FISCAL NOTE
Date Requested: January 29, 2020
Time Requested: 11:50 AM |
| Agency: |
Tax & Revenue Department, WV State |
|---|
| CBD Number: |
Version: |
Bill Number: |
Resolution Number: |
| 2126 |
Amendment |
HB4421 |
|
|---|
| 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 the proposed version of this bill is to encourage development, transportation and use of natural gas liquids for the benefit of natural gas projects in the state by providing certain tax credits related to the production, transportation, storage, use and consumption of natural gas liquids. As amended, the presumed purpose of the bill would be limited to providing certain tax credits related to the transportation and storage of natural gas liquids.
The provisions of the original bill would give an eligible business a State tax credit equal to the amount of West Virginia property taxes paid on equipment and inventory from their business activities. According to our interpretation, the proposed amendment to this bill limits the eligible taxpayer to any natural gas liquid storer or transporter that is subject to the Personal Income Tax or Corporation Net Income Tax, including those members of an affiliated group of taxpayers engaged in a unitary business. This group of eligible taxpayers would be eligible for a State tax credit equal to the amount of West Virginia property taxes paid on equipment and inventory from their business activities. This amended bill would only include members who use natural gas liquids in their business activities as eligible taxpayers. Eligible taxpayer is generally defined to be any natural gas liquid producer, natural gas liquids storer, natural gas liquids user or natural gas liquids transporter who owns or operates pipeline facilities used for the transportation and delivery of natural gas liquids for storage, used in manufacturing or consumption. The amendment to this bill removed the credit available against the Severance Tax. Passage of this amended bill could initially result in a loss of up to $1 million to the General Revenue Fund in FY2022 based on limited storage and transportation activities in West Virginia. As these sectors grow in response to increased future activity, local property taxes on associated machinery and inventory will likely increase significantly along with the potential loss in State General revenue associated with the tax credits for local taxes paid.
Additional administrative costs incurred by the State Tax Department would be $25,000 in FY2021 and $10,000 in subsequent fiscal years. Administrative costs incurred by the State Property Tax Division would be minimal, as the division would only be involved in providing the inventory and equipment values for calculations of the proposed tax credit.
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 |
25,000 |
10,000 |
| Personal Services |
0 |
10,000 |
10,000 |
| Current Expenses |
0 |
0 |
0 |
| Repairs and Alterations |
0 |
0 |
0 |
| Assets |
0 |
0 |
0 |
| Other |
0 |
15,000 |
0 |
| 2. Estimated Total Revenues |
0 |
-1,000,000 |
-1,000,000 |
Explanation of above estimates (including long-range effect):
The provisions of the original bill would give an eligible business a State tax credit equal to the amount of West Virginia property taxes paid on equipment and inventory from their business activities. According to our interpretation, the proposed amendment to this bill limits the eligible taxpayer to any natural gas liquid storer or transporter that is subject to the Personal Income Tax or Corporation Net Income Tax, including those members of an affiliated group of taxpayers engaged in a unitary business. This group of eligible taxpayers would be eligible for a State tax credit equal to the amount of West Virginia property taxes paid on equipment and inventory from their business activities. This amended bill would only include members who use natural gas liquids in their business activities as eligible taxpayers. Eligible taxpayer is generally defined to be any natural gas liquid producer, natural gas liquids storer, natural gas liquids user or natural gas liquids transporter who owns or operates pipeline facilities used for the transportation and delivery of natural gas liquids for storage, used in manufacturing or consumption. The amendment to this bill removed the credit available against the Severance Tax. Passage of this amended bill could initially result in a loss of up to $1 million to the General Revenue Fund in FY2022 based on limited storage and transportation activities in West Virginia. As these sectors grow in response to increased future activity, local property taxes on associated machinery and inventory will likely increase significantly along with the potential loss in State General revenue associated with the tax credits for local taxes paid.
Additional administrative costs incurred by the State Tax Department would be $25,000 in FY2021 and $10,000 in subsequent fiscal years. Administrative costs incurred by the State Property Tax Division would be minimal, as the division would only be involved in providing the inventory and equipment values for calculations of the proposed tax credit.
Memorandum
The stated purpose of the proposed version of this bill is to encourage development, transportation and use of natural gas liquids for the benefit of natural gas projects in the state by providing certain tax credits related to the production, transportation, storage, use and consumption of natural gas liquids. As amended, the presumed purpose of the bill would be limited to providing certain tax credits related to the transportation and storage of natural gas liquids.
The amended bill creates doubt as to the continued viability of W.Va. Code §§11-24-13a(g) and 11-24-13c(b)(2). Section 11-24-13a(g) limits application of a credit to the single entity that earned the credit and to the entity’s proportionate share, while section 11-24-13c(b)(2) provides that no tax credit earned by one member of a unitary group, but not fully used or allowed to that member, may be used by another member of the group or applied against the total income of the combined group. In contrast, the bill defines “eligible taxpayer” to include “those members of an affiliated group of taxpayers engaged in a unitary business, in which one or members of the affiliated group is a person subject to the Personal Income Tax or Corporation Net Income Tax.”
While the bill’s title states that the bill “authorizes the Tax Commissioner to promulgate rules,” no such explicit authorization can be found, unless it can be inferred by the bill’s provision that taxpayers claiming the credit must provide information required by the Tax Commissioner.
Person submitting Fiscal Note: Mark Muchow
Email Address: kerri.r.petry@wv.gov