FISCAL NOTE
Date Requested: February 06, 2023
Time Requested: 11:33 AM |
| Agency: |
Tax & Revenue Department, WV State |
|---|
| CBD Number: |
Version: |
Bill Number: |
Resolution Number: |
| 2994 |
Introduced |
HB3264 |
|
|---|
| CBD Subject: |
Finance and Administration |
|---|
|
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 provide a onetime fee and tax free day for a new for profit business or domestic corporation to obtain a license in this state.
According to our interpretation, the Tax Department in coordination with the Secretary of State shall designate three days per year when new for-profit businesses can register their business without paying the Business Registration Fee. This tax relief is only for one year. Businesses must be new and a resident of West Virginia. A corporate taxpayer must be a domestic corporation.
Roughly 83 percent of new businesses registered in the State are domiciled in West Virginia. On average, nearly 5,700 new businesses domiciled in West Virginia are registered in the State annually. Passage of this bill would have no impact unless the one-time Business Registration Fee would be removed permanently as opposed to delayed. Permanent removal would reduce General Revenue Fund collections by up to $170,000 in FY2024 and subsequent fiscal years. The bill also attempts to temporarily remove the Corporation License Tax, a tax that was repealed as of July 1, 2008.
There would be no additional administrative costs incurred by the State Tax Department.
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 Tax Department in coordination with the Secretary of State shall designate three days per year when new for-profit businesses can register their business without paying the Business Registration Fee. This tax relief is only for one year. Businesses must be new and a resident of West Virginia. A corporate taxpayer must be a domestic corporation.
Roughly 83 percent of new businesses registered in the State are domiciled in West Virginia. On average, nearly 5,700 new businesses domiciled in West Virginia are registered in the State annually. Passage of this bill would have no impact unless the one-time Business Registration Fee would be removed permanently as opposed to delayed. Permanent removal would reduce General Revenue Fund collections by up to $170,000 in FY2024 and subsequent fiscal years. The bill also attempts to temporarily remove the Corporation License Tax, a tax that was repealed as of July 1, 2008.
There would be no additional administrative costs incurred by the State Tax Department.
Memorandum
The stated purpose of this bill is to provide a onetime fee and tax free day for a new for profit business or domestic corporation to obtain a license in this state.
The title is insufficient and may conflict with Articles 6 and 30 of the West Virginia Constitution. In addition, the provisions of the bill may violate the Interstate Commerce Clause.
This bill does not impose a one-time fee nor is there only one tax-free day. It is unclear whether there would be three separate days per year or a one-time three-day period in which taxpayers could have taxes and fees waived. It is also uncertain from the bill’s language whether this tax relief would be repeated annually.
It is not clear whether newly registered corporations and pass through entities would be permitted to have business locations in other states. Also, it is not certain whether a new business entity can have existing locations. Further, it is unclear how business franchises would be treated under the proposed language. Since a business registration certificate is required for each business location, it is not clear whether the fee waiver would apply to each location.
The bill allows only the first-year waiver of the Business Registration Tax. However, permanent business registrations are available pursuant to W.Va. Code §11-12-5. This bill only provides a waiver of the Business Registration Tax; however, it still imposes a tax related to permanent business registration certificates granted on or after July 1, 2010. Therefore, the proposed changes to the Business Registration Tax do not appear to accomplish anything. Further, the proposed changes to the Corporate License Tax per W.Va. Code §11-12C-2 do not appear to accomplish anything as this tax was repealed on July 1, 2008, per W.Va. Code §11-12C-13.
Person submitting Fiscal Note: Mark Muchow
Email Address: kerri.r.petry@wv.gov