FISCAL NOTE
Date Requested: January 23, 2024
Time Requested: 04:31 PM |
| Agency: |
Tax & Revenue Department, WV State |
|---|
| CBD Number: |
Version: |
Bill Number: |
Resolution Number: |
| 2586 |
Introduced |
|
HJR19 |
|---|
| CBD Subject: |
|
|---|
|
FUND(S):
General Revenue Fund, local governments
Sources of Revenue:
General Fund local property tax revenue
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 resolution is to propose an amendment to the West Virginia Constitution that would exempt personal property in the form of manufacturing inventory and manufacturing equipment from ad valorem taxation.
As written, this resolution proposes an amendment to the Constitution of the State of West Virginia to be submitted to the voters of the State at the next general election to be held in the year 2024. The amendment would exempt tangible personal property in the form of manufacturing inventory and manufacturing equipment from Property Tax. There is no definition of manufacturing within the resolution. If “manufacturing” is defined using the North American Industry Classification System (NAICS) code series ranging between 31 and 33, then the exemption of all manufacturing equipment and manufacturing inventory would result in an initial revenue loss during the first full year of effect of roughly $34.7 million to the State General Revenue Fund, $48.6 million to local county school boards, $32.8 million to county commissions and $7.9 million to municipalities. The distribution of estimated cost is based on information from taxes levied as reported in the Classified Assessed Valuations Taxes Levied for 2023 Tax Year publication of the State Tax Department and the incorporation of the calculation of local property tax share within the State Aid to Schools Formula.
This estimate does not include inventory and machinery related to the coal mining industry or any equipment associated with producing oil and gas. Once a well is producing, the value of the equipment, up to the point of sale, is assumed to be included in the value of the working interest (producer interest) of the well. Excluding such equipment from oil and gas valuations would require a change to the Legislative Rule governing such valuations. Additionally, the estimate does not include any tax impact on public utility personal property. The addition of industrial tangible personal property of the mining sector and public utility tangible personal property would significantly increase the estimated loss.
Additional one-time administrative costs for the State Tax Department would be $50,000. There would be no additional costs to local governments.
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 |
0 |
-124,000,000 |
Explanation of above estimates (including long-range effect):
As written, this resolution proposes an amendment to the Constitution of the State of West Virginia to be submitted to the voters of the State at the next general election to be held in the year 2024. The amendment would exempt tangible personal property in the form of manufacturing inventory and manufacturing equipment from Property Tax. There is no definition of manufacturing within the resolution. If “manufacturing” is defined using the North American Industry Classification System (NAICS) code series ranging between 31 and 33, then the exemption of all manufacturing equipment and manufacturing inventory would result in an initial revenue loss during the first full year of effect of roughly $34.7 million to the State General Revenue Fund, $48.6 million to local county school boards, $32.8 million to county commissions and $7.9 million to municipalities. The distribution of estimated cost is based on information from taxes levied as reported in the Classified Assessed Valuations Taxes Levied for 2023 Tax Year publication of the State Tax Department and the incorporation of the calculation of local property tax share within the State Aid to Schools Formula.
This estimate does not include inventory and machinery related to the coal mining industry or any equipment associated with producing oil and gas. Once a well is producing, the value of the equipment, up to the point of sale, is assumed to be included in the value of the working interest (producer interest) of the well. Excluding such equipment from oil and gas valuations would require a change to the Legislative Rule governing such valuations. Additionally, the estimate does not include any tax impact on public utility personal property. The addition of industrial tangible personal property of the mining sector and public utility tangible personal property would significantly increase the estimated loss.
Additional one-time administrative costs for the State Tax Department would be $50,000. There would be no additional costs to local governments.
Memorandum
The stated purpose of this resolution is to propose an amendment to the West Virginia Constitution that would exempt personal property in the form of manufacturing inventory and manufacturing equipment from ad valorem taxation.
The terms “manufacturing”, “manufacturing equipment” and “manufacturing inventory” are not defined in the bill.
Person submitting Fiscal Note: Mark Muchow
Email Address: kerri.r.petry@wv.gov