FISCAL NOTE

Date Requested: January 24, 2023
Time Requested: 01:09 PM
Agency: Tax & Revenue Department, WV State
CBD Number: Version: Bill Number: Resolution Number:
2742 Introduced HB3007
CBD Subject: Economic Development


FUND(S):

Not Indicated in Bill

Sources of Revenue:

Other Fund not indicated in bill

Legislation creates:





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 Small Business Payroll Tax Credit, a three-year program establishing a tax credit for up to five employees for new businesses with fewer than 15 employees; establishing a start date and end date; listing amounts of credits for five employees; and requiring the Department of Economic Development to track the progress of this program and present a report. According to our interpretation, the bill creates a “Small Business Payroll Tax Credit” for any business formed on or after July 1, 2023, which employs fewer than 15 employees. The business must be newly formed, cannot have existed in West Virginia with the same members at any period between 2013 and 2023, and cannot be a foreign corporation opening a subsidiary in West Virginia. The “Small Business Payroll Tax Credit’ is set up as a three-year program beginning on July 1, 2023 and ending on December 31, 2025. The program will apply to tax years beginning January 1, 2023, January 1, 2024, and January 1, 2025. The amount of credit would be based on a percentage of the “payroll tax assessed against the employer for that employee’s salary” for the first five employees hired. The legislation does not identify the tax against which the credit will be applied or the specific payroll taxes on which it will be based; therefore, it is not possible to estimate the impact on General Revenue Fund collections or whether there will be additional administrative costs incurred by the State Tax Department to administer the credit.



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 0 0 0
Personal Services 0 0 0
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 bill creates a “Small Business Payroll Tax Credit” for any business formed on or after July 1, 2023, which employs fewer than 15 employees. The business must be newly formed, cannot have existed in West Virginia with the same members at any period between 2013 and 2023, and cannot be a foreign corporation opening a subsidiary in West Virginia. The “Small Business Payroll Tax Credit’ is set up as a three-year program beginning on July 1, 2023 and ending on December 31, 2025. The program will apply to tax years beginning January 1, 2023, January 1, 2024, and January 1, 2025. The amount of credit would be based on a percentage of the “payroll tax assessed against the employer for that employee’s salary” for the first five employees hired. The legislation does not identify the tax against which the credit will be applied or the specific payroll taxes on which it will be based; therefore, it is not possible to estimate the impact on General Revenue Fund collections or whether there will be additional administrative costs incurred by the State Tax Department to administer the credit.



Memorandum


The stated purpose of this bill is to create the Small Business Payroll Tax Credit, a three-year program establishing a tax credit for up to five employees for new businesses with fewer than 15 employees; establishing a start date and end date; listing amounts of credits for five employees; and requiring the Department of Economic Development to track the progress of this program and present a report. The bill may have title defects. The bill refers to a “tax rebate” in subsection §11-13MM-2(b) but does not use the term anywhere outside of the subsection, including in the title. The title of the bill has language limiting application of the tax credit to a maximum of five employees, but the body of the bill lacks similar language. In addition, the characterization of the 3-year program as a “trial period” in §11-13MM-4 is not mentioned in the title of the bill. The bill does not address several issues necessary to qualify for or administer the credit including: the tax against which the credit would be applied and whether any of the qualifying employees are required to be full-time or part-time. The terms “newly-formed” business, and “members” are not defined. The specific payroll tax(es) the credit will be based on (“payroll tax assessed against the employer”) should be identified. The bill needs more specific language regarding the report to be completed by the Department of Economic Development including when and to whom the report is to be presented.



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