636, 2019 Va. Acts at  __  (codified  at  Va.  Code  Ann.  §§  13.1-1094(14)(2) -1099.3, -1099.4(A), -1099.5(C) (Cum. Supp. 2019)).

      [71].    Id. ch. 636, 2019 Va. Acts at __ (codified at Va. Code Ann. § 13.1-1099.3(A) (Cum. Supp. 2019)).

      [72].    Id. ch. 636, 2019 Va. Acts at __ (codified at Va. Code Ann. § 13.1-1088 (Cum. Supp. 2019)).

      [73].    Id. ch. 636, 2019 Va. Acts at __ (codified at Va. Code Ann. § 13.1-1002 (Cum. Supp. 2019)).

      [74].    See id. ch. 636, 2019 Va. Acts at __ (codified at Va. Code Ann. §§ 13.1-1089 to -1090 (Cum. Supp. 2019)).

      [75].    Id. ch. 636, 2019 Va. Acts at __ (codified at Va. Code Ann. § 13.1-1090 (Cum. Supp. 2019)).

      [76].    Id. ch. 636, 2019 Va. Acts at __ (codified at Va. Code Ann. § 13.1-1002 (Cum. Supp. 2019)).

      [77].    See id. ch. 636, 2019 Va. Acts at __ (codified at Va. Code Ann. § 13.1-1091 (Cum. Supp. 2019)).

      [78].    Id. ch. 636, 2019 Va. Acts at __.

      [79].    Id. ch. 636, 2019 Va. Acts at __ (codified at Va. Code Ann. § 13.1-1091(1) (Cum. Supp. 2019)).

      [80].    Id. ch. 636, 2019 Va. Acts at __ (codified at Va. Code Ann. § 13.1-1091(2) (Cum. Supp. 2019)).

      [81].    Id. ch. 636, 2019 Va. Acts at __ (codified at Va. Code Ann. § 13.1-1091(3) (Cum. Supp. 2019)).

      [82].    Id. ch. 636, 2019 Va. Acts at __ (codified at Va. Code Ann. § 13.1-1091(4) (Cum. Supp. 2019)).

      [83].    Id. ch. 636, 2019 Va. Acts at __ (codified at Va. Code Ann. § 13.1-1091(5) (Cum. Supp. 2019)).

      [84].    Id. ch. 636, 2019 Va. Acts at __ (codified at Va. Code Ann. § 13.1-1092 (Cum. Supp. 2019)).

      [85].    See Va. Code Ann. § 13.1-1001.1(C) (Repl. Vol. 2016).

      [86].    Ch. 636, 2019 Va. Acts at __ (codified at Va. Code Ann. § 13.1-1093 (Cum. Supp. 2019)).

      [87].    Id. ch. 636, 2019 Va. Acts at __ (codified at Va. Code Ann. § 13.1-1095(A) (Cum. Supp. 2019)).

      [88].    Id. ch. 636, 2019 Va. Acts at __ (codified at Va. Code Ann. § 13.1-1093(A)(9) (Cum. Supp. 2019)).

      [89].    Id. ch. 636, 2019 Va. Acts at __ (codified at Va. Code Ann. § 13.1-1095(B) (Cum. Supp. 2019)).

      [90].    Id. ch. 636, 2019 Va. Acts at __.

      [91].    Id. ch. 636, 2019 Va. Acts at __ (codified at Va. Code Ann. § 13.1-1097(A) (Cum. Supp. 2019)).

      [92].    Id. ch. 636, 2019 Va. Acts at __ (codified at Va. Code Ann. § 13.1-1096(B)(2) (Cum. Supp. 2019)).

      [93].    Id. ch. 636, 2019 Va. Acts __ (codified at Va. Code Ann. § 13.1-1096(B)(1) (Cum. Supp. 2019)).

      [94].    Id. ch. 636, 2019 Va. Acts __ (codified at Va. Code Ann. §§ 13.1-1098, -1099 (Cum. Supp. 2019)).

      [95].    See id. ch. 636, 2019 Va. Acts at __.

      [96].    See id. ch. 636, 2019 Va. Acts  at  __  (codified  at  Va.  Code  Ann.  §§  13.1-1099.2, -1099.10 (Cum. Supp. 2019)).

      [97].    See id. ch. 636, 2019 Va. Acts at __.

      [98].    Id. ch. 636, 2019 Va. Acts at __ (codified at Va. Code Ann. § 13.1-1099.2(A)–(B) (Cum. Supp. 2019)).

      [99].    Id. ch. 636, 2019 Va. Acts at __ (codified at Va. Code Ann. § 13.1-1099.2(C) (Cum. Supp. 2019)).

    [100].    Id. ch. 636, 2019 Va. Acts at __ (codified at Va. Code Ann. §§ 13.1-1088, -1099.10 (Cum. Supp. 2019)).

    [101].    Id. ch. 636, 2019 Va. Acts at __ (codified at Va. Code Ann. § 13.1-1099.3 (Cum. Supp. 2019)).

    [102].    Id. ch. 636, 2019 Va. Acts at __ (codified at Va. Code Ann. § 13.1-1099.4 (Cum. Supp. 2019)).

    [103].    Id. ch. 636, 2019 Va. Acts at __ (codified at Va. Code Ann. § 13.1-1099(C)–(D) (Cum. Supp. 2019)).

    [104].    Id. ch. 636, 2019 Va. Acts at __ (codified at Va. Code Ann. § 13.1-1099(E)–(F) (Cum. Supp. 2019)).

    [105].    Id. ch. 636, 2019 Va. Acts at __ (codified at Va. Code Ann. § 13.1-1099.6(A) (Cum. Supp. 2019)).

    [106].    Id. ch. 636, 2019 Va. Acts at __ (codified at Va. Code Ann. § 13.1-1099.6(B) (Cum. Supp. 2019)).

    [107].    Id. ch. 636, 2019 Va. Acts at __ (codified at Va. Code Ann. § 13.1-1099.6(C) (Cum. Supp. 2019)).

    [108].    Id. ch. 636, 2019 Va. Acts at __ (codified at Va. Code Ann. § 13.1-1099.6(D) (Cum. Supp. 2019)).

    [109].    See id. ch. 636, 2019 Va. Acts at __ (codified at Va. Code Ann. § 13.1-1093 (Cum. Supp. 2019)).

    [110].    Id. ch. 636, 2019 Va. Acts at __ (codified at Va. Code Ann. § 13.1-1099.7 (Cum. Supp. 2019)).

    [111].    Id. ch. 636, 2019 Va. Acts at __.

    [112].    Id. ch. 636, 2019 Va. Acts at __.

    [113].    See Adkisson, supra note 61.

    [114].    Ch. 636, 2019 Va. Acts at __ (codified at Va. Code Ann. § 13.1-1099.8 (Cum. Supp. 2019)).

    [115].    Id. ch. 636, 2019 Va. Acts at __ (codified at Va. Code Ann. § 13.1-1099.9(1) (Cum. Supp. 2019)).

    [116].    Id. ch. 636, 2019 Va. Acts at __ (codified at Va. Code Ann. § 13.1-1099(2) (Cum. Supp. 2019)).

    [117].    Id. ch. 636, 2019 Va. Acts at __ (codified at Va. Code Ann. § 13.1-1099.10 (Cum. Supp. 2019)).

    [118].    Id. ch. 636, 2019 Va. Acts at __ (codified at Va. Code Ann. § 13.1-1088 (Cum. Supp. 2019)).

    [119].    Id. ch. 636, 2019 Va. Acts at __ (codified at Va. Code Ann. § 13.1-1099.10 (Cum. Supp. 2019)).

    [120].    See id. ch. 636, 2019 Va. Acts at __.

    [121].    Id. ch. 636, 2019 Va. Acts at __.

    [122].    Id. ch. 636, 2019 Va. Acts at __ (codified at Va. Code Ann. § 13.1-1099.10(D) (Cum. Supp. 2019)).

    [123].    Id. ch. 636, 2019 Va. Acts at __ (codified at Va. Code Ann. § 13.1-1099.11 (Cum. Supp. 2019)).

    [124].    Id. ch. 636, 2019 Va. Acts at __ (codified at Va. Code Ann. § 13.1-1099.12(A) (Cum. Supp. 2019)).

    [125].    Id. ch. 636, 2019 Va. Acts at __ (codified at Va. Code Ann. § 13.1-1099.12(B) (Cum. Supp. 2019)).

    [126].    Id. ch. 636, 2019 Va. Acts at __ (codified at Va. Code Ann. § 13.1-1099.13 (Cum. Supp. 2019)).

    [127].    Id. ch. 636, 2019 Va. Acts at __ (codified at Va. Code Ann. § 13.1-1099.12 (Cum. Supp. 2019)). But see id. ch. 636, 2019 Va. Acts at __ (codified at Va. Code Ann. § 13.1-1099.19 (Cum. Supp. 2019)) (allowing a Protected Series of a nonsurviving Series LLC to become a relocated Protected Series of the surviving Series LLC).

    [128].    Id. ch. 636, 2019 Va. Acts at __ (codified at Va. Code Ann. § 13.1-1099.14 (Cum. Supp. 2019)).

    [129].    Id. ch. 636, 2019 Va. Acts at __ (codified at Va. Code Ann. § 13.1-1099.15 (Cum. Supp. 2019)).

    [130].    Id. ch. 636, 2019 Va. Acts at __ (codified at Va. Code Ann. §§ 13.1-1099.15, -1099.16 (Cum. Supp. 2019)).

    [131].    Id. ch. 636, 2019 Va. Acts at __ (codified at Va. Code Ann. § 13.1-1099.21 (Cum. Supp. 2019)).

    [132].    Id. ch. 636, 2019 Va. Acts at __ (codified at Va. Code Ann. § 13.1-1099.23 (Cum. Supp. 2019)).

    [133].    Id. ch. 636, 2019 Va. Acts at __ (codified at Va. Code Ann. § 13.1-1099.22 (Cum. Supp. 2019)).

    [134].    297 Va. 1, 822 S.E.2d 358 (2019).

    [135].    Id. at 6, 822 S.E.2d at 361.

    [136].    Va. Code Ann. § 13.1-724(A) (Cum. Supp. 2018); May, 297 Va. at 7, 822 S.E.2d at 361–62.

    [137].    May, 297 Va. at 10, 822 S.E.2d at 363.

    [138].    Id. at 7, 822 S.E.2d at 361–62.

    [139].    Id. at 8, 822 S.E.2d at 362.

    [140].    Id. at 8, 822 S.E.2d at 362.

    [141].    Id. at 8, 822 S.E.2d at 362.

    [142].    Id. at 8, 822 S.E.2d at 362.

    [143].    Id. at 8, 822 S.E.2d at 362.

    [144].    Id. at 8, 822 S.E.2d at 362.

    [145].    Id. at 9, 822 S.E.2d at 362.

    [146].    Id. at 10, 13, 822 S.E.2d at 363–64.

    [147].    Id. at 11–12, 822 S.E.2d at 364.

    [148].    Id. at 13, 822 S.E.2d at 364.

    [149].    Id. at 16, 822 S.E.2d at 366.

    [150].    Id. at 16, 822 S.E.2d at 366.

    [151].    Id. at 16, 822 S.E.2d at 366.

    [152].    Id. at 13, 822 S.E.2d at 364–65.

    [153].    Id. at 17, 822 S.E.2d at 364–65.

    [154].    Id. at 16, 822 S.E.2d at 366.

Employment Law

Employment Law

Bret G. Daniel and Erin B. Edwards, Annual Survey of Virginia Law Employment Law, 54 U. Rich. L. Rev. 103 (2019).

Click here to download PDF.

Bret G. Daniel *

Erin B. Edwards **

Introduction

Virginia has historically been regarded as an employer-friendly jurisdiction. However, in recent years, the Fourth Circuit Court of Appeals has issued an increasing number of opinions that tend to favor employees. With a state legislature largely reluctant to interfere in the employer-employee relationship, developments in employment law generally occur via Fourth Circuit jurisprudence. Given the predominance of federal employment law in Virginia, the following discussion regarding developments in this practice area focuses less on state statutes and courts, and more on decisions handed down from the federal bench.

This Article provides an update on recent developments in employment law in Virginia.[1] It does not attempt to capture every change in the law, but instead focuses on significant developments in this arena. Part I of the Article discusses noteworthy shifts in Fourth Circuit jurisprudence regarding: the Equal Pay Act, Title VII of the Civil Rights Act, the Americans with Disabilities Act, and the Fair Labor Standards Act. Part II of the Article contains a brief update on state-specific statutory and case law developments regarding military leave, data privacy, employee access to personnel records, and Virginia’s unique flavor of wrongful termination—Bowman claims.

 I. Developments in Fourth Circuit Jurisprudence

 A. Pay Equity and the Equal Pay Act

Pay equity is a central issue affecting women’s rights in the workplace and has become a point of particular focus for state lawmakers,[2] the United States Congress,[3] and the Equal Employment Opportunity Commission (“EEOC”), which now requires some EEO-1 filers to report pay data for all employees by sex, race, and ethnicity, as discussed in more detail further on in this Article.[4] In Virginia, Democrat members of the General Assembly have proposed pay equity legislation for the last five sessions running.[5] But, like the majority of employment laws in Virginia, the Commonwealth currently adheres to federal standards under the Equal Pay Act (“EPA”).[6]

To prevail on an EPA claim, a plaintiff must demonstrate that her[7] employer paid her “different wages . . . for equal work in [a] job[] which require[d] equal skill, effort and responsibility and which [was] performed under similar working conditions.”[8]The “equal work” component of a prima facie case requires work “substantially equal in skill, effort and responsibility.”[9]Although jobs need not be identical, they should be “virtually identical.”[10] Merely identifying other male employees with similar titles or the same general responsibilities is insufficient to state a claim.[11] The requirement that a plaintiff must compare her pay with that of another employee performing substantially equal work distinguishes the EPA from Title VII of the Civil Rights Act (“Title VII”). The EPA “creates a sort of ‘strict liability’ for discrimination on the basis of sex” when such a comparison can be made, whereas Title VII requires a showing of “discriminatory intent.”[12] Accordingly, although the EPA eliminates the need to demonstrate intent, establishing a prima facie case entails a heightened comparator analysis—an issue the Fourth Circuit recently addressed in the context of higher education in Spencer v. Virginia State University.[13]

If a plaintiff establishes a prima facie case, then the burden shifts to the employer to show that any pay differential resulted from a permissible exception: “(i) a seniority system; (ii) a merit system; (iii) a system which measures earnings by quantity or quality of production; or (iv) a differential based on any other factor other than sex.”[14] If the employer can establish one of these affirmative defenses, then the burden falls on the plaintiff to rebut the employer’s evidence.[15] It is this fourth “catch-all” affirmative defense that has drawn the ire of the plaintiff’s bar and come under scrutiny by state legislatures that have passed their own versions of the EPA.[16] Indeed, proposed amendments to the Virginia Equal Pay Act,[17] which did not pass committee during the 2019 session, narrow the catch-all defense by requiring the employer to show that the factor is: (1) job related; (2) consistent with business necessity; and (3) “not based on or derived from a protected class-based differential in compensation.”[18] Employers would lose the defense if the employee can prove the existence of an alternative practice that would meet the same business purpose.[19] Although these amendments did not pass, Virginia nevertheless saw a significant narrowing of an employer’s ability to assert affirmative defenses at summary judgment in a recent case decided by the Fourth Circuit, EEOC v. Maryland Insurance Administration.[20]

  1. EEOC v. Maryland Insurance Administration

In January 2018, the Fourth Circuit articulated a new summary judgment standard for EPA cases, stating that the “burden of ultimate persuasion” is on the employer such that once an employee establishes a prima facie case of pay discrimination, the employer must prove that the pay disparity was based on a factor other than sex “so convincingly that a rational jury could not have reached a contrary conclusion.”[21] In other words, a merely plausible explanation for the pay disparity is insufficient if the employer does not carry its burden to prove that the proffered reason does “in fact explain the wage disparity.”[22] In so holding, the Fourth Circuit joined the Third and Tenth Circuits.[23]

The EEOC brought this action on behalf of three female fraud investigators who alleged that male fraud investigators were paid more for performing equal work.[24] The district court granted summary judgment, holding that the four male fraud investigators identified by the EEOC were not proper comparators, and even if they were, the pay disparity was due to the comparators’ credentials and prior work experience, not their sex.[25]

The comparators’ credentials and prior work experience were—in the district court’s opinion—legitimate factors other than sex that explained the pay differential.[26] Indeed, the Maryland Insurance Administration (“MIA”) had a defined salary schedule consisting of twenty separate steps, and new hires’ step placement was based on prior work experience, relevant professional designations, licenses and certifications, and prior years of service in state employment.[27] MIA presented evidence that the male comparators were placed at higher steps due to their relevant experience, certifications, and years of prior service.[28]

The Fourth Circuit, however, held that MIA could not “shield itself from liability under the EPA solely because [it] uses the state’s Standard Salary Schedule and awards credit for prior state employment or a lateral transfer within the state employment system.”[29] While the salary schedule may have been facially neutral, the court noted that “MIA exercise[d] discretion each time it assign[ed] a new hire to a specific step and salary range based on its review of the hire’s qualifications and experience.”[30] In sum, although MIA offered a facially gender-neutral reason “other than sex” for the pay disparity, the court held that the job-related distinctions between the female fraud investigators and alleged comparators, including prior state employment, must “in fact” motivate the pay decision such that no reasonable jury could reach a contrary conclusion.[31] Such a standard is a high bar for any defendant to clear on summary judgment and a prime example of how the Fourth Circuit is trending in a more plaintiff-friendly direction.

  1. Spencer v. Virginia State University

Decided in March 2019, Spencer v. Virginia State University is the most recent in a series of higher education EPA claims filed in the Fourth Circuit.[32] Spencer followed the Fourth Circuit’s decision in Maryland Insurance, and it appears the court viewed it as an opportunity to take a step back from the hardline summary judgment standard articulated in that case. In a unanimous decision, the court reinforced the plaintiff’s burden of establishing a prima facie case of wage discrimination and identified at least one “factor other than sex” that would warrant summary judgment, affirming the district court’s grant of summary judgment in favor of defendant Virginia State University (“VSU”).[33]

Zoe Spencer, a sociology professor at VSU, alleged that the university violated the EPA and Title VII by paying her less than two male professors: Michael Shackleford and Cortez Dial.[34] Both Shackleford and Dial were former administrators.[35]Spencer earned approximately $70,000 per year, while Shackleford and Dial earned over $100,000 per year.[36] Spencer attributed the pay differential to her sex, but the Fourth Circuit determined that a number of other factors rendered Shackleford and Dial improper comparators. The court’s analysis in this regard reinforced the “demanding threshold requirement” that “requires a comparator to have performed work ‘virtually identical’ (or the apparent synonym, ‘substantially equal’) to the plaintiff’s in skill, effort, and responsibility.”[37] The court explained that “[i]n alleging this necessary equality, a plaintiff may not rely on broad generalization at a high level of abstraction,” and went on to scrutinize the differences between the professorial duties and responsibilities of Spencer, Shackleford, and Dial.[38]

Spencer argued that all VSU professors, regardless of department or college, “perform equal work because they all perform the same essential tasks: preparing syllabi and lessons, instructing students, tracking student progress, managing the classroom, providing feedback, and inputting grades.”[39] In her view, these essential tasks required the same skills, such as “studying, preparing, presenting, discussing, and so forth.”[40] The court disagreed, aptly observing that the same tasks are shared by “middle-school teachers and law-school professors, pre-algebra teachers and biomedical-engineering professors.”[41]

As a starting point, the court noted that Spencer was a sociology professor in the Department of Sociology, Social Work, and Criminal Justice, while Shackleford and Dial taught in different departments.[42] Shackleford was a professor in the Department of Doctoral Studies.[43] And Dial served as a professor in Mass Communications.[44] The Fourth Circuit has long recognized that “differences between academic departments generally involve differences in skill and responsibility,”[45] but has not entirely foreclosed the possibility that a professor-plaintiff could establish sufficient evidence to show that work in one department is substantially equal to work in another.[46] Spencer, however, failed to overcome the tall task of demonstrating equality of work between professors in different departments.[47] Among some of the more significant differences between Spencer, Shackleford, and Dial, the court highlighted the fact that the three professors taught different class levels; Spencer taught mostly undergraduate level courses, while the two men taught mostly graduate students.[48] Additionally, unlike Spencer, Shackleford supervised doctoral dissertations.[49] Overall, the record showed that Shackleford and Dial generally worked more hours than Spencer, despite Spencer’s attempt to demonstrate that she actually did more work than her comparators.[50]

Notably, the court found this particular argument—that Spencer performed more work due to research and publishing responsibilities that Shackleford and Dial did not share—“paradoxical[]” inasmuch as she was only “piling on differences.”[51] In a remarkable departure from other circuit courts, the Fourth Circuit held in a footnote, “[p]iling on differences—even those suggesting that Spencer did better or more work—does nothing to prove equality of work.”[52] The court conclusively stated that Spencer had not adduced any evidence to demonstrate that she and her comparators performed equal work, and therefore failed to establish a prima facie case under the EPA.[53]

The court further held that even if the comparators were sufficient to state a prima facie case, the university proffered an unrebutted “factor other than sex” that did in fact explain the wage disparity.[54] VSU utilized a reduction in administrator salaries of nine-twelfths (or seventy-five percent) for all administrators transitioning to faculty positions, regardless of sex.[55]Although Spencer attempted to argue that the policy was erroneously applied, the court stated, “such an imprudent decision would still serve as a non-sex-based explanation for the pay disparity.”[56]

This case served as an opportunity for the Fourth Circuit to reinforce the high standard for establishing equality of work under the EPA and to take a step back from Maryland Insurance. The Maryland Insurance case ostensibly made summary judgment less attainable by setting a more stringent standard for establishing an affirmative defense. However, in Spencer, the Fourth Circuit made it a point to temper its previous analysis, stating,

The Equal Pay Act is a powerful tool, permitting an employee to prevail on a wage discrimination claim with no evidence of intentional discrimination. But this tool must be tempered by adherence to its provisions. Doing so requires that the work performed by the plaintiff and her comparators be equal and that the wage disparity not be based on a factor other than sex.[57]

Spencer failed on both counts.

  1. EEO-1 Pay Data Collection

Of particular note in the world of pay equity, the EEOC began collecting pay data for the first time in March 2018 in an effort to improve investigations of pay discrimination.[58] For decades, the EEOC has required private employers with 100 or more employees and certain federal contractors with fifty or more employees to file the Employer Information Report EEO-1 (“EEO-1”).[59] Component 1 of the EEO-1 requires covered employers to report aggregate data about employees’ ethnicity, race, and sex by job category.[60] In 2014, the Obama administration directed the Secretary of Labor to develop a pay data collection program.[61] Two years later, in 2016, after the Office of Management and Budget (“OMB”) approved the program, the EEOC announced that it would begin collecting summary pay data from EEO-1 filers beginning in March 2018.[62] In its press release, the EEOC stated the purpose of the data collection program was to “improve investigations of possible pay discrimination, which remains a contributing factor to persistent wage gaps.”[63] In August 2017, however, following the election of President Donald Trump, the OMB “initiat[ed] a review and immediate stay of the effectiveness of the pay data collection aspects of the EEO-1 form”—effectively staying the collection of pay data indefinitely.[64]

On March 4, 2019, Judge Tanya S. Chutkan of the U.S. District Court for the District of Columbia issued an order vacating the stay of the pay data component (“Component 2”) of the EEO-1.[65] Judge Chutkan held that the OMB’s decision to stay implementation of Component 2 was invalid on two grounds: (1) it violated OMB regulations; and (2) it was arbitrary and capricious because the decision “lacked the reasoned explanation that the [Administrative Procedure Act] requires.”[66] The court vacated the OMB’s stay and further ordered that the OMB’s previous approval of the revised EEO-1 form, including Component 2, shall be in effect.[67] Judge Chutkan’s order was not clear on whether she intended the EEOC to immediately begin collecting pay data (EEO-1 reports were due in less than ninety days—May 31, 2019), or whether the change would take effect with a later EEO-1 filing cycle.

On April 25, 2019, Judge Chutkan provided more clarity, ruling that covered employers must submit Component 2 pay data by September 30, 2019.[68] Subsequently, on May 3, 2019, the EEOC issued a notice advising EEO-1 filers to begin preparing pay data for calendar years 2017 and 2018 for submission by the court-ordered deadline.[69] The notice further stated that the EEOC would begin collecting pay data in mid-July of 2019.[70]

Now, Virginia employers and federal contractors with 100 or more employees[71] must report pay data by sex, race, and ethnicity, as well as job category. For each job category and protected class, employers must sort and tabulate income by “pay band,” of which there are twelve.[72] In addition, employers must calculate and report total hours worked by all employees in each pay band.[73] For exempt employees, filers may report forty hours per week for full-time employees, twenty hours per week for part-time employees, or the actual number of hours worked by such employees.[74]

In sum, the flurry of activity spurred by Judge Chutkan’s March 4, 2019 Order has set in motion the EEOC’s first full-scale collection of pay data from covered employers.

 B. Title VII of the Civil Rights Act

Title VII prohibits discrimination because of—or on the basis of—“race, color, religion, sex, or national origin.”[75] There are two ways to plead a claim of Title VII discrimination: “either with direct evidence or through the ‘prima facie’ method (also called ‘burden shifting’ or the McDonnell Douglas framework).”[76] Under the “direct” method, a plaintiff must provide: “(1) direct or indirect evidence of intentional discrimination (2) against plaintiff for belonging to a protected class, which motivated (3) an adverse employment action.”[77] Indirect evidence is routinely considered “to be tantamount to circumstantial evidence.”[78]To utilize the burden-shifting framework established in McDonnell Douglas Corporation v. Green,[79] a plaintiff first establishes a prima facie case by demonstrating: “(1) membership in a protected class; (2) satisfactory job performance; (3) adverse employment action; and (4) different treatment from similarly situated employees outside the protected class.”[80]

  1. Exhausting Administrative Remedies

Traditionally, courts in the Fourth Circuit have treated as jurisdictional the requirement that a plaintiff file a charge of discrimination with the EEOC before filing a federal lawsuit.[81] If jurisdictional in nature, a failure-to-exhaust defense could be raised at any point during litigation.[82] In Fort Bend County v. Davis, the Supreme Court of the United States unanimously agreed that the requirement of filing a charge with the EEOC, while still a mandatory processing rule, is procedural in nature and, thus, not jurisdictional.[83] The Court did not specify precisely how early a failure-to-exhaust defense must be raised, but indicated that the requirement is “properly ranked among the array of claim-processing rules that must be timely raised to come into play.”[84] This recent development represents a change in how courts will analyze failure-to-exhaust defenses moving forward, and it remains to be seen how jurisdictions will determine when the defense is timely raised. But for practitioners, the message is clear: raise such a defense at the earliest possible opportunity.

