FISCAL NOTE
Date Requested: February 08, 2017
Time Requested: 06:33 PM |
| Agency: |
Tax & Revenue Department, WV State |
|---|
| CBD Number: |
Version: |
Bill Number: |
Resolution Number: |
| 1037 |
Introduced |
SB24 |
|
|---|
| 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 create income tax credits against personal income tax for educational expenses incurred by parents for a child under twenty-one years of age and for expenses incurred by teachers for the purchase of supplementary educational materials or professional development costs.
Our interpretation of the proposed legislation suggests taxpayers with dependent children currently enrolled in a public or private educational program—possibly at primary, secondary, or postsecondary levels—may be eligible to claim this credit so long as that child resides in the State and is under 21 years of age. Thus, all educational levels are considered. Estimates reflect the maximum credit claimed for all eligible dependent children and teachers. It is reasonable that the full credit will likely not be claimed for every dependent child or eligible teacher should the proposed bill be enacted; however, determining partial participation if portions of available credits are not claimed is difficult.
With respect to educational expenses incurred by parents for a child under 21 years of age, the resulting revenue impact is estimated to be a loss of $57.0 million annually beginning in FY2018. The tax credit would equal 100% of costs up to $500 per year per child. With respect to expenses incurred by teachers for the purchase of supplementary educational materials or professional development costs, if all teachers at public and private primary and secondary institutions in the State were to claim the maximum credit, the estimate revenue impact would be a loss of approximately $22.4 million annually. The tax credit equals 100% of expenses up to $1,000 per year. It should be noted that current law allows a federal and state deduction of similar expenses, up to $250 for each year, for instructors in the State. There were 18,800 claims totaling nearly $4.8 million in TY2013, representing less than full participation from eligible instructors. The proposed bill keeps this deduction and adds an additional credit. The added incentive could likely increase participation, thus increasing the number of deduction claims each year. Combined, revenue losses are estimated to be up to $79.4 million annually beginning in FY2018.
The State Tax Department would incur $170,000 in additional administrative costs in FY2018 and $150,000 per year in subsequent fiscal years.
Fiscal Note Detail
| Effect of Proposal |
Fiscal Year |
2017
Increase/Decrease
(use"-") |
2018
Increase/Decrease
(use"-") |
Fiscal Year
(Upon Full
Implementation) |
| 1. Estmated Total Cost |
0 |
170,000 |
150,000 |
| Personal Services |
0 |
150,000 |
150,000 |
| Current Expenses |
0 |
0 |
0 |
| Repairs and Alterations |
0 |
0 |
0 |
| Assets |
0 |
10,000 |
0 |
| Other |
0 |
10,000 |
0 |
| 2. Estimated Total Revenues |
0 |
-79,400,000 |
-79,400,000 |
Explanation of above estimates (including long-range effect):
Our interpretation of the proposed legislation suggests taxpayers with dependent children currently enrolled in a public or private educational program—possibly at primary, secondary, or postsecondary levels—may be eligible to claim this credit so long as that child resides in the State and is under 21 years of age. Thus, all educational levels are considered. Estimates reflect the maximum credit claimed for all eligible dependent children and teachers. It is reasonable that the full credit will likely not be claimed for every dependent child or eligible teacher should the proposed bill be enacted; however, determining partial participation if portions of available credits are not claimed is difficult.
With respect to educational expenses incurred by parents for a child under 21 years of age, the resulting revenue impact is estimated to be a loss of $57.0 million annually beginning in FY2018. The tax credit would equal 100% of costs up to $500 per year per child. With respect to expenses incurred by teachers for the purchase of supplementary educational materials or professional development costs, if all teachers at public and private primary and secondary institutions in the State were to claim the maximum credit, the estimate revenue impact would be a loss of approximately $22.4 million annually. The tax credit equals 100% of expenses up to $1,000 per year. It should be noted that current law allows a federal and state deduction of similar expenses, up to $250 for each year, for instructors in the State. There were 18,800 claims totaling nearly $4.8 million in TY2013, representing less than full participation from eligible instructors. The proposed bill keeps this deduction and adds an additional credit. The added incentive could likely increase participation, thus increasing the number of deduction claims each year. Combined, revenue losses are estimated to be up to $79.4 million annually beginning in FY2018.
The State Tax Department would incur $170,000 in additional administrative costs in FY2018 and $150,000 per year in subsequent fiscal years.
Memorandum
The stated purpose of this bill is to create income tax credits against personal income tax for educational expenses incurred by parents for a child under twenty-one years of age and for expenses incurred by teachers for the purchase of supplementary educational materials or professional development costs.
The proposed bill has a possible title defect as the language in the body of the bill includes no mention of “parents” as eligible Taxpayers for the credit, although mentioned in the title. The bill does not specify who actually has to incur the expenses related to the education of a child, and it is recommended the language be amended to include this specification. Similarly, the bill does not specify that qualifying expenses have to be incurred by the teacher instructing the student subject, nor does it include language prohibiting a Taxpayer from claiming the credit twice (i.e., as both a teacher and a non-teacher).
The word “student” would be more appropriate than “child” as children become adults at the age of 18. The bill fails to clarify if a Taxpayer or teacher could claim the credit for more than one child, and fails to define “supplementary education materials or professional development costs.” Further, the bill is unclear as to whether the credit is available for students who are residents of West Virginia but who are educated out-of-state.
As written, the definition of “qualifying expense” leaves open many possibilities as to what would constitute a qualifying expense. It is unclear whether such expenses as transportation costs to and from school, travel expenses for class trips, and music lessons, for example, would qualify. The bill is also unclear whether a single expenditure benefitting more than one student would be prorated among those students. The bill does not establish a rulemaking authority.
Person submitting Fiscal Note: Mark Muchow
Email Address: kerri.r.petry@wv.gov