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General Assembly 2010: What's on tap for business?

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RICHMOND — The state budget and transportation funding, no doubt, will be dominant themes of the General Assembly session that starts today, Wednesday, in Richmond.

But hundreds of other bills also will be introduced. Some of those would affect businesses: how they are taxed, how they bag merchandise, how they're insured.

Many bills will be tabled as legislators try to hold down state spending this year and avoid tax increases.

"The budget, rather than individual pieces of legislation, will dominate the discussion," predicted Hugh Keogh, president and CEO of the Virginia Chamber of Commerce. "The budget concerns are so overwhelming that they are going to take the lion's share of attention."

But a few other bills may make their way out and become state law.

This is a look at some of the issues concerning business and bills that have been introduced on those issues.

Electricity Regulation

As the State Corporation Commission reviews Appalachian Power's request for a rate increase, at least one Virginia legislator wants to change the law governing that process.

Sen. W. Roscoe Reynolds (D-Martinsville) has submitted a bill, SB74, to reinstate the guidelines for regulating rates that the SCC followed before Virginia attempted to deregulate its electricity industry in 1999.

Reynolds' bill would erase most of the provisions of a 2007 law that returned utility companies to rate regulation but guaranteed them earnings comparable to those of competing companies in nearby states. It would limit the commission to approve rates that cover a company's operating costs and allow it a "just" and "reasonable" return on its investments.

Sen. Donald McEachin (D-Henrico County) has focused on energy conservation. His bill, SB71, would require electricity utilities to institute energy-efficiency programs to cut their customers' power usage by 12.2 percent of projected annual consumption by 2022. He hopes efficiency efforts will create "green" jobs and opportunities for economic development and will reduce the need to build new coal-fired power plants.

Tax Breaks for Business Expansion

Legislators are seeking tax incentives to encourage hiring and investment by small businesses. One measure, HB2, would provide a tax credit of 10 percent on an investment made in business-related personal property and real estate improvements. A company would have to invest at least $10,000 and do so between July 2010 and July 2011.

A second bill, HB94, would reduce the corporate tax rate for a small business that increased the number of its full-time employees by at least 5 percent over the year-earlier total. A business that adds workers could apply the rate reduction — from the standard rate of 6 percent to a rate of 5 percent — for three years.

Plastic Bags

The General Assembly will consider more legislation this year to discourage the use of disposable bags or prohibit them outright.

Del. Adam Ebbin (D-Alexandria) announced plans last week to propose a 5-cent fee on plastic or paper bags used for purchases in grocery, drug, liquor and convenience stores. Ebbin said it isn't a ban, but a "consumer choice" meant to encourage consumers to shop with reusable bags.

Of that nickel, retailers would receive a penny back to cover the costs of collecting the fee. Retailers that have their own incentive programs would receive 2 cents back. Revenue the state collects would go to the Virginia Water Quality Improvement Fund.

"This bill is different because there's incentives for business, funds involved for them to collect from the fee," said Ebbin, explaining why he believes his bill has a greater chance of gaining industry support than past anti-bag efforts.

Those incentives won't necessarily get retailers on board, said Susan Milhoan, president and chief executive of Retail Alliance. The fee will increase the burden on retailers to collect, keep paperwork for and remit another state tax, she said.

Growing momentum against plastic bags will push retailers to come up with a solution without the help of government, Milhoan said.

Ebbin said his goal is to diminish the damage that bags inflict on the state's landscape, from its waterways to its cotton fields, and the pollution resulting from the production of both paper and plastic sacks.

Privatization of ABC Stores

The General Assembly also is expected to consider proposals to allow private companies to sell liquor, which is currently distributed only through state-owned stores under the Department of Alcoholic Beverage Control.

Keogh said privatization would probably get the backing of the business community.

Retail Alliance would support privatization, said Milhoan, but would want full competition among distributors. Merchants fear the state would grant a limited number of liquor-sale licenses only to large retailers, such as Walmart.

Virginia legislators should first study privatization in other states, Milhoan said. "We don't want to rush into this just because we need more money for the state."

Insurance: Chinese Drywall

Two bills moving through the General Assembly aim to prevent home insurers from canceling policies or denying coverage to home-owners affected by Chinese-made drywall.

Introduced by Del. Glenn Oder (R-Newport News), the first bill, HB44, seeks to ensure individuals can file a claim with their home insurer on property damage caused by the tainted drywall.

The second bill, HB45, also from Oder, forbids home insurers from canceling or increasing the rates on property insurance policies because of the presence of the wallboard.

A recent government study of homes built with the Chinese-made drywall found a "strong association" between the wallboard and metal corrosion and a "possible" connection between sulfide gases it emitted and health problems reported by home-owners across the country.

The U.S. Consumer Product Safety Commission also concluded late last year that Chinese-made drywall emits higher levels of volatile sulfur gases than typical U.S.-made drywall.

Bob Bradshaw, president and chief executive of Independent Insurance Agents of Virginia, said he wasn't aware of any insurer in Virginia dropping customers whose homes were built with Chinese-made drywall.

Bradshaw said he thinks home insurance policies probably won't cover losses associated with the drywall, such as the corrosion and appliance failures. However, if the corroded wiring caused a fire in the house, that probably would be covered, he said.

"A homeowner policy used to be called a fire policy," Bradshaw said. "So if a house burns down, the policy will cover it so long as you didn't start it."

Newspapers in Florida and Louisiana have reported on home-owners in those states losing insurance coverage after filing drywall-related claims.