  1. LGBTQ Protections

Since 2015, the American LGBTQ community has enjoyed the right to marry,[85] but they are not necessarily protected from discrimination in the workplace. Although the EEOC treats sexual orientation and gender identity as protected classes under Title VII,[86] federal courts differ on the question of whether the term “sex” under Title VII encompasses these characteristics.[87]

On April 22, 2019, the Supreme Court granted certiorari in two companion cases, Bostock v. Clayton County and Altitude Express, Inc. v. Zarda, to decide whether Title VII provides protection against discrimination based on an individual’s sexual orientation.[88] The Court also granted certiorari in R.G. and G.R. Harris Funeral Homes, Inc. v. E.E.O.C. to determine whether Title VII prohibits discrimination against transgender individuals based on (1) their status as transgender; or (2) sex stereotyping under Price Waterhouse.[89] These decisions will affect how Virginia treats both sexual orientation and transgender status under Title VII. Until those decisions are released, the cases discussed below govern treatment of LGBTQ discrimination in Virginia.

 a. Hinton v. Virginia Union University

As recently reaffirmed by the Eastern District of Virginia in Hinton v. Virginia Union University, the Fourth Circuit does not recognize sexual orientation as a protected class.[90] Terry Hinton, an openly gay man, was a longtime administrative assistant at Virginia Union University (“VUU”).[91] In 2013, VUU declined to raise Hinton’s pay after Hinton pointed out that he was paid less than four female administrative assistants with comparable duties and lengths of service.[92] Later in 2013, after Dr. Latrelle Green became Hinton’s direct supervisor, Hinton was twice reprimanded for, and asked to cease, engaging in “drama and recurring gossip.”[93] Soon after the second reprimand, Green put a letter containing multiple examples of alleged “unprofessional misconduct” in Hinton’s personnel file.[94] When Hinton later requested to take classes at nearby Virginia Commonwealth University, which other VUU employees had previously done, Green denied Hinton’s request.[95] Nearly two years later, when Green was no longer Hinton’s supervisor, Green allegedly told Hinton that the President of VUU had told her to give him his reprimand letter “because he had a problem with Hinton’s sexual orientation.”[96]

Hinton urged the district court to depart from the Fourth Circuit’s position that no cause of action exists for discrimination on the basis of sexual orientation, articulated in Wrightson v. Pizza Hut of America, Inc.,[97] because the relevant portion of the opinion was dicta and “the case actually turned on issues of same-sex sexual harassment.”[98] The court held that the Fourth Circuit’s stance on sexual orientation under Title VII, while it began as dicta in Wrightson, is substantively treated as the rule in the Fourth Circuit.[99] The court further explained that Wrightson remains the rule in the circuit notwithstanding the July 2015 EEOC policy that Title VII prohibits discrimination on the basis of sexual orientation.[100]

 b. Grimm v. Gloucester County School Board

In an education case brought under Title IX and on remand from the Supreme Court of the United States, the Eastern District of Virginia held that discrimination on the basis of transgender status constitutes gender stereotyping and is per se actionable sex discrimination under both Title VII and Title IX.[101] Gavin Grimm, a transgender man who had started the transition process at the end of his freshman year of high school, met with the Principal of Gloucester High School, along with his mother, to explain that he would be attending school as a boy.[102] Grimm provided a treatment documentation letter from his medical providers that indicated he should “be treated as a male in all respects—including restroom use.”[103] After initially using the isolated and inconveniently located restroom in the nurse’s office, Grimm sought permission to use the boys’ restroom—which the Principal approved.[104]

While Grimm experienced no incidents for nearly two months, adults in the community eventually learned of his use of the boys’ restroom and demanded the Gloucester County School Board put an end to the accommodation.[105] After weeks of negotiation, the Board passed a policy to restrict restroom usage to a student’s biological sex.[106] Grimm soon stopped using the restroom at school, which caused him to develop “a painful urinary tract infection” and led to “difficulty concentrating in class because of his physical discomfort.”[107] Grimm sued the School Board under Title IX alleging that the Board’s policy discriminated on the basis of sex.[108]

Courts “may ‘look to case law interpreting Title VII’ . . . which prohibits employment discrimination on the basis of . . . sex—‘for guidance in evaluating a claim brought under Title IX.’”[109] In Grimm, the court examined the Price Waterhouse holding that “Title VII barred discrimination not only based on the plaintiff’s gender, but based on ‘sex stereotyping’ because the plaintiff had failed to act in accordance with gender stereotypes associated with women.”[110] Following the District of Maryland, the Eastern District of Virginia concluded that “discrimination on the basis of transgender status constitutes gender stereotyping because ‘by definition, transgender persons do not conform to gender stereotypes.’”[111] The Court further concluded “that based on the gender-stereotyping theory from Price Waterhouse, claims of discrimination on the basis of transgender status are per se sex discrimination under Title VII or other federal civil rights laws.”[112] Finding gender stereotyping actionable under Title VII, the court extended the rule to Title IX, denied the motion to dismiss, and allowed Grimm’s claim to move forward.[113]

  1. Sex Discrimination

The social media #MeToo movement has brought sexual harassment to the forefront of discussion in our workplaces, legislatures, and federal agencies.[114] Between October 2017 and October 2018, #MeToo was used an average of 55,319 times a day on Twitter alone.[115] Forty-four percent of the United States Congress addressed sexual misconduct on their official Facebook accounts between October 1 and December 30, 2017.[116] The number of EEOC charges alleging sexual harassment increased by 13.6% between 2017 and 2018, following a downward trend in such charges from 2010 to 2017.[117] In 2018, charges of discrimination containing allegations of sexual harassment were the highest since 2011.[118] Despite the swift social and political implications, the full extent of the movement’s legal impact is yet to be determined.

 a. Parker v. Reema Consulting Services, Inc.

In Parker v. Reema Consulting Services, Inc., a recent “watercooler” case, the Fourth Circuit recognized that an employer who participates in circulating a false rumor, sexual in nature, may be liable under Title VII.[119] Soon after Evangeline Parker was promoted for a sixth time, male employees circulated a rumor that she obtained the promotion because she had engaged in a sexual relationship with a higher ranking manager.[120] The day after the highest-ranking manager at the facility, Larry Moppins, discussed the false rumor at a meeting (one in which Parker did not participate), Moppins met with Parker.[121] During the meeting, Moppins blamed Parker for “bringing the situation to the workplace” and told her that he “could no longer recommend her for promotions or higher-level tasks because of the rumor,” nor would he “allow her to advance any further.”[122]

After another meeting with Moppins where he “lost his temper and began screaming” at her, Parker filed a sexual harassment complaint with human resources.[123] Several weeks later, Moppins “simultaneously issued [Parker] two written warnings and then fired her.”[124]

While Reema argued that employment action was taken because of the “rumored conduct in sleeping with her boss to obtain [a] promotion,” the Fourth Circuit concluded that the allegations sufficiently alleged discrimination on the basis of sex because male employees started and circulated the false rumor which furthered “traditional negative stereotypes regarding the relationship between the advancement of women in the workplace and their sexual behavior.”[125] Acknowledging that these stereotypes “stubbornly persist in our society” and “may cause superiors and coworkers to treat women in the workplace differently from men,” the court held that Parker had sufficiently pled gender-based harassment.[126] The court further concluded that “the dichotomy that [Reema], as well as the district court, purports to create between harassment ‘based on gender’ and harassment based on ‘conduct’ is not meaningful in this case because the conduct is also alleged to be gender-based.”[127]

 b. Ray v. International Paper Company

Overturning the district court’s grant of summary judgment in favor of the employer, the Fourth Circuit decided that the alleged withholding of voluntary overtime hours could constitute a “tangible employment action” under Title VII.[128] Around one year after International Paper hired Tamika Ray, her supervisor, Johnnie McDowell, started asking Ray for sexual favors, offered to pay her for those favors, and grabbed her thigh.[129] Even though Ray “repeatedly refus[ed] his advances and ask[ed] him to stop,” McDowell continued the behaviors.[130] More than ten years after Ray began working at International Paper, she reported McDowell’s continued conduct to other company supervisors.[131] After learning that Ray had reported the conduct, McDowell informed Ray “that she could no longer perform ‘voluntary’ overtime work before the beginning of her regular work shifts.”[132]

In a sexual harassment case, “[w]hen a supervisor is the harasser and the ‘harassment culminates in a tangible employment action, the employer is strictly liable.’”[133] Because McDowell’s decision to withhold voluntary overtime hours “negatively affected her income,” the court concluded that Ray presented evidence of a tangible employment action sufficient to survive summary judgment.[134]

 c. Bauer v. Lynch

In a case challenging the physical fitness test utilized by the Federal Bureau of Investigation (“FBI”), the Fourth Circuit adopted the rule that “an employer does not contravene Title VII when it utilizes physical fitness standards that distinguish between the sexes on the basis of their physiological differences but impose an equal burden of compliance on both men and women, requiring the same level of physical fitness of each.”[135] After a new agent trainee, Jay Bauer, fell one push-up shy of the thirty required push-ups for male trainees, Bauer filed a sex-based discrimination suit under Title VII because the FBI required female trainees to complete only fourteen push-ups.[136] The FBI designed the trainee test requirements based on a study of trainees and their reasoning that, due to physiological differences, “equally fit men and women would perform differently in the same events.”[137] The test utilized a “gender-normed framework” that had “the complementary benefits of allowing the measurement of equivalent fitness levels between men and women while also mitigating the negative impact that would otherwise result from requiring female Trainees to satisfy the male-oriented standards.”[138]

The court acknowledged that “physical fitness standards suitable for men may not always be suitable for women, and accommodations addressing physiological differences . . . are not necessarily unlawful.”[139] Since men and women “demonstrate their fitness differently,” the test for whether or not physical fitness standards discriminate on the basis of sex “depends on whether they require men and women to demonstrate different levels of fitness.”[140] The Fourth Circuit vacated the district court’s decision to award summary judgment to Bauer “on the basis of an erroneous legal standard” and remanded the case.[141] Because the FBI’s test imposed equivalent burdens on both men and women in assessing physical fitness, the Eastern District of Virginia granted summary judgment to the FBI on remand.[142]

  1. Title VII Retaliation

In Hernandez v. Fairfax County, the Fourth Circuit held that the proportionality of a disciplinary reprimand to an incident of employee misconduct can factor in determining whether the employer was retaliating against the employee for an earlier sexual harassment complaint.[143] Magaly Hernandez worked for more than ten years as a female firefighter for Fairfax County, Virginia.[144] Soon after she transferred to a different station, the station captain, Jon Bruley, “engaged in inappropriate conduct toward her, including blocking her path in the hallway, placing his chin on her shoulder, and positioning his body ‘right up against’ her.”[145] Despite Hernandez’s repeated requests for Bruley to stop, he continued making inappropriate sexual comments, which led Hernandez to report Bruley’s behavior to his supervisor, Cheri Zosh.[146] Bruley stopped making inappropriate comments after Zosh confronted him, but he “began monitoring and tracking [Hernandez’s] activities and movements at work” for several months, which prompted Hernandez to file a formal complaint with Fairfax County.[147] Once Hernandez was transferred to a different fire station, “she was involved in a verbal confrontation with a male firefighter during a basketball game at the station.”[148] After an investigation, the County issued Hernandez “a written reprimand for workplace violence and unbecoming conduct.”[149]

The Fourth Circuit found that Hernandez had engaged in protected activity by making an initial report to Zosh regarding Bruley’s conduct towards her and by filing an official complaint with the County before she was transferred.[150] After the “brief, non-physical altercation” at the basketball event, the County’s written reprimand disqualified Hernandez from any promotions for at least one year.[151] The court held that the reprimand could constitute an adverse employment action because of the disproportionality between the severity of the reprimand and the minor nature of the altercation.[152] Based on the fact that only four months had passed between Hernandez’s official complaint and the County’s investigation of the basketball incident, together with the relative severity of the reprimand, the court held that a jury could conclude that the County had retaliated against Hernandez.[153] The Fourth Circuit, therefore, reversed summary judgment and remanded to the district court for further proceedings.[154]

  1. Title VII Joint Employer Liability

The Fourth Circuit expressly defined joint employer liability under Title VII in Butler v. Drive Automotive Industries of America, Inc.[155] Recognizing “the reality of changes in modern employment,” the court adopted the hybrid test, because it “best captures the fact-specific nature of Title VII cases.”[156] While acknowledging that the common law element of control “remains the ‘principal guidepost’ in the analysis,” the court articulated nine factors for courts to consider when determining whether there is a joint employer relationship:

(1)  authority to hire and fire the individual;

(2)  day-to-day supervision of the individual, including employee discipline;

(3)  whether the putative employer furnishes the equipment used and the place of work;

(4)  possession of and responsibility over the individual’s employment records, including payroll, insurance, and taxes;

(5)  the length of time during which the individual has worked for the putative employer;

(6)  whether the putative employer provides the individual with formal or informal training;

(7)  whether the individual’s duties are akin to a regular employee’s duties;

(8)  whether the individual is assigned solely to the putative employer; and

(9)  whether the individual and putative employer intended to enter into an employment relationship.[157]

The court specified that the first, second, and third factors are the most important, although “no one factor is determinative.”[158] The factors are not inflexible, as courts within the circuit are able to “modify the factors to the specific industry context” and should consider each factor in relation to the particular employment relationship at issue.[159]

 C. The Americans with Disabilities Act

With education around mental health issues on the rise, recent Fourth Circuit decisions have considered the extent to which alleged disabilities related to mental health are covered under the Americans with Disabilities Act (“ADA”). In addition, as a matter of first impression, the Eastern District of Virginia recently held that compensatory and punitive damages are not available forms of relief for ADA retaliation claims.

  1. Mental Health

 a. Jacobs v. North Carolina Administrative Office of the Courts

In 2015, the Fourth Circuit held that a social anxiety disorder may qualify as a disability under the ADA.[160] Christina Jacobs alleged that she suffered from social anxiety and requested, as an accommodation for the alleged disability, to be reassigned from her front counter job to a role that involved “less direct interpersonal interaction.”[161] After Jacobs disclosed her disability on two separate occasions and officially requested an accommodation, she was terminated “because she was not ‘getting it’” and the employer did not have a place for her services.[162]

While the district court found that Jacobs, as a matter of law, was not disabled, the Fourth Circuit disagreed.[163] Although Jacobs had previously attended outings with coworkers and attempted to perform her front counter job duties, these facts did not establish that she was not “substantially limited” in interacting with others.[164] The court deemed that “[a] person need not live as a hermit in order to be ‘substantially limited’ in interacting with others,” and overturned the district court’s grant of summary judgment to the employer.[165]

 b. Maubach v. City of Fairfax

Another recent Fourth Circuit decision emphasized the importance of the employee participating in the interactive process.[166] Stefanie Maubach, who suffered from panic attacks, requested permission to bring her emotional support dog, Mr. B, into the workplace as she performed her dispatcher duties.[167] Her employer, the City of Fairfax, allowed her to bring Mr. B to work on a trial basis.[168] After her supervisor experienced allergy issues caused by Mr. B, Maubach refused the City’s request that she bring a hypoallergenic dog in place of Mr. B.[169] She also refused to change shifts so that she would not have to leave her dispatcher post uncovered when she needed to take Mr. B out for a walk.[170] Ultimately, the court ruled against Maubach because she failed to participate in the interactive process in good faith.[171] Where “an employee causes the interactive process to break down by insisting on a particular accommodation, an employer cannot be held liable under the ADA.”[172]

 c. Hannah P. v. Coats

The Fourth Circuit also clarified that an employer is permitted to consider an employee’s attendance issues when making employment decisions, even where the employee’s attendance issues stem from an alleged disability—in this case, depression.[173] Hannah was diagnosed with depression only a few months into her five-year term with the Office of the Director of National Intelligence.[174] She did not immediately request any accommodations, but she did notify at least two supervisors of her condition.[175] Two years after Hannah started working, her schedule was “erratic,” she came into work very late, she was “unreachable” for hours, and she had “numerous unplanned absences.”[176] After meeting with a supervisor to make an attendance plan “to reconcile Hannah’s depression with [the employer’s] staffing needs,” Hannah continued to have issues that did not comport with the attendance plan and negatively impacted her co-workers’ and supervisors’ workloads.[177]

The employer rejected Hannah’s application for a permanent position because her “recent performance [was] not consistent with a potentially good employee.”[178] Despite intracompany memoranda discussing Hannah’s medical condition, the court found that the attendance issues were not pretext for discrimination because the focus of the employer’s decision was on the frequency of the attendance issues and its impact on Hannah’s performance.[179]

  1. ADA Retaliation

On a question of first impression, the Eastern District of Virginia held that compensatory and punitive damages are not available forms of relief for ADA retaliation claims.[180] The Fourth Circuit had twice held that compensatory and punitive damages were not available, but neither decision was binding precedent.[181] Because compensatory and punitive damages are unavailable, plaintiffs are not entitled to a jury trial and can seek only equitable relief.[182]

D. The Fair Labor Standards Act

In April 2017, the Fourth Circuit established a new test for joint employer liability under the Fair Labor Standards Act (“FLSA”).[183] The standard articulated in Salinas v. Commercial Interiors, Inc. is unique among the circuits, and a challenging one for employers to overcome. Unlike the test under Title VII, discussed supra, the Salinas test focuses on the relationship between the putative joint employers, rather than the relationship between the worker and each company.

The plaintiffs in Salinas were drywall installers employed by J.I. General Contractors, Inc., a subcontractor, providing services to a general contractor, Commercial Interiors, Inc.[184] Plaintiffs filed claims for unpaid wages and overtime against both J.I. General Contractors and Commercial Interiors.[185] The District of Maryland held that Commercial Interiors was not a joint employer and dismissed it from the case.[186] On appeal, the Fourth Circuit overturned the decision, holding that

joint employment exists when (1) two or more persons or entities share, agree to allocate responsibility for, or otherwise codetermine—formally or informally, directly or indirectly—the essential terms and conditions of a worker’s employment and (2) the two or more persons’ or entities’ combined influence over the terms and conditions of the worker’s employment render the worker an employee as opposed to an independent contractor.[187]

Under the first part of the test, the court enumerated six, non-exhaustive factors:

(1) Whether, formally or as a matter of practice, the putative joint employers jointly determine, share, or allocate the power to direct, control, or supervise the worker, whether by direct or indirect means;

(2) Whether, formally or as a matter of practice, the putative joint employers jointly determine, share, or allocate the power to—directly or indirectly—hire or fire the worker or modify the terms or conditions of the worker’s employment;

(3) The degree of permanency and duration of the relationship between the putative joint employers;

(4) Whether, through shared management or a direct or indirect ownership interest, one putative joint employer controls, is controlled by, or is under common control with the other putative joint employer;

(5) Whether the work is performed on a premises owned or controlled by one or more of the putative joint employers, independently of or in connection with one another; and

(6) Whether, formally or as a matter of practice, the putative joint employers jointly determine, share, or allocate responsibility over functions ordinarily carried out by an employer, such as handling payroll; providing workers’ compensation insurance; paying payroll taxes; or providing the facilities, equipment, tools, or materials necessary to complete the work.[188]

Applying these factors, the court found that Commercial Interiors and J.I. General Contractors “were not completely disassociated”—that the relationship was one of “one employment”—and next considered whether the plaintiffs were employees or subcontractors.[189] The court held that the plaintiffs were “economically dependent on Commercial and J.I. in the aggregate” and were therefore employees of both companies.[190]

The most striking element of this new test is the focus on the relationship between the putative joint employers, instead of the relationship between the worker and each company individually. Rejecting common law agency principles, the court instead held that the “combined influence over the terms and conditions of a worker’s employment may give rise to liability under the FLSA if the entities are ‘not completely disassociated’ with regard to the worker’s employment.”[191] Therefore, any degree of cooperation between the putative joint employers—even if one of the companies does not exercise direct control over the worker—may be enough to establish joint employer liability.[192]

 II. State Law Update

As discussed, supra, Virginia employment laws generally mirror federal law. To the extent the Commonwealth supplements federal law, the distinctions are relatively minor, but in recent years there have been a handful of noteworthy developments on topics such as military leave, data privacy, employee access to personnel files, and wrongful termination claims.

 A. Military Leave

On March 9, 2018, the Virginia General Assembly amended the state’s military leave laws to provide protections for members of the Civil Air Patrol and all persons employed in Virginia who serve in the National Guards of other states.[193] Previously, only residents of Virginia who served in the National Guards of other states were afforded leave and reemployment rights.[194]

 B. The Virginia Data Breach Notification Act

Effective July 1, 2017, Virginia expanded employers’ notification obligations under the Virginia Data Breach Notification Act.[195] Employers and payroll service providers must notify the state’s attorney general, without unreasonable delay, when a covered employer discovers unauthorized access and acquisition of unencrypted or unredacted computerized data containing a taxpayer identification number, in combination with that taxpayer’s income tax withholding.[196]

Covered employers must report a breach if it: (1) compromises the confidentiality of the data; and (2) causes identity theft or fraud, or the employer reasonably believes it has caused or will cause such harm.[197] Covered employers must notify the attorney general even if the breach does not otherwise trigger the statute’s notification obligations to affected individuals.[198]

 C. Personnel Files

Historically, Virginia employers were under no obligation to produce personnel files or employment records to employees or former employees, absent a subpoena. But as of July 1, 2019, all employers in Virginia must, upon written request,

furnish a copy of all records or papers retained by the employer in any format, reflecting (i) the employee’s dates of employment with the employer; (ii) the employee’s wages or salary during the employment; (iii) the employee’s job description and job title during the employment; and (iv) any injuries sustained by the employee during the course of the employment with the employer.[199]

Employers have thirty days to respond to the request.[200] A willful failure to respond may render the employer liable for all expenses incurred by the employee in trying to obtain the records, including attorneys’ fees and court costs.[201]

The statute contains one narrow exception: if the employer has a written statement from the employee’s treating physician or clinical psychologist that providing the employee with his or her employment records may endanger the life or safety of the employee or of another person, then the employer must provide the records to the employee’s attorney or authorized insurer, rather than directly to the employee.[202]

 D. Bowman Claims

Since its inception in Bowman v. State Bank of Keysville,[203] Virginia’s common law cause of action for wrongful termination has lacked a clearly defined scope. Recent guidance from the Supreme Court of Virginia, such as in Francis v. National Accrediting Commission of Career Arts & Sciences, Inc.,[204] has added some clarity to an area of Virginia employment law lacking in predictable black letter law.

Virginia adheres to the employment at-will doctrine.[205] Under that doctrine, either the employee or the employer may end their employment relationship for any reason or no reason.[206] In Bowman, the Supreme Court of Virginia recognized an exception and created a common law cause of action in those instances where the termination of an employee violates Virginia law.[207] In the decades that followed Bowman, the court offered occasional guidance on what constitutes actionable wrongful termination.[208] The result is a patchwork of cases attempting to define several distinct scenarios that may form the basis of a Bowman claim. In Francis, the court’s discussion clarifies the state of the law for those navigating the wrongful termination landscape.[209]

Noemie Francis was terminated after she obtained a preliminary protective order against a co-worker.[210] Following her termination, Francis filed suit alleging wrongful discharge in violation of public policy under Bowman.[211] The trial court sustained the employer’s demurrer and the Supreme Court of Virginia affirmed.[212] In doing so, the court articulated the three “scenarios” available to Bowman plaintiffs.[213] Although the three scenarios are not new concepts, the court’s summary of viable Bowman claims provides a road map for those litigating these types of cases.[214] The court noted that the exception to the employment at-will doctrine is “narrow” and limited to only three circumstances:

(1) When an employer violated a policy enabling the exercise of an employee’s statutorily created right.

(2) When the public policy violated by the employer was explicitly expressed in the statute and the employee was clearly a member of that class of persons directly entitled to the protection enunciated by the public policy.

(3) When the discharge was based on the employee’s refusal to engage in a criminal act.[215]

The third scenario was not at issue, and the court ultimately held that Francis did not state a claim for wrongful termination under scenarios one or two because her termination did not itself violate the public policy stated in the protective order statutes, which is to protect the health and safety of the petitioner or any family or household member of the petitioner.[216] The court reasoned that the termination did not prevent Francis “from exercising her statutory rights under the Protective Order Statutes” nor did it violate the express statutory public policy of protecting her public safety.[217]

The precise limitations of the “public policy” exceptions remain somewhat open, but the court appears resistant to claims of wrongful termination where the statute does not clearly contemplate some form of relief for retaliation or expressly recognize a right exercised by the terminated employee that directly results in her termination.[218]

Conclusion

The employment law landscape in Virginia has changed in recent years, largely due to shifts in the Fourth Circuit’s interpretation of federal law. Because most employment laws in Virginia mirror federal law, the more significant developments in this practice area occur via the federal bench. Notwithstanding that reality, the Virginia legislature has tinkered at the margins of laws regarding military leave, data privacy, and access to personnel records. In addition, the Supreme Court of Virginia recently clarified the standard for wrongful termination claims. Even if state law remains somewhat static, federal employment laws will continue to evolve as courts in Virginia interpret and apply those laws in this jurisdiction.


*      Associate, Ogletree, Deakins, Nash, Smoak & Stewart, P.C., Richmond, Virginia. J.D., 2017, University of Richmond School of Law; B.S., 2010, Florida State University.

**   J.D. Candidate 2021, University of Virginia School of Law; M.Ed., 2015, Clemson University; B.S., 2013, University of Virginia’s College at Wise.

[1].   The Article encompasses developments occurring between approximately 2015 and 2019.

 [2].    See, e.g., Women’s Bureau, U.S. Dep’t of Labor, Pay Transparency and Equal Pay Protections, https://dol.gov/wb/EqualPay/equalpay_txt.htm [https://perma.cc/YT95-A8E5] (summarizing state laws around pay transparency and equal pay).

        [3].    Paycheck Fairness Act, H.R. 7, 116th Cong. (as passed by House of Representatives, Mar. 27, 2019).

        [4].    See infra Part I.A.3.

        [5].    See S.B. 1636, Va. Gen. Assembly (Reg. Sess. 2019); H.B. 1089, Va. Gen. Assembly (Reg. Sess. 2018); S.B. 1080, Va. Gen. Assembly (Reg. Sess. 2017); S.B. 221, Va. Gen. Assembly (Reg. Sess. 2016); S.B. 772, Va. Gen. Assembly (Reg. Sess. 2015).

        [6].    See Equal Pay Act of 1963 § 1, 29 U.S.C. § 206(d) (2012); Va. Code Ann. § 40.1-28.6 (Repl. Vol. 2013).

        [7].    Both men and women are protected from discriminatory pay practices under the EPA, but for the purposes of this section of the Article, we use female pronouns throughout.

        [8].    Brinkley-Obu v. Hughes Training, Inc., 36 F.3d 336, 343 (4th Cir. 1994).

        [9].    Strag v. Bd. of Trs., 55 F.3d 943, 950 (4th Cir. 1995) (emphasis added).

      [10].    Wheatley v. Wicomico Cty., 390 F.3d 328, 333 (4th Cir. 2004) (quoting Brennan v. City Stores, Inc., 479 F.2d 235, 238 (5th Cir. 1973)).

      [11].    See Noel-Batiste v. Va. State Univ., No. 3:12cv00826-HEH, 2013 U.S. Dist. LEXIS, 16875, at *17 (E.D. Va. Feb. 6, 2013) (“It is insufficient that Plaintiff and other male [employees] have similar titles and similar generalized responsibilities; the skills, effort and responsibility must be substantially equal.”).

      [12].    Hassman v. Valley Motors, Inc., 790 F. Supp. 564, 569 (D. Md. 1992) (quoting Brewster v. Barnes, 788 F.2d 985, 993 n.13 (4th Cir. 1986)).

      [13].    919 F.3d 199, 203 (4th Cir. 2019); see discussion infra Part I.A.2.

      [14].    29 U.S.C. § 206(d)(1) (2012).

      [15].    See Strag v. Bd. of Trs., 55 F.3d 943, 948 (4th Cir. 1995).

      [16].    See, e.g., Cal. Lab. Code § 1197.5 (West 2019); N.J. Stat. Ann. § 10:5-12 (West 2019); N.Y. Lab. Law § 194 (Consol. 2019) (effective Oct. 8, 2019).

      [17].    S.B. 1636, Va. Gen. Assembly (Reg. Sess. 2019). Notably, this bill would have expanded the definition of “protected class” under the Virginia Equal Pay Act to include “persons distinguished by race, color, religion, sex, sexual orientation, gender identity or expression, political affiliation, national origin, marital status, veteran status, disability, or age.” Id.

      [18].    Id.

      [19].    Id.

      [20].    U.S. Equal Emp’t Opportunity Comm’n v. Md. Ins. Admin., 879 F.3d 114, 121 (4th Cir. 2018).

      [21].    Id. (emphasis added).

      [22].    Id. (emphasis omitted).

      [23].    Id. (citing Mickelson v. N.Y. Life Ins. Co., 460 F.3d 1304, 1312 (10th Cir. 2006); Stanziale v. Jargowsky, 200 F.3d 101, 107–08 (3d Cir. 2000)).

      [24].    Id. at 117–18.

      [25].    See U.S. Equal Emp’t Opportunity Comm’n v. Md. Ins. Admin., No. 15-1091, 2016 U.S. Dist. LEXIS 142701, at *1–2 (D. Md. Oct. 14, 2016), vacated and remanded, 879 F.3d 114, 124 (4th Cir. 2018).

      [26].    Id.

      [27].    Md. Ins. Admin., 879 F.3d at 116–17.

      [28].    See id. at 118–19.

      [29].    Id. at 122–23.

      [30].    Id. at 123.

      [31].    Id.

      [32].    See, e.g., Earl v. Norfolk State Univ., No. 2:13cv148, 2016 U.S. Dist. LEXIS 35171, at *2–3 (E.D. Va. Mar. 17, 2016); Noel-Batiste v. Va. State Univ., No. 3:12cv00826-HEH, 2013 U.S. Dist. LEXIS 16875, at *1, *7–8 (E.D. Va. Feb. 6, 2013).

      [33].    Spencer v. Va. State Univ., 919 F.3d 199, 202, 208–09 (4th Cir. 2019).

      [34].    Id. at 202.

      [35].    Id.

      [36].    Id.

