The Virginia Court of Appeals issued a ruling on November 10, 2026, regarding the City of Colonial Heights' ability to collect penalties and interest on delinquent property taxes. The court's decision affects local governments' authority to impose retroactive tax penalties and clarifies the legal framework surrounding property tax collections in Virginia.

This case arose from a dispute between the City of Colonial Heights and Alpene Land, LLC, along with other taxpayers, regarding unpaid real estate taxes. The City had sought to collect penalties and interest on these taxes, but a lower court ruled that the City lacked the authority to do so. The appeals court's ruling reversed part of the lower court's decision, allowing the City to collect certain penalties and interest, while affirming that the City could not retroactively impose new rates.

Background

The City of Colonial Heights filed complaints against Alpene Land, LLC, and other parties in December 2022, seeking to sell properties for unpaid real estate taxes. The City claimed that the taxpayers owed over $65,000 in delinquent taxes spanning multiple years, from 2016 to 2024. The taxpayers argued that they had redeemed their properties by paying the amount they believed was due.

In June 2024, the Circuit Court for the City of Colonial Heights ruled that the City's ordinance allowing it to collect penalties and interest on delinquent taxes was ineffective. The City then passed a new ordinance in August 2024, attempting to retroactively set penalty and interest rates at ten percent. However, the circuit court ruled that this new ordinance could not be applied retroactively, leading to the City's appeal.

The Ruling

The Court of Appeals of Virginia, led by Judge Doris Henderson Causey, ruled that the City of Colonial Heights was permitted to collect penalties and interest on delinquent property taxes according to the default rates established by the Code of Virginia. The court stated, "The City was thus authorized to impose the five percent penalty and ten percent interest rates on the delinquent real estate taxes." However, the court affirmed the lower court's ruling that the City could not retroactively apply the new rates set in the August 2024 ordinance.

In its analysis, the court highlighted the importance of statutory interpretation, noting that the City’s previous ordinance did not establish a specific penalty or interest rate, thus default rates applied. The court emphasized that the City lacked the authority to enact retroactive tax penalties, stating, "The ordinance's prolonged period of retroactivity constitutes a divergence from basic ex post facto principles to an extent that raises serious questions about its constitutionality."

Impact

This ruling has significant implications for local governments in Virginia regarding their authority to collect taxes and impose penalties. It clarifies that while municipalities can set their own penalty and interest rates, they cannot apply these rates retroactively without explicit legislative authority. This decision reinforces the Dillon Rule, which limits the powers of local governments to those expressly granted by the state.

The ruling may also affect taxpayers in Colonial Heights and similar jurisdictions, as it confirms that default rates for penalties and interest on delinquent property taxes can be enforced. However, taxpayers can expect that any changes to tax rates will not apply to debts incurred prior to the enactment of new ordinances.

What's Next

The City of Colonial Heights may consider further legal options, including potential appeals to the Virginia Supreme Court, regarding the retroactive application of tax penalties. Meanwhile, there are no related cases currently pending that would affect this ruling.