FISCAL NOTE

Date Requested: February 22, 2016
Time Requested: 09:46 AM
Agency: Tax Department, State
CBD Number: Version: Bill Number: Resolution Number:
2580 Amendment SB555
CBD Subject: Taxation


FUND(S):

State Road Fund

Sources of Revenue:

Other Fund State Road 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 provide whenever the average wholesale price of motor fuel is less than $2 per gallon, the tax on that fuel is increased by an additional $.04.
    
    According to our interpretation, the bill will add $.04 to the $.205 excise tax rate whenever the calculation of the wholesale price conducted every year prior to the application of the ten percent floor for the change in price or the $2.34 absolute floor currently in statute falls below $2 per gallon. This would effectively raise the excise tax on motor fuel to $.245 from $.205 each year this occurred. Current actual average wholesale prices for motor fuels are below $2.00 per gallon. If current price trends remain in place for the July 2016 to October 2016 period, passage of this bill would increase Motor Fuel Excise Tax collections by roughly $17.0 million in FY2017 and by roughly $40.0 million in FY2018. The proposed tax adjustment would not apply to alternative fuels.
    
    Additional costs to the Tax Department would be $1,400 in any year where the rate changes.
    
    



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 0 0 0
Personal Services 0 0 0
Current Expenses 0 0 0
Repairs and Alterations 0 0 0
Assets 0 0 0
Other 0 0 0
2. Estimated Total Revenues 0 0 0


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


    According to our interpretation, the bill will add $.04 to the $.205 excise tax rate whenever the calculation of the wholesale price conducted every year prior to the application of the ten percent floor for the change in price or the $2.34 absolute floor currently in statute falls below $2 per gallon. This would effectively raise the excise tax on motor fuel to $.245 from $.205 each year this occurred. Current actual average wholesale prices for motor fuels are below $2.00 per gallon. If current price trends remain in place for the July 2016 to October 2016 period, passage of this bill would increase Motor Fuel Excise Tax collections by roughly $17.0 million in FY2017 and by roughly $40.0 million in FY2018. The proposed tax adjustment would not apply to alternative fuels.
    
    Additional costs to the Tax Department would be $1,400 in any year where the rate changes.
    
    
    



Memorandum


    The stated purpose of this bill is to provide whenever the average wholesale price of motor fuel is less than $2 per gallon, the tax on that fuel is increased by an addition $.04.
    
    The Committee Substitute changes the amount added to the flat rate of the motor fuel tax when the “actual wholesale price” falls below $2.00 from $.05 to $ .04. The Committee Substitute attempts to distinguish “actual wholesale price” from the calculated wholesale price. The language is not clear.
    
    The bill mixes the two components of the motor fuel tax by adding to the flat rate with the calculation of the variable rate component.
    
    The term “actual wholesale price” is undefined and does not take into consideration the time period over which the average wholesale price is determined. The formula to determine the average wholesale price is over three pages and is set out in 110 CSR 14C. The market or “actual wholesale price” is part of the calculation.
    
    On line 19 “shall not fall below” should be in quotes in order for the sentence to make sense.
    
    The bill does not provide for the lifting of the excise tax when the average wholesale price rises again.
    



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