FISCAL NOTE

Date Requested: February 12, 2019
Time Requested: 12:53 PM
Agency: Tax & Revenue Department, WV State
CBD Number: Version: Bill Number: Resolution Number:
3044 Introduced HB3015
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 provide a tax credit for persons who graduate with an associate’s, bachelor’s, or graduate degree in the area of science, technology, engineering, mathematics, nursing, or teaching from any regionally accredited in-state or out-of-state higher education institution or any regionally accredited in-state community and technical college and who thereafter continue to reside in this state. According to our interpretation, the proposed bill would allow a tax credit for college graduates who complete a two-year, four-year, or post-graduate degree program in the specific areas mentioned above. The amount of the credit is equal to the amount of taxes paid for the year in which the taxpayer graduates and the next subsequent year, not to exceed $1,500 per year, and no more than $3,000 for the two years. In the third year, the taxpayer may apply a refund for the allowable credit not used in the first two years. The State Tax Department does not have sufficient information to accurately estimate the revenue loss from this proposal, but the loss would be substantial. Additional administrative costs incurred by the State Tax Department would be $65,000 in the first year of implementation and $40,000 per year for each year thereafter.  



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 0 0 40,000
Personal Services 0 0 40,000
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, the proposed bill would allow a tax credit for college graduates who complete a two-year, four-year, or post-graduate degree program in the specific areas mentioned above. The amount of the credit is equal to the amount of taxes paid for the year in which the taxpayer graduates and the next subsequent year, not to exceed $1,500 per year, and no more than $3,000 for the two years. In the third year, the taxpayer may apply a refund for the allowable credit not used in the first two years. The State Tax Department does not have sufficient information to accurately estimate the revenue loss from this proposal, but the loss would be substantial. Additional administrative costs incurred by the State Tax Department would be $65,000 in the first year of implementation and $40,000 per year for each year thereafter.  



Memorandum


The stated purpose of this bill is to provide a tax credit for persons who graduate with an associate’s, bachelor’s, or graduate degree in the area of science, technology, engineering, mathematics, nursing, or teaching from any regionally accredited in-state or out-of-state higher education institution or any regionally accredited in-state community and technical college and who thereafter continue to reside in this state. An “eligible taxpayer” is defined in the bill as “a person who graduates with an associate’s degree, a bachelor’s degree, or a graduate degree in the area of science, technology, engineering, mathematics, nursing, or teaching from any regionally accredited in-state or higher education institution or any regionally accredited in-state community and technical college on or after January 1, 2019, and before January 1, 2024, and who thereafter continuously resides in this state from the date of graduation through the next subsequent year.” This definition does not include the “out-of-state higher education institution” mentioned in the bill’s purpose note. The bill purports to allow a credit for tax years beginning after December 31, 2018; but the definition of “eligible taxpayer” results in there being no possibility of an “eligible taxpayer” until after December 31, 2020, at the earliest. The amount of the credit is determined by the person’s personal income tax “paid and otherwise unrefundable . . . for the taxable year in which the eligible taxpayer graduated and the next subsequent year, not to exceed $1,500 per year.” However, the credit cannot be applied against the eligible taxpayer’s personal income tax liability until year three (i.e., after the year of graduation and the subsequent year). In the third year (the second year after graduation), the eligible taxpayer must apply for “a refund of the allowable tax credits” by April 30. In the title of subsection (c), the credit is identified as “refundable,” which usually means that the amount of the credit can exceed the amount of tax owed so that a taxpayer’s liability can be reduced to zero and they can get a “refund” on top of that. However, nothing in the rest of the bill indicates that this credit is refundable to that extent. If the eligible taxpayer fails to apply for the credit before April 30 of year three, then the credit is forfeited. It is unclear why April 30 is the date set for forfeiture, when personal income taxes are normally due by April 15 following the end of the tax year.   No credit may be refunded for any personal income tax imposed after December 31, 2024. This provision is unclear. If this means that the credit may not be applied to tax years after 2024, then persons who graduate in 2024 will not have a chance to qualify as “eligible taxpayers” before the credit expires, since they will have to reside in West Virginia for all of 2025 (the next subsequent year) before becoming eligible.



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