FISCAL NOTE

Date Requested: February 13, 2018
Time Requested: 01:11 PM
Agency: Tax & Revenue Department, WV State
CBD Number: Version: Bill Number: Resolution Number:
2615 Introduced HB4565
CBD Subject: Taxation


FUND(S):

General Revenue Fund

Sources of Revenue:

General Fund

Legislation creates:

Decreases Existing Revenue, Increases Existing Expenses



Fiscal Note Summary


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


    The stated purpose of this bill is to exempt social security benefits from personal income tax.
    
    The bill proposes a modification that would reduce federal adjusted gross income, for West Virginia Personal Income Tax purposes, by the amount of Social Security benefits paid to the extent that the benefits are included in federal adjusted gross income. The modification would be effective for taxable years beginning after December 31, 2018.
    
    According to our interpretation, passage of the bill would reduce General Revenue Fund collections by roughly $92.0 million in FY2020 due to the exclusion of taxable social security benefits from the State Personal Income Tax. The value of the proposed tax exclusion will escalate over time as members of the baby-boom generation begin receiving Social Security benefits.
    
    Additional administrative costs incurred by the State Tax Department would be $12,000 in FY2020 and $10,000 in each of the fiscal years thereafter.
    



Fiscal Note Detail


Effect of Proposal Fiscal Year
2018
Increase/Decrease
(use"-")
2019
Increase/Decrease
(use"-")
Fiscal Year
(Upon Full
Implementation)
1. Estmated Total Cost 0 0 10,000
Personal Services 0 0 10,000
Current Expenses 0 0 0
Repairs and Alterations 0 0 0
Assets 0 0 0
Other 0 0 0
2. Estimated Total Revenues 0 -92,000,000 0


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


    According to our interpretation, passage of the bill would reduce General Revenue Fund collections by roughly $92.0 million in FY2020 due to the exclusion of taxable social security benefits from the State Personal Income Tax. The value of the proposed tax exclusion will escalate over time as members of the baby-boom generation begin receiving Social Security benefits.
    
    Additional administrative costs incurred by the State Tax Department would be $12,000 in FY2020 and $10,000 in each of the fiscal years thereafter.
    



Memorandum


    The stated purpose of this bill is to exempt social security benefits from personal income tax.
    
    The bill does not accomplish its purpose as it provides a reducing modification rather than an exemption. There is a title defect in this bill as it fails to mention the internal effective date.
    
    The bill does not define ‚Äúsocial security benefits. The proposed bill covers all the benefits received under 42 U.S.C., Chapter 7, the Social Security Act. However, there are a few items in the Social Security Act which may not be typically thought of as social security benefits, such as providing funds to assist the States in the administration of their unemployment compensation laws. Therefore, some definition of what benefits are included in this proposed modification would be useful to avoid confusion and possible litigation.
    
    



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