Virginia: Constitutionality of Tax Credits

The Virginia Attorney General Kenneth Cuccinelli issued an opinion that the limitations on the General Assembly's appropriation powers contained in Constitution of Va. IV § 16 and Constitution of Va. VIII § 10 do not preclude the enactment of statutes allowing tax credits that Virginia taxpayers may claim for making contributions to sectarian entities, nonprofit organizations not controlled by Virginia or to private schools not owned or controlled by Virginia or one of its political subdivisions. The constitutional restrictions apply only to appropriations of public funds. The Attorney General distinguished appropriations of funds from income tax credits. Credits offset dollar for dollar the tax obligation a taxpayer would otherwise incur and the benefit derived from a tax credit does not flow out of the state's general fund; rather, it reduces the tax revenues that would otherwise go into the general fund. (Attorney General Opinion, 11-144, 05/25/2012.)