FISCAL NOTE
Date Requested: January 11, 2024
Time Requested: 08:44 PM |
| Agency: |
Tax & Revenue Department, WV State |
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| CBD Number: |
Version: |
Bill Number: |
Resolution Number: |
| 1581 |
Introduced |
HB4318 |
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|---|
| CBD Subject: |
|
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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 is to exempt social security benefits from personal income tax.
According to our interpretation, passage of this bill, would exempt all Social Security benefits received pursuant to Title 42 U.S.C., Chapter 7 from personal income tax for taxable years beginning after December 31, 2024. Social Security benefits received pursuant to Title 42 U.S.C., Chapter 7 include, but are not limited to, social security benefits paid by the Social Security Administration as Old Age, Survivors and Disability Insurance Benefits, or Supplemental Security Income.
Under current law, a decreasing modification for Social Security benefits is allowed when the federal adjusted gross income of a married couple filing a joint return does not exceed $100,000, or $50,000 in the case of a single individual or a married individual filing a single return. Current statute allows 35 percent of the amount of Social Security benefits included in federal adjusted gross income for taxable years beginning on or after January 1, 2020 to be excluded for taxpayers in those income brackets. For taxable years beginning on or after January 1,2021, this reduction increases to 65 percent and on January 1, 2022 it increases to 100 percent.
Per our interpretation, based on updated statistical data and Personal Income Tax rates currently in effect, passage of this bill would reduce General Revenue Fund collections by a minimal amount in FY2025, by $37.7 million in FY2026 and by increasing amounts in subsequent fiscal years.
Additional administrative costs incurred by the State Tax Department would be $61,500 in FY2026 and $45,000 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 |
0 |
0 |
45,000 |
| Personal Services |
0 |
0 |
45,000 |
| 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 |
-37,700,000 |
Explanation of above estimates (including long-range effect):
According to our interpretation, passage of this bill, would exempt all Social Security benefits received pursuant to Title 42 U.S.C., Chapter 7 from personal income tax for taxable years beginning after December 31, 2024. Social Security benefits received pursuant to Title 42 U.S.C., Chapter 7 include, but are not limited to, social security benefits paid by the Social Security Administration as Old Age, Survivors and Disability Insurance Benefits, or Supplemental Security Income.
Under current law, a decreasing modification for Social Security benefits is allowed when the federal adjusted gross income of a married couple filing a joint return does not exceed $100,000, or $50,000 in the case of a single individual or a married individual filing a single return. Current statute allows 35 percent of the amount of Social Security benefits included in federal adjusted gross income for taxable years beginning on or after January 1, 2020 to be excluded for taxpayers in those income brackets. For taxable years beginning on or after January 1,2021, this reduction increase to 65 percent and on January 1, 2022 it increases to 100 percent.
Per our interpretation, based on updated statistical data and Personal Income Tax rates currently in effect, passage of this bill would reduce General Revenue Fund collections by a minimal amount in FY2025, by $37.7 million in FY2026 and by increasing amounts in subsequent fiscal years.
Additional administrative costs incurred by the State Tax Department would be $61,500 in FY2026 and $45,000 in subsequent fiscal years.
Memorandum
The stated purpose of this bill is to exempt social security benefits from personal income tax.
The bill creates a new subdivision W. Va. Code §11-21-12(c)(7), providing a personal income tax decreasing modification: “For taxable years beginning after December 31, 2024, any social security benefits received pursuant to Title 42 U.S.C., Chapter 7.” At first glance, this bill seems redundant to current language in §11-21-12(c)(8)(C). That modification became effective on or after January 1, 2022, and reads in pertinent part: “For taxable years beginning on or after January 1, 2022, 100 percent of the social security benefits received pursuant to Title 42 U.S.C., Chapter 7,…”
However, under current §11-21-12(c)(8)(C), the reducing modification is allowable only when the federal adjusted gross income of a married couple filing a joint return does not exceed $100,000, or $50,000 in the case of a single individual or a married individual filing a separate return. Since the bill does not change anything in subdivision (c)(8), there may be confusion about whether the income caps still apply to the apparent total decreasing modification in the new subdivision (c)(7).
Furthermore, the proposed language refers to “any social security benefits received,” with no limitation as to whether all the received benefits were included in federal adjusted gross income. This could lead to a scenario where a taxpayer is allowed a modifying reduction against personal income tax that exceeds the amount of income reported in their federal AGI.
The new language of $11-21-12(c)(7) addresses social security benefits whereas subdivisions §11-21-12(c)(7)(A) through (C) essentially address military benefits. This may lead to confusion.
The bill title and the bill’s purpose describe this as “exempting social security benefits from personal income tax.” This bill is not accurately described as an exemption, but rather as a modification allowing taxpayers to subtract social security benefits from their federal adjusted gross income for purposes of personal income tax.
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Person submitting Fiscal Note: Mark Muchow
Email Address: kerri.r.petry@wv.gov