      [37].    Id. at 203–04 (citing Wheatley v. Wicomico Cty., 390 F.3d 328, 332–33 (4th Cir. 2004)).

      [38].    Id. at 204 (citing Wheatley, 390 F.3d at 332–33).

      [39].    Id.

      [40].    Id.

      [41].    Id.

      [42].    Id. at 202.

      [43].    Spencer v. Va. State Univ., No. 3:16cv989-HEH, 2018 U.S. Dist. LEXIS 15773, at *11 (E.D. Va. Jan. 30, 2018), aff’d, 919 F.3d 199 (4th Cir. 2019).

      [44].    Id. at *9.

      [45].    Spencer, 919 F.3d at 205 (citing Strag v. Bd. of Trs., 55 F.3d 943, 950 (4th Cir. 1995); Soble v. Univ. of Md., 778 F.2d 164, 167 (4th Cir. 1985)); see also Earl v. Norfolk State Univ., No. 2:13cv148, 2016 U.S. Dist. LEXIS 35171, at *14–15 (E.D. Va. Mar. 17, 2016) (“[R]are would be the case where a university professor can demonstrate that a professor from a different department is a valid EPA comparator . . . .”).

      [46].    See Spencer, 919 F.3d at 204–05 (“While comparisons might be drawn between some departments, any such comparison requires the plaintiff to articulate with specificity why the work performed and skills needed by a professor in one department are virtually identical—and not just generally related or of comparable worth—to those in another.”).

      [47].    See id. at 204–06.

      [48].    Id. at 205.

      [49].    Id.

      [50].    Id.

      [51].    Id. at 205, n.2.

      [52].    Compare id., with Blackman v. Fla. Dep’t of Bus. & Prof’l Regulation, 599 F. App’x 907, 918 (11th Cir. 2015) (“If an employer could circumvent the protections of the EPA by merely piling more work onto its female employees than its male employees, the EPA would be meaningless.”), and Riordan v. Kempiners, 831 F.2d 690, 699 (7th Cir. 1987) (“[A]n employer cannot avoid the [EPA] by the simple expedient of loading extra duties onto its female employees—unless it pays them more.”).

      [53].    Spencer, 919 F.3d at 203, 206.

      [54].    Id. at 206.

      [55].    Id.

      [56].    Id.

      [57].    Id. at 207.

      [58].    See Press Release, Equal Emp’t Opportunity Comm’n, EEOC to Collect Summary Pay Data (Sept. 29, 2016), https://www.eeoc.gov/eeoc/newsroom/release/9-29-16.cfm [https: //perma.cc/FF3A-PHKG].

      [59].    See 29 C.F.R. § 1602.7 (1967); 41 C.F.R. § 60-1.7 (1978).

      [60].    Agency Information Collection Activities: Revision of the Employer Information Report (EEO-1) and Comment Request, 81 Fed. Reg. 5113, 5113 (Jan. 21, 2016).

      [61].    Memorandum from the White House to the Sec’y of Labor (Apr. 8, 2016), https://ob amawhitehouse.archives.gov/the-press-office/2014/04/08/presidential-memorandum-advan cing-pay-equality-through-compensation-data [https://perma.cc/FF3A-PHKG].

      [62].    Press Release, Equal Emp’t Opportunity Comm’n, supra note 58.

      [63].    Id.

      [64].    What You Should Know: Statement of Acting Chair Victoria A. Lipnic About OMB Decision on EEO-1 Pay Data Collection, U.S. Equal Emp’t Opportunity Comm’n, https:// www.eeoc.gov/eeoc/newsroom/wysk/eeo1-pay-data.cfm [https://perma.cc/RQU7-45SZ].

      [65].    See Nat’l Women’s Law Ctr. v. Office of Mgmt. & Budget, 358 F. Supp. 3d 66, 93 (D.D.C. 2019).

      [66].    See id. at 90.

      [67].    Id. at 93.

      [68].    Order at 2, Nat’l Women’s Law Ctr. v. Office of Mgmt. & Budget, 358 F. Supp. 3d 66 (D.D.C. Apr. 25, 2019) (No. 17-CV-2458), Document 71.

      [69].    EEO-1 Pay Data Collection for 2017, 84 Fed. Reg. 18,974 (May 3, 2019).

      [70].    Id.

      [71].    See Agency Information Collection Activities, 81 Fed. Reg. 45,479, 45,484 (July 14, 2016).

      [72].    Frequently Asked Questions (FAQs), U.S. Equal Emp. Opportunity Comm’n, https://eeoccomp2.norc.org/faq [https://perma.cc/G2G8-WB8Z].

      [73].    Id.

      [74].    Id.

      [75].    42 U.S.C. § 2000e-2(a)(1) (2012).

      [76].    Hinton v. Va. Union Univ., 185 F. Supp. 3d 807, 817 (E.D. Va. 2016).

      [77].    Id.

      [78].    Id. (quoting Lee v. Wade, No. 3:15CV37, 2015 U.S. Dist. 115660, at *3 (E.D. Va. Aug. 31, 2015)).

      [79].    411 U.S. 792, 802 (1973).

      [80].    See, e.g., Hinton, 185 F. Supp. 3d at 817–18 (quoting Goode v. Cent. Va. Legal Aid Soc’y, Inc., 807 F.3d 619, 626 (4th Cir. 2015)).

  [81].    See Fort Bend Cty. v. Davis, 139 S. Ct. 1843, 1848 (2019) (citing Jones v. Calvert Group, Ltd., 551 F. 3d 297, 300 (4th Cir. 2009)).

      [82].    See id. at 1849–50.

      [83].    Id. at 1845, 1850–51.

      [84].    Id. at 1846.

      [85].    See Obergefell v. Hodges, 135 S. Ct. 2584, 2607–08 (2015).

      [86].    What You Should Know About EEOC and the Enforcement Provisions for LGBT Workers, U.S. Equal Emp’t Opportunity Comm’n, https://www.eeoc.gov/eeoc/newsroom/ wysk/enforcement_protections_lgbt_workers.cfm [https://perma.cc/RF76-VM36].

      [87].    Compare Bostock v. Clayton Cty. Bd. of Comm’rs, 723 Fed. App’x 964, 964 (11th Cir. 2018) (per curiam) (confirming that there is no cause of action for discrimination on the basis of sexual orientation under Title VII), cert. granted, 139 S. Ct. 1599 (U.S. Apr. 22, 2019) (No. 17-1618), with Zarda v. Altitude Express, Inc., 883 F.3d 100, 112 (2d Cir. 2018) (holding that Title VII protects against discrimination on the basis of sexual orientation), cert. granted, 139 S. Ct. 1599 (U.S. Apr. 22, 2019).

      [88].    Bostock v. Clayton Cty., 139 S. Ct. 1599 (2019) (granting petition for writ of certiorari); Altitude Express, Inc. v. Zarda, 139 S. Ct. 1599 (2019) (granting petition for writ of certiorari).

      [89].    R.G. & G.R. Harris Funeral Homes, Inc., v. Equal Emp’t Opportunity Comm’n, 139 S. Ct. 1599 (2019) (granting petition for writ of certiorari); see Price Waterhouse v. Hopkins, 490 U.S. 228, 250–51, 258 (1989).

      [90].    185 F. Supp. 3d 807, 814–15 (E.D. Va. 2016).

      [91].    Id. at 812.

      [92].    Id.

      [93].    Id.

      [94].    Id.

      [95].    Id. at 812–13.

      [96].    Id. at 813.

      [97].    99 F.3d 138, 143 (4th Cir. 1996).

      [98].    Hinton, 185 F. Supp. 3d at 815.

      [99].    Id. See Murray v. N.C. Dep’t of Pub. Safety, 611 Fed. App’x 166, 166 (4th Cir. 2015) (per curiam); Wrightson, 99 F.3d at 143.

    [100].    See Hinton, 185 F. Supp. 3d at 815, 817 (explaining that EEOC rulings have “the power to persuade” but protecting on the basis of sexual orientation is ultimately within the purview of Congress).

    [101].    Grimm v. Gloucester Cty. Sch. Bd., 302 F. Supp. 3d 730, 738, 746–47 (E.D. Va. 2018).

    [102].    Id. at 736–37.

    [103].    Id. at 736.

    [104].    Id. at 737.

    [105].    Id.

    [106].    Id. at 737–38.

    [107].    Id. at 738.

    [108].    Id.

    [109].    Id. at 144 (citing G.G. ex rel. Grimm v. Gloucester Cty. Sch. Bd., 822 F.3d 709, 718 (4th Cir. 2016)).

    [110].    Id. (citing Price Waterhouse v. Hopkins, 490 U.S. 228, 250–51 (1989)).

    [111].    Id. at 745 (citing M.A.B. v. Bd. of Educ., 286 F. Supp. 3d 704, 714 (D. Md. 2018)).

    [112].    Id. at 746.

    [113].    Id. at 746, 748, 752.

    [114].    See Monica Anderson & Skye Toor, How Social Media Users Have Discussed Sexual Harassment Since #MeToo Went Viral,  Pew  Research  Ctr.  (Oct. 22, 2018), https://pewre search.org/fact-tank/2018/10/11/how/how-social-media-users-have-discussed-sexual-harass ment-since-metoo-went-viral/ [https://perma.cc/K98B-HEEM]; Charges Alleging Sexual Harassment FY 2010–FY 2018, Equal Emp’t Opportunity Comm’n, https://www.eeoc.gov /eeoc/statistics/enforcement/sexual_harassment_new.cfm [https://perma.cc/9Q4S-MTBA] [hereinafter Sexual Harassment Charges].

    [115].    Anderson & Toor, supra note 114.

    [116].    Id.

    [117].    See Sexual Harassment Charges, supra note 114.

    [118].    Id.

    [119].    915 F.3d 297, 299–300, 305 (4th Cir. 2019), petition for cert. filed, 87 U.S.L.W. 3457 (U.S. May 9, 2019) (No. 18-1442).

    [120].    Id. at 300.

    [121].    Id.

    [122].    Id.

    [123].    Id. at 300–01.

    [124].    Id. at 301.

    [125].    Id. at 302–03.

    [126].    Id. at 303 (quoting Spain v. Gallegos, 26 F.3d 439, 448 (3d Cir. 1994)).

    [127].    Id. at 304.

    [128].    Ray v. Int’l Paper Co., 909 F.3d 661, 668, 671 (4th Cir. 2018).

    [129].    Id. at 665.

    [130].    Id.

    [131].    Id.

    [132].    Id.

    [133].    Id. at 667 (quoting Vance v. Ball State Univ., 570 U.S. 421, 424 (2013)).

    [134].    Id. at 668.

    [135].    Bauer v. Lynch, 812 F.3d 340, 351 (4th Cir. 2016).

    [136].    Id. at 342.

    [137].    Id. at 343.

    [138].    Id.

    [139].    Id. at 350.

    [140].    Id. at 351.

    [141].    Id. at 351–52.

    [142].    See Bauer v. Sessions, 254 F. Supp. 3d 809, 819 (E.D. Va. 2017).

    [143].    See 719 F. App’x 184, 189 (4th Cir. 2018) (per curiam).

    [144].    Id. at 185–86.

    [145].    Id. at 186.

    [146].    Id.

    [147].    Id.

    [148].    Id.

    [149].    Id.

    [150].    Id. at 189.

    [151].    Id.

    [152].    Id.

    [153].    Id.

    [154].    Id. at 190.

    [155].    793 F.3d 404, 408 (4th Cir. 2015).

    [156].    Id. at 410, 413.

    [157].    Id. at 414.

    [158].    Id. at 414–15 (quoting Cilecek v. Inova Health Sys. Servs., 115 F.3d 256, 260 (4th Cir. 1997)).

    [159].    Id. at 414–15.

    [160].    Jacobs v. N.C. Admin. Office of the Courts, 780 F.3d 562, 570 (4th Cir. 2015).

    [161].    Id. at 565.

    [162].    Id. at 566–67.

    [163].    Id. at 570.

    [164].    Id. at 574.

    [165].    Id. at 573, 582.

    [166].    Maubach v. City of Fairfax, No. 1:17-cv-921, 2018 U.S. Dist. LEXIS 73815, at *12–14 (E.D. Va. Apr. 30, 2018).

    [167].    Id. at *3–4.

    [168].    Id. at *4.

    [169].    Id. at *5, 9–10.

    [170].    Id. at *5–6, 8.

    [171].    Id. at *19.

    [172].    Id. at *17.

    [173].    Hannah P. v. Coats, 916 F.3d 327, 344 (4th Cir. 2019).

    [174].    Id. at 333.

    [175].    Id.

    [176].    Id. at 334.

    [177].    Id. at 334–35.

    [178].    Id. at 343.

    [179].    Id.

    [180].    Akbar-Hussain v. ACCA, Inc., No. 1:16cv1323 (JCC/IDD), 2017 U.S. Dist. LEXIS 6472, at *11–13 (E.D. Va. Jan. 17, 2017).

    [181].    Id. at *11 (citing Rhoads v. Fed. Deposit Ins. Corp., 94 Fed. App’x 187, 188 (4th Cir. 2004) (per curiam); Bowles v. Carolina Cargo, Inc., 100 Fed. App’x 889, 890 (4th Cir. 2004) (per curiam)).

    [182].    See id. at *13.

    [183].    Salinas v. Commercial Interiors, Inc., 848 F.3d 125, 140 (4th Cir. 2017).

    [184].    Id. at 129.

    [185].    Id. at 131.

    [186].    Id. at 132.

    [187].    Id. at 151.

    [188].    Id. at 141–42.

    [189].    Id. at 150.

    [190].    Id. at 150–51.

    [191].    Id. at 137–38.

    [192].    Id. at 150–51.

    [193].    Act of Mar. 9, 2018, ch. 216, 2018 Va. Acts __, __ (codified as amended at Va. Code Ann. §§ 44-93.2 to -93.4 (Cum. Supp. 2019)).

    [194].    See Va. Code Ann. §§ 44-93.2 to -93.4 (Repl. Vol. 2013).

    [195].    See id.

    [196].    Id.

    [197].    Id.

    [198].    See id.

    [199].    Va. Code Ann. § 8.01-413.1(B) (Cum. Supp. 2019).

    [200].    Id.

    [201].    Id. § 8.01-413.1(D) (Cum. Supp. 2019).

    [202].    Id. § 8.01-413.1(E) (Cum. Supp. 2019).

    [203].    See 229 Va. 534, 535, 540, 331 S.E.2d 797, 798, 801 (1985).

    [204].    See 293 Va. 167, 174, 796 S.E.2d 188, 192 (2017).

    [205].    Id. at 171, 796 S.E.2d at 190.

    [206].    Johnston v. William E. Wood & Assocs., Inc., 292 Va. 222, 225, 787 S.E.2d 103, 105 (2016) (quotation marks omitted).

    [207].    Bowman, 229 Va. at 540, 331 S.E.2d at 801.

    [208].    See, e.g., Mitchem v. Counts, 259 Va. 179, 187–91, 523 S.E.2d 246, 250–53 (2000) (explaining that terminating an employee for refusing to engage in criminal activity is grounds for a wrongful termination suit); Bailey v. Scott-Gallaher, Inc., 253 Va. 121, 125–26, 480 S.E.2d 502, 504–05 (1997) (holding that terminations which violate a statutory public policy give rise to a wrongful termination suit).

    [209].    See Francis, 293 Va. at 172–73, 796 S.E.2d at 190–91.

    [210].    Id. at 170, 796 S.E.2d at 189–90.

    [211].    Id. at 171, 796 S.E.2d at 190.

    [212].    Id. at 171, 175, 796 S.E.2d at 190, 192.

    [213].    Id. at 172–73, 796 S.E.2d at 190–91.

    [214].    See id. at 173–75, 796 S.E.2d at 191–92.

    [215].    Id. at 172–73, 796 S.E.2d at 190–91 (quotation marks omitted).

    [216].    Id. at 173–75, 796 S.E.2d at 191–92.

    [217].    Id. at 174–75, 796 S.E.2d at 191–92.

    [218].    See id. at 173–75, 796 S.E.2d at 191–92.

 


Taxation

Taxation

Craig D. Bell and Michael H. Brady, Annual Survey of Virginia Law Taxation, 54 U. Rich. L. Rev. 133 (2019).

Click here to download PDF.


Craig D. Bell *

Michael H. Brady **

Introduction

This Article reviews significant recent developments in the laws affecting Virginia state and local taxation. Its Parts cover legislative activity, judicial decisions, and selected opinions and other pronouncements from the Virginia Department of Taxation (the “Tax Department”) and the Attorney General of Virginia over the past year.

Part I of this Article addresses state taxes. Part II covers local taxes, including real and tangible personal property taxes, license taxes, recordation taxes, and administrative local tax procedures.

The overall purpose of this Article is to provide Virginia tax and general practitioners with a concise overview of the recent developments in Virginia taxation that are most likely to impact their clients. However, it does not address many of the numerous minor, locality-specific or technical legislative changes to Title 58.1 of the Virginia Code, which covers taxation.

I.    Taxes Administered by the Tax Department

A.  Significant Legislative Activity

1.   Sales and Use Taxation

The most significant legislative action in 2019 involved sales and use taxation and imposed obligations on non-Virginians that will affect nearly all who reside in the Commonwealth.

a.   Remote Sellers and Marketplace Facilitators’ Sales and Use Tax Obligations

In 2018, the sales and use tax tsunami that was the Supreme Court’s decision in South Dakota v. Wayfair[1] swept away all apparent legal obstacles to states requiring sales tax collection and remission by remote sellers. In 2019,  Virginia joined  the  wave of

states imposing sales tax obligations upon out-of-state retailers without in-state employees, operations, or property.[2]

Accepting the invitation extended by Wayfair, the Virginia General Assembly adopted House Bill 1722 (Chapter 815), which imposed, effective July 1, 2019, sales tax registration, collection, and remission obligations upon “remote sellers,”[3] or  those “dealers” whose “sufficient contact with the Commonwealth” resulted in more than $100,000 of annual gross revenue from retails sales or “200 or more separate retail sales transactions . . . in the Commonwealth.”[4] These thresholds mimic those used by South Dakota that were approved by the Wayfair Court as a sufficient gauge of “economic and virtual contacts” necessary for a substantial nexus to exist between the challenging businesses and that state.[5]

Using Wayfair as a springboard, House Bill 1722 also imposed upon “marketplace facilitators,” for the first time, the sales tax registration, collection, and remission obligations applicable to sellers who qualify as “dealers” under Virginia law.[6] The bill defines marketplace facilitators to include those who “facilitate, for consideration and regardless of whether such consideration is deducted as fees from transactions, the sale of [another]’s products through a physical or electronic marketplace operated by such” marketplace facilitator, such as eBay.[7] However, to be liable for sales and use tax obligations, the marketplace facilitators must also “have sufficient contact with Virginia.”[8] Contact statutorily arises when the marketplace facilitator conducts certain activities connecting buyers and sellers, assists in their exchange of goods or currency, and has “economic nexus through either” facilitation of “sales in Virginia that, in the aggregate, generate more than $100,000 in gross revenue” for the marketplace facilitator or facilitation of “200 or more separate retail sale transactions . . . in the Commonwealth.”[9] If this standard is met, the marketplace facilitator must register as a dealer, collect sales and use tax “on all transactions that it facilitates through its marketplace,” and remit payment of the same as do in-state retailers and (now) remote sellers.[10]

However, marketplace facilitators may obtain a waiver of their obligation from the Tax Department by showing that all of the marketplace sellers associated with their activity are already registered as dealers under Virginia Code section 58.1-613 or have sufficient contacts to require such registration, and that collecting on behalf of the sellers “would create an undue burden or hardship for either party.”[11] If a waiver is given, the obligation to collect and remit would be the marketplace sellers’.[12]

Thus, while being a marketplace seller—or an unrelated party “that makes sales through any physical or electronic marketplace operated by such marketplace facilitator”[13]—does not subject the person to sales and use tax obligations,[14] it may not relieve the seller of duties that otherwise exist. A marketplace seller may also be subjected to audit and held liable if it provides “incorrect information” to the marketplace facilitator that results in a deficiency.[15]

Besides increasing the efficacy of sales and use tax compliance obligations, and so practically increasing the scope of such taxes, this revision may legally subject a facilitated sale to sales or use tax obligations that would not otherwise exist, imperfect or otherwise. That is because a marketplace facilitator’s obligation to collect and remit sales tax is not affected by whether the “marketplace seller,” the one who is actually selling the goods, “would not have been required to collect and remit sales and use tax had the sale not been made through such marketplace.”[16]

The General Assembly recognized that this new regime exposes remote sellers and marketplace facilitators to substantial new liability and included a few provisions to address the most obvious concerns. One provision relieves the marketplace facilitator from all liability for “the incorrect collection or remittance of sales and use tax on transactions it facilitates or for which it is the seller if the error is due to reasonable reliance” upon incorrect or insufficient information provided by a marketplace seller, a purchaser, or the Commonwealth.[17] Another shields the marketplace facilitator from class actions in Virginia courts premised upon alleged “overpayment of sales and use tax collected on sales facilitated by the marketplace facilitator.”[18] Another protects both marketplace facilitators and remote sellers from liability for erroneous sales and use tax collection if the error is a result of the remote seller’s or marketplace facilitator’s reasonable reliance on information provided by the Commonwealth.”[19]

The Tax Department anticipates significant additional revenue from this legislation. In its 2019 Fiscal Impact Statement anticipating Governor Northam’s approval of the legislation, the Tax Department projected that the legislation would “result in an estimated positive revenue impact of up to $155 million in Fiscal Year 2020, $175 million per year for Fiscal Years 2021 through 2023, and $180 million for Fiscal Years 2024 and 2025.”[20] Taking these numbers into account, Governor Ralph Northam’s proposed 2018–20 Biennial Budget projected sales and use tax to represent approximately seven percent of the total revenues funding the Commonwealth’s government, or more than seven billion dollars of revenue for Fiscal Years 2018–19, and 2019–20.[21]

Besides deriving significant new revenues from, and imposing substantial new compliance burdens (and potential liability) on, remote sellers and marketplace facilitators, the General Assembly also used the occasion to increase the Tax Department’s workload. The Tax Department is now obliged to assist this expanded list of taxpayers with compliance by “[p]rovid[ing] adequate information to remote sellers to enable them to identify state and local sales and use tax rates and exemptions [and] to software providers to enable them to make software and services available to remote sellers.”[22] These obligations extend to providing at least thirty days’ prior notice of a change in local sales and use tax rates; no change will be effective until thirty days have passed following notice.[23] In administering the sales tax and auditing compliance, the Tax Department may require “no more than one sales and use tax return per month be filed with the Department by any remote seller or any software provider on behalf of such remote seller,” and must enable the remote seller to “complete a single audit that covers the state and local sales and use taxes in all localities”—two provisions aimed at reducing taxpayer-compliance burdens.[24]

Further recognizing the extraordinary burdens that may reduce compliance by marketplace facilitators, the General Assembly also authorized the Tax Department to “temporarily suspend or delay the collection or reporting requirements, or both, of a marketplace facilitator.”[25] However, the marketplace facilitator must submit a  “written  application”  with  “good cause shown.”[26] Even still, the suspension or delay may not “exceed 90 days after collection is required,” or beyond September 29, 2019.[27]

Lastly, the Tax Department was charged with “develop[ing] guidelines implementing the provisions of this act,” presumably to ease uncertainty and increase compliance.[28]

b.   Reduced Sales and Use Tax Rate on Personal Hygiene Products

Another broad-based change wrought in 2019 was to the taxation of personal hygiene products. The Commonwealth imposes a sales and use tax rate of 4.3% “[o]f the gross sales price of each item or article of tangible personal property when sold at retail or distributed in this Commonwealth,” and “of the cost price of each item or article of tangible personal property stored in or outside this Commonwealth for use or consumption in this Commonwealth.”[29] However, the Commonwealth has long since taxed “food purchased for human consumption” at only “one and one-half percent of the gross sales price,”[30] subject to only an additional one percent sales and use tax by localities.[31] Localities are generally prohibited from applying additional local sales and use tax options to “food purchased for human consumption.”[32]

In adopting Senate Bill 1715 (Chapter 550), the General Assembly defined a new category of tangible personal property for sales and use tax purposes, that of “essential personal hygiene products,”[33] and subjected it to the same favorable sales and use tax treatment as “food purchased for human consumption,” an effective 1.5%.[34] This included adding “personal hygiene products” to the preexisting food exemptions from local sales and use tax authority given to certain localities in Northern Virginia,[35] the Historic Triangle,[36] and Hampton Roads.[37]

The provisions of Senate Bill 1715 become effective January 1, 2020.[38] Once effective, the Tax Department expects these provisions to result in more than $4.5 million in annual sales and use tax savings.[39]

c.   Payment of Retail Sales and Use Tax by Dealer Permitted

Prior to 2019, Virginia law generally prohibited all persons from “advertis[ing] or hold[ing] out to the public, directly or indirectly, that he will absorb all or any part of the sales or use tax, or that he will relieve the purchaser, consumer, or lessee of the payment of all or any part of such tax,” no matter if he does in fact absorb or relieve such purchasers, consumers, or lessees of any part of the sales or use tax.[40] The only exception to this blanket prohibition has been for certain statutory sales tax holidays.[41]

Senate Bill 1615 (Chapter 758) both repealed this broad prohibition,[42] and adopted Virginia Code section 58.1-626.1, expressly permitting a “dealer” as defined by Virginia law[43] to “absorb and assume payment of all or any part of the sales or use tax otherwise due from the purchaser, consumer, or lessee.”[44] If the dealer absorbs or assumes the tax due, it must “remit to the Department the full amount of tax due with the return that covers the period in which the dealer completed the sale or transaction.”[45] In all cases, the dealer must “separately state the sales price of an item and the full amount of sales and use tax due on such item at the point of the sale or transaction, even if the dealer intends to absorb and assume the amount of tax due.”[46]

d.   Sales and Use Tax Exemption for Single Member LLC Solely Owned by a Nonprofit

Virginia law generally exempts a whole range of nonprofit entities with certificates of exemption from collecting or paying state or local sales or use taxes.[47] With the proliferation of limited liability companies, the Virginia General Assembly in 2019 adopted House Bill 1950 (Chapter 20) to clarify that a “single member limited liability company whose sole member is a nonprofit organization” may be an exempt “nonprofit organization” or “nonprofit entity.”[48] House Bill 1950 also clarified that an entity qualifies as a “nonprofit organization” or “nonprofit entity” by fulfilling the preexisting criteria now contained in subsection (D) of Virginia Code section 58.1-609.11.[49]

2.   Income Taxation

As Virginia sales and use taxation underwent significant changes in 2019 in response to actions taken across the Potomac, in the form of Wayfair, the law of Virginia income taxation also changed in response to federal action—the Tax Cuts and Jobs Act of 2017 (the “2017 Tax Act”).[50]

a.   Conformity to the Internal Revenue Code and Creation of Taxpayer Relief Fund

As has been its custom, the General Assembly in 2019 amended section 58.1-301 of the Virginia Code, the provision mandating conformity with the Internal Revenue Code (“I.R.C.”) as of a certain date, to December 31, 2018, from February 9, 2018, made the legislation effective immediately and the changes effective for tax years beginning on and after January 1, 2018.[51] In adopting Senate Bill 1372, the Assembly conformed Virginia law to most provisions of the I.R.C., including most provisions of the 2017 Tax Act which had generally not been followed in 2018,[52] and all provisions of the Bipartisan Budget Act of 2018.[53]

On the business side, the General Assembly provided, for tax years beginning on and after January 1, 2018, a deduction of the “20 percent of business interest disallowed as a deduction” under I.R.C. section 163(j) from both individual and corporate taxable income.[54] The General Assembly also updated the existing rule of subtracting all I.R.C. section 951 income, known as Subpart F income, from corporate taxable income to also subtract all I.R.C. section 951A “Global Intangible Low-Taxed Income.”[55]Lastly, the Assembly continued the Commonwealth’s long-standing policy of not conforming Virginia law to certain business loss and depreciation provisions of the I.R.C. These included the “special depreciation allowance for certain property provided for under” I.R.C.  sections 168(k), 168(l), 168(m), 1400L, and 1400N;[56] the five-year carry-back period for certain net operating losses under I.R.C. section 172(b)(1)(H);[57] and the income tax deductions related to “applicable high yield discount obligations” under I.R.C. section 163(e)(5)(F).[58] Virginia tax law also continues to  disallow  income tax deductions related to the deferral of certain income from debt cancellation under I.R.C. section 108(i),

unless the taxpayer elects to include such income in the taxpayer’s Virginia taxable income ratably over a three-taxable-year period beginning with taxable year 2009 for transactions completed in taxable year 2009, or over a three-taxable-year period beginning with taxable year 2010 for transactions completed in taxable year 2010 on or before April 21, 2010.[59]

