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Introduced Version House Bill 2964 History

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Key: Green = existing Code. Red = new code to be enacted

FISCAL NOTEWEST virginia Legislature

2017 regular session

Introduced

House Bill 2964

By Delegate Bates

[Introduced March 13, 2017; Referred
to the Committee on Health and Human Resources then Finance.
]

A BILL to amend the Code of West Virginia, 1931, as amended, by adding thereto a new section, designated §5-1A-2a; to amend and reenact §11-15-3a of said code; to amend and reenact §11-17-3 of said code; to amend said code by adding thereto a new section, designated §11-21-4g; and to amend and reenact §11-24-4 of said code, all relating to implementing the “Budget Stabilization Act of 2017”; placing a limited budget freeze of four years to 2015 Governor’s budget proposal, excepting certain funding obligations; providing a temporary food tax; providing for an increase in the tobacco tax; providing for a temporary increase in the personal income tax rates; providing for a temporary increase in the corporation net income tax; and providing for a removal of certain taxes sooner upon sufficient funding to state reserve account.

Be it enacted by the Legislature of West Virginia:


That of the Code of West Virginia, 1931, as amended, be amended by adding thereto a new section, designated §5-1A-2a; that §11-15-3a of said code be amended and reenacted; that §11-17-3 of said code be amended and reenacted; that said code be amended by adding thereto a new section, designated §11-21-4g; and that §11-24-4 of said code be amended and reenacted, all to read as follows:

CHAPTER 5. GENERAL POWERS AND AUTHORITY OF THE GOVERNOR, SECRETARY OF STATE AND ATTORNEY GENERAL; BOARDOF PUBLIC WORKS; MISCELLANEOUS AGENCIES, COMMISSIONS, OFFICES, PROGRAMS, ETC.


ARTICLE 1A. ITEMIZATION OF PROPOSED APPROPRIATIONS IN BUDGET BILL SUBMITTED BY GOVERNOR TO LEGISLATURE.


§5-1A-2a. Budget Stabilization Act of 2017.


(a) Effective with the enactment of this section during the 2017 Regular Session of the Legislature, the Governor may not propose to the Legislature, pursuant to section two of this article, a budget larger in total dollars expended than that was submitted by the Governor as reflected in the introduced versions of S.B.233 and H.B. 2016 of the Regular Session of the 2015 Legislature, except to increase funding for Public Employees Insurance Agency to fund state employee benefits, to meet state Medicaid program requirements pursuant to Title XIX of the Social Security Act, or to meet state employee and teacher pension fund contributions and funding obligations of the state. The purpose of the provisions of this act implementing temporary tax increases pursuant to section three-a, article fifteen, chapter eleven; and section four-g, article twenty-one, chapter eleven; and section four, article twenty-four, chapter eleven, all of this code, is to temporary fund the state at the 2015 fiscal year budget level, by implementing a budget freeze, tied to temporary tax increases to provide the preservation of essential government services, while stabilizing the state budget funding stream, and using any excess moneys to fund the state Revenue Shortfall Accounts. This act also establishes an increase in the state tobacco tax, as provided in section three-a, article seventeen, chapter eleven of this code, which is a permanent tax intended to both reduce tobacco consumption and provide enhanced revenue for the state.

(b) To the extent that projected revenues do not allow the Governor to project spending equal to the amount of the Governor’s proposed 2015 fiscal year budget, the Governor shall submit a budget reduced sufficiently to reflect those budget estimates. If the Governor projects that the revenues of the state will exceed the proposed 2015 fiscal year budget, those excess moneys shall be appropriated to the Revenue Shortfall Fund created pursuant to section twenty, article two, chapter eleven-b of this code.

(c) The provisions of this section expire and are of no force or effect beginning July 1, 2021: Provided, That notwithstanding any code provision to the contrary, the expiration of a temporary tax increase authorized in section three-a, article fifteen, chapter eleven; and section four-g, article twenty-one, chapter eleven; and section four, article twenty-four, chapter eleven, all of this code, shall be suspended prior to their scheduled expiration of July 1, 2021, if the combined balance of funds as of the end of any fiscal year, in the Revenue Fund Shortfall Reserve Fund and the Revenue Fund Shortfall Reserve Fund Part B established in section twenty, article two, chapter eleven b of this code equals or exceeds twenty percent of the General Revenue Fund budgeted for the upcoming fiscal year: Provided, however, That if the Revenue Fund Shortfall Reserve Fund and the Revenue Fund Shortfall Reserve Fund Part B next equals or exceeds seventeen and one-half percent but not twenty percent, of the General Revenue Fund budgeted for the immediately succeeding fiscal year, the temporary tax increases contained in section three-a, article fifteen, chapter eleven; and section four-g, article twenty-one, chapter eleven; and section four, article twenty-four, chapter eleven, all of this code, shall be reduced by one half for the upcoming fiscal year.

