FISCAL NOTE
Date Requested: January 10, 2024
Time Requested: 03:43 PM |
| Agency: |
Tax & Revenue Department, WV State |
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| CBD Number: |
Version: |
Bill Number: |
Resolution Number: |
| 1506 |
Introduced |
HB4213 |
|
|---|
| CBD Subject: |
Counties |
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|
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 relates to pension benefits which are exempt from income taxation. The bill adds Division of Natural Resources police, deputy sheriffs, full-time firefighters, and municipal police officers into the class of law-enforcement officers exempted.
As written, this bill allows a full Personal Income Tax exemption for retirement benefits from the Public Employees Retirement System received by officers retired from the Division of Natural Resources, including those formerly classified as conservation officers, deputy sheriffs, full-time firefighters and municipal police officers. The provisions of the bill are retroactive to tax years beginning after December 31, 2022.
Based on our interpretation, the bill would extend the full Personal Income Tax Exemption to the following groups receiving benefits from the Public Employees Retirement System-Division of Natural Resource officers, deputy sheriffs, full-time firefighters, and municipal police officers. Due to the retroactive provisions in the bill, passage of this bill would result in a loss to the General Revenue Fund of roughly $520,000 in FY2025 and $260,000 a year beginning in FY2026. However, extension of the proposed tax exclusions to certain retirees of the Public Employees Retirement System will result in additional litigation on the part of federal civil service retirees and possibly any disfavored public employee retirees. Past history with similar litigation would suggest that at a minimum passage of this legislation would ultimately result in the full exclusion of federal civil service retirees at an additional cost of $23.1 million per year.
Additional administrative costs would be $20,000 in FY2024 and $10,000 in subsequent fiscal years.
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 |
20,000 |
10,000 |
10,000 |
| Personal Services |
10,000 |
10,000 |
10,000 |
| Current Expenses |
0 |
0 |
0 |
| Repairs and Alterations |
0 |
0 |
0 |
| Assets |
0 |
0 |
0 |
| Other |
10,000 |
0 |
0 |
| 2. Estimated Total Revenues |
0 |
-520,000 |
-260,000 |
Explanation of above estimates (including long-range effect):
As written, this bill allows a full Personal Income Tax exemption for retirement benefits from the Public Employees Retirement System received by officers retired from the Division of Natural Resources, including those formerly classified as conservation officers, deputy sheriffs, full-time firefighters and municipal police officers. The provisions of the bill are retroactive to tax years beginning after December 31, 2022.
Based on our interpretation, the bill would extend the full Personal Income Tax Exemption to the following groups receiving benefits from the Public Employees Retirement System-Division of Natural Resource officers, deputy sheriffs, full-time firefighters, and municipal police officers. Due to the retroactive provisions in the bill, passage of this bill would result in a loss to the General Revenue Fund of roughly $520,000 in FY2025 and $260,000 a year beginning in FY2026. However, extension of the proposed tax exclusions to certain retirees of the Public Employees Retirement System will result in additional litigation on the part of federal civil service retirees and possibly any disfavored public employee retirees. Past history with similar litigation would suggest that at a minimum passage of this legislation would ultimately result in the full exclusion of federal civil service retirees at an additional cost of $23.1 million per year.
Additional administrative costs would be $20,000 in FY2024 and $10,000 in subsequent fiscal years.
Memorandum
The stated purpose of this bill relates to pension benefits which are exempt from income taxation. The bill adds Division of Natural Resources police, deputy sheriffs, full-time firefighters, and municipal police officers into the class of law-enforcement officers exempted.
There is concern that preferential treatment for a group of state and local government retirees relative to federal civil service retirees would conflict with the U.S. Supreme Court ruling in Davis v. Michigan.
The bill title and purpose statement are clear as to the intent of the amendment, which is to extend the full Personal Income Tax exemption to benefits received under the Public Employees Retirement System by Division of Natural Resource officers, deputy sheriffs, full-time firefighters and municipal police officers. However, the language added, along with misplaced and missing commas, render the amendment susceptible to confusion.
The word “exempt” is used in the title and purpose rather than the statutory language of “modification reducing federal adjusted gross income.”
Person submitting Fiscal Note: Mark Muchow
Email Address: kerri.r.petry@wv.gov