With the unexpected revenues resulting from generally conforming to the 2017 Tax Act “estimated to be approximately $450 million annually” for Fiscal Years 2019 through 2025, the General Assembly created “a special nonreverting fund known as the ‘Taxpayer Relief Fund.’”[60] Revenues in the fund shall be appropriated “to effectuate permanent or temporary tax reform measures.”[61] In the near term and assuming projections come to fruition, individual taxpayers who timely filed their 2018 return will receive an additional $110 refund, while those who were married and timely filed a joint 2018 return will receive an additional $220 refund, to be issued in early October 2019.[62]

For tax year 2019 forward, the General Assembly chose to use some of these additional revenues to both deconform to the 2017 Tax Act’s limitation on deductions for state and local taxes to allow their subtraction and the 2017 Tax Act’s suspension of the overall limit on itemized deductions for tax year 2019 forward, substantially increasing the standard deduction to grant relative tax relief to all Virginians.[63] Under this legislation, the standard deduction for tax years 2019 through 2025 increases from $3000 for single individuals and $6000 for married couples filing jointly to $4500 for singles and $9000 for married couples filing jointly.[64] The Tax Department projected that approximately $420 million in relief from personal income tax liability will be provided in tax year 2019 due to this change alone.[65]

b.   Income Taxation of Trusts Administered in the Commonwealth

Under former law, a “resident estate or trust” was defined for income tax purposes to include not only those estates and trusts created by persons domiciled at death in the Commonwealth and those trusts of living persons domiciled in the Commonwealth, but also those trusts or estates “administered in the Commonwealth.”[66] Resident estates or trusts are taxed on their federal taxable income, with some adjustments to account for “distributable net income,”[67] while nonresident estates or trusts are taxed by reference to “[their] share of income, gain, loss and deduction attributable to Virginia sources,” with certain adjustments.[68]

House Bill 2526 (Chapter 23) removes from the list of resident estate or trust those merely being “administered in Virginia”—i.e., those owning assets in Virginia, having a Virginia resident fiduciary, or being supervised by a Virginia court[69]—and so redefines them as “nonresident estate or trust.”[70] As a result, these estates and trusts will now only have to file a Virginia income tax return and be liable for Virginia income tax in proportion to their Virginia sourced income, as provided in Virginia Code sections 58.1-362 and -363. The statute’s timing is noteworthy, as the Supreme Court of the United States granted certiorari in a case involving state power to tax nonresident trusts a little more than a month before the General Assembly passed House Bill 2526.[71]

c.   Eminent Domain Gain Subtracted from Virginia Taxable Income

Since the Supreme Court’s decision in Kelo v. City of New London,[72] the issue of eminent domain has been the subject of significant state legislative attention throughout the country, including in the Commonwealth.[73] In 2019, that attention turned to addressing the tax consequences of receiving just compensation for a taking.[74]

Preserving the value of the award to the condemnee, the General Assembly adopted Senate Bill 1256 (Chapter 270), providing that “any gain recognized from the taking of real property by condemnation proceedings” shall be subtracted from the Virginia taxable income of both individuals and corporations for tax year 2019 forward.[75]

3.   Tax Credits and ‌Exemptions

a.   Extension of the Major Business Facility Tax Credit and Publication of Claim Data

In the mid-1990s, the General Assembly created the “major business facility job tax credit” against individual income tax, estate tax, corporate income tax, bank franchise tax, insurance premium license tax, and public service company license tax, claimable by a “qualified company” who commenced or expanded a “major business facility” in the Commonwealth.[76] This legislation was adopted to attract job-creating investments into the economy of Virginia and administered by both the Tax Department and what is now the Virginia Economic Development Partnership (“VEDP”).[77]

At the time of adoption, the credit created by Virginia Code section 58.1-439 was to sunset in 2005.[78] Instead, the section has since  been  amended  numerous  times,  including  to  extend  the

provision through 2019. While the number of claimants has decreased over the last five years, taxpayers claimed nearly $7 million in credits in 2017.[79]

House Bill 2003 (Chapter 669) extends the credit to July 1, 2022.[80] It also tasks the Tax Department and the VEDP with publishing for tax year 2019 forward the location of facilities claiming credits, the type of business claiming the credits, the number of jobs for which a credit is claimed, and the total cost of the credits to the Commonwealth’s general fund.[81] This annual publication, the first installment of which will not be due until November 2021, must be done in a “manner that prevents the identification of particular taxpayers, reports, returns, or items.”[82]

b.   Worker Retraining Tax Credit Replaced

The 2019 session saw the General Assembly again revise the Worker Retraining Tax Credit found in section 58.1-439.6, supplementing the types of training that are eligible for a credit and renaming the credit the “Worker Training Tax Credit” to reflect this change. House Bill 2539 (Chapter 189) revised that Virginia Code section to advance the sunset date for the Worker Retraining Tax Credit, from January 1, 2022, to  January 1, 2019,[83]  and  adopted Vignia Code section 58.1-439.6:1 to afford a Worker Training Tax Credit for tax years 2019 through 2022.[84]

The new Virgnia Code section affords substantially the same credit to businesses “primarily engaged in manufacturing,” allowing thirty-five percent of its “direct costs incurred during the taxable year in conducting orientation, instruction, and training in the Commonwealth relating to the manufacturing activities undertaken by the business” to be used as a credit against personal and corporate income tax liability for tax years 2019 through 2022.[85] The annual $2000-credit-per-business limit still applies.[86] Note that after tax year 2018, VEDP no longer has a role in certifying orientation, instruction, or training programs; or in reporting to the Assembly “on the status and implementation of the credit.”[87] Instead, the Department of Education oversees the certification of these programs, and the Tax Commissioner now reports “on the status and implementation of” the Worker Training Tax Credit to the General Assembly.[88]

However, the primary change wrought by House Bill 2539 was to the sort of training now eligible for a credit. Under the Worker Retraining Tax Credit, still applicable to tax year 2018, a business may claim a credit “in an amount equal to 30 percent of all expenditures paid or incurred by the employer during the taxable year for eligible worker retraining,” defined as the “retraining of a qualified employee that promotes economic development in the form of (i) noncredit courses at any of the Commonwealth’s comprehensive community colleges or a private school or (ii) worker retraining  programs  undertaken  through  an  apprenticeship agreement approved by the Commissioner of Labor and Industry.”[89] Where the retraining occurred at a private school, additional limitations on the amount of credit applied, depending on the courses taken.[90]

Under the Worker Training Tax Credit, applicable to tax year 2019 and those “prior to July 1, 2022,” a business may claim a credit “in an amount equal to 35 percent,” up from thirty percent, “of expenses incurred by the business during the taxable year for eligible worker training.”[91] Eligible  worker  training  includes the

 

training of a qualified employee or non-highly compensated worker in the form of (i) credit or noncredit courses at any institution recognized on the Eligible Training Provider List that results in the qualified employee or non-highly compensated worker receiving a workforce credential or (ii) instruction or training that is part of an apprenticeship agreement approved by the Commissioner of Labor and Industry.[92]

The “Workforce Innovation Opportunity Act Title 1 Administrator” is responsible for providing the Tax Commissioner with the annual Eligible Training Provider List.[93]

While a business may claim a credit of no more than $500 annually per qualified employee, and no more than $1000 per “non-highly compensated worker annually,” no unique limit applies for expenses incurred for training from a private school (which for years prior to tax year 2019 were limited to no more than $300 per employee for any type of training).[94] Although capping expenditures per employee, House Bill 2529 expanded the types of eligible training to include those leading to a “workforce credential,” and substantially expanded the number of potential trainees to include “non-highly compensated workers,” who need not be full-time, benefited employees, but merely have an income “less than Virginia’s median wage, as reported by the Virginia Employment Commission, in the taxable year prior to applying for the credit.”[95] While the scope of the allowable credit has substantially expanded, the provision limiting “the total amount of tax credits granted under this section for each fiscal year [to] $1 million” remains unchanged.[96]

c.   Virginia Port Volume Increase Tax Credits Made Transferrable

Virginia Port Volume Increase Tax Credits may be claimed by “a taxpayer that is an agricultural entity, manufacturing-related entity, or mineral and gas entity that uses port facilities in the Commonwealth and increases its port cargo volume at these facilities by a minimum of five percent in a single calendar year over its base year port cargo volume” to claim a credit against individual or corporate tax liability, with such credit amount as “determined by the Virginia Port Authority.”[97] The Virginia Port Authority calculates the amount of credit available by reference to the “TEU, unit of roll-on/‌roll-off cargo, or 16 net tons of noncontainerized cargo” used by the taxpayer, and no taxpayer may “receive more than $250,000 for each calendar year except” where the “maximum amount of credits allowed for all qualifying taxpayers,” $3.2 million for each calendar year, has not been claimed, in which case the claiming taxpayers “shall be allowed a pro rata share of the remaining allocated credit up to $3.2 million.”[98] Under that section, “[i]f the credit exceeds the taxpayer’s tax liability for the taxable year, the excess amount may be carried forward and claimed against income taxes in the next five succeeding taxable years.”[99]

Senate Bill 1652 (Chapter 759) authorizes a holder of Virginia Port Volume Increase Tax Credits issued for tax years 2018 through 2021 to “transfer unused but otherwise allowable credit for use by another taxpayer on Virginia income tax returns.”[100]The taxpayer must effectuate such transfer “within one calendar year of the credit holder earning such credit.”[101] The taxpayer receiving the credits may retroactively apply them, and “may file an amended return under this chapter to claim such transferred credit for a prior tax year,” provided the time for filing an amended return or other statute of limitation has not passed.[102]Transferring taxpayers are obliged to give “notification of such transfer to the Department in accordance with procedures and forms prescribed by the Tax Commissioner.”[103]

d.   Education Improvement Scholarship Tax Credits Expand for Students with Disabilities

Virginia law provides Education Improvement Scholarship Tax Credits against individual and corporate income tax liability, as well as bank franchise tax, insurance premium license tax, and public service license tax liability, for sixty-five percent of the value of a donation (in excess of $500) made to a “scholarship foundation,” defined as a nonprofit “established to provide financial aid for the education of students residing in the Commonwealth,”[104] subject to the approval of the Department of Education.[105]

Prior to 2019, “scholarship foundations” could award scholarships from tax-credit-derived funds for use at “eligible schools”[106] to cover the cost of “qualified educations expenses only to students whose family’s annual household income [was] not in excess of 300 percent of the current poverty guidelines or [to] eligible students with a disability.”[107] Both had been defined to embrace only Virginia residents whose educational circumstances fit certain narrow categories[108] and, in the case of an “eligible student with a disability,” were limited to those with a finalized “individualized educational program” (“IEP”) under the “federal Individuals with Disabilities Education Act” and whose family income was not in excess of four times the current poverty guidelines.[109]

 

Senate Bill 1365 (Chapter 808) liberalized some of these requirements for Virginia children who have an IEP for tax years 2019 through 2023.[110] First, it expanded the definition of “eligible student with a disability” to include all Virginia resident children with an IEP, whether or not their educational circumstances fit the narrow definition of a “student” under Virginia Code section 58.1-439.25.[111] Second, it increased the amount of scholarship monies that could be provided to an eligible student with a disability for a single school year. Before, eligible students with disabilities, like less disadvantaged students were limited to

the lesser of (i) the actual qualified educational expenses of the student or (ii) 100 percent of the per-pupil amount distributed to the local school division (in which the student resides) as the state’s share of the standards of quality costs using the composite index of ability to pay as defined in the general appropriation act.[112]

Now, eligible students with disabilities may receive the lesser of “the actual qualified educational expenses” or “300 percent of the per-pupil amount” (calculated as stated above).[113]

However, this increased amount of scholarship funding may be granted only to the eligible student with a disability who attends “a school for students with disabilities, as defined in § 22.1-319,” that meets certain other licensing and accreditation requirements, qualifies as a nonprofit, and does not receive public funding to educate the eligible students with disabilities.[114]The means-testing for receipt of scholarships from “tax-credit-derived funds” by eligible students with disabilities remains; therefore, those whose “family’s annual household income is . . . in excess of 400 percent of the current poverty guidelines” are not eligible for these scholarships.[115] Finally, the limit on the total amount of credits that may be issued annually by the Commonwealth remains at $25 million,[116] about half of which were issued in Fiscal Year 2018, continuing the steady rise over the life of the credit program.[117]

e.   Education Improvement Scholarship Tax Credits Expands to Pre-K Education

Senate Bill 1015 (Chapter 817) further expanded the Education Improvement Scholarship Tax Credits program to embrace a new class of recipients, allowing scholarships from tax-credit-derived funds also to be awarded to “eligible pre-kindergarten children” attending a certified “nonpublic pre-kindergarten program.”[118]

The “eligible pre-kindergarten child” is defined to include only certain disadvantaged children.[119] The “nonpublic pre-kindergarten program” includes only those pre-kindergarten programs not operated directly or indirectly by any level of government that is either “a preschool program designed for child development and kindergarten preparation that complies with nonpublic school accreditation requirements administered by the Virginia Council for Private Education,” participates in and enjoys at least a Level 3 rating in the “quality rating and improvement system for early childhood programs administered in partnership between the Virginia Early Childhood Foundation and the Office of Early Childhood Development of the Department of Social Services” (known as “Virginia Quality”), or is a child day center that is licensed by the Department of Social Services and implements “a curriculum, professional development program, and coaching model developed and endorsed by a baccalaureate public institution of higher education.”[120] The nonpublic pre-kindergarten program’s curriculum must meet certain requirements as certified by the Virginia Council for Private Education or by the Virginia Early Childhood Foundation.[121]

 

Scholarships to pre-kindergarten children cannot exceed, in the aggregate, “the lesser of the actual qualified educational expenses of the child or the state share of the grant per child under the Virginia Preschool Initiative for the locality in which the eligible pre-kindergarten child resides.”[122]

Senate Bill 1015 also reduced the civil penalty applicable to scholarship foundations for their first violation of the disbursal requirements. Previously, scholarship foundations that failed to “disburse an amount at least equal to 90 percent of the value of the donations it receives (for which tax credits were issued under this article) during each 12-month period ending on June 30 by the immediately following June 30 for qualified educational expenses through scholarships to eligible students” were subject to “a civil penalty equal to 200 percent of the difference between 90 percent of the value of the tax-credit-derived donations it received in the applicable 12-month period and the amount that was actually disbursed.”[123] Now, under Senate Bill 1015, the civil penalty “for the first offense” is cut in half to an amount equivalent to “the difference between 90 percent of the value of the tax-credit-derived donations it received in the applicable 12-month period and the amount that was actually disbursed.”[124]

f.    Limit on Historic Rehabilitation Credits Made Permanent

Since 2000, Virginia law has permitted individuals, trusts, estates, and corporations to take a credit against applicable income, bank franchise, insurance premium license, and public service corporation license taxes in the amount of one quarter of rehabilitation expenses incurred in rehabilitating certified historic structures when such expenses are certified as eligible by the Virginia Department of Historic Resources.[125] Because these tax credits were previously uncapped, the amount claimed rose to $98 million for Fiscal Year 2016.[126]

For tax year 2017, the General Assembly acted to limit the amount of credits that a single taxpayer may claim annually to $5 million for tax years 2017 and 2018.[127] House Bill 2705 (Chapter 25)  now  makes  this  limitation  applicable  to  tax  years  2019  forward.[128]

g.   Land Preservation Tax Credits Available for Lands on Which Facilities Operated, Fees Charged, If Donated to Commonwealth or Instrumentality

Since 2000, Virginia law has afforded substantial, nonrefundable tax credits against Virginia income tax liability for qualifying donations of land for preservation purposes (“Land Preservation Tax Credits”).[129] Since 2007, those credits have been in an amount equal to “40 percent of the fair market value of the land or interest in land” “located in Virginia,” that

is conveyed for the purpose of agricultural and forestal use, open space, natural resource, and/‌‌or biodiversity conservation, or land, agricultural, watershed and/‌‌or historic preservation, as an unconditional donation by the landowner/‌‌taxpayer to a public or private conservation agency eligible to hold such land and interests therein for conservation or preservation purposes.[130]

The interest in land must be conveyed in a certain fashion to be a “qualified donation” and thus potentially eligible for issuance of Land Preservation Tax Credits.[131] It also must be conveyed to a “public or private conservation agency eligible to hold such land and interests therein for conservation or preservation purposes” to be eligible for such credits.[132] This has been statutorily determined to include qualifying donations “made to the Commonwealth of Virginia [or] an instrumentality thereof,” among other nonprofit organizations.[133]

 

Current law, however, does not make clear whether the recipient’s use of the donated land, including by charging fees or leasing the donated land to another profit-making enterprise, bars a taxpayer from claiming Land Preservation Tax Credits for an otherwise eligible conveyance. House Bill 2482 (Chapter 649) answers that question for purposes of donations to “the Commonwealth or an instrumentality thereof.”[134]

As amended, Virginia Code section 58.1-512 now provides that the Commonwealth or its instrumentalities may “operate[] a facility on a conveyance, including charging fees for the use of such facility, . . . so long as any fees are used for conservation or preservation purposes,” and that they may “enter[] into an agreement with a third party to lease or manage a  facility  on  a  conveyance . . . for conservation or preservation purposes,” even where such third party “is operated primarily as a business with intent for profit,” without disqualifying the conveyance from generating Land Preservation Tax Credits.[135]

h.   Time To Apply for Land Preservation Tax Credits Extended

Under current law, taxpayers may not be allowed any Land Preservation Tax Credits unless they file a complete application with the Tax Department “by December 31 of the year following the calendar year of the conveyance.”[136] The materials required for a complete application are fairly extensive.[137]

House Bill 1816 (Chapter 183) extends the window of time in which a taxpayer must apply to be allowed Land Preservation Tax Credits.[138] For conveyances made by the end of 2019, an application will be timely and credits may be allowed if filed by December 31, 2022, it being “the third year following the calendar year of the conveyance.”[139] For conveyances made on January 1, 2020, or thereafter, the application must be filed “by December 31 of the second year following the calendar year of the conveyance,” also by December 31, 2022.[140]

i.    Exemption from Recordation Tax for Deeds of Distribution

Virginia law generally provides for a tax upon the recordation of every deed “except a deed exempt from taxation by law,”[141]the recordation of every “deed[] of trust or mortgage[]” including every “construction loan deed[] of trust or mortgage[]” (except as specifically provided),[142] and “every contract or memorandum thereof relating to real or personal property admitted to record” (except as provided by statute).[143] Some exemptions are provided depending on whom the real estate or lease of real estate is being conveyed to or from, or whether the deed purposes to secure certain obligations.[144]

Senate Bill 1610 (Chapter 757) amends Virginia Code section 58.1-811 to add an exemption dealing with transfers of trust assets and revise that Code section’s other provisions to conform with this exemption.[145] New subsection (K) provides for an exemption from all recordation taxes levied pursuant to the Virginia Recordation Tax Act[146] on “any deed of distribution when no consideration has passed between the parties.”[147] A deed of distribution “shall state therein on the front page that it is a deed of distribution” and is defined as a

deed conveying property from an estate or trust (i) to the original beneficiaries of a trust from the trustees holding title under a deed in trust; (ii) the purpose of which is to comply with a devise or bequest in the decedent’s will or to transfer title to one or more beneficiaries after the death of the settlor in accordance  with a  dispositive provision in the trust instrument; (iii) that carries out the exercise of a power of appointment; or (iv) is pursuant to the exercise of the power under the Uniform Trust Decanting Act.[148]

4.   Miscellaneous: Joint Study on Exempting Military Retirement Income

Under current Virginia law, the only “military retirement income” allowed preferred tax treatment is that received “by an individual awarded the Congressional Medal of Honor.”[149] As there are few living recipients,[150] with even fewer living in Virginia, this is a relatively minor tax benefit.

Recognizing that neighboring states and many other states provide more favorable treatment for military retirement income and desirous that Virginia “maintain its reputation as a veteran-friendly state and, more importantly, strive to reward veterans for their service to Virginia and the United States by fully exempting military retirement income from state income tax,” the House and Senate jointly requested that the Department of Veterans Services and the Tax Department “convene a joint working group to study the feasibility of exempting military retirement income from taxation.”[151] There were no votes against the advancement of this resolution at any stage in either house.[152]

The General Assembly directed these agencies to evaluate the effects of “phasing in a full exemption of military retirement income,” and to consider

(i) the impact of fully exempting military retirement income on Virginia’s current population of veterans, (ii) the projected effect of such exemption on Virginia’s competitiveness as a desirable state of residence for veterans in comparison with other states, (iii) the revenue losses associated with fully exempting military retirement income from state income tax, and (iv) any other factors the Agencies deem relevant.[153]

 

All agencies of the Commonwealth are directed to lend their aid to the study “upon request” and the Tax Department and Department of Veterans Services are required to submit an executive summary and report “no later than the first day of the 2020 Regular Session of the General Assembly.”[154]

B.  Significant Judicial Decision Concerning Corporate Income Tax—Corporate Executive Board Co. v. Virginia Department of Taxation

In this case, the Supreme Court of Virginia considered a taxpayer’s challenge to Virginia’s method of apportionment of sales of services for corporate income tax reporting and held that there was no violation of the U.S. Constitution, even though portions of the taxpayer’s sales revenue were subject to taxation by Virginia and other states.[155] When a company has income from business activity both within Virginia as well as in other states or countries, then the Virginia Code establishes a statutory method to allocate and apportion the Virginia taxable income (the “Statutory Method”).[156] Corporate Executive Board Company (“CEB”) challenged the Statutory Method as applied by the Tax Department in this case.[157]

CEB is a multinational corporation headquartered in Arlington, Virginia.[158] “CEB describes itself as ‘the premier “best practices’’ advisory firm in the world.’”[159] Most of CEB’s revenue, over ninety-five percent, comes from an “annual fixed fee subscription service of its ‘Core Product.’”[160] CEB’s Core Product includes “online access to best practices research, executive education and networking events, and tools used by executives to analyze business functions and processes,” along with customized support.[161] For the three tax years at issue in this case, only $66 million of CEB’s $1.76 billion in total sales were attributable to customers located in Virginia (about five percent).[162] However, the majority of CEB’s employees who developed and improved the Core Product were located in Virginia, as well as all of CEB’s computer servers that housed the Core Product.[163] Additionally, CEB’s Information Technology function, located in Arlington, Virginia, managed and controlled these servers.[164]

Virginia uses a formulary apportionment that has been in effect since 1960. This Statutory Method is based on the average of “a payroll factor, a property factor, and a double-weighted sales factor.”[165] This Statutory Method had been adopted by most states after the National Conference of Commissioners on Uniform States Laws first put it out as a model statute in 1957.[166]Virginia’s application of the Statutory Method resulted in CEB’s overall Virginia apportionment of 87% in 2011, 81% in 2012, and 80% in 2013, and in CEB paying millions of dollars in Virginia Corporation Income Tax in each of these three tax years based on these apportionment percentages.[167]

CEB also paid income tax in many other states based on those states’ apportionment schemes, resulting in CEB paying apportioned state corporate income tax on its multistate income in excess of 120% of its multistate nationwide income.[168]Virginia uses the “cost of performance” formula for the sales factor of its Statutory Method.[169] When a business generates income as a result of actions performed in Virginia and other states, gross receipts are allocated to Virginia if “a greater portion of the income-producing activity is performed in the Commonwealth than in any other state, based on costs of performance.”[170]

CEB argued that “[b]ecause [its] products are intangible goods, the apportionment methodology applied to CEB’s income under the Virginia statute deemed almost all of CEB’s sales to have been made in Virginia” based on its cost of performance being so heavily performed in Virginia.[171] In essence, the Statutory Method allocated to Virginia 97% of its sales in 2011, 91% in 2012, and 88% in 2013.[172] Accordingly, CEB sought to use an alternative apportionment method pursuant to Virginia Code section 58.1-421 (the “Relief Statute”).[173] The Relief Statute permits a taxpayer to propose an alternative method to the Tax Department when the Statutory Method “operates to subject a corporation to taxation on a greater portion of its Virginia taxable income than is reasonably attributable to business or sources within” Virginia.[174]

The alternative apportionment method proposed by CEB was to source sales revenue based on customer location, changing only the sales factor of the Statutory Method; the payroll and property factors of the Statutory Method would remain unchanged. CEB argued that its alternative method would assign sales to the “source of the revenue (i.e., the location of the customer) to reflect the actual market for CEB’s products (i.e., destination-based sourcing, also called market-based sourcing).”[175]

The supreme court took note that “[a] growing number of [s]tates have revisited their method of apportioning income from the sale of services,” with the cost of performance method waning and market sourcing taking its place.[176] The court also noted that the revision of apportionment formulas by the states was not being done in a uniform manner with “[s]ome states tax[ing] services where the benefit is received, others where the service is delivered, and still others where the receipts are derived.”[177]Additionally, the supreme court observed that “[s]till other [s]tates . . . modified their apportionment rules for specific industries.”[178] Varying approaches on the sales factor “expose corporations to potential or actual multiple taxation.”[179]

CEB argued on appeal that the Tax Department’s enforcement of its Statutory Method, coupled with its failure to accept CEB’s alternative apportionment methodology, resulted in an unconstitutionally apportioned income for tax years 2011 to 2013, in violation of the “dormant” Commerce Clause and the Due Process Clause of the Fourteenth Amendment.[180]

The Supreme Court of Virginia rejected CEB’s challenge of its Virginia corporate income tax assessments. The court ruled that double taxation on its own did not violate the Commerce Clause and held that CEB did not suffer from an unconstitutional income apportionment as the State’s formula reasonably reflected the in-state component of the company’s activities that were being taxed.[181] The court found nothing in the Statutory Method of apportioning corporate income violative of the Supreme Court of the United States’s analysis and test for evaluating a state’s apportionment requirement as set forth in Complete Auto Transit, Inc. v. Brady[182] and Container Corp. of America v. Franchise Tax Board.[183]

The court stated it could find nothing in the Supreme Court’s precedent “interpreting the dormant Commerce Clause or the Due Process Clause that requires one of two taxing states to ‘recede simply because both have lawful tax regimes reaching the same income.’”[184] The court noted “the stipulated facts establish[ed] that the content for CEB’s Core Product was developed by CEB employees working in Virginia” as the computer servers on which the product resided were located in Virginia.[185] Therefore, “[e]ach time a customer use[d] CEB’s Core Product,  the customer reache[d] into Virginia to consult materials develope[d] . . . and stored in Virginia.”[186]

The court held that “[t]he Tax Department’s apportionment of income did not ‘reach[] beyond that portion of value that is fairly attributable to economic activity within’” Virginia and, thus, that “Virginia’s apportionment method satisfies the constitutional standard.”[187] The court further held that the alternative apportionment relief afforded by Virginia Code section 58.1-421 does not apply under its plain language, there being no inequitable result, and also that any such double taxation was not due to any inequity caused by Virginia’s apportionment statutes, but rather to the fact that some other state has a unique method of allocation and apportionment due to changes adopted more recently by other states in their apportionment formulas and the increased trend of using single-factor sales apportionment.[188] As Virginia’s apportionment formula has been adhered to for nearly sixty years, “CEB’s double taxation did not ‘occur[] in consequence of or on account of’ Virginia law.”[189] The circuit court’s decision was affirmed by the Supreme Court of Virginia.[190]

II.  Taxes Administered by Localities

A.  Significant Legislative Activity

1.   Real Estate Taxation

2019 could be termed the year of the exemption in local taxation. It saw the General Assembly amend a wide array of statutes governing the constitutionally permitted deviations from uniform, fair market value assessment and taxation.

a.   Annual Increase of Special Use Lands’ Assessed Value May Be Limited by Ordinance

Exercising the authority recognized by article X, section 2 of the Virginia Constitution,[191] the General Assembly allows real estate to be subject to special assessment for land preservation purposes. The special assessments may be extended to four classifications of real estate—that devoted to “agricultural,” “horticultural,” “forest,” or “open-space” use[192]—if a locality elects to “adopt an ordinance to provide for the use value assessment and taxation, in accord with the provisions of this article, of real estate [so] classified.”[193] For land so classified in a locality that has adopted such an ordinance, the assessor “shall consider only those indicia of value which such real estate has for agricultural, horticultural, forest or open space use, and real estate taxes for such jurisdiction shall be extended upon the value so determined.”[194] The result is assessment at “use value,” rather than traditional “fair market value,” which would reduce the overall assessment.[195] Most of Virginia’s localities authorize use valuation of one or more of these classifications.[196]

