FISCAL NOTE
Date Requested: January 13, 2023
Time Requested: 04:13 PM |
| Agency: |
Tax & Revenue Department, WV State |
|---|
| CBD Number: |
Version: |
Bill Number: |
Resolution Number: |
| 2562 |
Introduced |
SB168 |
|
|---|
| 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 encourage an incentivize the sale of thermal or steam coal to coal-fired electric generating facilities, which are located in West Virginia and that serve West Virginia residents, by exempting the sale of such coal from the severance tax, thereby providing cheaper electricity to the State’s residents.
According to our interpretation of this bill, thermal or steam coal extracted after March 31, 2023, and sold for the purpose of generating electricity to a coal-fired electric generating facility that is physically located within the State of West Virginia would be exempt from the Severance Tax. Based on average annual West Virginia coal purchases of roughly 15 million tons by in-state electric power generators and an average current price of $55 per ton, the anticipated annual cost of the proposed legislation would be close to $22 million. Given that the local 5 percent share of net State Coal Severance Tax collections is protected by a minimum statutory share, a portion of the cost to the State may involve maintenance of the minimum local share. Approximately one-third of the steam coal derived from the Coal Severance Tax are sold to West Virginia coal-fired electric generated facilities, and the remaining two-thirds is either sold to other states or countries.
Passage of this bill would result in a loss to the General Revenue Fund of roughly $3.5 million in FY2023, $22.0 million in FY2024 and $24.0 million in in FY2024 and subsequent fiscal years.
Additional administrative costs incurred by the State Tax Department would be $10,000 in FY2023.
Fiscal Note Detail
| Effect of Proposal |
Fiscal Year |
2023
Increase/Decrease
(use"-") |
2024
Increase/Decrease
(use"-") |
Fiscal Year
(Upon Full
Implementation) |
| 1. Estmated Total Cost |
10,000 |
0 |
0 |
| Personal Services |
0 |
0 |
0 |
| Current Expenses |
0 |
0 |
0 |
| Repairs and Alterations |
0 |
0 |
0 |
| Assets |
0 |
0 |
0 |
| Other |
10,000 |
0 |
0 |
| 2. Estimated Total Revenues |
-3,500,000 |
-22,000,000 |
-24,000,000 |
Explanation of above estimates (including long-range effect):
According to our interpretation of this bill, thermal or steam coal extracted after March 31, 2023, and sold for the purpose of generating electricity to a coal-fired electric generating facility that is physically located within the State of West Virginia would be exempt from the Severance Tax. Based on average annual West Virginia coal purchases of roughly 15 million tons by in-state electric power generators and an average current price of $55 per ton, the anticipated annual cost of the proposed legislation would be close to $22 million. Given that the local 5 percent share of net State Coal Severance Tax collections is protected by a minimum statutory share, a portion of the cost to the State may involve maintenance of the minimum local share. Approximately one-third of the steam coal derived from the Coal Severance Tax are sold to West Virginia coal-fired electric generated facilities, and the remaining two-thirds is either sold to other states or countries.
Passage of this bill would result in a loss to the General Revenue Fund of roughly $3.5 million in FY2023, $22.0 million in FY2024 and $24.0 million in in FY2024 and subsequent fiscal years.
Additional administrative costs incurred by the State Tax Department would be $10,000 in FY2023.
Memorandum
The stated purpose of this bill is to encourage an incentivize the sale of thermal or steam coal to coal-fired electric generating facilities, which are located in West Virginia and that serve West Virginia residents, by exempting the sale of such coal from the severance tax, thereby providing cheaper electricity to the State’s residents.
This bill does raise some concerns. Since the thermal or steam coal Severance Tax exemption would apply to coal sold for use within the State of West Virginia, the effect of this bill is to create a de facto export tariff on coal sold for use outside the State. Such taxes on interstate commerce may run contrary to the intended purpose of the Commerce Clause of the U.S Constitution.
Person submitting Fiscal Note: Mark Muchow
Email Address: kerri.r.petry@wv.gov