FISCAL NOTE
Date Requested: January 11, 2024
Time Requested: 10:33 PM |
| Agency: |
Tax & Revenue Department, WV State |
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| CBD Number: |
Version: |
Bill Number: |
Resolution Number: |
| 2014 |
Introduced |
HB4507 |
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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 the bill is to create a tax credit for improving facades in historic districts. The bill provides that individuals and corporations are entitled to a 25 percent tax credit of the replacement cost of a historic façade.
According to our interpretation, passage of this bill would result in the creation of two separate tax preference provisions for the costs of improvement of a façade of a building with no historic value which is located within a historic district. For a Taxpayer subject to Personal Income Tax, the tax preference is a decreasing modification to income equal to 25 percent of the replacement cost of a façade of a building with no historic value. As a decreasing modification, a maximum tax benefit would be 5.12 percent of 25 percent of costs, or 1.28 percent of costs. For a Taxpayer subject to the Corporation Net Income Tax, the tax preference would equal 25 percent of the cost. The proposed bill fails to outline any standards or guidelines as to qualified facades or qualified costs other than a non-historic building location in a historic district. The local county commission or city council would decide what buildings qualify for State tax relief. By contrast, qualified historic rehabilitation costs must be approved by the State Historic Preservation Office according to federal
rehabilitation guidelines. We are unable to accurately estimate the cost of this bill given the subjective standards for qualification for State tax benefits.
Additional administrative costs incurred by the State Tax Department would be $20,000 in FY2025 and $5,000 per year 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 |
20,000 |
5,000 |
| Personal Services |
0 |
5,000 |
0 |
| Current Expenses |
0 |
0 |
0 |
| Repairs and Alterations |
0 |
0 |
0 |
| Assets |
0 |
0 |
0 |
| Other |
0 |
15,000 |
0 |
| 2. Estimated Total Revenues |
0 |
0 |
0 |
Explanation of above estimates (including long-range effect):
According to our interpretation, passage of this bill would result in the creation of two separate tax preference provisions for the costs of improvement of a façade of a building with no historic value which is located within a historic district. For a Taxpayer subject to Personal Income Tax, the tax preference is a decreasing modification to income equal to 25 percent of the replacement cost of a façade of a building with no historic value. As a decreasing modification, a maximum tax benefit would be 5.12 percent of 25 percent of costs, or 1.28 percent of costs. For a Taxpayer subject to the Corporation Net Income Tax, the tax preference would equal 25 percent of the cost. The proposed bill fails to outline any standards or guidelines as to qualified facades or qualified costs other than a non-historic building location in a historic district. The local county commission or city council would decide what buildings qualify for State tax relief. By contrast, qualified historic rehabilitation costs must be approved by the State Historic Preservation Office according to federal rehabilitation guidelines. We are unable to accurately estimate the cost of this bill given the subjective standards for qualification for State tax benefits.
Additional administrative costs incurred by the State Tax Department would be $20,000 in FY2025 and $5,000 per year in subsequent fiscal years.
Memorandum
The stated purpose of this bill is to create a tax credit for improving facades in historic districts. The bill provides that individuals and corporations are entitled to a 25 percent tax credit of the replacement cost of a historic façade.
This bill does not accomplish its purpose, as the title of this bill references the creation of a credit against the Personal Income Tax, while the proposed new section §11-21-12o creates a decreasing Schedule M modification. This would allow Personal Income Tax taxpayers to be treated differently than Corporation Net Income Tax taxpayers.
The plan in this bill must be approved by the county commission or municipality where the district is located, and there are no specific criteria listed aside from the subjective standards of “to complement the historic facades in the district, materially improving the overall historic appearance of the district.: Further, there is no application process set forth and there are no limitations on the amount of credit or decreasing modification. There are also no reporting requirements. Carryback, carryforward, and transferability of the proposed tax credits are not addressed in this bill. Overall, the bill is difficult to enforce due to lack of clarity.
Person submitting Fiscal Note: Mark Muchow
Email Address: kerri.r.petry@wv.gov