FISCAL NOTE

Date Requested: February 08, 2016
Time Requested: 02:14 PM
Agency: Tax Department, State
CBD Number: Version: Bill Number: Resolution Number:
2458 Introduced HB4433
CBD Subject: Taxation


FUND(S):

General Revenue Fund

Sources of Revenue:

General Fund

Legislation creates:

Neither Program nor Fund



Fiscal Note Summary


Effect this measure will have on costs and revenues of state government.


    The stated purpose of this bill is to continue providing a personal income tax adjustment to the gross income of certain retirees receiving pensions from defined pension plans that terminated and are being paid a reduced maximum benefit guarantee.
    
    Retirees receiving pensions from defined pension plans that terminated and are being paid a reduced maximum benefit guarantee from the federal Pension Benefit Guaranty Corporation (PBGC) received a personal income tax adjustment equal to the amount of pension income not received through Tax Year 2014. This bill would extend the allowance of that decreasing modification beginning in Tax Year 2015 and terminating after five years beginning on January 1, 2016. The allowance for Tax Year 2015 would be retroactive and result in amended returns for that tax year. Passage of the proposed legislation would result in a potential loss for Tax Year 2015 of approximately $400,000. Most of this loss would occur in FY2017, with the potential for some of this loss occurring in FY2016 dependent on when amended returns are filed. An additional loss of $400,000 is anticipated in FY2017 from Tax Year 2016 returns. Approximately $400,000 in annual revenue losses are expected for the remaining years until termination.
    
    The administrative cost to the State Tax Department would be $28,000 in the current fiscal year, $10,000 in FY2017 and $5,000 in subsequent years.
    



Fiscal Note Detail


Effect of Proposal Fiscal Year
2016
Increase/Decrease
(use"-")
2017
Increase/Decrease
(use"-")
Fiscal Year
(Upon Full
Implementation)
1. Estmated Total Cost 28,000 10,000 5,000
Personal Services 25,000 5,000 5,000
Current Expenses 0 0 0
Repairs and Alterations 0 0 0
Assets 0 0 0
Other 3,000 5,000 0
2. Estimated Total Revenues 0 -800,000 -400,000


Explanation of above estimates (including long-range effect):


    Retirees receiving pensions from defined pension plans that terminated and are being paid a reduced maximum benefit guarantee from the federal Pension Benefit Guaranty Corporation (PBGC) received a personal income tax adjustment equal to the amount of pension income not received through Tax Year 2014. This bill would extend the allowance of that decreasing modification beginning in Tax Year 2015 and terminating after five years beginning on January 1, 2016. The allowance for Tax Year 2015 would be retroactive and result in amended returns for that tax year. Passage of the proposed legislation would result in a potential loss for Tax Year 2015 of approximately $400,000. Most of this loss would occur in FY2017, with the potential for some of this loss occurring in FY2016 dependent on when amended returns are filed. An additional loss of $400,000 is anticipated in FY2017 from Tax Year 2016 returns. Approximately $400,000 in annual revenue losses are expected for the remaining years until termination.
    
    The administrative cost to the State Tax Department would be $28,000 in the current fiscal year, $10,000 in FY2017 and $5,000 in subsequent years.
    



Memorandum


    The stated purpose of this bill is to continue providing a personal income tax adjustment to the gross income of certain retirees receiving pensions from defined pension plans that terminated and are being paid a reduced maximum benefit guarantee.
    
    The title of the proposed bill fails to state that the modification is retroactive or that it terminates after five years. The title also states this is an “adjustment to gross income” rather than a modification reducing federal adjusted gross income.
    
    It is unclear how the Tax Department is to administer a retroactive modification. For example, additional language stating whether everyone claiming the modification would have to file an amended return for TY2015 would be beneficial. The proposed bill would add additional time and monetary expense in order for the Tax Department to notify individuals about the change. Further, it is very difficult for the Tax Department to administer this modification retroactively. The Tax Department would prefer that the modification begin on January 1, 2016.
    
    
    



    Person submitting Fiscal Note: Mark Muchow
    Email Address: kerri.r.petry@wv.gov