FISCAL NOTE
Date Requested: January 11, 2024
Time Requested: 09:56 AM |
| Agency: |
Tax & Revenue Department, WV State |
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| CBD Number: |
Version: |
Bill Number: |
Resolution Number: |
| 1824 |
Introduced |
HB4201 |
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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 provide for the creation of an “EV Manufacturers Investment Credit.” The bill provides for definitions. The bill establishes tier 1 eligibility, credits, and exemptions. The bill establishes tier 2 eligibility, credits, and exemptions. The bill provides for the forfeiture of unused tax credits. Finally, the bill provides for the redetermination of credit allowed.
This bill would allow for two tax credits for electric vehicle manufacturers. The tier 1 tax credit is a credit for electric vehicle manufacturers, electric vehicle component part manufacturers, or electric vehicle power supply equipment manufacturers that invest over $20 million in capital investments or create more than 100 new jobs within four years. The credit is equal to 75 percent of the income tax withholdings of new jobs created in this state. This could increase to 100 percent for electric vehicle manufacturing projects that are located in priority areas. Created jobs that are retained would qualify for additional income tax withholding credits of 25 percent or 50 percent if such projects are located in priority areas. A non-refundable tax credit would be provided that is equal to ten percent of eligible training costs for full-time new and retained employees.
Tier 2 tax credits are for electric vehicle manufacturers that invest at least $1 billion in capital investments or create over 500 new jobs within five years, electric vehicle component part manufacturers that vest at least $200 million in capital investments or create over 100 jobs within five years, or manufacturers that are converting existing facilities to allow for production of electric vehicles and electric vehicles component parts or electric vehicle power supplies, and will invest $100 million in capital investments or create over 100 new jobs or new jobs equivalent to 10 percent of their statewide baseline, whichever is less, within five years. These eligible electric vehicle manufacturers would be eligible for all credits made available in W. Va. Code §11-13NN-2 for up to 15 years. If during any taxable year the manufacturer ceases operation as an eligible manufacturer in this state for which the credit was allowed, then the unused portion of the credit is forfeited for the taxable year and all ensuing years, unless the cause is from fire, flood, storm, or other casualty.
We cannot accurately estimate the revenue impact of this bill. The provisions of this bill would only affect future investments or job additions by these types of manufacturers. The proposed tax credits are loosely defined with significant uncertainty over the rules of operation. Investments in manufacturing within West Virginia already qualify for various existing tax credits, including the Manufacturing Investment Credit and the Economic Opportunity Tax Credit.
Additional administrative costs incurred by the State Tax Department would be $47,500 in FY 2025 and $22,500 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 |
47,500 |
22,500 |
| Personal Services |
0 |
22,500 |
22,500 |
| Current Expenses |
0 |
0 |
0 |
| Repairs and Alterations |
0 |
0 |
0 |
| Assets |
0 |
0 |
0 |
| Other |
0 |
25,000 |
0 |
| 2. Estimated Total Revenues |
0 |
0 |
0 |
Explanation of above estimates (including long-range effect):
This bill would allow for two tax credits for electric vehicle manufacturers. The tier 1 tax credit is a credit for electric vehicle manufacturers, electric vehicle component part manufacturers, or electric vehicle power supply equipment manufacturers that invest over $20 million in capital investments or create more than 100 new jobs within four years. The credit is equal to 75 percent of the income tax withholdings of new jobs created in this state. This could increase to 100 percent for electric vehicle manufacturing projects that are located in priority areas. Created jobs that are retained would qualify for additional income tax withholding credits of 25 percent or 50 percent if such projects are located in priority areas. A non-refundable tax credit would be provided that is equal to ten percent of eligible training costs for full-time new and retained employees.
Tier 2 tax credits are for electric vehicle manufacturers that invest at least $1 billion in capital investments or create over 500 new jobs within five years, electric vehicle component part manufacturers that vest at least $200 million in capital investments or create over 100 jobs within five years, or manufacturers that are converting existing facilities to allow for production of electric vehicles and electric vehicles component parts or electric vehicle power supplies, and will invest $100 million in capital investments or create over 100 new jobs or new jobs equivalent to 10 percent of their statewide baseline, whichever is less, within five years. These eligible electric vehicle manufacturers would be eligible for all credits made available in W. Va. Code §11-14NN-2 for up to 15 years. If during any taxable year the manufacturer ceases operation as an eligible manufacturer in this state for which the credit was allowed, then the unused portion of the credit is forfeited for the taxable year and all ensuing years, unless the cause is from fire, flood, storm, or other casualty.
We cannot accurately estimate the revenue impact of this bill. The provisions of this bill would only affect future investments or job additions by these types of manufacturers. The proposed tax credits are loosely defined with significant uncertainty over the rules of operation. Investments in manufacturing within West Virginia already qualify for various existing tax credits, including the Manufacturing Investment Credit and the Economic Opportunity Tax Credit.
Additional administrative costs incurred by the State Tax Department would be $47,500 in FY 2025 and $22,500 in subsequent fiscal years.
Memorandum
The stated purpose of this bill is to provide for the creation of an “EV Manufacturers Investment Credit.” The bill provides for definitions. The bill establishes tier 1 eligibility, credits, and exemptions. The bill establishes tier 2 eligibility, credits, and exemptions. The bill provides for the forfeiture of unused tax credits. Finally, the bill provides for the redetermination of credit allowed.
The bill provides no guidance regarding what “significantly reduced” means, does not further mention an “application,” and does not identify who would be anticipating closure or significant reduction of operations.
The bill purports to create two separate tiers of tax credits and exemptions. The first tier is for any EV manufacturer, EV component part manufacturer, or EV power supply equipment manufacturer that “invests more than $20 million in capital investments or creates more than 100 new jobs within four years.” The investment of job creation apparently does not necessarily need to be in West Virginia. There is no guidance as to when the four-year period starts.
Taxpayers who qualify under tier 1 “shall be eligible to receive a tax credit equal to 75 percent of the income tax withholdings of new jobs created in the state,” with the percentage increasing to 100 percent for projects (undefined) that locate in priority areas. Because of the way the sentence is structured, it appears that a company that makes minimum investment or job creation nationwide (or worldwide) can claim the credit with regard to whatever portion of the investment of job creation occurred in West Virginia.
The bill states that “[n]o manufacturer may benefit from any of the tax credits in this section [tier 1] for more than 10 years.” Whether the 10 years contemplated must be consecutive is not addressed. It is unclear whether this provision allows a carry forward, a carry back, or both. The bill’s title not only notes that the bill provides for forfeiture of unused tax credits; it also includes the statement that the bill provides “for the redetermination of credit allowed.”
The bill does not include an effective date.
Person submitting Fiscal Note: Mark Muchow
Email Address: kerri.r.petry@wv.gov