FISCAL NOTE
Date Requested: February 20, 2023
Time Requested: 04:03 PM |
| Agency: |
Tax & Revenue Department, WV State |
|---|
| CBD Number: |
Version: |
Bill Number: |
Resolution Number: |
| 3828 |
Introduced |
SB729 |
|
|---|
| 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 establish the Energy Intensive Industrial or Manufacturing Consumer Tax Credit.
The provisions of this bill would provide a tax credit to an electric power company who enters into a special contract with a qualified energy intensive industrial consumer for a reduced special rate or terms and conditions not otherwise available for the general industrial consumer. The provisions of the bill define a qualified industrial consumer as an industrial facility located in West Virginia after January 1, 2024 if such enterprise’s cost of electricity constitutes at least 15 percent of the cost of production, the enterprise creates at least 25 new jobs, the enterprise invested at least $5 million in fixed assets or other capital expenditures at the service location as set forth in the special contract and the enterprise has a billing demand of at least 5,000 kilowatts. Enterprises that existed on January 1, 2024 may qualify with an additional increase in annual billing demand of at least 5,000 kilowatts compared to 2023. The tax credit would equal 0.19 cents per kilowatt-hour of electricity sold to a qualified enterprise.
According to the West Virginia Public Service Commission, there are currently nine facilities that serve under special contracts with demands above 5,000 kilowatts. Had this bill included the nine existing contracts, the revenue impact would have been a loss of $3.8 million. However, the provisions of this bill only relate to qualified contracts as defined after January 1, 2024. Because of this requirement, we cannot determine the number of contracts qualifying after the effective date. As a result, we cannot reasonably estimate the loss of revenue associated with this bill.
The current Business and Occupation tax on the electric power industry is largely a fixed tax on taxable generating capacity with the capacity tax accounting for roughly 93 percent of all tax collected. The yield of the fixed tax does not increase with additional sales of electricity. The proposed tax credit would generally apply against the fixed capacity tax for the electric power company.
Additional administrative costs incurred by the Tax Department would be $20,000 in FY2024.
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 |
20,000 |
0 |
| Personal Services |
0 |
0 |
0 |
| Current Expenses |
0 |
0 |
0 |
| Repairs and Alterations |
0 |
0 |
0 |
| Assets |
0 |
0 |
0 |
| Other |
0 |
20,000 |
0 |
| 2. Estimated Total Revenues |
0 |
0 |
0 |
Explanation of above estimates (including long-range effect):
The provisions of this bill would provide a tax credit to an electric power company who enters into a special contract with a qualified energy intensive industrial consumer for a reduced special rate or terms and conditions not otherwise available for the general industrial consumer. The provisions of the bill define a qualified industrial consumer as an industrial facility located in West Virginia after January 1, 2024 if such enterprise’s cost of electricity constitutes at least 15 percent of the cost of production, the enterprise creates at least 25 new jobs, the enterprise invested at least $5 million in fixed assets or other capital expenditures at the service location as set forth in the special contract and the enterprise has a billing demand of at least 5,000 kilowatts. Enterprises that existed on January 1, 2024 may qualify with an additional increase in annual billing demand of at least 5,000 kilowatts compared to 2023. The tax credit would equal 0.19 cents per kilowatt-hour of electricity sold to a qualified enterprise.
According to the West Virginia Public Service Commission, there are currently nine facilities that serve under special contracts with demands above 5,000 kilowatts. Had this bill included the nine existing contracts, the revenue impact would have been a loss of $3.8 million. However, the provisions of this bill only relate to qualified contracts as defined after January 1, 2024. Because of this requirement, we cannot determine the number of contracts qualifying after the effective date. As a result, we cannot reasonably estimate the loss of revenue associated with this bill.
The current Business and Occupation tax on the electric power industry is largely a fixed tax on taxable generating capacity with the capacity tax accounting for roughly 93 percent of all tax collected. The yield of the fixed tax does not increase with additional sales of electricity. The proposed tax credit would generally apply against the fixed capacity tax for the electric power company.
Additional administrative costs incurred by the Tax Department would be $20,000 in FY2024.
Memorandum
The stated purpose of this bill is to establish the Energy Intensive Industrial or Manufacturing Consumer Tax Credit.
This bill is missing several definitions and tests to measure thresholds, which makes the credit difficult to administer.
Person submitting Fiscal Note: Mark Muchow
Email Address: kerri.r.petry@wv.gov