House Bill 2365 (Chapter 22) further empowers localities to undertake real estate taxation in a manner that aids the preservation of these lands from market forces.[197] House Bill 2365 does so by allowing localities to adopt or amend ordinances for use value assessment and taxation to provide “that the annual increase in the assessed value of property within the classes of real estate” recited above “shall not exceed a dollar amount per acre specified in the ordinance.”[198]

b.   Dwelling Defined for Purposes of Tax Exemption for Elderly and Disabled

Article X, section 6 of the Virginia Constitution permits the General Assembly to authorize localities to exempt “from local property taxation, or a portion thereof, . . . of real estate and personal property designed for continuous habitation owned by, and occupied as the sole dwelling of, persons not less than sixty-five years of age or persons permanently and totally disabled.”[199]The General Assembly may also authorize localities “to establish either income or financial worth limitations, or both, in order to qualify for such relief.”[200] The General Assembly has authorized localities to extend this exemption and establish these limitations.[201]

Although used twenty-four times in chapter 32, article 2, which governs this exemption, the term “dwelling” is not defined nor its contours delineated. House Bill 2150 fills that lacuna, defining “[d]welling” to include any “improvement to real estate exempt pursuant to this article and the land upon which such improvement is situated,” provided certain conditions are met.[202] The improvement must be “used to house or cover any motor vehicle” within the classes created by Virginia Code section 58.1-3503(A)(3) through (A)(10), any “households goods” or personal effects within the class created by Virginia Code section 58.1-3503(A)(14), or  any  “household goods exempted from personal property tax[ation]” by Virginia Code section 58.1-3504, and may not be “used principally” for “a business purpose.”[203]

c.   Income Limits Claiming Exemption for Elderly and Disabled May Exclude Disability Benefits for Co-Occupants of Dwelling

As noted above, localities are authorized “to establish either income or financial worth limitations, or both, in order to qualify for” the property tax exemption otherwise available to elderly and disabled persons.[204] In the event they choose to use an “annual income limitation” as part of their means-testing, the localities must aggregate

the income received during the preceding calendar year . . . by (i) owners of the dwelling who use it as their principal residence, (ii) owners’ relatives who live in the dwelling, except for those relatives living in the dwelling and providing bona fide caregiving services to the owner whether such relatives are compensated or not, and [may also aggregate the income received by] (iii) . . . nonrelatives of the owner who live in the dwelling except for bona fide tenants or bona fide caregivers of the owner, whether compensated or not.[205]

 

In 2019, the General Assembly authorized localities when applying their annual income limitation, to exclude from their aggregation “disability income received” by others who live in the dwelling who are “permanently and totally disabled.”[206]

d.   Surviving Spouse May Take Disabled Veteran Exemption to New Residence

Section 6-A supplements the list of authorized property tax exemptions found in section 6 of the Virginia Constitution with an exemption from real property taxation of the principal place of residence of any veteran with “a one hundred percent service-connected, permanent, and total disability,” with the exemption extending to the veteran’s surviving spouse “so long as the surviving spouse does not remarry.”[207] Prior to 2019, the surviving spouse could claim the exemption only if he or she “continue[d] to occupy the real property as his or her principal place of residence.”[208] Section 6-A affords the same exemption to the surviving spouse of “any member of the armed forces of the United States who was killed in action” who does not remarry, without regard to whether the surviving spouse moves “to a different principal place of residence.”[209] Section 6-B affords the same exemption to the surviving spouse of “any law-enforcement officer, firefighter, search and rescue personnel, or emergency medical services personnel who was killed in the line of duty” who does not remarry, similarly without regard to whether the surviving spouse moves “to a different principal place of residence.”[210]

In November 2018, Virginia voters removed the requirement that the surviving spouse of a disabled veteran had to “continue[] to occupy the real property as his or her principal place of residence” to claim the exemption.[211] Accordingly, in 2019, the General Assembly updated the general law, extending this exemption to provide that “[t]he exemption applies without any restriction on the spouse’s moving to a different principal place of residence.”[212] At the same time, the General Assembly updated its prior statutory grants of the exemptions permitted to those surviving spouses of service members killed in action and of “any law-enforcement officer, firefighter, search and rescue personnel, or emergency medical services personnel . . . killed in the line of duty”[213] to remove language requiring, inconsistently with the constitutional terms, that the surviving spouse had to “continue[] to occupy the real property as his principal place of residence.”[214]

These provisions apply to tax year 2019 forward.[215] However, if previous surviving spouses of a disabled veteran lost their exemptions prior to tax year 2019 “solely because [they] moved to a different principal place of residence, then [they] shall be eligible to claim such exemption for taxable years beginning on and after January 1, 2019,” provided they are otherwise eligible.[216]

e.   Department of Health To Certify Water Pollution Control Projects for Exemption

The Virginia Constitution also authorizes the General Assembly to “define as a separate subject of taxation any property, including real or personal property, . . . used primarily for the purpose of abating or preventing pollution of the atmosphere or waters of the Commonwealth or for the purpose of transferring or storing solar energy,” and to either “directly exempt or partially exempt such property from taxation” or allow localities “to exempt or partially exempt such property from taxation.”[217] The General Assembly has elected to directly exempt such property that meets the statutory definition of “[c]ertified pollution control equipment and facilities” from state and local taxation.[218]

 

Prior to 2019, the State Water Control Board was the sole certifying agency of “pollution control equipment and facilities” directed at “water pollution.”[219] In 2019, however, the General Assembly elected to divide this responsibility between the State Water Control Board and the Virginia Department of Health.[220] House Bill 2811 (Chapter 441) gave the latter the responsibility to certify for exemption all “pollution control equipment and facilities” directed at “water pollution,” that consists of “onsite sewage systems that serve 10 or more households, use nitrogen-reducing processes and technology, and are constructed, wholly or partially, with public funds.”[221] The General Assembly declared that an “emergency” exists, and so, House Bill 2811 was made effective on its passage on March 18, 2019.[222]

f.    Partial Exemption May Be Granted for Flood Mitigation Efforts

In November of 2018, the voters of the Commonwealth approved an amendment to the Virginia Constitution, permitting the General Assembly to authorize

by general law the governing body of any county, city, or town to provide for a partial exemption from local real property taxation, within such restrictions and upon such conditions as may be prescribed, of improved real estate subject to recurrent flooding upon which flooding abatement, mitigation, or resiliency efforts have been undertaken.[223]

Pursuant to this constitutional authorization, the General Assembly adopted Senate Bill 1588 (Chapter 754), authorizing all localities to provide by ordinance for a “partial tax exemption for improved real estate that is subject to recurrent flooding and upon which qualifying improvements have been made.”[224] To be “qualifying flood improvements,” it must be a “flooding abatement, mitigation, or resiliency improvements that do not increase the size of any impervious area and are made either to qualifying structures or to land.”[225] If the latter, “the improvements must be made primarily for the benefit of one or more qualifying structures,” defined as “a structure that was completed prior to July 1, 2018, or a structure that was completed more than 10 years prior to the completion of the qualifying flood improvements.”[226] Additionally, the qualifying improvements that  may provide the basis for the partial exemption must have been made on or after July 1, 2018.[227]

Senate Bill 1588 authorized the partial exemption ordinances to

(i) establish flood protection standards that qualifying flood improvements must meet in order to be eligible for the exemption; (ii) determine the amount of the exemption; (iii) set income or property value limitations regarding eligibility for the exemption; (iv) provide that the exemption shall last for only a specified number of years; (v) determine, based upon flood risk, zones or districts within the locality in which the exemption shall be available, . . . ; and (vi) establish preferred actions that qualify for the exemption.[228]

g.   Assessed Value Threshold Increased for Conveyance of Delinquent Lands to Localities

Virginia law provides localities a range of mechanisms for recovering delinquent real estate taxes or other charges that operate as a lien on the real estate, including providing for judicial sale by public auction.[229] Under certain defined circumstances, a locality may bypass the process of a public auction of the property that is subject to a tax or other lien and petition a circuit court to appoint a special commissioner to transfer title of the property to the locality.[230]

Prior to 2019, most localities could petition for such an appointment if (1) the parcel that was the subject of a lien(s) had an assessed value of $50,000 or less; and (2) the parcel’s aggregate taxes and liens (including penalties and interest), exceeded one-half, or the taxes alone exceeded one-quarter, of that assessed value.[231] For parcels in the Cities of Norfolk, Richmond, Hopewell, Newport News, Petersburg, Fredericksburg, and Hampton, the same procedure but different thresholds applied.[232] If the property was worth more than $100,000, a petition could be filed only if the aggregate delinquent charges, including penalties and interest, exceeded 35%, or the percentage of taxes alone exceeded 15%, of the property’s assessed value.[233] If the property was worth $100,000 or less, a petition could be filed only if the aggregate delinquent charges, including penalties and interest, exceeded 20%, or the percentage of taxes alone exceeded 10%, of the property’s assessed value.[234] In such a case, as long as the property is not “an occupied dwelling,” the locality must “enter[] into an agreement for sale of the parcel to a nonprofit organization to renovate or construct a single-family dwelling on the parcel for sale to a person or persons to reside in the dwelling whose income is below the area median income.”[235]

The $100,000 limit had been set in 2014,[236] while the $50,000 limit had been increased from $20,000 back in 2004.[237]House Bill 2060 (Chapter 541) further raised these thresholds for the appointment of a commissioner from $100,000 to $150,000 in the cities of Fredericksburg, Hampton, Hopewell, Newport News, Norfolk, Petersburg, and Richmond, and from $50,000 to $75,000 in all other localities.[238] House Bill 2405 (Chapter 159) moved the City of Martinsville into the category for urban localities.[239]

h.   Private Collections Agents Authorized To Collect Amounts Other Than Local Taxes

Depending on the period of delinquency, localities may employ various methods to seek collection of delinquent taxes and other charges. Where the local taxes and other charges are six or more months overdue, a locality may employ an attorney, the sheriff, or “a local delinquent tax collector.”[240] Prior to 2019, if local taxes “remain[ed] delinquent for a period of three months or more and . . . the appropriate statute of limitations ha[d] not yet run,” treasurers of localities could also employ “the services of private collection agents to assist with the collection of any local taxes,” but not any other charges.[241]

Senate Bill 1301 (Chapter 271) enlarged the authority of localities to employ private collection agents “to assist with the collection of . . . other amounts due to the locality,” not just “local taxes.”[242]

2.   Tangible Personal Property Taxation—Local Gas Severance Tax Authority Extended Through 2021

Localities are authorized to “adopt a license tax on every person engaging in the business of severing gases from the earth,” and to levy the same at a rate not to exceed one percent of the gross receipts of the licensee “from the sale of gases severed within such county.”[243] Known as the “[l]ocal gas road . . . improvement tax,” the

moneys collected for each county or city from the taxes imposed under authority of this section and subsection B of § 58.1-3741 shall be paid into a special fund of such county or city to be called the Coal and Gas Road Improvement Fund of such county or city, and shall be spent for such improvements to public roads as the coal and gas road improvement advisory committee and the governing body of such county or city may determine.[244]

Certain portions of the funds may be used for purposes other than roads “[i]n those localities that comprise the Virginia Coalfield Economic  Development  Authority.”[245]  This tax is presently imposed by the eight Southwest Virginia localities that make up the Virginia Coalfield Economic Development Authority.[246]

The authority to impose the local gas road improvement tax was to sunset at the end of 2019; however, House Bill 2555 (Chapter 24) extended this authority through 2021.[247]

3.   BPOL Taxation—Start-Up Food Carts Subject to Only One BPOL License

Virginia localities generally impose business, profession, occupation and licensure, or “BPOL” taxes, on the basis of gross receipts at a “definite place of business.”[248] As a result, itinerant businesses may be exposed to BPOL licensing, reporting, and taxation in numerous localities, thereby presenting knotty sourcing issues that they may be ill-equipped to manage.[249]

In 2019, the General Assembly adopted Senate Bill 1425 (Chapter 791), granting some relief from these BPOL burdens to start-up food cart owners.[250] As is the want of modern legislation, the anodyne term “mobile food unit” was adopted and is defined as “a restaurant that is mounted on wheels and readily moveable from place to place at all times during operation.”[251]

Owners of a mobile food unit that is a “new business,” i.e., one that “locates for the first time to do business in a locality,” who pay “the license tax required by the locality in which the mobile food unit is registered, . . . shall not be required to pay any further license tax imposed by any other locality for conducting business from such mobile food unit in the confines of such other locality.”[252] This partial exemption may be extended to “up to three mobile food units.”[253]

This partial exemption expires “two years after the payment of the initial license tax in the locality in which the mobile food unit is registered” and does not exempt the owner of the “mobile food unit” from the requirement “to register with the commissioner of the revenue or director of finance in any locality in which he conducts business from such mobile food unit.”[254]

4.   Machinery and Tools Taxation—Assessed Value Measure for Machinery and Tools Remains Undefined

Virginia Code section 58.1-3507(A) lists and segregates “as a class of tangible personal property . . . subject to local taxation only” non-idle “[m]achinery and tools . . . used in a manufacturing, mining, water well drilling, processing or reprocessing, radio or television broadcasting, dairy, dry cleaning or laundry business.”[255] Under Virginia Code section 58.1-3507(B), “[m]achinery and tools segregated for local taxation pursuant to subsection A, other than energy conservation equipment of manufacturers, shall be valued by means of depreciated cost or a percentage or percentages of original total capitalized cost excluding capitalized interest.”[256]

This measure for the assessment of machinery and tools (“M&T”) dates back to 1980.[257] However, it has never received an authoritative interpretation. When it was interpreted at the behest of a local commissioner of the revenue by Virginia’s Office of the Attorney General, it was interpreted to mean  the same  thing

as “original cost,” to wit, the  “original  cost paid  by  the  original purchaser of the property from the manufacturer or dealer,” not the taxpayer’s purchase cost.[258]

House Bill 2640 proposed to countermand that opinion by defining “[o]riginal total capitalized cost” to mean “the cost of the machinery and tools when acquired by the current owner of the machinery and tools plus any amount incurred by such owner to extend the useful life of the machinery and tools,” provided the current owner acquired the M&T “in a bona fide, arm’s-length transaction.”[259] The legislation proposed to create a presumption that all purchases “from anyone other than a member of the current owner’s affiliated group, as defined in § 58.1-3700.1,” were “bona fide, arm’s-length transaction[s] unless the contrary is shown.”[260] On the other hand, acquisitions “from a member of the [purchaser’s] affiliated group” would be presumed to not “be a bona fide, arm’s-length transaction unless the contrary is shown.”[261] Where a taxpayer did not acquire the M&T through “a bona fide, arm’s-length transaction,” original total capitalized cost was to be defined as “the prior owner’s original total capitalized cost.”[262]

The Bill was reported from the House Committee on Finance and subjected to two readings, but engrossment was refused.[263]

B.  Significant Judicial Decisions

1.   Real Property Tax Assessments Upheld; Virginia Code Section 58.1-3984(B) Held Constitutional

When a taxpayer fails to show that real property tax assessments were not arrived at in accordance with generally accepted appraisal practices, the tax assessments stand.[264] A taxpayer, Kingstowne M&N LP (“Kingstowne” or “Taxpaper”), challenged its real property tax assessments for tax years 2012, 2013, 2014, and 2015.[265] “The property in question [was] the last undeveloped tract of 4.6 acres in the Kingstowne Center, a mixed-use development of 43.37 acres in Alexandria, [Virginia].” The comprehensive plan contemplates a mixed use to include high rise residential use.[266] In 2008, Fairfax County granted an amendment that allowed density on Parcel M, the subject property, to 1.2 million square feet of office space.[267] During the tax years at issue, the property was zoned office use.[268] In 2015, the Taxpayer requested, and in 2016, Fairfax County granted an amendment to allow a change to multifamily residential and retail space.[269]

Fairfax County assessed the real property by means of a mass appraisal.[270] Kingstowne filed suit challenging the assessment, asserting that the assessment exceeded fair market value of the property.[271] Fairfax County contended that the Taxpayer failed to meet its burden of proof under Virginia Code section 58.1-3984 and further that the County properly assessed the property.[272] The trial court held that Kingstowne failed to meet its burden of proof and upheld the County’s tax assessments for each of the four tax years.[273]

Tax assessments are entitled to a “statutory presumption that the valuation determined by the assessor or [the] Board of Equalization is correct.”[274] Virginia Code section 58.1-3984(B) sets forth the requirements a taxpayer must establish to successfully rebut this presumption.

The taxpayer may rebut the presumption by showing by a preponderance of the evidence: (1) that the property in question was valued at more than its fair market value, and (2) that its fair market value was  not  arrived  in  accordance  with  generally  accepted  appraisal practices, procedures, rules and standards as prescribed by nationally recognized professional appraisal organizations such as the IAAO and applicable Virginia law relating to valuation of property.[275]

Kingstowne contended that the law under West Creek Associates LLC v. County of Goochland[276] still stands and that a “taxpayer may carry its burden of establishing manifest error in an assessment by the [C]ounty by showing only that it is substantially higher than the fair market value of the property.”[277] Kingstowne asserted that the additional language added to Virginia Code § 58.13984(B) was merely instructional by the General Assembly “on the various ways in which a taxpayer could meet its burden of proof.”[278]

The court rejected those arguments and adopted the reasoning of the court in Staunton Mall Realty Management, L.L.C. v. Augusta County Board of Supervisors,[279] that the “amendment makes it clear that it is no longer an option for the taxpayer to prove manifest error solely by showing a sufficient disparity between fair market value and assessed value without also showing that the taxing authority employed an improper methodology.”[280]

Kingstowne also contended that the “Virginia Constitution mandates only that assessments be at fair market value.”[281]However, article X, section 2 of the Virginia Constitution states “all assessments of real estate and tangible personal property shall be at their fair market value, to be ascertained as prescribed by law.”[282] This phrase does not limit the General Assembly from enacting legislation circumscribing the appeal by a taxpayer of a County’s assessment.[283] In short, Virginia Code section 58.1-3984(B) does not permit the County to make non-fair-market value assessments; it merely provides for what a taxpayer must establish to overcome the presumption that the County has made a fair market value assessment.[284]

The circuit court held that Kingstowne’s evidence failed to establish “that these assessments were not arrived at in accordance with generally accepted appraisal practices, procedures, rules, and standards as prescribed by any nationally recognized professional appraisal organizations.”[285]

Even assuming that Taxpayer met his burden of proof that the county assessment was not arrived at in accordance with generally accepted appraisal practices, or that the Taxpayer need only prove that the property in question is valued at more than its fair market value; the [c]ourt found that the presumption of the correctness of the county’s assessment was not overcome.[286]

The court found the County’s expert to be more credible than the Taxpayer’s expert as to the fair market value of the property in question.[287]

In comparing these fair market values with the mass appraisal assessments performed by the Board of Equalization, and in rejecting the fair market values opined by the Taxpayer’s expert the [c]ourt decline[d] to conclude that they are so stark as to warrant an inference of manifest error or to overcome the presumption of correctness.[288]

The court denied the Taxpayer’s petition for relief and entered judgment for Fairfax County.[289]

2.   City of Fairfax Commits Manifest Error by Using Valuation Approach Not in Accordance with Generally Accepted Appraisal Practices

For real property tax assessment purposes, the City of Fairfax must assess the Army Navy Country Club’s land as residential property and omit the golf club’s improvements (e.g., clubhouse, pool, tennis courts) that would be demolished in the event of residential development.[290] The Army Navy Country Club (“ANCC”) owned 232 acres of real property located in the City of Fairfax that for many years had been used as a country club and golf course.[291] For tax years 2012 to 2016, the City assessed the property at approximately $53 million.[292] The subject property was “zoned for by-right residential development,” and the parties agreed that the property’s highest and best use was for residential development, despite it being used as a country club and golf course.[293] ANCC asserted the fair market value of the property for the five years at issue should have been no greater than $20 million to $29.88 million.[294]

To rebut the presumption of correctness of the challenged tax assessments, ANCC argued that the City’s property tax assessments exceeded the fair market value for the five tax years and that the City derived its assessments from a flawed methodology.[295] Both parties presented a number of appraisers and other fact witnesses to establish their fair market value determinations for the ANCC property and the methodologies used in arriving at their opinions of value.[296]

The Fairfax County Circuit Court held the tax assessments were improper because the City used an improper methodology that was not in accordance with generally accepted appraisal practices.[297] Both parties agreed that the highest and best use for the property “requires the [p]roperty to be evaluated as if it consist[ed] of residential lots” and not as a country club and golf course.[298] Both parties agreed the ANCC property could yield 332 lots.[299] However, the City “not only valued the land, but valued the improvements on the property.”[300] The City conceded that the improvements would need to be demolished if the property was to be developed for residential use.[301] However, the City’s assessor valued the improvements and “assigned them a reduced value, and then depreciated that value.”[302] Placing a value on the improvements increased the overall assessment of the property.[303] The City assessor testified “the improvements would have been used during the development of the [p]roperty.”[304] The circuit court held “it was improper [for the City] to value the land under a residential scheme, and also value the improvements, because the improvements, would be nonexistent if the [p]roperty consisted of residential lots.”[305] The court also noted that the City’s valuation of the improvements was inconsistent with a recent real property tax case between the parties on this same property in which the earlier court noted no value should be assigned to the improvements.[306]

By holding that the City’s valuation methodology was flawed and not in accordance with generally accepted appraisal practices, the circuit court determined that the resulting values were greater than its fair market value. The court then evaluated all of the appraiser’s opinions of value and other evidence presented at trial and concluded the correct fair market value for the property was $44,632,900 for each of the five tax years in the litigation.[307]

3.   Court Finds County Real Property Tax Assessments Manifestly Erroneous and Grants Relief

In Jewell Smokeless Coal Corp. v. Buchanan County, the Buchanan County Circuit Court held that the landowner carried its burden of showing that Buchanan County’s tax assessments were manifestly erroneous and awarded a refund.[308] Jewell Smokeless Coal Corporation (“Jewell Smokeless”) owned a coke manufacturing and processing plant located on seven tracts of land in Buchanan County.[309]

“The Jewell Smokeless plant in Buchanan County [was] a unique industrial coke manufacturing facility with 142 coke ovens with several buildings and structures supporting the coke ovens.”[310] Only six of the seven parcels of land were the subject of the judicial tax assessment challenge.[311] “In 2013 and 2014, the total assessed value for all parcels was $17,345,200,” with the land valued at $277,000 and the “Buildings/‌Structures” valued at $17,068,200.[312] In 2015, the County hired Wampler-Eanes Appraisal Group, Ltd. (“Wampler-Eanes”) to conduct a county-wide reassessment, and the County increased the assessment of the Jewell Smokeless plant from $17,345,200 (for tax year 2014) to over $255,000,000 for 2015.[313] The assessment by Wampler-Eanes placed $254,430,200 of the total assessment on one tract, 2HH 118004, of the seven tracts owned by Jewell Smokeless.[314]

Mr. Wampler testified at trial that he used the “cost approach method” for his values.[315] “He determined a cost figure of $3.7 million per coke oven and multiplied that amount by 142 ovens.”[316] He then depreciated that $525 million amount down to the $255 million assessment.[317] During a three-day trial, Jewell Smokeless called two expert appraisers to testify regarding the improvements, which totaled $32,262,000.[318] The County took the unique position of not offering a counter expert to defend its own assessment.[319] Instead, the County relied on the presumption of correctness afforded to the tax assessments by Virginia Code section 58.1-3984(B).[320] The County also called two appraisers to critique and highlight what they considered to be errors by Jewell Smokeless’s experts who testified about the fair market value of the subject property and its improvements.[321]

The trial court held that the County’s assessor, Wampler-Eanes, committed a manifest error in making his assessment.[322]Wampler-Eanes placed 99.58% of the total assessment of value on one parcel—2HH 118004.[323] This allocation of value was “inconsistent with the evidence and conflict[ed] with the expert testimony.”[324] Mr. Wampler, called as a witness by Jewell Smokeless despite being the County’s assessor, could not satisfactorily explain how he ended up putting 99.58% of the value on one tract when a number of coke ovens (about 112), which he had valued at $3.7 million each, were located on other tracts of the subject property at issue in the trial.[325] The disparity in value between the County’s assessment ($254 million) and that opined by the County’s expert witness ($23,783,500) for the one parcel 2HH 118004 was massive, and the court ruled it “shows a manifest error in Wampler-Eanes[’] methodology that is not within the range of a reasonable difference of opinion” among experts.[326]

After evaluating the evidence and testimony of the appraisers, the trial court held the County’s tax assessments were erroneous and ruled the fair market value of the property and improvements for each of the three tax years at issue in the case (2015, 2016, and 2017) to be $41,437,712.[327] In reaching the court’s opinion of value for the property, the court made three other rulings. First, the court held Jewell Smokeless is not required to prove a value to the land that was already established by the County’s assessments and with which Jewell Smokeless agreed.[328] The property owner never contested the land values assessed by the County, only the assessments of the improvements.[329] Second, the court dismissed the County’s argument that Jewell Smokeless offered no evidence that the value approved by the Board of Equalization (“BOE”) “was not arrived at in accordance with generally accepted appraisal practices” so the presumption of correctness of the tax assessment should remain in effect.[330]The court relied on the chairman of the BOE letter put into evidence by Jewell Smokeless showing a reduction in assessed value of the property from $254,430,200 to $199,685,000.[331] In the letter, the BOE failed to include any of the other parcels of land and placed ninety-nine percent of the value on one parcel, similar to the Wampler-Eanes methodology that the court previously held to be flawed.[332] The court also noted that, unlike the assessor, the BOE appears to have no statutory requirement to comply with generally accepted appraisal practices and the BOE decision to reduce the assessment lacked any explanation.[333]

The third finding by the court was that it believed no “entrepreneurial incentive” should be used by an appraiser for a specific use property such as the coke oven plant that is owner operated.[334] The court noted that an entrepreneurial incentive is more applicable in other types of development as a “developer profit,” as opposed to an owner-user.[335] The court concluded its finding that the County’s tax assessments were erroneous by establishing fair market value for the buildings and structures.[336]The court added its fair market valuations for the improvements to the County’s assessments of land value to reach the court’s fair market value for each of the parcels.[337]

Conclusion

The 2019 session of the Virginia General Assembly diverged sharply from its recent trend toward targeted and technical changes in the tax laws. The prime example of this break was the legislature’s enactment of new economic sales and use tax nexus laws which require remote, e-commerce sellers and marketplace facilitators who sell or facilitate sales to Virginia customers to register for the collection of sales and use tax. Under the new economic nexus laws, a remote seller or marketplace facilitator creates an economic nexus with Virginia if they sell or facilitate the sales of more than $100,000 in annual gross retail sales or 200 or more transactions to Virginia customers annually. Virginia joins a growing number of states implementing new tax laws to capitalize on the 2018 decision by the Supreme Court of the United States in Wayfair.  The remainder  of  the  General  Assembly’s

state tax legislation largely conforms to its habit of targeted and technical changes.

As to local taxes, the most notable trend was the extent to which the trial courts continued to wrestle with real property tax challenges. The ambiguously worded 2012 amendment to the long-standing relief statute, Virginia Code section 58.1-3984, established a new standard as to what a taxpayer must prove to be successful in challenging a real estate tax assessment and sowed the seeds of taxpayer, locality, and trial court confusion. The latest circuit court decisions, reviewed previously, confirm the difficulties of identification, interpretation, and application, suggesting that legislative guidance may be required. The problem is especially acute for challenges to assessments of large manufacturing or special purpose facilities which invariably require courts to delve into the niceties of real property appraisal practice now that the general principles of which have been made elements of real estate assessment challenges. The identification, interpretation, and application of this vague body of real estate appraisal standards by individual circuit court judges now controls whether relief from overassessment may be granted. We anticipate the next few years will bring more real property tax assessment challenges and, with them, still more judicial grappling with real estate valuation principles.

 


        [1].    138 S. Ct. 2080 (2018).

        [2].    Act of Mar. 26, 2019, ch. 815, 2019 Va. Acts __, __ (codified as amended at Va. Code Ann. §§ 58.1-601, -602, -604, -612, -612.1, -615, -625, -635 (Cum. Supp. 2019)).

        [3].    Id. ch. 815, 2019 Va. Acts at __.

        [4].    Id. ch. 815, 2019 Va. Acts at __ (codified as amended at Va. Code Ann. § 58.1-612(C)(10)–(11) (Cum. Supp. 2019)).

