FISCAL NOTE

Date Requested: March 08, 2017
Time Requested: 01:11 PM
Agency: Tax & Revenue Department, WV State
CBD Number: Version: Bill Number: Resolution Number:
1777 Introduced HB2862
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 establish the “Stay in the State Act” tax credit that allows residents of this state who remain in state after graduating with an undergraduate or associate degree from a state institution to be granted a tax credit for the total cost of tuition and interest for student loans used to obtain their degree; this tax credit is against personal property tax in West Virginia and is awarded over a ten year period; employers are also allowed to claim the credit for employees that qualify for the credit; and in-state high schools, colleges and universities are required to inform and assist students with obtaining the tax credit. According to our interpretation, this bill would allow a Personal Income Tax credit for student loan payments made by graduates who work in West Virginia. In addition, a credit is allowed for employers who make loan payments for their employees. The State Tax Department does not have sufficient information to accurately estimate the amount of credits or decreasing modifications that would be taken for student loan payments. We are unable to accurately estimate the revenue loss to the General Revenue Fund attributable to passage of this bill, but the loss could be substantial. Additional administrative costs incurred by the State Tax Department would be $45,000 in FY2019 and $35,000 in fiscal years thereafter.



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 0 35,000
Personal Services 0 0 35,000
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, this bill would allow a Personal Income Tax credit for student loan payments made by graduates who work in West Virginia. In addition, a credit is allowed for employers who make loan payments for their employees. The State Tax Department does not have sufficient information to accurately estimate the amount of credits or decreasing modifications that would be taken for student loan payments. We are unable to accurately estimate the revenue loss to the General Revenue Fund attributable to passage of this bill, but the loss could be substantial. Additional administrative costs incurred by the State Tax Department would be $45,000 in FY2019 and $35,000 in fiscal years thereafter.



Memorandum


The stated purpose of this bill is to establish the “Stay in the State Act” tax credit that allows residents of this state who remain in state after graduating with an undergraduate or associate degree from a state institution to be granted a tax credit for the total cost of tuition and interest for student loans used to obtain their degree; this tax credit is against personal property tax in West Virginia and is awarded over a ten year period; employers are also allowed to claim the credit for employees that qualify for the credit; and in-state high schools, colleges and universities are required to inform and assist students with obtaining the tax credit. The bill does not accomplish its purpose because its stated purpose indicates that the tax credit is against personal property taxes when, in fact, the tax credit is against personal income taxes. Further, the stated purpose says that this credit is awarded over a 10-year period. However, the bill appears to allow a taxpayer to claim the credit beyond 10 years. It does permit a 10-year carryforward period for any unused credit. In addition, the proposed bill is vague and difficult to administer. There are definition issues, portions of W. Va. Code §11-21-25(j)(6)(b) not providing enough guidance and an arguably a title defect in this bill in that it does not address the effective date, or that the credit is refundable under certain circumstances or that the credit may be carried forward for ten years or that credit is against personal income tax liability. It would be difficult to administer this credit as the proposed bill is vague in several different sections.



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