CHAPTER 11. TAXATION.

ARTICLE 15. CONSUMERS SALES AND SERVICE TAX.

§11-15-3a. Rate of tax on food and food ingredients intended for human consumption; reductions and cessations of tax.


(a) Rate of tax on food and food ingredients. -- Notwithstanding any provision of this article or article fifteen-a of this chapter to the contrary:

(1) Rate reduction. -- The rate of tax on sales, purchases and uses of food and food ingredients intended for human consumption after June 30, 2008, shall be three percent of its sales price, as defined in section two, article fifteen-b of this chapter.

(2) Additional rate reduction. -- The rate of tax on sales, purchases and uses of food and food ingredients as defined in that section that is intended for human consumption after December 31, 2011, shall be two percent of its sales price, as defined in that section. After June 30, 2012, the rate of tax on sales, purchases and uses of food and food ingredients as defined in that section that is intended for human consumption shall be one percent of its sales price, as defined in that section.

(3) Contingent termination of tax on food. -- The tax on sales, purchases and uses of food and food ingredients as defined in section two, article fifteen-b of this chapter that is intended for human consumption shall cease after June 30, 2013, and no such tax shall be imposed on sales, purchases and uses of food and food ingredients so defined: Provided, That the cessation of tax after June 30, 2013, authorized by this subsection shall be suspended if the balance of funds as of December 31, 2012, in the Revenue Shortfall Reserve Fund established in section twenty, article two, chapter eleven-b of this code does not equal or exceed twelve and one-half percent of the General Revenue Fund budgeted for the fiscal year commencing July 1, 2012. Such suspension shall terminate, and the cessation of tax shall proceed, beginning on July 1 of any calendar year beginning after December 31, 2013, in which the balance of funds as of December 31 of the preceding fiscal year in said Revenue Shortfall Reserve Fund equals or exceeds twelve and one-half percent of the General Revenue Fund budgeted for the immediately succeeding fiscal year.

(b) After June 30, 2017, the rate of tax on sales, purchases and uses of food and food ingredients intended for human consumption, as defined in section two, article fifteen-b of this chapter, is three percent of its sales price. The tax imposed pursuant to this subsection expires July 1, 2021.

(b) (c) Calculation of tax on fractional parts of a dollar. -- The tax computation under this section shall be carried to the third decimal place and the tax rounded up to the next whole cent whenever the third decimal place is greater than four and rounded down to the lower whole cent whenever the third decimal place is four or less. The seller may elect to compute the tax due on a transaction on a per item basis or on an invoice basis provided the method used is consistently used during the reporting period.

(c) (d) Federal Food Stamp and Women, Infants and Children programs, other exemptions. -- Nothing in this section affects application of the exemption from tax provided in section nine of this article for food purchased by an eligible person using food stamps, electronic benefits transfer cards or vouchers issued by or pursuant to authorization of the United States Department of Agriculture to individuals participating in the Federal Food Stamp Program, by whatever name called, or the Women, Infants and Children (WIC) program, or application of any other exemption from tax set forth in this article or article fifteen-a of this chapter.


ARTICLE 17. TOBACCO PRODUCTS EXCISE TAX ACT.


§11-17-3. Levy of tax; ratio; dedication of proceeds.


(a) Tax on cigarettes and tobacco products other than cigarettes. — For the purpose of providing revenue for the General Revenue Fund of the state, an excise tax is hereby levied and imposed on sales of cigarettes and tobacco products other than cigarettes.

(b) Tax rate on cigarettes. — Effective May 1, 2003, the excise tax rate levied and imposed on the sale of cigarettes is 55 cents on each twenty cigarettes or in like ratio on any part thereof: Provided, That on and after July 1, 2016, the excise tax rate levied and imposed on the sale of cigarettes is $1.20 on each twenty cigarettes or in like ratio on any part thereof: Provided, however, That on and after July 1, 2017, the excise tax rate levied and imposed on the sale of cigarettes is $1.55 on each twenty cigarettes or in like ratio on any part thereof. Only one sale of the same article shall be used in computing the amount of tax due under this subsection.