        [5].    138 S. Ct. at 2099. It bears noting that the Court left unresolved whether South Dakota’s law ran afoul of some other Commerce Clause principle besides the now-discarded “Quill physical presence rule.” Id. The question as to whether these thresholds are appropriate for Virginia, a state with an annual GDP ten times that of South Dakota, also remains open. Cf. U.S. Bureau of Econ. Analysis, Gross Domestic Product by State: Fourth Quarter and Annual 2018 (2019), https://www.bea.gov/data/gdp/gdp-state [https://perma.cc/KDW4-WQP4]. This fact appears to have been recognized by the General Assembly, as the provisions imposing the thresholds upon both remote sellers and marketplace providers qualified the requirement with “or other minimum amount as may be required by federal law.” See Act of Mar. 26, 2019, ch. 815, 2019 Va. Acts __, __ (codified as amended at Va. Code Ann. §§ 58.1-612(C)(10)–(11), -612.1(C)(3)(a)–(b) (Cum. Supp. 2019)). Besides this qualification, the General Assembly also included a severability provision. See id. ch. 815, 2019 Va. Acts at __.

        [6].    Ch. 815, 2019 Va. Acts at __ (codified as amended at Va. Code Ann. § 58.1-612.1 (Cum. Supp. 2019)).

        [7].    Id. ch. 815, 2019 Va. Acts at __ (codified as amended at Va. Code Ann. § 58.1-612.1(A) (Cum. Supp. 2019)).

        [8].    Id. ch. 815, 2019 Va. Acts at __ (codified as amended at Va. Code Ann. § 58.1-612.1(B) (Cum. Supp. 2019)).

        [9].    Id. ch. 815, 2019 Va. Acts at __ (codified as amended at Va. Code Ann. § 58.1-612.1(C)(1)–(3) (Cum. Supp. 2019)).

      [10].    Id. ch. 815, 2019 Va. Acts at __ (codified as amended at Va. Code Ann. § 58.1-612.1(B), (C)–(D)(1), (F) (Cum. Supp. 2019)).

      [11].    Id. ch. 815, 2019 Va. Acts at __ (codified as amended at Va. Code Ann. § 58.1-612.1(D)(3) (Cum. Supp. 2019)). The Tax Department was tasked with “develop[ing] guidelines implementing the provisions of this act, including guidelines implementing the provisions of subsection D of § 58.1-612.1 of the Code of Virginia,” creating a waiver of the collection requirement for certain marketplace facilitators. Id. ch. 815, 2019 Va. Acts at  __.

      [12].    Id. ch. 815, 2019 Va. Acts at __ (codified as amended at Va. Code Ann. § 58.1-612.1(D)(3), (F)(ii) (Cum. Supp. 2019)).

      [13].    Id. ch. 815, 2019 Va. Acts at __ (codified as amended at Va. Code Ann. § 58.1-612.1(A) (Cum. Supp. 2019)).

      [14].    Id. ch. 815, 2019 Va. Acts at __ (codified as amended at Va. Code Ann. § 58.1-612.1(B), (D)(2), (F) (Cum. Supp. 2019)).

      [15].    Id. ch. 815, 2019 Va. Acts at __ (codified as amended at Va. Code Ann. § 58.1-612.1(E), (F)(i) (Cum. Supp. 2019)).

      [16].    Id. ch. 815, 2019 Va. Acts at __ (codified as amended at Va. Code Ann. § 58.1-612.1(A) (Cum. Supp. 2019)).

      [17].    Id. ch. 815, 2019 Va. Acts at __ (codified as amended at Va. Code Ann. § 58.1-612.1(E)(i)–(iii) (Cum. Supp. 2019)).

      [18].    Id. ch. 815, 2019 Va. Acts at __ (codified as amended at Va. Code Ann. § 58.1-612.1(I) (Cum. Supp. 2019)).

      [19].    Id. ch. 815, 2019 Va. Acts at __ (codified as amended at Va. Code Ann. §§ 58.1-625(D)(2), -635(D) (Cum. Supp. 2019)).

      [20].    Dep’t of Taxation, 2019 Fiscal Impact Statement, H.B. 1722, at 1, http://lis. virginia.gov/cgi-bin/legp604.exe?191+oth+HB1722FER161+PDF [https://perma.cc/77VJ-HKLF].

      [21].    FY 2018–20 Total Revenues, https://budget.lis.virginia.gov/sessionreport/2019/1/ 2084/ [http://perma.cc/2SXH-DXTN].

      [22].    Ch. 815, 2019 Va. Acts at __ (codified as amended at Va. Code Ann. § 58.1-601(B)(1)–(2) (Cum. Supp. 2019)).

      [23].    Id. ch. 815, 2019 Va. Acts at __ (codified as amended at Va. Code Ann. § 58.1-605(C)(2) (Cum. Supp. 2019)).

      [24].    Id. ch. 815, 2019 Va. Acts at __ (codified as amended at Va. Code Ann. § 58.1-601(B)(3)–(4) (Cum. Supp. 2019)).

      [25].    Id. ch. 815, 2019 Va. Acts at __.

      [26].    Id. ch. 815, 2019 Va. Acts at __.

      [27].    Id. ch. 815, 2019 Va. Acts at __.

      [28].    Id. ch. 815, 2019 Va. Acts at __.

      [29].    Va. Code Ann. §§ 58.1-603(1), (3), -604(2) (Repl. Vol. 2017).

      [30].    Id. § 58.1-605(B) (Repl. Vol. 2017).

      [31].    Id. § 58.1-611.1(A)(2) (Repl. Vol. 2017); id. § 58.1-605(B) (Repl. Vol. 2017).

      [32].    E.g., id. §§ 58.1-603.1, -603.2 (Repl. Vol. 2017).

      [33].    Act of Mar. 18, 2019, ch. 550, 2019 Va. Acts __, __ (codified as amended at Va. Code Ann. § 58.1-611.1(C)(2) (Cum. Supp. 2019)). These are defined as “(i) nondurable incontinence products such as diapers, disposable undergarments, pads, and bed sheets and (ii) menstrual cups and pads, pantyliners, sanitary napkins, tampons, and other products used to absorb or contain menstrual flow.” Id. ch. 550, 2019 Va. Acts at __.

      [34].    Id. ch. 550, 2019 Va. Acts at __ (codified as amended at Va. Code Ann. § 58.1-611(A), (B) (Cum. Supp. 2019)).

      [35].    Id. ch. 550, 2019 Va. Acts at __ (codified as amended at Va. Code Ann. § 58.1-603.1 (Cum. Supp. 2019)).

      [36].    Id. ch. 550, 2019 Va. Acts at __ (codified as amended at Va. Code Ann. § 58.1-603.2(B)–(C) (Cum. Supp. 2019)).

      [37].    Id. ch. 550, 2019 Va. Acts at __ (codified as amended at Va. Code Ann. § 58.1-604.01 (Cum. Supp. 2019)).

      [38].    Id. ch. 550, 2019 Va. Acts at __ (codified as amended at Va. Code Ann. §§ 58.1-603.1, -603.2, -604.01, -611.1 (Cum. Supp. 2019)).

      [39].    Dep’t  of  Taxation,  2019 Fiscal Impact Statement, S.B. 1715, at 2, http://lis. virginia.gov/cgi-bin/legp604.exe?191+oth+SB1715FER161+PDF [https://perma.cc/24RD- 6ZWH].

      [40].    Va. Code Ann. § 58.1-626 (Repl. Vol. 2017).

      [41].    Id. § 58.1-626(i)–(ii) (Repl. Vol. 2017).

      [42].    Act of Mar. 21, 2019, ch. 758, 2019 Va. Acts __, __ (codified at Va. Code Ann. § 58.1-626.1 (Cum. Supp. 2019)).

      [43].    Va. Code Ann. § 58.1-612(B) (Cum. Supp. 2019).

      [44].    Ch. 758, 2019 Va. Acts at __ (codified as amended at Va. Code Ann. § 58.1-626.1(A) (Cum. Supp. 2019)).

      [45].    Id. ch. 758, 2019 Va. Acts at __ (codified as amended at Va. Code Ann. § 58.1-626.1(C) (Cum. Supp. 2019)).

      [46].    Id. ch. 758, 2019 Va. Acts at __ (codified as amended at Va. Code Ann. § 58.1-626.1(B) (Cum. Supp. 2019)).

      [47].    Va. Code Ann. § 58.1-609.11(A)–(C) (Repl. Vol. 2017).

      [48].    Act of Feb. 15, 2019, ch. 20, 2019 Va. Acts __, __ (codified as amended at Va. Code Ann. § 58.1-609.11(A) (Cum. Supp. 2019)).

      [49].    Id. ch. 20, 2019 Va. Acts at __ (codified as amended at Va. Code Ann. § 58.1-609.11(A)–(B), (C)(1)(ii), (D)–(G) (Cum. Supp. 2019)).

      [50].    See Tax Cuts and Jobs Act, Pub. L. No. 115-97, 131 Stat. 2054 (2017) (codified at 26 U.S.C. §§ 59(A), 1400(Z)(1–2)).

      [51].    Act of Feb. 15, 2019 ch. 18, 2019 Va. Acts at __ (codified as amended at Va. Code Ann. §§ 58.1-301, -322.03, -402 (Cum. Supp. 2019)).

      [52].    See Va. Code Ann. § 58.1-301(B)(6) (Cum. Supp. 2018).

      [53].    See Bipartisan Budget Act of 2018, Pub. L. No. 115-123, 132 Stat. 64 (2018).

      [54].    Ch. 18, 2019 Va. Acts at __ (codified as amended at Va. Code Ann. §§ 58.1-322.03(15), -402(A), (G) (Cum. Supp. 2019)).

      [55].    Id. ch. 18, 2019 Va. Acts at __ (codified as amended at Va. Code Ann. § 58.1-402(C)(7) (Cum. Supp. 2019)).

      [56].    Va. Code Ann. § 58.1-301(B)(1) (Repl. Vol. 2017).

      [57].    Id. § 58.1-301(B)(2) (Repl. Vol. 2017).

      [58].    Id. § 58.1-301(B)(3) (Repl. Vol. 2017).

      [59].       Id. § 58.1-301(B)(4) (Repl. Vol. 2017).

      [60].    Ch. 18, 2019 Va. Acts at __.

      [61].    Id. ch. 18, 2019 Va. Acts at __.

      [62].    Id. ch. 18, 2019 Va. Acts at __.

      [63].    Id. ch. 18, 2019 Va. Acts at __ (codified as amended at Va. Code Ann. §§ 58.1-301(B)(5), -322.03(16) (Cum. Supp. 2019)).

      [64].    Id. ch. 18, 2019 Va. Acts at __ (codified as amended at Va. Code Ann. § 58.1-322.03(1)(b)(ii) (Cum. Supp. 2019)).

      [65].    Dep’t of Taxation, 2019 Fiscal Impact Statement, S.B. 1372, at 4, http://lis. virginia.gov/cgi-bin/legp604.exe?191+oth+SB1372FER161+PDF [https://perma.cc/4RHG-PP7A].

      [66].    Va. Code Ann. § 58.1-302 (Repl. Vol. 2017).

      [67].    Id. § 58.1-361 (Repl. Vol. 2017).

      [68].    Id. § 58.1-362 (Repl. Vol. 2017).

      [69].    See 23 Va. Admin. Code § 10-115-10 (2017).

      [70].    Act of Feb. 15, 2019, ch. 23, 2019 Va. Acts __, __ (codified as amended at Va. Code Ann. § 58.1-302 (Cum. Supp. 2019)).

      [71].    See N.C. Dep’t of Revenue v. The Kimberley Rice Kaestner 1992 Family Trust, 814 S.E.2d 43 (N.C. 2017), cert. granted, 139 S. Ct. 915 (Jan. 11, 2019 (No. 18-457)).

      [72].    545 U.S. 469 (2005).

      [73].    See, e.g., Va. Const. art. I, § 11; Va. Code Ann. § 1-219.1(A) (Repl. Vol. 2017).

      [74].    Act of Mar. 8, 2019, ch. 270, 2019 Va. Acts __, __ (codified as amended at Va. Code Ann. §§ 58.1-322.02(29), -402(27) (Cum. Supp. 2019)).

      [75].    Id. ch. 270, 2019 Va. Acts at __ (codified as amended at Va. Code Ann. §§ 58.1-322.02(29), -402(27) (Cum. Supp. 2019)).

      [76].    Act of Apr. 11, 1994, ch. 750, 1994 Va. Acts 1141, 1141 (codified at Va. Code Ann. § 58.1-439 (Cum. Supp. 1994)).

      [77].    Id. ch. 750, 1994 Va. Acts at 1141, 1142–43 (codified at Va. Code Ann. § 58.1-439(C)(1), (E), (K), (N) (Cum. Supp. 1994)).

      [78].    Id. ch. 750, 1994 Va. Acts at 1141 (codified at Va. Code Ann. § 58.1-439(A)(1) (Cum. Supp. 1994)).

      [79].    Dep’t of Taxation, 2019 Fiscal Impact Statement, H.B. 2003, at 2, http://lis. virginia.gov/cgi-bin/legp604.exe?191+oth+HB2003FER161+PDF [https://perma.cc/Y3ZR-ND8P].

      [80].    Act of Mar. 21, 2019, ch. 699, 2019 Va. Acts __, __ (codified as amended at Va. Code Ann. § 58.1-439(A) (Cum. Supp. 2019)).

      [81].    Id. ch. 699, 2019 Va. Acts at __ (codified as amended at Va. Code Ann. § 58.1-439(U)(1)–(4) (Cum. Supp. 2019)).

      [82].    Id. ch. 699, 2019 Va. Acts at __ (codified as amended at Va. Code Ann. § 58.1-439(U) (Cum. Supp. 2019)).

      [83].    Act of Mar. 5, 2019, ch. 189, 2019 Va. Acts __, __ (codified as amended at Va. Code Ann. § 58.1-439.6(B)(1)–(2) (Cum. Supp. 2019)).

      [84].    Id. ch. 189, 2019 Va. Acts at __ (codified as amended at Va. Code Ann. § 58.1-439.6:1 (Cum. Supp. 2019)).

      [85].    Id. ch. 189, 2019 Va. Acts at __ (codified as amended at Va. Code Ann. § 58.1-439.6:1(B)(2) (Cum. Supp. 2019)).

      [86].    See Va. Code Ann. § 58.1-439.6:1(B)(2) (Cum. Supp. 2019)).

      [87].    Ch. 189, 2019 Va. Acts at __ (codified as amended at Va. Code Ann. §§ 58.1-439.6(D)(2), (G)–(H), -439.6:1(D)(2), (G) (Cum. Supp. 2019)).

      [88].    Id. ch. 189, 2019 Va. Acts at __.

      [89].    Id. ch. 189, 2019 Va. Acts at __ (codified as amended at Va. Code Ann. § 58.1-439.6(A), (B)(1) (Cum. Supp. 2019)).

      [90].    Id. ch. 189, 2019 Va. Acts at __.

      [91].    Id. ch. 189, 2019 Va. Acts at __ (codified as amended at Va. Code Ann. § 58.1-439.6:1(B)(1) (Cum. Supp. 2019)).

      [92].    Id. ch. 189, 2019 Va. Acts at __ (codified as amended at Va. Code Ann. § 58.1-439.6:1(A) (Cum. Sup. 2019)).

      [93].    Id. ch. 189, 2019 Va. Acts at __ (codified as amended at Va. Code Ann. § 58.1-439.6:1(D)(1) (Cum. Supp. 2019)).

      [94].    Id. ch. 189,  2019 Va. Acts at __ (codified as amended at Va. Code Ann. §§ 58.1-439.6(B)(1), -439.6:1(B)(1) (Cum. Supp. 2019)).

      [95].    Id. ch. 189, 2019 Va. Acts at __ (codified as amended at Va. Code Ann. § 58.1-439.6:1(A), (B)(1) (Cum. Supp. 2019)). A “workforce credential” is defined as “an industry-recognized (i) certification, (ii) certificate, or (iii) degree.” Id. ch. 189, 2019 Va. Acts at __ (codified as amended at Va. Code Ann. § 58.1-439.6:1(A) (Cum. Supp. 2019)).

      [96].    Id. ch. 189, 2019 Va. Acts at __ (codified as amended at Va. Code Ann. §§ 58.1-439.6(B)(3), -439.6:1(B)(3) (Cum. Supp. 2019)).

      [97].    Va. Code Ann. § 58.1-439.12:10(B)(1) (Repl. Vol. 2017); see id. § 58.1-439.12:10 (C)(1)–(2) (Repl. Vol. 2017).

      [98].    Id. § 58.1-439.12:10(B)(2), (C)(2) (Repl. Vol. 2017).

      [99].    Id. § 58.1-439.12:10(B)(3) (Repl. Vol. 2017).

    [100].    Act of Mar. 21, 2019, ch. 759, 2019 Va. Acts __, __ (codified as amended at Va. Code Ann. § 58.1-439.12:10(D)(1), (3) (Cum. Supp. 2019)).

    [101].    Id. ch. 759, 2019 Va. Acts at __ (codified as amended at Va. Code Ann. § 58.1-439.12:10(D)(2) (Cum. Supp. 2019)).

    [102].    Id.  ch. 759, 2019 Va. Acts at __ (codified as amended at Va. Code Ann. § 58.1-439.12:10(D)(1)–(2) (Cum. Supp. 2019)).

    [103].    Id.  ch. 759, 2019 Va. Acts at __ (codified as amended at Va. Code Ann. § 58.1-439.12:10(D)(1) (Cum. Supp. 2019)).

    [104].    Va. Code Ann. §§ 58.1-439.25, -439.26(A) (Repl. Vol. 2017).

    [105].    Id. § 58.1-439.27 (Repl. Vol. 2017).

    [106].    Id. § 58.1-439.28(C)–(D) (Repl. Vol. 2017).

    [107].    Id. § 58.1-439.28(C)(i) (Repl. Vol. 2017).

    [108].    Apparently unwilling to state the circumstances that would not qualify, being a Virginia resident child who was already attending a nonpublic school, the Virginia General Assembly required that the child be a “resident of Virginia” who

(i) in the current school year has enrolled and attended a public school in the Commonwealth for at least one-half of the year, (ii) for the school year that immediately preceded his receipt of a scholarship foundation scholarship was enrolled and attended a public school in the Commonwealth for at least one-half of the year, (iii) is a prior recipient of a scholarship foundation scholarship, (iv) is eligible to enter kindergarten or first grade, or (v) for the school year that immediately preceded his receipt of a scholarship foundation scholarship was domiciled in a state other than the Commonwealth and did not attend a nonpublic school in the Commonwealth for more than one-half of the school year.

Id. § 58.1-439.25 (Repl. Vol. 2017).

    [109].    Id.

    [110].    Act of Mar. 26, 2019, ch. 808, 2019 Va. Acts __, __ (codified as amended at Va. Code Ann. §§ 58.1-439.25, -439.28 (Cum. Supp. 2019)).

    [111].    Id. ch. 808, 2019 Va. Acts at __ (codified as amended at Va. Code Ann. § 58.1-439.25 (Cum. Supp. 2019)).

    [112].    Va. Code Ann. § 58.1-439.28(E) (Repl. Vol. 2017).

    [113].    Ch. 808, 2019 Va. Acts at __ (codified as amended at Va. Code Ann. § 58.1-439.28(E)(2)(a)(i)–(ii) (Cum. Supp. 2019)).

    [114].    Id. ch. 808, 2019 Va. Acts at __ (codified as amended at Va. Code Ann. § 58.1-439.28(E)(2)(b)(i)–(iv) (Cum. Supp. 2019)).

    [115].    Id. ch. 808, 2019 Va. Acts at __ (codified as amended at Va. Code Ann. § 58.1-439.28(C)(i) (Cum. Supp. 2019)).

    [116].    Va. Code Ann. § 58.1-439.26(B)(1) (Repl. Vol. 2017).

    [117].    Dep’t of Planning and Budget, 2019 Fiscal Impact Statement, S.B. 1365, at 2 (2019), http://lis.virginia.gov/cgi-bin/legp604.exe?191+oth+SB1365FER122+PDF [https:// perma.cc/4JFN-3NSW].

    [118].    Act of Mar. 26, 2019, ch. 817, 2019 Va. Acts __, __ (codified as amended at Va. Code Ann. § 58.1-439.28(C)(i), (D)(1)(iv)(b) (Cum. Supp. 2019)).

    [119].    Id. ch. 817, 2019 Va. Acts at __ (codified as amended at Va. Code Ann. § 58.1-439.25 (Cum. Supp. 2019)).

    [120].    Id. ch. 817, 2019 Va. Acts at __.

    [121].    Id. ch. 817, 2019 Va. Acts at __ (codified as amended at Va. Code Ann. § 58.1-439.28(D)(2) (Cum. Supp. 2019)).

    [122].    Id. ch. 817, 2019 Va. Acts at __ (codified as amended at Va. Code Ann. § 58.1-439.28(E)(2) (Cum. Supp. 2019)).

    [123].    Va. Code Ann. § 58.1-439.28(A) (Repl. Vol. 2017).

    [124].    Ch. 817, 2019 Va. Acts at __ (codified as amended at Va. Code Ann. § 58.1-439.28(A) (Cum. Supp. 2019)).

    [125].    Va. Code Ann. § 58.1-339.2(A), (C)(1), (D) (Cum. Supp. 2019).

    [126].    Dep’t of Taxation, 2019 Fiscal Impact Statement, H.B. 2705, at 2, http://lis. virginia.gov/cgi-bin/legp604.exe?191+oth+HB2705FER161+PDF [https://perma.cc/4LR8-G 62P].

    [127].    Act of Mar. 24, 2017, ch. 721, 2017 Va. Acts 1273, 1273 (codified as amended at Va. Code Ann. § 58.1-339.2(C)(2) (Repl. Vol. 2017)).

    [128].    Act of Feb. 15, 2019, ch. 25, 2019 Va. Acts __, __ (codified as amended at Va. Code Ann. § 58.1-339.2(C)(2) (Cum. Supp. 2019)).

    [129].    Va. Code Ann. § 58.1-512(A) (Repl. Vol. 2017).

    [130].       Id. § 58.1-512(A) (Repl. Vol. 2017).

    [131].    Id. § 58.1-512(B), (C)(2) (Repl. Vol. 2017).

    [132].    Id. § 58.1-512(A) (Repl. Vol. 2017); see id. § 58.1-511 (Repl. Vol. 2017) (defining “Public or Private Conservation Agency”).

    [133].    Id. § 58.1-512(C)(4) (Repl. Vol. 2017).

    [134].    Act of Mar. 19, 2019, ch. 649, 2019 Va. Acts __, __ (codified as amended at Va. Code Ann. § 58.1-512 (Cum. Supp. 2019)).

    [135].    Id. ch. 649, 2019 Va. Acts at __ (codified as amended at Va. Code Ann. § 58.1-512(A)(2) (Cum. Supp. 2019)).

    [136].    Va. Code Ann. § 58.1-512(D)(4)(a) (Repl. Vol. 2017).

    [137].    See id. § 58.1-512(D)(1)–(2) (Repl. Vol. 2017).

    [138].    See Act of Mar. 5, 2019, ch. 183, 2019 Va. Acts __, __ (codified as amended at Va. Code Ann. § 58.1-512 (Cum. Supp. 2019)).

    [139].    Id. ch. 183, 2019 Va. Acts at __ (codified as amended at Va. Code Ann. § 58.1-512(D)(4)(a)(i) (Cum. Supp. 2019)).

    [140].    Id. ch. 183, 2019 Va. Acts at __ (codified as amended at Va. Code Ann. § 58.1-512(D)(4)(a)(ii) (Cum. Supp. 2019)).

    [141].    Va. Code Ann. § 58.1-801(A) (Repl. Vol. 2017).

    [142].    Id. §§ 58.1-803(A), -804(B) (Repl. Vol. 2017).

    [143].    Id. § 58.1-807(A) (Repl. Vol. 2017).

    [144].    See id. § 58.1-811(A)–(C) (Repl. Vol. 2017).

    [145].    Act of Mar. 19, 2019, ch. 757, 2019 Va. Acts __, __ (codified as amended at Va. Code Ann. § 58.1-811 (Cum. Supp. 2019)).

    [146].    See Va. Code Ann. §§ 58.1-800 to -817 (Repl. Vol. 2017).

    [147].    Ch. 757, 2019 Va. Acts at __ (codified as amended at Va. Code Ann. § 58.1-811(K) (Cum. Supp. 2019)).

    [148].    Id. ch. 757, 2019 Va. Acts at __ (citations omitted).

    [149].    Va. Code Ann. § 58.1-322.02(18) (Cum. Supp. 2019).

    [150].    See Living Recipients, Congr. Medal of Honor Soc’y, https://www.cmohs.org/liv ing-recipients.php [https://perma.cc/CT9F-CV9R].

    [151].    H.J. Res. 674, Va. Gen. Assembly (Reg. Sess. 2019).

    [152].    2019 Session: House Joint Resolution No. 674, History, Legis. Info. Servs., https: //lis.virginia.gov/cgi-bin/legp604.exe?191+sum+HJ674 [https://perma.cc/RD28-D3ML].

    [153].    H.J. Res. 674.

    [154].    Id.

    [155].    See Corp. Exec. Bd. Co. v. Va. Dep’t of Taxation (CEB), 297 Va. 57, 822 S.E.2d 918 (2019).

    [156].    See Va. Code Ann. §§ 58.1-406 to -420 (Repl. Vol. 2017).

    [157].    CEB, 297 Va. at 63, 822 S.E.2d at 920.

    [158].    Id. at 63, 822 S.E.2d at 920.

    [159].    Id. at 63, 822 S.E.2d at 920.

    [160].    Id. at 63, 822 S.E.2d at 920.

    [161].    Id. at 63, 822 S.E.2d at 920. For a complete description of the facts and analysis set out in the Arlington County Circuit Court’s decision, see Craig D. Bell & Michael H. Brady, Annual Survey of Virginia Law: Taxation, 53 U. Rich. L. Rev. 135, 154–57 (2018) (discussing the trial court’s decision).

    [162].    CEB, 297 Va. at 63, 822 S.E.2d at 920.

    [163].    Id. at 64, 822 S.E.2d at 920.

    [164].    Id. at 64, 822 S.E.2d at 920.

    [165].    Id. at 65, 822 S.E.2d at 921.

    [166].    Id. at 65, 822 S.E.2d at 921.

    [167].    Brief of Appellant at 9, CEB, 297 Va. 57, 822 S.E.2d 918 (2019) (No. CL16-1525).

    [168].    CEB, 297 Va. at 68, 822 S.E.2d at 923.

    [169].    Id. at 69, 822 S.E.2d at 923.

    [170].    Va. Code Ann. § 58.1-416(A)(2) (Cum. Supp. 2019).

    [171].    Brief of Appellant, supra note 168, at 8.

    [172].    Id.

    [173].    CEB, 297 Va. at 69, 822 S.E.2d at 923.

    [174].    Id. at 68, 822 S.E.2d at 923 (citing Va. Code Ann. § 58.1-421 (Repl. Vol. 2017)).

    [175].    Brief of Appellant, supra note 168, at 13.

    [176].    CEB, 297 Va. at 67, 822 S.E.2d at 922.

    [177].    Id. at 68, 822  S.E.2d at 922.

    [178].    Id. at 68, 822  S.E.2d at 923.

    [179].    Id. at 68, 822 S.E.2d at 923.

    [180].    Id. at 69–70, 822 S.E.2d. at 923–24.

    [181].    Id. at 72–73, 822 S.E.2d. at 925–26.

    [182].    Id. at 71, 822 S.E.2d. at 924 (citing 430 U.S. 274, 279 (1977)).

    [183].    Id. at 71, 822 S.E.2d. at 925 (citing 463 U.S. 159, 169 (1982)).

    [184].    Id. at 73, 822 S.E.2d at 926 (quoting Comptroller of the Treasury v. Wynne, 135 S. Ct. 1787, 1813 (2015) (Ginsburg, J., dissenting)).

    [185].    Id. at 73, 822 S.E.2d at 926.

    [186].    Id. at 73, 822 S.E.2d at 926.

    [187].    Id. at 73–74, 822 S.E.2d at 926 (quoting Okla. Tax Comm’n v. Jefferson Lines, Inc., 514 U.S. 185 (1995)).

    [188].    Id. at 75–76, 822 S.E.2d at 927–28.

    [189].    Id. at 76, 822 S.E.2d at 926–27 (quoting Nielsen Co. (US), LLC v. Cty. Bd., 289 Va. 79, 94 (2015)).

    [190].    Id. at 81, 822 S.E.2d at 930.

