FISCAL NOTE
Date Requested: January 31, 2024
Time Requested: 04:23 PM |
| Agency: |
Division of Regulatory and Fiscal Affairs, WV |
|---|
| CBD Number: |
Version: |
Bill Number: |
Resolution Number: |
| 2002 |
Introduced |
SB309 |
|
|---|
| CBD Subject: |
Taxation |
|---|
|
FUND(S):
General Revenue Fund
Sources of Revenue:
General Fund
Legislation creates:
Decreases Existing Revenue
Fiscal Note Summary
Effect this measure will have on costs and revenues of state government.
Senate Bill 309 creates a state child care tax credit that would be effective retroactive to January 1, 2024. This bill would create a tax credit against personal income taxes in the amount of either 20 percent of the federal child and dependent care expenses credit or 10 percent of the federal child tax credit, whichever is greater in value. For the child tax credit allowed under 26 U.S.C §24 this includes the additional child credit. The amount of this credit that exceeds the resident’s individual income taxes due would be refunded to the individual. This refund is only available to individuals whose income does not exceed $100,000.
The Division of Regulatory and Fiscal Affairs (RAFA) estimates the reduction in general revenues from this bill to be $42,067,100.
Fiscal Note Detail
| Effect of Proposal |
Fiscal Year |
2024
Increase/Decrease
(use"-") |
2025
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 |
-42,067,100 |
-42,067,100 |
Explanation of above estimates (including long-range effect):
Senate Bill 309 would provide for a state tax credit against personal income taxes in the amount of either 20 percent of the child and dependent care credit (CDCC) or 10 percent of the child tax credit (CTC), whichever is greater. This credit would be refundable and would take effect for tax years beginning on or after January 1, 2024.
The CDCC is a federal tax credit for parents or caregivers to help cover the cost of qualifying care expenses for children 12 years of age and younger or other qualifying dependents. The CCDC is generally worth 20 to 35 percent of child care expenses paid up to $3,000 for one qualifying dependent or $6,000 for two or more qualifying dependents. The amount of percentage that is given is based off income, as income increases the percentage allowed decreases. Once the adjusted gross income reaches $43,000, the maximum a taxpayer can claim is 20 percent of expenses paid.
The federal CTC is a federal tax credit for parents or caregivers who have children or dependents aged 17 and younger. The child tax credit is $2,000 per child or dependent for caregivers with annual income of $200,000 or less for single and head of household filers and $400,000 for joint filers.
To calculate the costs of SB 309, RAFA used 2019 Statement of Income data from the Internal Revenue Service. This data includes the number of returns filed in each federal income tax bracket with a breakdown of all credits by number of returns claimed and the total amount of credits claimed over those returns. Due to the availability of data and the implications of the pandemic, RAFA used IRS data from Tax Year 2019 regarding income brackets $100,000 and less.
The total amount claimed by West Virginia taxpayers eligible for SB 309 from the CDCC was $4,790,000 with 9,540 claims in these brackets. Since SB 309 would limit the amount to 20 percent of the federal CDCC, RAFA calculated 20 percent of the $4,790,000 and totaled $958,000.
Using the same Statement of Income data from the IRS, the total amount claimed by West Virginia taxpayers eligible for SB 309 from the child tax credit was $250,633,000 and $170,038,000 from the additional child credits. Since SB 309 would limit the amount to 10 percent of the federal CTC, RAFA calculated 10 percent of the $420,671,000 and totaled $42,067,100.
SB 309 would refund eligible taxpayers the higher of the two amounts therefore $42,067,100 is the estimated total.
Memorandum
Although all 148,890 returns claiming the child care credit or child tax credit at the federal level would be eligible for this state tax credit, they may not all claim it. This would reduce the costs to the state.
An additional tax credit for child care could potentially incentivize people to seek child care services. In effect, the increased demand for child care services may lead to improvements in the quality and availability of child care options as providers respond to market demand, increasing claims and the overall cost of this bill.
If the credit allows more individuals to enter or re-enter the workforce, there could be positive economic effects that RAFA is unable to calculate. This could include increased tax revenue, higher consumer spending, or reduced dependence on other social welfare programs.
This bill could have slight administrative costs for the Tax Division of the West Virginia Department of Revenue.
It was also noted in the Fiscal Note from the Department of Revenue that this bill does not give a reference to the filing status of the “taxpayer”. This may cause taxpayers who would normally file jointly to each claim a credit as the bill is read in the singular which would increase cost to the State.
Person submitting Fiscal Note: Peter Shirley
Email Address: peter.shirley@wvlegislature.gov