(c) Tax on tobacco products other than cigarettes. — Effective January 1, 2002, the excise tax levied and imposed on the sales or use of tobacco products other than cigarettes at the rate equal to seven percent of the wholesale price of each article or item of tobacco products other than cigarettes sold by the wholesaler or subjobber dealer, whether or not sold at wholesale, or if not sold, then at the same rate upon the use by the wholesaler or dealer: Provided, That on and after July 1, 2016, the excise tax rate levied and imposed on the sales or use of tobacco products other than cigarettes is at the rate equal to twelve percent of the wholesale price of each article or item of tobacco products other than cigarettes sold by the wholesaler or subjobber dealer, whether or not sold at wholesale, or if not sold, then at the same rate upon the use by the wholesaler or dealer. Only one sale of the same article shall be used in computing the amount of tax due under this subsection.

(d) Effective date of amendments. — Amendments to this section enacted in the year 2003 apply in determining tax imposed under this article from May 1, 2003, through June 30, 2016. Amendments to this section enacted in the year 2016 apply in determining tax imposed under this article effective on and after July 1, 2016. The amendment to this section enacted in 2017 applies in determining tax imposed under this article effective on and after July 1, 2017.

ARTICLE 21. PERSONAL INCOME TAX.


§11-21-4g. Rate of tax -- Taxable years beginning on or after January 1, 2017.


(a) Rate of tax on individuals (except married individuals filing separate returns), individuals filing joint returns, heads of households, estates and trusts. -- The tax imposed by section three of this article on the West Virginia taxable income of every individual (except married individuals filing separate returns); every individual who is a head of a household in the determination of his or her federal income tax for the taxable year; every husband and wife who file a joint return under this article; every individual who is entitled to file his or her federal income tax return for the taxable year as a surviving spouse; and every estate and trust shall be determined in accordance with the following table:

If the West Virginia

taxable income is:                                                                The tax is:

 

Not over $10,000                                                                 3.5% of the taxable income

 

Over $l0,000 but not                                                            $350.00 plus 4.5% of excess

      over $25,000                                                                              over $10,000

 

Over $25,000 but not                                                           $1,025.00 plus 5% of excess

      over $40,000                                                                              over $25,000

 

Over $40,000 but not                                                           $1,775.00 plus 6.5% of excess

      over $60,000                                                                              over $40,000

 

Over $60,000 but not                                                          $3,075.00 plus 7% of excess

Over $200,000                                                                                 over $60,000

 

Over $200,000                                                             $12,875.00 plus 7.5%  excess                                                                                                                                                                                 _                                                                                                       over $200,000

(b) Rate of tax on married individuals filing separate returns. -- In the case of husband and wife filing separate returns under this article for the taxable year, the tax imposed by section three of this article on the West Virginia taxable income of each spouse shall be determined in accordance with the following table:

If the West Virginia

taxable income is:                                                                   The tax is:

 

Not over $5,000                                                                      3.5% of the taxable income

 

Over $5,000 but not                                                                $175.00 plus 4.5% of excess

            over $l2,500                                                                            over $5,000

 

Over $l2,500 but not                                                               $512.50 plus 5% of

            over $20,000                                                                           excess over $l2,500

 

Over $20,000 but not                                                              $887.50 plus 6.5% of excess

            over $30,000                                                                           over $20,000

 

Over $30,000 but not                                                              $1,537.50 plus 7% of

           over $100,000                                                              excess over $30,000

 

Over $100,000                                                                        $6,437.50  plus 7.5% of

_                                                                                                            excess over $100,000

(c) Applicability of this section. -- The provisions of this section, as amended in 2017, shall be applicable in determining the rate of tax imposed by this article for all taxable years beginning after December 31, 2016, and shall be in lieu of the rates of tax specified in section four-e of this article: Provided: That effective July 1, 2021, this section expires and is no longer in force or effect, and the provisions of section four-e of this article shall again become effective.

ARTICLE 24. CORPORATION NET INCOME TAX.


§11-24-4. Imposition of primary tax and rate thereof; effective and termination dates.

Primary tax. -- (1) In the case of taxable periods beginning after June 30, 1967, and ending prior to January 1, 1983, a tax is hereby imposed for each taxable year at the rate of six percent per annum on the West Virginia taxable income of every domestic or foreign corporation engaging in business in this state or deriving income from property, activity or other sources in this state, except corporations exempt under section five.

(2) In the case of taxable periods beginning on or after January 1, 1983, and ending prior to July 1, 1987, a tax is hereby imposed for each taxable year on the West Virginia taxable income of every domestic or foreign corporation engaging in business in this state or deriving income from property, activity or other sources in this state, except corporations exempt under section five of this article, and any banks, banking associations or corporations, trust companies, building and loan associations and savings and loan associations, at the rates which follow:

(A) On taxable income not in excess of $50,000, the rate of six percent; and

(B) On taxable income in excess of $50,000, the rate of seven percent.