    [191].    Va. Const. art. X, § 2 (“The General Assembly may define and classify real estate devoted to agricultural, horticultural, forest, or open space uses, and may by general law authorize any county, city, town, or regional government to allow deferral of, or relief from, portions of taxes otherwise payable on such real estate if it were not so classified, provided the General Assembly shall first determine that classification of such real estate for such purpose is in the public interest for the preservation or conservation of real estate for such uses. In the event the General Assembly defines and classifies real estate for such purposes, it shall prescribe the limits, conditions, and extent of such deferral or relief. No such deferral or relief shall be granted within the territorial limits of any county, city, town, or regional government except by ordinance adopted by the governing body thereof.”).

    [192].    Va. Code Ann. § 58.1-3230 (Repl. Vol. 2017).

    [193].    Id. § 58.1-3231 (Repl. Vol. 2017).

    [194].    Id. § 58.1-3236(A) (Repl. Vol. 2017).

    [195].    Id. § 58.1-3236(D) (Repl. Vol. 2017).

    [196].    See Dep’t of Taxation, 2019 Fiscal Impact Statement, H.B. 2365, at 2, http:// lis.virginia.gov/cgi-bin/legp604.exe?191+oth+HB2365FER161+PDF [https://perma.cc/L894-QF97].

    [197].    Act of Feb. 15, 2019, ch. 22, 2019 Va. Acts __, __ (codified as amended at Va. Code Ann. § 58.1-3231 (Cum. Supp. 2019)).

    [198].    Id. ch. 22, 2019 Va. Acts at __.

    [199].    Va. Const. art. X, § 6(b).

    [200].    Id.

    [201].    Va. Code Ann. § 58.1-3210(A) (Repl. Vol. 2017); id. § 58.1-3212 (Repl. Vol. 2017).

    [202].    Act of Mar. 21, 2019, ch. 736, 2019 Va. Acts __, __ (codified as amended at Va. Code Ann. § 58.1-3210(C) (Cum. Supp. 2019)).

    [203].    Id. ch. 736, 2019 Va. Acts at __.

    [204].    Va. Const. art. X, § 6(b); Va. Code Ann. § 58.1-3212 (Repl. Vol. 2017).

    [205].    Va. Code Ann. § 58.1-3212 (Repl. Vol. 2017).

    [206].    Act of Feb. 15, 2019, ch. 16, 2019 Va. Acts __, __ (codified as amended at Va. Code Ann. § 58.1-3212 (Cum. Supp. 2019)).

    [207].    Va. Const. art. X, § 6-A(a).

    [208].    Id.

    [209].    Id. art. X, § 6-A(b).

    [210].    Id. art. X, § 6-B.

    [211].    Id. art. X, § 6-A(a).

    [212].    Act of Feb. 15, 2019, ch. 15, 2019 Va. Acts __, __ (codified as amended at Va. Code Ann. § 58.1-3219.5(B) (Cum. Supp. 2019)).

    [213].    Id. ch. 15, 2019 Va. Acts at __ (codified as amended at Va. Code Ann. §§ 58.1-3219.9(C), -3219.14(C) (Cum. Supp. 2019)).

    [214].    Va. Const. art. X, § 6-B.

    [215].    Ch. 15, 2019 Va. Acts at __ (codified as amended at Va. Code Ann. § 58.1-3219.9 (Cum. Supp. 2019)).

    [216].    Id. ch. 15, 2019 Va. Acts at __.

    [217].    Va. Const. art. X, § 6(d).

    [218].    Va. Code Ann. § 58.1-3660(A)–(B) (Repl. Vol. 2017).

    [219].    Id. § 58.1-3660(B) (Repl. Vol. 2017).

    [220].    Act of Mar. 18, 2019, ch. 441, 2019 Va. Acts __, __ (codified as amended at Va. Code Ann. § 58.1-3660(B) (Cum. Supp. 2019)).

    [221].    Id. ch. 441, 2019 Va. Acts at __.

    [222].    Id. ch. 441, 2019 Va. Acts at __ (codified as amended at Va. Code Ann. § 58.1-3660 (Cum. Supp. 2019)).

    [223].    Va. Const. art. X, § 6(k) (2019).

    [224].    Act of Mar. 21, 2019, ch. 754, 2019 Va. Acts __, __ (codified at Va. Code Ann. § 58.1-3228.1(B) (Cum. Supp. 2019)).

    [225].    Id. ch. 754, 2019 Va. Acts at __ (codified at Va. Code Ann. § 58.1-3228.1(A) (Cum. Supp. 2019)).

    [226].    Id. ch. 754, 2019 Va. Acts at __.

    [227].    Id. ch. 754, 2019 Va. Acts at __ (codified at Va. Code Ann. § 58.1-3228.1(B) (Cum. Supp. 2019)).

    [228].    Id. ch. 754, 2019 Va. Acts at __ (codified at Va. Code Ann. § 58.1-3228.1(C) (Cum. Supp. 2019)).

    [229].    Va. Code Ann. § 58.1-3965(A) (Repl. Vol. 2017).

    [230].    Id. § 58.1-3970.1(A) (Repl. Vol. 2017).

    [231].    Id. § 58.1-3970.1(A)(i)–(iii) (Repl. Vol. 2017).

    [232].    Id. § 58.1-3970.1(B) (Repl. Vol. 2017).

    [233].    Id. § 58.1-3970.1(B)(i) (Repl. Vol. 2017).

    [234].    Id. § 58.1-3970.1(B)(ii) (Repl. Vol. 2017).

    [235].    Id.

    [236].    Act of Apr. 3, 2014, ch. 519, 2014 Va. Acts 858, 858 (codified as amended at Va. Code Ann. § 58.1-3970.1(B)(ii) (Repl. Vol. 2017)).

    [237].    Act of Apr. 15, 2004, ch. 968, 2004 Va. Acts 1895, 1896 (codified as amended at Va. Code Ann. § 58.1-3970.1 (Cum. Supp. 2004)).

    [238].    Act of Mar. 18, 2019, ch. 541, 2019 Va. Acts __, __ (codified as amended at Va. Code Ann. § 58.1-3970.1(A)(i), (B)(ii) (Cum. Supp. 2019)).

    [239].    Act of Feb. 27, 2019, ch. 159, 2019 Va. Acts __, __ (codified as amended at Va. Code Ann. § 58.1-3970.1(B) (Cum. Supp. 2019)).

    [240].    Va. Code Ann. § 58.1-3934(A)–(B) (Repl. Vol. 2017).

    [241].    Id. § 58.1-3919.1 (Repl. Vol. 2017).

    [242].    Act of Mar. 8, 2019, ch. 271, 2019 Va. Acts __, __ (codified as amended at Va. Code Ann. § 58.1-3919.1 (Cum. Supp. 2019)).

    [243].    Va. Code Ann. § 58.1-3713(A) (Repl. Vol. 2017); see id. § 58.1-3712(A) (Repl. Vol. 2017).

    [244].    Id. § 58.1-3713(A) (Repl. Vol. 2017).

    [245].    Id.

    [246].    See Dep’t of Taxation, 2019 Fiscal Impact Statement, H.B. 2555, at 1, http:// lis.virginia.gov/cgi-bin/legp604.exe?191+oth+HB2555FER161+PDFhttps://perma.cc/ZQP 5-N24V] (listing the City of Norton and the Counties of Buchanan, Dickenson, Lee, Russell, Scott, Tazewell, and Wise as those who impose the tax); see also Va. Code Ann. § 15.2-6002 (Repl. Vol. 2017) (listing these localities).

    [247].    Act of Feb. 15, 2019, ch. 24, 2019 Va. Acts __, __ (codified as amended at Va. Code Ann. § 58.1-3713(C) (Cum. Supp. 2019)).

    [248].    Va. Code Ann. §§ 58.1-3703(A), -3708 (Repl. Vol. 2017).

    [249].    Va. Code Ann. §§ 58.1-3700, -3708(A)–(B) (Repl. Vol. 2017).

    [250].    Act of Mar. 22, 2019, ch. 791, 2019 Va. Acts __, __ (codified at Va. Code Ann. § 58.1-3715.1 (Cum. Supp. 2019)).

    [251].    Id. ch. 791, 2019 Va. Acts at __ (codified at Va. Code Ann. § 58.1-3715.1(A) (Cum. Supp. 2019)).

    [252].    Id. ch. 791, 2019 Va. Acts at __ (codified at Va. Code Ann. § 58.1-3715.1(A)–(B) (Cum. Supp. 2019)).

    [253].    Id. ch. 791, 2019 Va. Acts at __ (codified at Va. Code Ann. § 58.1-3715.1(B) (Cum. Supp. 2019)).

    [254].    Id. ch. 791, 2019 Va. Acts at __ (codified at Va. Code Ann. § 58.1-3715.1(B)–(C) (Cum. Supp. 2019)).

    [255].    Va. Code Ann. § 58.1-3507(A) (Repl. Vol. 2017).

    [256].    Id. § 58.1-3507(A) (Repl. Vol. 2017).

    [257].    Act of Mar. 29, 1980, ch. 412, 1980 Va. Acts 478, 479 (codified as amended at Va. Code Ann. § 58-829.7 (Cum. Supp. 2019)).

    [258].    It has, however, been the subject of a recent advisory opinion by Virginia’s Office of the Attorney General, exercising the authority granted by Virginia Code section 2.2-505(A). See 2014 Va. Att’y Gen. Op. 103, 105 (June 26, 2014).

    [259].    H.B. 2640, Va. Gen. Assembly (Reg. Sess. 2019) (proposing to codify this amendment at Va. Code Ann. § 58.1-3507(D)(1)).

    [260].    Id.

    [261].    Id. (proposing to codify this amendment at Va. Code Ann. § 58.1-3507(D)(2)).

    [262].    Id.

    [263].    2019 Session: House Bill No. 2640, History, Legis. Info. Servs., https://lis.virgini a.gov/cgi-bin/legp604.exe?191+sum+HJ674 [https://perma.cc/RD28-D3ML].

    [264].    Kingstowne M&N LP v. Fairfax County, No. CL2017-12241 at 2 (2018) (Fairfax County) (letter opinion).

    [265].    Id. at 1.

    [266].    Id.

    [267].    Id.

    [268].    Id.

    [269].    Id.

    [270].    Id.

    [271].    Id.

    [272].    Id.

    [273].    Id. at 4–5.

    [274].    Id. at 2.

    [275].    Id.

    [276].    276 Va. 393, 665 S.E.2d 834 (2008).

    [277].    Kingstowne, at 2 (internal quotation marks omitted).

    [278].    Id. (internal quotation marks omitted).

    [279].    92 Va. Cir. 96 (2015) (Augusta County).

    [280].    Kingstowne, at 3 (citing Staunton Mall, 92 Va. Cir. at 105–06). For a well-reasoned opinion regarding the requirements to successfully challenge a real property tax assessment under Virginia Code section 58.1-3984(B) after the 2012 legislation amending this statute, see Hershey Chocolate of Va., Inc. v. Cty. of Augusta, CL140 02172-00, 2018 Va. Cir. LEXIS 722 (2018) (Augusta County).

    [281].    Kingstowne, at 3.

    [282].    Id. (citing  Va. Const. art. X, § 2).

    [283].    Id.

    [284].    Id.

    [285].    Id.

    [286].    Id. at 4.

    [287].    Id.

    [288].    Id. at 5.

    [289].    Id.

    [290].    Army Navy Country Club v. City of Fairfax, 99 Va. Cir. 232, 233, 237–38 (2018) (Fairfax County).

    [291].    Id. at 232.

    [292].    Id. at 233.

    [293].    Id.

    [294].    Id.

    [295].    Id. at 235.

    [296].    Id. at 233.

    [297].    Id.

    [298].    Id. at 237–38.

    [299].    Id. at 238.

    [300].    Id.

    [301].    Id.

    [302].    Id.

    [303].    Id.

    [304].    Id.

    [305].    Id.

    [306].    Id.; see Army-Navy Country Club v. City of Fairfax, 86 Va. Cir. 1 (2012) (Fairfax County).

    [307].    Id. at 240.

    [308].    See Jewell Smokeless Coal Corp. v. Cty. of Buchanan, No. CL 16-578 (2018) (Buchanan County) (letter opinion).

    [309].    Id. at 1–2.

    [310].    Id. at 3.

    [311].    Id.

    [312].    Id.

    [313].    Id. at 4.

    [314].    Id. at 3–4.

    [315].    Id. at 4.

    [316].    Id.

    [317].    Id.

    [318].    Id. at 4–5.

    [319].    Id. at 5.

    [320].    Id.

    [321].    Id. at 4.

    [322].    Id. at 7.

    [323].    Id. at 6.

    [324].    Id.

    [325].    Id. at 4–6.

    [326].    Id. at 7.

    [327].    Id. at 12.

    [328].    Id. at 9.

    [329].    Id.

    [330].    Id.

    [331].    Id.

    [332].    Id.

    [333].    Id. at 10.

    [334].    Id. at 11–12.

    [335].    Id. at 12.

    [336].    Id. at 12–13.

    [337].    Id.

 


* Partner, McGuireWoods LLP, Richmond, Virginia. LL.M., 1986, Marshall-Wythe School of Law, College of William & Mary; J.D., 1983, State University of New York at Buffalo; M.B.A., 1980, Syracuse University; B.S., 1979, Syracuse University.

Mr. Bell is a past chair of McGuireWoods’s Tax and Employee Benefits Department and practices primarily in the areas of state and local taxation, and civil and criminal tax litigation. He is a Fellow of the American College of Tax Counsel, a Fellow of the Virginia Law Foundation, a Fellow of the American Bar Foundation, a Master of the J. Edgar Murdock Inn of Court (United States Tax Court), an adjunct professor of tax law at the College of William & Mary’s Marshall-Wythe School of Law, and a past chair of both the Tax and Military Law sections of the Virginia State Bar and of the Tax Section of the Virginia Bar Association. Mr. Bell is an emeritus director of the Community Tax Law Project, a nonprofit pro bono provider of tax law services for the working poor, and is its recipient of the Lifetime Pro Bono Achievement Award for his pro bono work in representing hundreds of Virginians before the IRS, in United States Tax Court, and in federal district court, as well as developing and training many lawyers in the area of federal tax law to expand pro bono tax representation for low-income taxpayers.

** Counsel, McGuireWoods LLP, Richmond, Virginia. J.D., 2009, The University of Texas School of Law; B.S., 2006, Liberty University. Following law school, Mr. Brady clerked for Chief Justice Cynthia D. Kinser of the Supreme Court of Virginia from 2009 to 2011. He then served as the assistant solicitor general in the Office of the Attorney General of Virginia from 2011 to 2014, joining McGuireWoods LLP in 2014.

Wills, Trusts, and Estates

Wills, Trusts, and Estates

J. William Gray Jr. & Katherine E. Ramsey, Annual Survey of Virginia Law Wills, Trusts and Estates, 54 U. Rich. L. Rev. 183 (2019).

Click here to download PDF.


J. William Gray, Jr. *

Katherine E. Ramsey **

Introduction

The 2019 Virginia General Assembly did not enact any major new legislation, but it did pass several significant amendments.[1] Among the most useful was an amendment to the Virginia Uniform Transfers to Minors Act which extended the maximum age for custodianships from twenty-one to twenty-five. The legislature also decided to cease imposing income taxes on estates and trusts whose sole connection to the Commonwealth is that they are being administered here. It responded to two recent court cases involving the required execution formalities for leases and the right to award attorneys’ fees in actions involving an agent’s breach of fiduciary duty under a power of attorney. Among other legislative actions, the General Assembly modernized the recordation tax exemption for certain deeds of distribution; dealt with issues affecting Virginia’s small estate, wrongful death, and property tax exemption statutes; made it easier for financial institutions to combat financial exploitation of the elderly; strengthened the enforcement of reporting requirements for guardians; and protected circuit court clerks who disclose probate tax return information to the commissioner of accounts or who destroy wills they have been holding for 100 years or more.

For its part, the Supreme Court of Virginia handed down six decisions addressing the presumption of undue influence, the attestation requirements and principles of construction applicable to wills, the legal effect of naming an estate or trust (rather than the fiduciary) as the sole party to a suit, the application of Virginia’s long-arm statute in an elder abuse case, and the legal requirements for execution of a lease with a term of five years or more.

  1. Legislation

 A. “Age 25” UTMA Custodianships

Donors who wish to make gifts to minors often use the Virginia Uniform Transfers to Minors Act (“UTMA”).[2] UTMA assets generally must be distributed to the minor beneficiary at age eighteen,[3] but the donor may delay the required distribution until the beneficiary’s twenty-first birthday simply by adding “(21)” to the title when transferring the assets to the UTMA custodian.[4]The holder of a power of appointment may exercise it in favor of a minor in the same manner,[5] as may an executor or a trustee if the will or trust instrument expressly authorizes them to do so.[6]

Attorneys are often asked if there is any way to delay the required distribution until the beneficiary is even older. One answer is to have the custodian use the UTMA assets to create a “qualified minor’s trust” under section 2503(c) of the Internal Revenue Code.[7] The terms of such a trust may extend the vesting age as the custodian thinks best, provided the beneficiary is given at least a one-time limited right of withdrawal at age twenty-one.[8] However, an experienced trusts and estates attorney is needed to draft a qualified minor’s trust, and the trustee must file annual income tax returns.[9] In many cases, these additional costs are prohibitive.

To fill the gap, the General Assembly has chosen to follow the lead of other states that have amended their UTMA statutes to allow transferors to specify a later UTMA age.[10] For custodianships established under Virginia’s UTMA on or after July 1, 2019, the donor may select the beneficiary’s twenty-fifth birthday as the final distribution date rather than eighteen or twenty-one, provided the UTMA account is established before the individual reaches age twenty-one.[11] The restriction is imposed at the time of transfer by including the parenthetical “(25)” after the UTMA reference.[12] As with prior law, a personal representative or trustee may also use the “(25)” designation if authorized by the governing will or trust.[13]

To qualify “UTMA (25)” gifts for the federal gift tax annual exclusion, the minor beneficiary must have a right to withdraw the custodial property, beginning thirty days before his or her twenty-first birthday and ending thirty days after the later of (1) that birthday; or (2) the date on which the custodian gives the beneficiary written notice of the withdrawal right.[14]

 B. Definition of Resident Trust for Income Tax Purposes

Virginia imposes an income tax on all resident estates and trusts.[15] A “resident estate or trust” includes estates of Virginia domiciliaries, as well as testamentary and inter vivos trusts created by, or holding property of, Virginia domiciliaries.[16]However, as of July 1, 2019, the definition no longer includes estates and trusts whose only connection to the Commonwealth is that they are being administered in Virginia.[17] Fiduciaries of estates and trusts affected by this legislative change should consider filing a final part-year state return for 2019.

 C. Effect of Leasehold Conveyance by Non-Deed

In a direct response to the holding in Game Place, L.L.C. v. Fredericksburg 35, LLC,[18] the General Assembly declared that a lease agreement or other writing conveying a nonfreehold interest in land is valid and enforceable even if the conveyance is not in the form of a deed.[19] The rule applies to all such writings in effect as of, or entered into after, February 13, 2019, the day the Governor signed the legislation.[20]

 D. Attorney Fees Under Power of Attorney Act

Another legislative response to a recent court decision may be found in new subsection E to Virginia Code section 64.2-1614. The successful plaintiffs in Mangrum v. Chavis, a breach-of-duty suit against an agent under a durable general power of attorney, were denied recovery of their legal fees from the agent under the Virginia Uniform Power of Attorney Act (“UPOAA”).[21] To avoid this outcome in the future, the new legislation provides that, for proceedings begun on or after July 1, 2019, a court may award costs and expenses, including reasonable attorney fees, “as justice and equity may require” to any party in a case involving the breach of an agent’s fiduciary duty under the UPOAA.[22] It may require those amounts to be paid by a specified party or from the principal’s property.[23]

 E. Recordation Tax on Deeds of Distribution

A long-standing exemption from recordation taxes under Chapter 8 of Virginia Code Title 58.1 applies to “deeds of distribution,” i.e., deeds that transfer property from an estate or trust to the beneficiary or beneficiaries entitled to the property under the terms of the will or trust.[24] The 2019 General Assembly broadened and clarified this exemption for deeds made on or after July 1, 2019.[25]

The amended exemption continues to cover deeds from a decedent’s personal representative to fulfill a devise or bequest and deeds from the trustee of a decedent’s trust to beneficiaries in accordance with trust terms at the decedent’s death.[26] In addition, it also now applies to (1) deeds from trustees under a deed of trust to the original beneficiaries; (2) deeds pursuant to the exerciseof a power of appointment; and (3) deeds pursuant to the exercise of a trustee’s decanting power under the Uniform Trust Decanting Act.[27] To qualify for the exemption, the deed must state on its front page that it is a deed of distribution.[28]

 F. Delivery of Small Asset

In 2013, the Virginia Small Estate Act[29] was amended to permit the designated successor under a small estate affidavit to cash checks and sign over other negotiable instruments that qualify under the statute as small assets.[30] However, many banks and other financial institutions, concerned about their liability under other provisions of the Virginia Code, were reluctant to comply with the designated successor’s request.[31]

To facilitate the use of small estate affidavits, Virginia Code section 64.2-601(E) has been amended to provide that when a designated successor with a proper small estate affidavit endorses or negotiates a check or other negotiable instrument payable to the decedent or his or her estate, the financial institution accepting the instrument will not be subject to liability for the amount accepted, notwithstanding other provisions in the Virginia Code to the contrary.[32]

 G. Entitlement to Damages for Wrongful Death

For causes of action arising on or after July 1, 2019, the preferred class of relatives who may share in damages arising from a decedent’s wrongful death includes the decedent’s parents if the decedent regularly provided them with support or services for living expenses, food, shelter, health care expenses, in-home assistance or care, or other necessaries in the twelve months before his or her death.[33] In all other events, parents remain entitled to a share of an award only if the decedent left no spouse or descendants.[34]

 H. Financial Exploitation of the Elderly

To help combat the financial exploitation of vulnerable adults, the General Assembly has authorized financial institutions to refuse or delay any suspect transactions or disbursement requests.[35] The transaction or disbursement may be refused or delayed for up to thirty business days if the institution’s employee, agent, or other representative believes in good faith that it involves the financial exploitation of an adult or knows that someone has filed a report with the local adult protective services hotline alleging that the transaction involves financial exploitation.[36] The institution and its staff are immune from civil and criminal liability for their actions taken in good faith with respect to the transaction, including making a report to the local department of social services.[37]

The statute defines financial exploitation as “the illegal, unauthorized, improper, or fraudulent use” of an adult’s assets to (1) profit, benefit, or advantage someone else; or (2) deprive the adult of rightful use of or access to the assets.[38] Examples include not only intentional breaches of fiduciary duty, but also intentionally failing to use financial assets for the adult’s benefit; controlling the adult’s property through undue influence, coercion, or duress; and forcing the adult to pay for goods or services for someone else’s benefit.[39]

 I. Abuse or Neglect of Incapacitated Adults

It is a crime for a person who has been given, or who has voluntarily taken, responsibility for the care, custody, or control of an incapacitated individual to abuse or neglect him or her.[40] Exemptions exist for those who act with the individual’s informed consent, pursuant to a financial or healthcare power of attorney, or in accordance with his or her religious beliefs.[41] The Virginia legislature confirmed in 2019 that these exemptions apply only if the informed consent was given, the power of attorney was made, or the religious beliefs were made known while the individual was not incapacitated.[42]

 J. Annual Report of Guardian

A guardian of an incapacitated individual must file an annual report with the local department of social services regarding the individual’s situation, including his or her mental, physical, and social condition; living arrangements; and services received.[43]A 2019 amendment authorizes the circuit court, upon notice from the local social services department that the guardian has failed to file the required report, to issue a summons or rule to show cause to the guardian.[44]

 K. Disclosure of Probate Tax Return Information

Virginia Code section 58.1-3 has been amended to confirm that the circuit court clerk may provide the commissioner of accounts with information from an estate’s probate tax return without violating Virginia’s laws governing confidentiality of personal tax information.[45]

 L. Wills Lodged for Safekeeping

Although few circuit court clerks still accept wills for safekeeping, those that do, and those that have accepted them in the past, are now free to destroy any will that has been lodged with them for 100 years or more.[46]

 M. Property Tax Exemptions

The General Assembly passed two separate bills in 2019 that addressed real property tax exemption issues:

  1. An improvement made to the otherwise exempt dwelling of an elderly or disabled owner will also be exempt if it is not used principally for business purposes and if it houses or covers a motor vehicle or household goods;[47] and
  2. The property tax exemptions for surviving spouses of disabled veterans, spouses of armed forces members killed in action, and spouses of law enforcement agents killed in the line of duty have been expanded.[48] For tax years beginning on or after January 1, 2019, a spouse who was previously eligible for this exemption will not lose it by moving to a new principal residence.[49] If a surviving spouse of a disabled veteran lost eligibility for the exemption before 2019 as the result of a move, it may be reclaimed now, but there appears to be no comparable provision for the spouse of an armed forces member or law enforcement agent killed in the line of duty.[50]

 II. Cases

 A. Effect of Presumption of Undue Influence in Procuring a Will

Parson v. Miller reexamined the evidence needed to raise a presumption of undue influence in a will contest and the effects of that presumption, once raised.[51] The case involved an elderly testator who had previously declared on several occasions that he intended to leave his property to his daughter, Miller.[52] However, one week before his death, he executed a will that instead left his entire estate to his caregiver, niece, and neighbor, Parson.[53] After the document was admitted to probate, Miller sought to impeach it, alleging that her father was unduly influenced by Parson.[54]

In addition to her father’s previous declarations, Miller presented evidence that he was in declining health and that Parson cared for him in his home and in the hospital and procured the will kit he used to name her as his sole beneficiary.[55] Miller was not able to cite any specific action Parson might have taken to influence her father.[56] Nevertheless, Miller argued that she should prevail in her claim due to the presumption of undue influence if Parson could not prove she did not unduly influence the testator.[57]

Several witnesses for Parson testified to the testator’s strong cognitive abilities and independence in the final weeks before his death and his concern about what Miller would likely do with his property.[58] They denied ever seeing Parson try to control him or limit others’ access to him.[59] Parson and others also testified that the testator initiated and arranged for his new will himself and that Parson was not present when it was prepared and signed.[60]

At trial, the court instructed the jury that Miller was entitled to a presumption of undue influence because she showed that her father was old, that he named a beneficiary on whom he was dependent, and that he had previously expressed an intention to make a contrary disposition.[61] The court denied Parson’s motion to strike the evidence.[62] After the jury found in Miller’s favor, the judge refused to set the verdict aside.[63]

On appeal, the Supreme Court of Virginia reiterated the rule that a party successfully raises a presumption of undue influence in the procurement of a will by showing that “(1) the testator was old when his will was established; (2) he named a beneficiary who stood in a relationship of confidence or dependence; and (3) he previously had expressed an intention to make a contrary disposition of his property.”[64] The court also reiterated that the presumption shifts only the burden of producing contrary evidence to the opposing party, and that once sufficient evidence had been produced to rebut the presumption, it disappears entirely.[65] The burden of proving undue influence by clear and convincing evidence always remains with the plaintiff.[66]

Since Parson produced evidence of the testator’s independence to rebut the presumption, the supreme court ruled that the trial court erred by instructing the jury as to the presumption.[67] It also found that the lower court erred when it did not grant Parson’s motions to strike or set aside the verdict.[68] Because Miller had produced no evidence that her father’s free will was actually overborne, the court reversed the trial court’s judgment.[69]

 B. Probate of Attested Will

The defendant in Canody v. Hamblin presented for probate as her father’s will three computer-generated pages of the same font and font size, without page numbers, and with no paragraphs split between pages, but with staple holes that lined up.[70] The document was signed by the testator and two witnesses and was notarized.[71] If established as a valid will, it would have effectively disinherited the testator’s other children, including his son, the plaintiff.[72]

Testimony from one witness and the notary established that the testator had properly executed the document as his will, but neither could testify as to the actual contents of the first two pages.[73] The son contended those pages might have been substituted after execution, and therefore argued the circuit court should have required the defendant to prove their authenticity as well.[74] He also argued that the testimony of one of the testator’s close friends, who said the testator had described to him an estate plan that mirrored the provisions in the document, should not have been considered for purposes of establishing the testamentary nature of the document.[75] Nevertheless, the circuit court directed the document to be admitted to probate as the decedent’s last will.[76]

In considering the son’s appeal, the supreme court confirmed that a document submitted for probate must show indicators of testamentary intent on its face, as the document at issue did.[77] Where its genuineness is questioned, however, extrinsic evidence is admissible to establish the testator’s state of mind and to show whether his plan and intent were consistent with its terms.[78]Therefore, the trial court properly considered the friend’s testimony to find that the first two pages were part of the original will.[79]

