FISCAL NOTE

Date Requested: February 07, 2020
Time Requested: 10:54 AM
Agency: Tax & Revenue Department, WV State
CBD Number: Version: Bill Number: Resolution Number:
2828 Introduced HB4757
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 create tax credits for persons and corporations that own or lease residential property where children reside or may reside that undertake lead abatement remediation projects; providing for a tax credit against personal income and corporate net income taxes for a percentage of the costs of the remediation; and allow for agency rule making to implement the verification of eligibility requirements for and the tax credit program. According to our interpretation, the provisions of this bill would provide eligible individuals and corporations with a tax credit based on the costs of certified lead paint abatement from certain residential use properties. The tax credit would be 75 percent of costs for projects completed between July 1, 2021 and June 30, 2023, 50 percent of costs for projects completed between July 1, 2023 and June 30, 2024, a 25 percent credit only on corporate tax returns for projects completed July 1, 2024 and June 30, 2025, and a 25 percent credit only on personal income tax returns for projects completed between July 1, 2025 and June 30, 2026. There is no ceiling on the amount of costs qualifying for income tax credits. The revenue loss associated with the proposed tax credits cannot readily be determined due to lack of information on the number of taxpayers who would qualify and the amount of lead abatement costs subject to the credit. It is predicted that lead paint abatement projects may increase with the passage of this bill since the tax credit would help defray expensive abatement costs According to the West Virginia Department of Health and Human Resources (DHHR) Lead Paint Abatement Program Manager, the last notification for a true abatement project was in 2015 for a historic home. West Virginia does not have any laws making lead paint abatement mandatory in homes, apartments, and daycares. Costs for hiring a lead paint abatement company can be expensive with total costs potentially exceeding $10,000 for a 2,000 square-foot home. Most property owners opt for interim controls like repainting and cleaning to deal with the lead paint issue. Additional administrative costs to the Tax Department would be approximately $20,000 in FY2022 and $5,000 in the subsequent years.



Fiscal Note Detail


Effect of Proposal Fiscal Year
2020
Increase/Decrease
(use"-")
2021
Increase/Decrease
(use"-")
Fiscal Year
(Upon Full
Implementation)
1. Estmated Total Cost 0 0 5,000
Personal Services 0 0 5,000
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 provisions of this bill would provide eligible individuals and corporations with a tax credit based on the costs of certified lead paint abatement from certain residential use properties. The tax credit would be 75 percent of costs for projects completed between July 1, 2021 and June 30, 2023, 50 percent of costs for projects completed between July 1, 2023 and June 30, 2024, a 25 percent credit only on corporate tax returns for projects completed July 1, 2024 and June 30, 2025, and a 25 percent credit only on personal income tax returns for projects completed between July 1, 2025 and June 30, 2026. There is no ceiling on the amount of costs qualifying for income tax credits. The revenue loss associated with the proposed tax credits cannot readily be determined due to lack of information on the number of taxpayers who would qualify and the amount of lead abatement costs subject to the credit. It is predicted that lead paint abatement projects may increase with the passage of this bill since the tax credit would help defray expensive abatement costs According to the West Virginia Department of Health and Human Resources (DHHR) Lead Paint Abatement Program Manager, the last notification for a true abatement project was in 2015 for a historic home. West Virginia does not have any laws making lead paint abatement mandatory in homes, apartments, and daycares. Costs for hiring a lead paint abatement company can be expensive with total costs potentially exceeding $10,000 for a 2,000 square-foot home. Most property owners opt for interim controls like repainting and cleaning to deal with the lead paint issue. Property owners also have the option of the Federal Renovation, Repair and Paint (RRP) law. Home remodeling and general repair fall under this category. General contractors should have RRP training to work on pre-1978 homes. Since they are not removing lead paint but usually removing the drywall, it is not as time consuming or expensive. Additional administrative costs to the Tax Department would be approximately $20,000 in FY2022 and $5,000 in the subsequent years.



Memorandum


The stated purpose of this bill is to create tax credits for persons and corporations that own or lease residential property where children reside or may reside that undertake lead abatement remediation projects; providing for a tax credit against personal income and corporate net income taxes for a percentage of the costs of the remediation; and allow for agency rule making to implement the verification of eligibility requirements for and the tax credit program. The provisions of this bill include new tax credits placed in sections of the Code normally reserved for income modifications or deductions. The bill adds a tax credit against personal income tax for owners or lessors of child-occupied residential properties and against corporation net income tax for corporations operating child-occupied residential properties. In order to qualify for the credit, the taxpayer must pay for lead abatement projects performed by a licensed lead abatement contractor done in compliance with the requirements of §16-35-1, et seq. The bill does not specifically state that the lead abatement project has to be completed on the child-occupied residential property in order to qualify for the tax credit, only that the owner or operator of a child-occupied residential property has to pay for a lead abatement project. For the corporation net income tax credit, the credit is specifically for those taxpayers that operate the child-occupied residential property, rather than own the property. Therefore, it leaves open the question as to whether a corporation that owns the property would be entitled to the tax credit if it pays for the lead abatement, but where another corporation or entity operates the business. There may be cases in which a taxpayer does not pay for the entire abatement project themselves, but also receives funding from another source. It is unclear from this bill how the tax credit is to be calculated under those circumstances. These tax credits may be difficult to administer. The bill provides that the Department of Health and Human Resources is to provide the forms to the lead abatement contractors for submission to the Tax Department confirming the amount of the project, that that project met federal and state standards, and when the project was completed. The form does not specially certify that work was done by a licensed lead abatement contractor. The bill also states that the owner or operator of the property must submit a copy to the Tax Commissioner. It is unclear if the Tax Department will be receiving two copies of this form, one from the lead abatement contractor and one from the owner or operator of the property. The bill title states that the bill establishes “personal and corporate tax credit to owners or occupiers of these residences.” The bill actually establishes tax credits against personal income tax and corporation net income tax for owners, operators, or lessors of child occupied residential properties that pay for lead abatement projects; but there is no credit for occupiers. There is nothing in this bill that would prevent a taxpayer that owns and operates a child-occupied residential property from deducting the expenses of abatement on their federal income taxes as an expense deduction and then also claiming this state tax credit. The bill gives the “Department of Revenue” authority to promulgate Legislative Rules regarding these credits. They should authorize the Tax Commissioner to promulgate such rules. The bill is vague. The terms’ “child occupied residential properties” and “lead abatement projects” are not defined.



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