FISCAL NOTE

Date Requested: March 08, 2021
Time Requested: 10:10 AM
Agency: Tax & Revenue Department, WV State
CBD Number: Version: Bill Number: Resolution Number:
2977 Introduced SB571
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 the West Virginia Earned Income Tax Credit. The bill authorizes a refundable tax credit based upon the federal earned income tax credit. The bill determines eligibility for the credit. The bill determines the amount of the credit. According to our interpretation, the bill would eliminate the current nonrefundable Low-income Family Tax Credit (FTC) and replace it with a refundable West Virginia Earned Income Tax Credit (WVEITC). For taxable years after December 31, 2021, a West Virginia resident who is eligible for and claims the federal earned income credit is eligible for a credit equal to 25 percent of the amount of the federal earned income tax credit (EITC). Qualification for the federal EITC is not limited to those with a qualifying child; therefore, section 11-21-22b(b), which expands the WVEITC to those not eligible for the EITC solely because they do not have a qualifying child, would have no impact as currently written. Some West Virginia residents who currently benefit from the Low-income Family Tax Credit would not be eligible for the WVEITC because they have no earned income. These individuals, many of whom would be retirees, would experience a tax increase. The provisions of the bill require that the commissioner make an effort every year to inform taxpayers who may be eligible to receive the credit. Per our interpretation, this bill, if passed, would reduce General Revenue Fund collections by at least $59.6 million in FY2023 and in subsequent fiscal years. A current proposal by the Federal House Ways and Means Committee would expand the Federal Earned Income Tax Credit to provide additional benefits to childless workers at an estimated cost of $13 billion. If this proposal became law, it would increase the revenue loss of the proposed West Virginia EITC by as much as $15.8 million per year. In addition, the West Virginia EITC would be tied into the Federal credit and West Virginia would automatically be subject to any future changes in the Federal Credit. Additional costs to the State Tax Department would be $25,000 in FY2022.



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 0 25,000 0
Personal Services 0 0 0
Current Expenses 0 0 0
Repairs and Alterations 0 0 0
Assets 0 0 0
Other 0 25,000 0
2. Estimated Total Revenues 0 0 -59,600,000


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


According to our interpretation, the bill would eliminate the current nonrefundable Low-income Family Tax Credit (FTC) and replace it with a refundable West Virginia Earned Income Tax Credit (WVEITC). For taxable years after December 31, 2021, a West Virginia resident who is eligible for and claims the federal earned income credit is eligible for a credit equal to 25 percent of the amount of the federal earned income tax credit (EITC). Qualification for the federal EITC is not limited to those with a qualifying child; therefore, section 11-21-22b(b), which expands the WVEITC to those not eligible for the EITC solely because they do not have a qualifying child, would have no impact as currently written. Some West Virginia residents who currently benefit from the Low-income Family Tax Credit would not be eligible for the WVEITC because they have no earned income. These individuals, many of whom would be retirees, would experience a tax increase. The provisions of the bill require that the commissioner make an effort every year to inform taxpayers who may be eligible to receive the credit. Per our interpretation, this bill, if passed, would reduce General Revenue Fund collections by at least $59.6 million in FY2023 and in subsequent fiscal years. A current proposal by the Federal House Ways and Means Committee would expand the Federal Earned Income Tax Credit to provide additional benefits to childless workers at an estimated cost of $13 billion. If this proposal became law, it would increase the revenue loss of the proposed West Virginia EITC by as much as $15.8 million per year. In addition, the West Virginia EITC would be tied into the Federal credit and West Virginia would automatically be subject to any future changes in the Federal Credit. Additional costs to the State Tax Department would be $25,000 in FY2022.



Memorandum


The stated purpose of this bill is to create the West Virginia Earned Income Tax Credit. The bill authorizes a refundable tax credit based upon the federal earned income tax credit. The bill determines eligibility for the credit. The bill determines the amount of the credit. Although the bill purports to create the West Virginia Earned Income Tax Credit, the title to section 22 remains “Low-income family tax credit.” The bill does not amend any part of section 22a, although that section sets forth definitions, including a definition of “tax credit” as “the low-income family tax credit authorized by this article”. Section 22a also provides definitions for terms that will become meaningless if this bill amends sections 22 and 22b, including definitions for “federal poverty guidelines,” “family size,” “indexed tax credit tables,” “modified federal adjusted gross income” and “qualified taxpayer.” Retention of definitions that have been rendered meaningless can cause confusion.



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