FISCAL NOTE

Date Requested: June 17, 2019
Time Requested: 04:18 PM
Agency: Tax & Revenue Department, WV State
CBD Number: Version: Bill Number: Resolution Number:
4003 Introduced HB167
CBD Subject:


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 create a personal income tax exemption of up to $3,000 per year to a parent or legal guardian of a student for expenses incurred in providing private or home school pre-K through 12 education for the student.
    
    Even though the stated purpose is to create a personal income tax exemption of up to $3,000 per year for qualified education expenses, the provisions of the bill would actually create a 100% tax credit of up to $3,000 for qualified expenses. If one $3,000 tax credit is allowed per taxpayer, the proposed bill could result in an annual loss to the General Revenue Fund of at least $30.0 million per year, assuming full participation, beginning in FY2020. The bill allows a 100 percent tax credit for qualified educational expenses up to a maximum of $3,000 for each parent or legal guardian of homeschooled children or children enrolled in a private school. In situations where educational expenses are shared between two or more taxpayers, such as a parent and a grandparent, there could be more than one $3,000 tax credit for the education of a single student. Under certain circumstances, the proposed tax credit could also influence a joint filing married couple to file separate tax returns for the purpose of gaining a total credit in excess of $3,000. According to the most recent statistics available, there are 11,397 students enrolled in private schools in West Virginia and 11,080 home-schooled students.
    
    The new tax credit would result in an increase in costs to the State Tax Department of $97,000 in FY2020 and $40,000 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 0 97,000 40,000
Personal Services 0 80,000 40,000
Current Expenses 0 0 0
Repairs and Alterations 0 0 0
Assets 0 2,000 0
Other 0 15,000 0
2. Estimated Total Revenues 0 -30,000,000 -30,000,000


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


    Even though the stated purpose is to create a personal income tax exemption of up to $3,000 per year for qualified education expenses, the provisions of the bill would actually create a 100% tax credit of up to $3,000 for qualified expenses. If one $3,000 tax credit is allowed per taxpayer, the proposed bill could result in an annual loss to the General Revenue Fund of at least $30.0 million per year, assuming full participation, beginning in FY2020. The bill allows a 100 percent tax credit for qualified educational expenses up to a maximum of $3,000 for each parent or legal guardian of homeschooled children or children enrolled in a private school. In situations where educational expenses are shared between two or more taxpayers, such as a parent and a grandparent, there could be more than one $3,000 tax credit for the education of a single student. Under certain circumstances, the proposed tax credit could also influence a joint filing married couple to file separate tax returns for the purpose of gaining a total credit in excess of $3,000. According to the most recent statistics available, there are 11,397 students enrolled in private schools in West Virginia and 11,080 home-schooled students.
    
    The new tax credit would result in an increase in costs to the State Tax Department of $97,000 in FY2020 and $40,000 in subsequent fiscal years.
    



Memorandum


    The stated purpose of this bill is to create a personal income tax exemption of up to $3,000 per year to a parent or legal guardian of a student for expenses incurred in providing private or home school pre-K through 12 education for the student.
    
    The bill creates a tax credit of up to $3,000 for each qualified taxpayer. It is unclear whether a taxpayer is limited to $3,000 total in tax credits or $3,000 for each eligible student. The bill title appears to state that the bill intends a maximum credit of $3,000, but the wording of the bill appears to indicate that the maximum amount may be per student.
    
    The definition of “qualified education expenses” is broad and vague. Terms used in the definition, such as “special needs services”, “transportation” and “peripheral equipment” are not defined.
    
    An eligible student appears to be one that attends an eligible private school or an eligible home school program. It is unclear whether the definition of eligible home school program is broad enough to include tutoring services of public school students. The broad definition of private school includes pre-K schools, and a number of day cares offer pre-K programs.
    
    The bill does not allow parents or legal guardians of students enrolled in public schools to take the tax credit even though they may also have incurred educational expenses. This distinction may run afoul of the West Virginia Constitution. Article X of the West Virginia Constitution requires that taxation “be equal and uniform throughout the state…”
    
    



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