FISCAL NOTE
Date Requested: February 16, 2021
Time Requested: 01:27 PM |
| Agency: |
Tax & Revenue Department, WV State |
|---|
| CBD Number: |
Version: |
Bill Number: |
Resolution Number: |
| 2339 |
Introduced |
HB2499 |
|
|---|
| CBD Subject: |
Taxation |
|---|
|
FUND(S):
General Revenue Fund, local governments
Sources of Revenue:
General Fund local property tax revenue
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 stimulate economic growth in manufacturing industries by amending the definition of manufacturing for purposes of special method for appraising qualified capital additions to manufacturing facilities for property tax purposes; by amending the formula for calculating credit allowed for manufacturing investment to include small arms ammunition manufacturing; by creating the West Virginia Tax Credit for Federal Excise Tax Imposed Upon Small Arms and Ammunition Manufacturers and providing for its administration and enforcement of the tax credit; and by exempting sales of small arms and small arms ammunition from state sales and use tax.
As written this bill proposes changes to the State Manufacturing Tax Credit and to the valuation procedures for the local ad valorem property tax with regards to small arms manufacturing activity. This bill also provides a ten year State tax credit for federal excise tax imposed upon small arms manufacturers that would be used to offset Corporation Net Income Tax and Personal Income Tax liabilities and exempts sales of small arms and small arms ammunition from State Sales and Use Tax. There is currently a 10 percent federal excise tax imposed on sales of handguns and an 11 percent federal excise tax on other ammunition (shells and cartridges) and other firearms which include rifles, shotguns, machine guns, etc. Per federal law, small manufacturers who manufacture, produce, or import less than 50 firearms per year are exempt from the federal excise tax on firearms. The proposed tax credit to small arms manufacturing equal to the amount of federal excise tax paid by such manufacturers would be minimal.
The current Manufacturing Investment Tax Credit already applies to all manufacturing activity in West Virginia including any manufacturing of small arms. Currently the Manufacturing Investment Tax Credit is equivalent to 5 percent of the qualified investment amount. The proposed bill would give a preference to small arms manufacturers by increasing the qualified investment percentage from 5 percent to 50 percent. The proposed tax credit enhancement provisions are not likely to have any fiscal impact given that such industry already qualifies for the benefits of the tax credit under current law.
The proposed bill would also lower the minimum capital investment requirement for salvage valuation treatment under the Special Method for Appraising Qualified Capital Additions to Manufacturing Facilities from $50 million to $1 million only for small arms manufacturing facilities located within two miles of a manufacturing facility owned or operated by the person making the capital addition that has a total original cost before the capital addition of at least $2 million. The potential cost in property tax revenue to local governments would be no more than minimal because this additional tax preference would narrowly apply only to small arms manufacturing, an activity with little or no existing presence in West Virginia. However, the proposed tax preference would provide small arms manufacturing facilities with a significant local property tax preference relative to nearly all other businesses in West Virginia and to businesses in other states given that the use of the salvage valuation formula would apply not only to investment in tangible personal property but also to any real property improvements.
In addition, the bill exempts small arms and small arms ammunition from Consumers Sales Tax. The exemption would result in a loss of $1.4 million to General Revenue Fund in FY2022 and $1.5 million in FY2023 and subsequent fiscal years.
Additional administrative costs incurred by the State Tax Department would be $15,000 in FY2021 and FY2022 and minimal in subsequent fiscal years.
Fiscal Note Detail
| Effect of Proposal |
Fiscal Year |
2021
Increase/Decrease
(use"-") |
2022
Increase/Decrease
(use"-") |
Fiscal Year
(Upon Full
Implementation) |
| 1. Estmated Total Cost |
35,000 |
35,000 |
5,000 |
| Personal Services |
20,000 |
20,000 |
0 |
| Current Expenses |
0 |
0 |
0 |
| Repairs and Alterations |
0 |
0 |
0 |
| Assets |
0 |
0 |
0 |
| Other |
15,000 |
15,000 |
5,000 |
| 2. Estimated Total Revenues |
0 |
-1,400,000 |
-1,500,000 |
Explanation of above estimates (including long-range effect):
As written this bill proposes changes to the State Manufacturing Tax Credit and to the valuation procedures for the local ad valorem property tax with regards to small arms manufacturing activity. This bill also provides a ten year State tax credit for federal excise tax imposed upon small arms manufacturers that would be used to offset Corporation Net Income Tax and Personal Income Tax liabilities and exempts sales of small arms and small arms ammunition from State Sales and Use Tax. There is currently a 10 percent federal excise tax imposed on sales of handguns and an 11 percent federal excise tax on other ammunition (shells and cartridges) and other firearms which include rifles, shotguns, machine guns, etc. Per federal law, small manufacturers who manufacture, produce, or import less than 50 firearms per year are exempt from the federal excise tax on firearms. The proposed tax credit to small arms manufacturing equal to the amount of federal excise tax paid by such manufacturers would be minimal.
The current Manufacturing Investment Tax Credit already applies to all manufacturing activity in West Virginia including any manufacturing of small arms. Currently the Manufacturing Investment Tax Credit is equivalent to 5 percent of the qualified investment amount. The proposed bill would give a preference to small arms manufacturers by increasing the qualified investment percentage from 5 percent to 50 percent. The proposed tax credit enhancement provisions are not likely to have any fiscal impact given that such industry already qualifies for the benefits of the tax credit under current law.
The proposed bill would also lower the minimum capital investment requirement for salvage valuation treatment under the Special Method for Appraising Qualified Capital Additions to Manufacturing Facilities from $50 million to $1 million only for small arms manufacturing facilities located within two miles of a manufacturing facility owned or operated by the person making the capital addition that has a total original cost before the capital addition of at least $2 million. The potential cost in property tax revenue to local governments would be no more than minimal because this additional tax preference would narrowly apply only to small arms manufacturing, an activity with little or no existing presence in West Virginia. However, the proposed tax preference would provide small arms manufacturing facilities with a significant local property tax preference relative to nearly all other businesses in West Virginia and to businesses in other states given that the use of the salvage valuation formula would apply not only to investment in tangible personal property but also to any real property improvements.
In addition, the bill exempts small arms and small arms ammunition from Consumers Sales Tax. The exemption would result in a loss of $1.4 million to General Revenue Fund in FY2022 and $1.5 million in FY2023 and subsequent fiscal years.
Additional administrative costs incurred by the State Tax Department would be $15,000 in FY2021 and FY2022 and minimal in subsequent fiscal years.
Memorandum
The stated purpose of this bill is to stimulate economic growth in manufacturing industries by amending the definition of manufacturing for purposes of special method for appraising qualified capital additions to manufacturing facilities for property tax purposes; by amending the formula for calculating credit allowed for manufacturing investment to include small arms ammunition manufacturing; by creating the West Virginia Tax Credit for Federal Excise Tax Imposed Upon Small Arms and Ammunition Manufacturers and providing for its administration and enforcement of the tax credit; and by exempting sales of small arms and small arms ammunition from state sales and use tax.
The bill does not define the term “portable firearm”. This bill is also silent with regards to arms with more than one barrel.
Person submitting Fiscal Note: Mark Muchow
Email Address: kerri.r.petry@wv.gov