The supreme court also rejected the son’s contention that his sister should be required to authenticate all three pages of the will because modern computers make forgery easy.[80] It noted that compliance with the statutory requirements for will execution has always been sufficient to create a presumption of a valid will and thereby to shift the burden of proving fraud onto the challenger.[81] The court found the possibility of fraud insufficient to justify the adoption of a “novel and more rigorous standard,” which would make it harder for property owners to devise their estates by means of wills.[82] Because the son did not provide any evidence of actual fraud, the court affirmed the decision to admit the document to probate as the testator’s will. [83]

 C. Interpretation of Will Residuary Clause

Feeney v. Feeney considered whether language in the residuary clause of a will was precatory or whether it limited the surviving spouse’s interest to a life estate.[84] The will left the testator’s residuary estate to his wife,[85] but it went on to describe the testator’s intentions regarding his wife’s use and ultimate disposition of the assets.[86] Specifically, the testator expressed his intention that she use the assets to support herself and his son from a prior marriage, that any assets remaining at her death continue in trust for the son, and that no assets pass to certain named individuals.[87] The will explained that the couple had agreed to provide for each other but to keep their assets separate so that, when both had died, their remaining assets could benefit their respective children.[88]

The testator’s sons asked the circuit court to construe the residuary clause as granting the widow only a life estate.[89] The parties agreed the language was unambiguous, so no extrinsic evidence was necessary.[90] On cross motions for summary judgment, the circuit court sided with the wife and found that the testator intended to leave her the entire residue.[91] It concluded that the additional language in the will regarding the wife’s use and ultimate disposition of the assets was precatory. It denied the sons’ request to charge their attorney fees against the estate, because it found they litigated the case for their own interests.[92]

In considering the sons’ appeal, the supreme court noted that no specific words are required to create a life estate and that a will should be construed to pass the greatest estate that the language can convey unless the language shows a contrary intention.[93] To ascertain a testator’s intention, the whole will must be examined and effect should be given to all its parts, as far as possible.[94]

The court went on to find that when the will was read as a whole, its provisions for the testator’s descendants after the widow’s death did, in fact, show that he intended to restrict her interest.[95] For example, the will referred to her right to “use” the residue, which the court found to imply only temporary rights inconsistent with an absolute power of disposition, especially since the will also included express limits as to how she was to use the property.[96] The court therefore found that the will created a life estate by implication, even though it did not expressly grant the residue to the widow “for life.”[97]

Despite its interpretation of the residuary clause, the supreme court rejected the sons’ claim for attorney fees.[98] It noted that parties in Virginia normally pay their own fees and costs and that the court has not explicitly recognized an exception for instances where parties seek judicial instructions with respect to a will or trust.[99] In any event, it observed that such a doctrine would apply only if judicial instructions were needed to interpret an ambiguous document, but in the instant case the sons had consistently maintained that the residuary clause in the testator’s will was clear and unambiguous.[100]

 D. Effect of Suit Against an Estate

Attorneys practicing in the area of trusts and estates often see documents prepared by others that refer to the trust or estate as if it were an entity. Ray v. Ready, in which the supreme court considered whether a plaintiff could amend a suit filed against an estate to name the personal representative as defendant after the limitations period had run, highlights the potentially severe consequences of such an error.[101]

In Ray, the decedent’s surviving spouse filed an action to claim her elective share of his augmented estate.[102] In doing so, she named her late husband’s estate as defendant, but made no mention of the estate’s administratrix.[103] The spouse served process on the estate by delivery to the administratrix, who filed an answer on behalf of the estate.[104] The estate’s attorney even pointed out the error to the spouse’s attorney, but the mistake was never corrected.[105]

After the six-month statute of limitations for augmented estate claims had run, the administratrix moved to dismiss the action as improperly filed.[106] The spouse sought leave to amend her claim, arguing that the proper party was before the court because the estate administratrix had answered the complaint in her representative capacity.[107] The circuit court ruled, however, that the spouse’s action was a nullity because the proper party was not named anywhere in the complaint, and it could not be amended because the claim was then time-barred.[108]

On appeal the supreme court noted that a plaintiff must always adequately identify the party being sued and that an estate and its fiduciary are not the same legal entity.[109] It rejected the spouse’s claim that her proposed substitution would merely correct a “misnomer,” saying that a misnomer occurs when the correct party is named incorrectly, not when an incorrect party is named.[110] In the latter event, the only resolution is to file a new action naming the correct party, subject to any applicable statute of limitations.[111]

The court acknowledged that Virginia Code section 8.01-6.3 provides a safe harbor for a defective pleading to be retroactively amended to name the representative, but only if the pleading “otherwise identifies the proper parties.”[112] In this case, the spouse’s pleading did not qualify for relief because it not only did not name the administratrix as defendant, it did not even refer to her anywhere in the document.[113]

With no statutory relief available, the supreme court found that the spouse’s claim was governed by the common law rule, which required it to have been re-filed rather than amended.[114] Unfortunately, refiling was not possible because the limitations period had run.[115]

 E. Jurisdiction over Foreign Defendant in Elder Abuse Case

In Mercer v. MacKinnon, the supreme court examined the jurisdiction of Virginia courts over a Canadian citizen who was accused of financially abusing an elderly Virginia resident.[116]

The plaintiff in the case, Mercer, was the primary caretaker for her elderly father and her step-mother, Eleanor.[117] While Mercer was occupied with her father’s care, MacKinnon, a Canadian citizen and Eleanor’s niece, came to Virginia and arranged for her aunt to sign a new power of attorney naming her as agent.[118] MacKinnon then moved her aunt to Canada and used the power of attorney to remove Mercer’s father from the couple’s joint accounts and otherwise take control of Eleanor’s retirement funds and bank accounts.[119]

Mercer and MacKinnon each subsequently petitioned the Virginia circuit court to be named Eleanor’s guardian and conservator.[120] The court gave each of them control over particular assets until a final determination could be made.[121] Each filed periodic accountings with the court-appointed guardian ad litem and regularly appeared in court by counsel and in person.[122]

Ultimately, the Virginia court appointed Mercer as Eleanor’s guardian and, following Eleanor’s death, administrator of her estate.[123] In the latter capacity, Mercer brought a suit against MacKinnon alleging that she had illegally used assets from accounts belonging to Eleanor.[124]

MacKinnon moved to dismiss Mercer’s complaint for lack of personal jurisdiction under Virginia’s “long-arm” statute, Virginia Code section 8.01-328.1.[125] The circuit court found that the only viable grounds for personal jurisdiction would be under Virginia Code section 8.01-328.1(A)(4), which establishes personal jurisdiction over an out-of-state defendant who causes tortious injury in Virginia by an act outside Virginia if the defendant engaged in a “persistent course of conduct” in Virginia.[126] It then ruled that the facts presented were insufficient to establish the requisite “persistent course of conduct” by MacKinnon.[127]

On appeal, Mercer contended that MacKinnon had used Eleanor’s Virginia assets to fund litigation in Canada for MacKinnon’s own benefit, and that she had engaged in the required persistent course of conduct by coming to Virginia, having a power of attorney prepared here, using it to change account beneficiary designations, seeking a fiduciary appointment from a Virginia court, and filing accountings and appeals.[128]

The supreme court characterized MacKinnon’s actions differently, noting that she came to Virginia once, had the power of attorney prepared, and then returned to Canada with her aunt, and that her only other contact with the state was “for the limited purpose of litigating a single case.”[129] Drawing on rulings from other states to address this issue of first impression in Virginia, the court concluded that MacKinnon’s contacts with the state “did not ‘exist for a long or longer than usual time or continuously,’ and they were not ‘enduring’ or ‘lingering.’”[130] Therefore, it affirmed the circuit court’s decision that MacKinnon’s actions did not constitute the sort of ongoing interaction with Virginia that the long-arm statute requires to support jurisdiction.[131]

 F. Necessity for Seal or Statutory Substitute

It has been the long-standing rule in Virginia that any lease for five or more years must be evidenced in writing and executed with the same formalities as a deed.[132] The plaintiff in Game Place, L.L.C. v. Fredericksburg 35, LLC received an unwelcome reminder of the importance of this formality.[133]

The plaintiff lessor sued to collect unpaid rent on a fifteen-year lease after the lessee vacated the property before the end of the lease term.[134] The lessee argued that the lease was unenforceable under Virginia’s Statute of Conveyances (Virginia Code section 55-2) because it had neither a formal seal nor any statutory seal substitute, as required for a valid deed.[135] The trial court rejected the lessee’s argument as elevating form over substance, and awarded the lessor the amount of rent unpaid under the lease as well as attorney fees.[136]

On appeal, the supreme court began with an extensive review of the historic reasons for sealed instruments.[137] It observed that the General Assembly has never done away with the common-law requirement for deeds to bear a seal.[138] Rather, it has authorized certain seal substitutes: a scroll, an imprint or stamp, the use of such words as “this deed” or “this indenture” in the document, or a notarial acknowledgment.[139] The lease at issue, however, had neither a seal nor any of the authorized seal substitutes; therefore it failed to satisfy the definition of “deed” for purposes of the Statute of Conveyances.[140]

The lessor argued that the lease should be governed by Virginia Code section 55-51, which makes certain defective deeds binding on the parties.[141] However, in ruling for the lessee, the court declared that that provision did not operate to change the definition of “deed” as used in the Statute of Conveyances, and therefore it did not excuse failure to satisfy the historic requirement of a seal or statutory equivalent.[142]

Conclusion

In a year without a Uniform Act or other major change in Virginia trust and estate law, the 2019 General Assembly nevertheless provided useful planning options in the form of an extended UTMA custodianship and a state income tax exemption for estates and trusts that are administered in Virginia but have no other connection with the Commonwealth. It made several other useful revisions, including augmenting state statutory protection against financial exploitation of adults;[143] protecting parents of wrongful death victims; clarifying conveyancing issues relating to leases and distribution deeds; facilitating settlement of small estates; and confirming the tax-exempt status of improvements to, or replacements of, exempt real estate. It also provided statutory protection for circuit court clerks concerned about potential liability for sharing probate tax return data with their commissioners of accounts or for destroying century-old wills lodged with them for safekeeping.

The Supreme Court of Virginia prompted a legislative response to its opinion in Game Place, its Parson opinion provided a refresher course in the elements and effects of the presumption of undue influence in will contests, its Canody opinion refused to adopt a stricter test for proper will execution, and Ray was a reminder of the importance of proper and timely pleading. Feeney showed the importance of considering all terms of a document, while Mercer was a surprisingly narrow application of Virginia’s long-arm statute.


       **    Partner, Virginia Estate & Trust Law, PLC, Richmond, Virginia. J.D., 1998, University of Virginia; M.S., 1988, Boston University; B.A., 1986, Virginia Polytechnic Institute and State University.

        [1].    Except where specifically noted, all 2018 legislation summarized in this Article became effective July 1, 2019.

        [2].    See Va. Code Ann. §§ 64.2-1900 to -1922 (Repl. Vol. 2017 & Cum. Supp. 2019).

        [3].    Id. § 64.2-1919(A)(1) (Cum. Supp. 2019).

        [4].    Id. § 64.2-1908(D) (Cum. Supp. 2019).

        [5].    Id. § 64.2-1903 (Repl. Vol. 2017).

        [6].    Id. § 64.2-1904 (Repl. Vol. 2017). Other fiduciaries, including an executor or trustee under an instrument that does not include an express authorization, may also make transfers under UTMA, but their powers are more limited and are not affected by the 2019 legislation. See id. § 64.2-1905 (Repl. Vol. 2017).

        [7].    See Va. Code Ann. § 64.2-1900 (Repl. Vol. 2017) (definition of “qualified minor’s trust”); id. § 64.2-1913(B) (Repl. Vol. 2017).

        [8].    This right of withdrawal is necessary to qualify the original transfer for the federal gift tax annual exclusion. See I.R.C. § 2503(c).

        [9].    See generally I.R.C. §§ 6011, 6012(a)(4).

      [10].    See, e.g., Act of Mar. 5, 1990, ch. 11, § 2, 1990 Alaska Sess. Laws (codified as amended at Alaska Stat. § 13.46.195); Act of June 11, 2015, ch. 140, § 3, 2015 Fla. Laws 909, 910 (codified as amended at Fla. Stat. § 710.123); Act of Jan. 4, 2017, ch. 432, 2016 Ohio Laws (codified as amended at Ohio Rev. Code Ann. § 5814.09 (LexisNexis)); Act of May 30, 2001, ch. 244, § 2, 2001 Or. Laws 532, 532 (codified as amended at Or. Rev. Stat. § 126.872); Act of June 12, 1995, ch. 513, 1995 Tenn. Pub. Acts 916 (codified as amended at Tenn. Code Ann. § 35-7-121); Act of Mar. 24, 2006, ch. 204, § 8, 2006 Wash. Sess. Laws 945, 951 (codified as amended at Wash. Rev. Code Ann. § 11.114.200).

      [11].    Act of Mar. 18, 2019, ch. 527, 2019 Va. Acts __, __ (codified as amended at Va. Code Ann. §§ 64.2-1908(E), -1919 (Cum. Supp. 2019)).

      [12].    Va. Code Ann. § 64.2-1908(E) (Cum. Supp. 2019).

      [13].    Id. § 64.2-1904 (Repl. Vol. 2017).

      [14].    Id. § 64.2-1919(B) (Cum. Supp. 2019); cf. I.R.C. § 2503(c).

      [15].    Va. Code Ann. §§ 58.1-360, -361 (Repl. Vol. 2017).

      [16].    Id. § 58.1-302 (Cum. Supp. 2019).

      [17].    Act of Mar. 5, 2019, ch. 192, 2019 Va. Acts __, __ (codified as amended at Va. Code Ann. § 58.1-302 (Cum. Supp. 2019)); Act of Feb. 15, 2019, ch. 23, 2019 Va. Acts __, __ (codified as amended at Va. Code Ann. § 58.1-302 (Cum. Supp. 2019)).

      [18].    295 Va. 396, 813 S.E.2d 312 (2018). For a discussion of the Game Place, L.L.C. case, see infra Part II.F.

      [19].    Act of Feb. 19, 2019, ch. 49, 2019 Va. Acts __, __ (codified as amended at Va. Code Ann. §§ 55-2, -57, -76, -77, -79, 58.1-807(B) (Cum. Supp. 2019)); Act of Feb. 13, 2019, ch. 11, 2019 Va. Acts __, __ (codified as amended at Va. Code Ann. §§ 55-2, -57, -76, -77, -79, 58.1-807(B) (Cum. Supp. 2019)).

      [20].    Ch. 49, 2019 Va. Acts at __; ch. 11, 2019 Va. Acts at __.

      [21].    See Mangrum v. Chavis, No. 160782, 2018 Va. Unpub. LEXIS 4, at *11–12 (Mar. 1, 2018) (unpublished decision).

      [22].    Act of Mar. 18, 2019, ch. 520, 2019 Va. Acts at __, __ (codified as amended at Va. Code Ann. § 64.2-1614(E) (Cum. Supp. 2019)).

      [23].    Id. ch. 520, 2019 Va. Acts at __.

      [24].    See Va. Code Ann. § 58.1-811(A)(13) (Cum. Supp. 2018).

      [25].    Act of Mar. 21, 2019, ch. 757, 2019 Va. Acts __, __ (codified as amended at Va. Code Ann. § 58.1-811(K) (Cum. Supp. 2019)).

      [26].    See Va. Code Ann. § 58.1-811(K) (Cum. Supp. 2019).

      [27].    Id. (citing Va. Code Ann. §§ 64.2-779.1 to -779.25 (Repl. Vol. 2017 & Cum. Supp. 2019)).

      [28].    Id.

      [29].    Va. Code Ann. §§ 64.2-600­ to -605 (Repl. Vol. 2017 & Cum. Supp. 2019).

      [30].    Act of Mar. 5, 2013, ch. 68, 2013 Va. Acts 125, 125 (codified as amended at Va. Code Ann. § 64.2-601(E) (Cum. Supp. 2013)).

      [31].    See, e.g., Va. Code Ann. §§ 8.3A-403, -417, -420 (Repl. Vol. 2015) (unauthorized signature on financial instrument, presentment warranties, and conversion of instrument).

      [32].    Act of Mar. 12, 2019, ch. 360, 2019 Va. Acts __, __ (codified as amended at Va. Code Ann. § 64.2-601(E) (Cum. Supp. 2019)).

      [33].    Act of Mar. 8, 2019, ch. 328, 2019 Va. Acts __, __ (codified as amended at Va. Code Ann. § 8.01-53(A)(i) (Cum. Supp. 2019)); Act of Feb. 19, 2019, ch. 47, 2019 Va. Acts __, __ (codified as amended at Va. Code Ann. § 8.01-53(A)(i) (Cum. Supp. 2019)).

      [34].    Va. Code Ann. § 8.01-53(A)(ii) (Cum. Supp. 2019).

      [35].    Act of Mar. 18, 2019, ch. 421, 2019 Va. Acts __, __ (codified as amended at Va. Code Ann. § 63.2-1606(C), (L) (Cum. Supp. 2019)); Act of Mar. 18, 2019, ch. 420, 2019 Va. Acts __, __ (codified as amended at Va. Code Ann. § 63.2-1606(C), (L) (Cum. Supp. 2019)).

      [36].    Va. Code Ann. § 63.2-1606(L) (Cum. Supp. 2019).

      [37].    Id.

      [38].    Id. § 63.2-1606(C) (Cum. Supp. 2019).

      [39].    Id.

      [40].    Id. § 18.2-369(A)–(C) (Cum. Supp. 2019).

      [41].    Id. § 18.2-369(D) (Cum. Supp. 2019).

      [42].    Act of Mar. 5, 2019, ch. 234, 2019 Va. Acts __, __ (codified as amended at Va. Code Ann. § 18.2-369(D) (Cum. Supp. 2019)).

      [43].    Va. Code Ann. § 64.2-2020 (Cum. Supp. 2019).

      [44].    Act of Mar. 18, 2019, ch. 443, 2019 Va. Acts __, __ (codified as amended at Va. Code Ann. § 64.2-2020(C) (Cum. Supp. 2019)).

      [45].    Act of Mar. 22, 2019, ch. 786, 2019 Va. Acts __, __ (codified as amended at Va. Code Ann. § 58.1-3(A)(5) (Cum. Supp. 2019)).

      [46].    Act of Mar. 18, 2019, ch. 529, 2019 Va. Acts __, __ (codified as amended at Va. Code Ann. § 64.2-409(G) (Cum. Supp. 2019)).

      [47].    Act of Mar. 21, 2019, ch. 737, 2019 Va. Acts __, __ (codified as amended at Va. Code Ann. § 58.1-3210(C) (Cum. Supp. 2019)); Act of Mar. 21, 2019, ch. 736, 2019 Va. Acts __, __ (codified as amended at Va. Code Ann. § 58.1-3210(C) (Cum. Supp. 2019)).

      [48].    Act of Mar. 25, 2019, ch. 801, 2019 Va. Acts __, __ (codified as amended at Va. Code Ann. §§ 58.1-3219.5, -3219.9, -3219.14 (Cum. Supp. 2019)); Act of Feb. 15, 2019, ch. 15, 2019 Va. Acts __, __ (codified as amended at Va. Code Ann. §§ 58.1-3219.5, -3219.9, -3219.14 (Cum. Supp. 2019)).

      [49].    Va. Code Ann. §§ 58.1-3219.5(B), -3219.9(C), -3219.14(C) (Cum. Supp. 2019).

      [50].    Ch. 801, 2019 Va. Acts at __; ch. 15, 2019 Va. Acts at __.

      [51].    296 Va. 509, 822 S.E.2d 169 (2018). For discussion of a similar case cited by the Parson court, Weedon v. Weedon, 283 Va. 241, 720 S.E.2d 552 (2012), see J. William Gray, Jr. & Katherine E. Ramsey, Annual Survey of Virginia Law: Wills, Trusts, and Estates, 47 U. Rich. L. Rev. 343, 369–72 (2012).

      [52].    See 296 Va. at 514­­­-16, 822 S.E.2d at 172–73.

      [53].    See id. at 513–14, 822 S.E.2d at 172.

      [54].    See id. at 514, 822 S.E.2d at 172.

      [55].    See id. at 514–15, 822 S.E.2d at 172–73.

      [56].    See id. at 515, 822 S.E.2d at 173.

      [57].    See id. at 521, 822 S.E.2d at 176.

      [58].    See id. at 517–19, 822 S.E.2d at 173–75.

      [59].    See id.

      [60].    See id.

      [61].    See id. at 520, 822 S.E.2d at 175.

      [62].    See id. at 520–21, 822 S.E.2d at 175–76.

      [63].    See id. at 521, 822 S.E.2d at 176.

      [64].    Id. at 524, 822 S.E.2d at 177 (citing Weedon v. Weedon, 283 Va. 251, 255, 720 S.E.2d 552, 559 (2012)).

      [65].    See id. at 527–28, 822 S.E.2d at 179.

      [66].    See id. at 528, 822 S.E.2d at 179 (citing Weedon, 283 Va. at 256, 720 S.E.2d at 560).

      [67].    See id. at 529, 822 S.E.2d at 180.

      [68].    See id. at 530–31, 822 S.E.2d at 181.

      [69].    See id.

      [70].    295 Va. 597, 600, 816 S.E.2d 286, 287 (2018).

      [71].    See id. at 600, 816 S.E.2d at 287.

      [72].    See id.

      [73].    See id. at 600–01, 816 S.E.2d at 287–88.

      [74].    See id. at 603, 816 S.E.2d at 289.

      [75].    See id. at 601, 816 S.E.2d at 288.

      [76].    Id.

      [77].    See id. at 601–02, 816 S.E.2d at 288 (quoting Payne v. Rice, 210 Va. 514, 517, 171 S.E.2d 826, 828 (1970)).

      [78].    See id. at 602, 816 S.E.2d at 288–89 (citing Samuel v. Hunter’s Executrix, 122 Va. 636, 638–41, 95 S.E. 399, 399–400 (1918)).

      [79].    See id. at 602–03, 816 S.E.2d at 289.

      [80].    See id. at 604–05, 816 S.E.2d at 290.

      [81].    See id. at 605, 816 S.E.2d at 290.

      [82].    See id. at 600, 604–05, 816 S.E.2d at 287, 290 (quoting Savage v. Bowen, 103 Va. 540, 546, 49 S.E. 668, 669–70 (1905)).

      [83].    See id. at 605–06, 816 S.E.2d at 290.

      [84].    295 Va. 312, 811 S.E.2d 830 (2018).

      [85].    See id. at 315, 811 S.E.2d at 831. The relevant language provided as follows: “I devise and bequeath all of such rest and residue of my Estate to [my wife], should she survive me.” Id.

      [86].    Id. at 315, 811 S.E.2d at 831–32.

      [87].    Id.

      [88].    Id. at 315, 811 S.E.2d at 832.

      [89].    See id. at 316, 811 S.E.2d at 832.

      [90].    Id.

      [91].    See id.

      [92].    See id. at 317, 811 S.E.2d at 832–33.

      [93].    Id. at 318, 811 S.E.2d at 833 (quoting Goodson v. Capehart, 232 Va. 232, 237, 349 S.E.2d 130, 134 (1986); then quoting Gaymon v. Gaymon, 258 Va. 224, 229, 315 S.E.2d 196, 199 (1984)).

      [94].    Id. at 317, 811 S.E.2d at 833 (quoting Haag v. Stickley, 239 Va. 298, 302, 389 S.E.2d 691, 694 (1990)).

      [95].    Id. at 318, 811 S.E.2d at 833.

      [96].    See id. at 318–19, 811 S.E.2d at 833–34.

      [97].    Id. at 319, 811 S.E.2d at 833–34.

      [98].    See id. at 321–22, 811 S.E.2d at 835.

      [99].    See id. at 321, 811 S.E.2d at 835 (citing Lannon v. Lee Conner Realty Corp., 238 Va. 590, 594, 385 S.E.2d 380, 382–83 (1989); then citing Dupont v. Shackelford, 235 Va. 588, 595, 369 S.E.2d 673, 677 (1988)).

    [100].    Id. at 321, 811 S.E.2d at 835.

    [101].    296 Va. 553, 822 S.E.2d 181 (2018).

    [102].    Id. at 556, 822 S.E.2d at 182–83.

    [103].    See id.

    [104].    Id. at 556, 822 S.E.2d at 183.

    [105].    See id.

    [106].    See id.

    [107].    See id. at 557, 822 S.E.2d at 183.

    [108].    See id.

    [109].    See id. at 558–59, 822 S.E.2d at 184 (quoting Swann v. Marks, 252 Va. 181, 184, 476 S.E.2d 170, 171 (1996)).

    [110].    See id. at 558–59, 822 S.E.2d at 184 (quoting Swann, 211 Va. at 184, 476 S.E.2d at 172)).

    [111].    Id. at 559, 822 S.E.2d at 184 (quoting Estate of James v. Peyton, 277 Va. 443, 456, 674 S.E.2d 864, 870 (2009)).

    [112].    See id. at 559-60, 822 S.E.2d at 184–85 (quoting Va. Code Ann. § 8.01-6.3(B) (Repl. Vol. 2015)).

    [113].    See id. at 560, 822 S.E.2d at 185.

    [114].    See id. at 559–60, 822 S.E.2d at 184–85.

    [115].    See id. at 560, 822 S.E.2d at 185.

    [116].    297 Va. 157, 823 S.E.2d 252 (2019).

    [117].    Id. at 159, 823 S.E.2d at 253.

    [118].    Id.

    [119].    Id. at 159–60, 823 S.E.2d at 253.

    [120].    Id. at 160, 823 S.E.2d at 253.

    [121].    See id.

    [122].    Id. at 160, 823 S.E.2d at 253–54.

    [123].    See id. at 160, 823 S.E.2d at 254.

    [124].    Id.

    [125].    Id. at 160–61, 823 S.E.2d at 254. Mercer opposed the motion on several grounds, citing the defendant’s actions as a basis for jurisdiction under section 8.01-328.1(A)(1) (Cum. Supp. 2018) (transacting business within Virginia), section 8.01-328.1(A)(3) (Cum. Supp. 2018) (causing tortious injury by an act or omission in Virginia), or section 8.01-328.1(A)(4) (Cum. Supp. 2018) (engaging in a consistent course of conduct in Virginia). See 297 Va. at 160–61, 823 S.E.2d at 254. She also argued personal jurisdiction existed because the case involved a probate matter within Virginia. Id. at 160–61, 823 S.E.2d at 254.

    [126].    See id. at 161, 823 S.E.2d at 254.

    [127].    Id. at 161, 823 S.E.2d at 254.

    [128].    See id. at 164–65, 823 S.E.2d at 256.

    [129].    Id. at 164, 823 S.E.2d at 256.

    [130].    See id. at 164, 823 S.E.2d at 255–56 (quoting the definition of “persistent” in Webster’s Third New International Dictionary 1686 (2002)).

    [131].    Id. at 165, 823 S.E.2d at 256.

    [132].    Va. Code Ann. § 55-2 (Cum. Supp. 2019) (“No estate . . . for a term of more than five years in lands shall be conveyed unless by deed or will[.]”).

    [133].    295 Va. 396, 813 S.E.2d 312 (2018).

    [134].    See id. at 399, 813 S.E.2d at 313.

    [135].    See id. at 400, 813 S.E.2d at 313.

    [136].    See id. at 401, 813 S.E.2d at 314.

    [137].    See id. at 401–07, 813 S.E.2d at 314–17.

    [138].    See id. at 407, 813 S.E.2d at 317.

    [139].    See id. (quoting Va. Code Ann. § 11-3 (Repl. Vol. 2016)).

    [140].    See id. at 407, 813 S.E.2d at 317.

    [141].    See id. at 412, 813 S.E.2d at 320. Virginia Code section 55-51 provides:

Any deed, or a part of a deed, which shall fail to take effect by virtue of this chapter shall, nevertheless, be as valid and effectual and as binding upon the parties thereto, so far as the rules of law and equity will permit, as if this chapter had not been enacted.

Va. Code Ann. § 55-51 (Cum. Supp. 2019).

    [142].    See 295 Va. at 412–13, 813 S.E.2d at 320–21.

    [143].    For a discussion of 2017 legislation also designed to prevent financial exploitation of vulnerable adults, see J. William Gray, Jr. & Katherine E. Ramsey, Annual Survey of Virginia Law: Wills, Trusts, and Estates, 52 U. Rich. L. Rev. 115, 131–32 (2017).

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