(3) In the case of taxable periods beginning on or after July 1, 1987, a tax is hereby imposed for each taxable year on the West Virginia taxable income of every domestic or foreign corporation engaging in business in this state or deriving income from property, activity or other sources in this state, except corporations exempt under section five of this article, at the rate of nine and three-quarters percent. Beginning July 1, 1988, and on each July 1 thereafter for four successive calendar years, the rate shall be reduced by fifteen one hundredths of one percent per year, with such rate to be nine percent on and after July 1, 1992.

(4) In the case of taxable periods beginning on or after January 1, 2007, a tax is hereby imposed for each taxable year on the West Virginia taxable income of every domestic or foreign corporation engaging in business in this state or deriving income from property, activity or other sources in this state, except corporations exempt under section five of this article, at the rate of eight and three-quarters percent.

(5) In the case of taxable periods beginning on or after January 1, 2009, a tax is hereby imposed for each taxable year on the West Virginia taxable income of every domestic or foreign corporation engaging in business in this state or deriving income from property, activity or other sources in this state, except corporations exempt under section five of this article, at the rate of eight and one-half percent.

(6) In the case of taxable periods beginning on or after January 1, 2012, a tax is hereby imposed for each taxable year on the West Virginia taxable income of every domestic or foreign corporation engaging in business in this state or deriving income from property, activity or other sources in this state, except corporations exempt under section five of this article, at the rate of seven and three-quarters percent: Provided, That the reduction in tax authorized by this subsection shall be suspended if the combined balance of funds as of June 30, 2011, in the Revenue Fund Shortfall Reserve Fund and the Revenue Fund Shortfall Reserve Fund - Part B established in section twenty, article two, chapter eleven-b of this code does not equal or exceed ten percent of the General Revenue Fund budgeted for the fiscal year commencing July 1, 2011: Provided, however, That the rate reduction schedule will resume in the calendar year immediately following any subsequent fiscal year when the combined balance of funds as of June 30 of that fiscal year in the Revenue Fund Shortfall Reserve Fund and the Revenue Fund Shortfall Reserve Fund - Part B next equals or exceeds ten percent of the General Revenue Fund budgeted for the immediately succeeding fiscal year.

(7) In the case of taxable periods beginning on or after January 1, 2013, a tax is hereby imposed for each taxable year on the West Virginia taxable income of every domestic or foreign corporation engaging in business in this state or deriving income from property, activity or other sources in this state, except corporations exempt under section five of this article, at the rate of seven percent: Provided, That the reduction in tax authorized by this subsection shall be suspended for one calendar year subsequent to the occurrence of the suspension of the reduction in tax authorized by subdivision (6) of this section: Provided, however, That the reduction in tax on the first day of any calendar year authorized by this subsection shall be suspended if the combined balance of funds as of June 30 of the preceding year in the Revenue Fund Shortfall Reserve Fund and the Revenue Fund Shortfall Reserve Fund - Part B established in section twenty, article two, chapter eleven-b of this code does not equal or exceed ten percent of the General Revenue Fund budgeted for the fiscal year commencing July 1, of the preceding year.

(8) In the case of taxable periods beginning on or after January 1, 2014, a tax is hereby imposed for each taxable year on the West Virginia taxable income of every domestic or foreign corporation engaging in business in this state or deriving income from property, activity or other sources in this state, except corporations exempt under section five of this article, at the rate of six and one-half percent: Provided, That the reduction in tax authorized by this subsection shall be suspended for one calendar year subsequent to the occurrence of the suspension of the reduction in tax authorized by subdivision (7) of this section: Provided, however, That the reduction in tax on the first day of any calendar year authorized by this subsection shall be suspended if the combined balance of funds as of June 30 of the preceding year in the Revenue Fund Shortfall Reserve Fund and the Revenue Fund Shortfall Reserve Fund - Part B established in section twenty, article two, chapter eleven-b of this code does not equal or exceed ten percent of the General Revenue Fund budgeted for the fiscal year commencing July 1, of the preceding year.

(9) In the case of taxable periods beginning on or after July 1, 2017, a tax is imposed for each taxable year on the West Virginia taxable income of every domestic or foreign corporation engaging in business in this state or deriving income from property, activity or other sources in this state, except corporations exempt under section five of this article, at the rate of seven and one-half percent: Provided, That effective July 1, 2021, the provisions of this subsection expire and the provisions of subsection (8) are again effective.

 

NOTE: The purpose of this bill is to implement several temporary tax increases to stabilize the state budget; including establishing a 3% food tax, increasing personal income tax rates; increasing tobacco taxes; and increasing the corporate net income tax rate; all to expire effective July 1, 2021.

Strike-throughs indicate language that would be stricken from a heading or the present law and underscoring indicates new language that would be added.

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