FISCAL NOTE

Date Requested: January 21, 2019
Time Requested: 01:43 PM
Agency: Tax & Revenue Department, WV State
CBD Number: Version: Bill Number: Resolution Number:
1784 Introduced HB2569
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 reinstate the film tax credits removed by the Legislature in 2018 by the passage of Enrolled Senate Bill 263. According to our interpretation of this bill, the Film Tax Credit would be reinstated and apply to all taxable years after December 31, 2018. This bill is to be applied retroactively to all tax years prior to the enactment of the bill’s amendments. Eligible film investment expenditures would need to be made after December 31, 2018. Prior law had allocated up to $5 million per year in tax credits for qualified film production. The average cost of the former Film Tax Credit between calendar years 2011 and 2017 was $1.8 million per year with a maximum credit amount during this same period of $4 million per year. There is often significant delay between the allotment of tax credits and their utilization on tax returns given that most of these tax credits are sold to third parties. Passage of this bill would result in a loss to the General Revenue Fund of roughly $2 million in FY2020 and roughly $4 million in FY2021 and in subsequent fiscal years. Additional administrative costs incurred by the State Tax Department would be $10,000 in the remainder of FY2019, $25,000 in FY2020 and $10,000 in subsequent fiscal years.



Fiscal Note Detail


Effect of Proposal Fiscal Year
2019
Increase/Decrease
(use"-")
2020
Increase/Decrease
(use"-")
Fiscal Year
(Upon Full
Implementation)
1. Estmated Total Cost 10,000 25,000 10,000
Personal Services 10,000 25,000 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 -2,000,000 -4,000,000


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


According to our interpretation of this bill, the Film Tax Credit would be reinstated and apply to all taxable years after December 31, 2018. This bill is to be applied retroactively to all tax years prior to the enactment of the bill’s amendments. Eligible film investment expenditures would need to be made after December 31, 2018. Prior law had allocated up to $5 million per year in tax credits for qualified film production. The average cost of the former Film Tax Credit between calendar years 2011 and 2017 was $1.8 million per year with a maximum credit amount during this same period of $4 million per year. There is often significant delay between the allotment of tax credits and their utilization on tax returns given that most of these tax credits are sold to third parties. Passage of this bill would result in a loss to the General Revenue Fund of roughly $2 million in FY2020 and roughly $4 million in FY2021 and in subsequent fiscal years. Additional administrative costs incurred by the State Tax Department would be $10,000 in the remainder of FY2019, $25,000 in FY2020 and $10,000 in subsequent fiscal years.



Memorandum


The stated purpose of this bill is to reinstate the film tax credits removed by the Legislature in 2018 by the passage of Enrolled Senate Bill 263. There may be administrative challenges to potentially untangle credit applicant’s attempts to deal with the previous repeal of the credit while applying the credit retroactively as if the repeal did not happen.



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