FISCAL NOTE
Date Requested: March 24, 2017
Time Requested: 11:42 AM |
| Agency: |
Tax & Revenue Department, WV State |
|---|
| CBD Number: |
Version: |
Bill Number: |
Resolution Number: |
| 1585 |
Introduced |
SB273 |
|
|---|
| CBD Subject: |
Education (Higher) |
|---|
|
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 provide a tax credit for education expenses and to enact an educational savings account program; providing a short title and definitions; qualifying for an educational savings account; amount of the account; responsibilities of the Treasurer; eligibility requirements for participating entities; responsibilities of resident school districts; and legal proceedings.
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. 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.
The credits in this legislation are retroactive to Tax Year 2016 which would result in amended returns in FY2018. The combined revenue losses are estimated to be up to $158.8 million in FY2018 and $79.4 million annually beginning in FY2019.
In addition, the proposed legislation attempts to enact an educational savings account program. The bill provides all the necessary information for the operation of an educational savings account program, but the bill fails to include language establishing, authorizing or creating the program.
Since passage of this bill would result in the processing of additional refunds in FY2018, additional costs attributable to the processing of these refunds would be significant. Additional administrative costs to the Tax Department would be $150,000 for FY2019 and 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 |
150,000 |
| Personal Services |
0 |
0 |
150,000 |
| Current Expenses |
0 |
0 |
0 |
| Repairs and Alterations |
0 |
0 |
0 |
| Assets |
0 |
0 |
0 |
| Other |
0 |
0 |
0 |
| 2. Estimated Total Revenues |
0 |
-158,800,000 |
-79,400,000 |
Explanation of above estimates (including long-range effect):
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. 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.
The credits in this legislation are retroactive to Tax Year 2016 which would result in amended returns in FY2018. The combined revenue losses are estimated to be up to $158.8 million in FY2018 and $79.4 million annually beginning in FY2019.
In addition, the proposed legislation attempts to enact an educational savings account program. The bill provides all the necessary information for the operation of an educational savings account program, but the bill fails to include language establishing, authorizing or creating the program.
Since passage of this bill would result in the processing of additional refunds in FY2018, additional costs attributable to the processing of these refunds would be significant. Additional administrative costs to the Tax Department would be $150,000 for FY2019 and thereafter.
Memorandum
The stated purpose of this bill is to provide a tax credit for education expenses and to enact an educational savings account program; providing a short title and definitions; qualifying for an educational savings account; amount of the account; responsibilities of the Treasurer; eligibility requirements for participating entities; responsibilities of resident school districts; and legal proceedings.
For tax years beginning on or after January 1, 2016, the bill retroactively creates a nonrefundable credit against the personal income tax for expenses incurred relative to the education of a child under the age of twenty-one who is a resident in the state or for expenses incurred for the purchase of supplementary education materials or professional development costs incurred by a classroom teacher employed by a public or private school.
The bill fails to accomplish its purpose in enacting an educational savings account program. The bill provides the name of the program, definitions, qualifications for receiving an account; the required amount of funds in the account, responsibilities of the Treasurer, eligibility requirements for participating entities (entities which are authorized to accept payments from an account), responsibilities of resident school districts, and legal proceedings, but does not include the language necessary to actually establish the program.
The bill’s definitions and requirements are in broad terms. There is much room for interpretation.
Person submitting Fiscal Note: Mark Muchow
Email Address: kerri.r.petry@wv.gov