Taxes: Retail

In his state budget, Gov. Tim Kaine again proposed to eliminate the "dealer discount," which returns to retailers a small portion of the money they collect from sales taxes to compensate them for the expense of collecting the taxes. Retailers will fight to keep the dealer discount, especially for smaller merchants whose annual sales are $12 million or less and who depend on that additional money, said Milhoan.

The Retail Alliance also hopes to see legislation that could reduce the amount of business taxes paid by some local merchants by clarifying the classification of retailers under the Business, Professional and Occupational License, known as BPOL.

A BPOL classification identifies the type of business and determines the tax rate it pays to the locality where it operates.

Health Care

Early bills dealing with the health care industry take up prominent issues from the national discussion, in some cases protesting legislation that Congress is considering.

Five Republicans co-sponsored the Virginia Health Care Freedom Act, HB10. The bill prohibits laws from impinging on individuals' and entities' right to choose private health care systems and insurance plans. It also forbids laws from imposing fees or other monetary penalties on people who choose to be uninsured and on businesses that elect not to provide health insurance.

Del. Robert G. Marshall (R-Prince William County) said he co-sponsored the bill because he believes that Congress doesn't have the authority to mandate health coverage for individuals. He said his proposed legislation empowers Virginia to refuse to collect federally imposed penalties on the uninsured and on businesses that don't provide coverage.

Other delegates are calling for studies of health coverage in Virginia. Del. John M. O'Bannon III (R-Henrico County) requested the formation of a joint subcommittee to recommend reforms to the state's private health care system, and Del. Bob Purkey (R-Virginia Beach) suggested studies of indigent health care and the state's physician shortage.

Marshall introduced several of the health-related bills and studies filed before the session. Among them: HB11, which would require that a patient's appeal of a decision that a service is not medically necessary be heard by a peer of the treating health care provider; HB12, which would allow parents to extend their group accident and sickness insurance policy to include children up to age 27; HB31, which would permit health insurance companies operating in other states to sell group plans approved in other states to Virginians; and HB34, which would require health insurers to cover diagnosis and treatment of autism and related conditions in children younger than 21.

Marshall also proposed creating a three-member board to determine health providers' liability for medical injuries, and he requested a study of alternatives to the state's medical liability system in an effort to reduce costs of defensive medicine.

Taxes: Property

HB16, introduced by Del. Mark Cole (R-Fredericksburg) calls for a constitutional amendment that would allow municipalities to grant property-tax relief for home-owners who are disabled or at least 65 years old.

Currently, such property tax relief must be approved by the General Assembly. The amendment also would allow municipalities to establish their own income and financial-worth guidelines for those individuals.

The bill would allow voters to decide in a referendum in November whether to give that authority to local governments.

Unemployment Compensation

Members of the business community said they expect the General Assembly to address expanding the eligibility for jobless benefits.

When the federal government offered $125 million in stimulus funds to the state last year for additional unemployment benefits, the General Assembly balked at requirements to broaden eligibility. Legislators said they feared that once the federal contributions ended, the additional cost of paying for the benefits would fall on Virginia businesses.

Tort Reform

The Virginia Chamber of Commerce said it plans to return to the General Assembly with two proposals for reducing the cost of lawsuits brought against businesses. One would allow a defendant to use depositions in support of a motion for summary judgment to address a dispute without a trial.

The second proposal would allow state courts to use an offer-in-judgment system, something already used in federal courts, that the chamber said would encourage plaintiffs and defendants to settle more cases out of court. If a plaintiff rejected a defendant's settlement offer and the outcome of a trial was no more favorable than the offer, the court would not require the defendant to pay the plaintiff's costs after the offer. The plaintiff also would have to pay the defendant's costs from that time.

Jack Harris, executive director of the Virginia Trial Lawyers Association, said there is no indication that the system would encourage more business-related cases to be settled in Virginia courts, where cases already are resolved more quickly than in the federal system. The trial lawyers' group will oppose both chamber proposals, Harris said.

Insurance: Credit Default Swaps

Congress has yet to impose regulations for use of credit default swaps, the speculative contracts that crippled American International Group two years ago and caused havoc in the financial markets.

Del. Robert G. Marshall (R-Manassas) figures Virginia should write its own rules for the swaps, which enable users to bet on a corporate borrower's credit quality. Marshall introduced HB28, which would adopt model legislation from the National Conference of Insurance Legislators for state regulation of the swaps.

His proposal doesn't sit well with some in the state's financial community.

"We have some real concerns about the bill" because the issue should be addressed at the national level, said Philip H. Boykin, senior vice president and director of government relations at the Virginia Bankers Association.

Telecommuting

Del. L. Scott Lingamfelter (R-Woodbridge) sees plenty of advantages to telecommuting. Workers escape traffic. Companies save on space. Productivity often rises.

So he wants to encourage businesses to give it a whirl. His bill, HB47, would provide a business a tax credit of up to $1,200 to offset the expenses of setting up an employee to work outside the office.

"If you believe, and I do, that telecommuting is a critical portion of the future work template for the economy, then you really need to begin to seriously offer legislation that will accomplish that purpose,"  Lingamfelter said.

He acknowledged, however, that "it's going to be extremely difficult to get this bill passed in this session, primarily because of the lack of funding." He hopes at least to persuade his colleagues to set aside money for a pilot project.

• To follow these and any  other bills through the process of becoming law, visit the Legislative Information System online at leg1.state.va.us/lis.htm.