FISCAL NOTE
Date Requested: January 18, 2024
Time Requested: 04:31 PM |
| Agency: |
Tax & Revenue Department, WV State |
|---|
| CBD Number: |
Version: |
Bill Number: |
Resolution Number: |
| 2934 |
Introduced |
HB4901 |
|
|---|
| CBD Subject: |
Taxation |
|---|
|
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 the first $20,000 of income of resident individuals from personal income taxation.
According to our interpretation, the bill would create an additional personal income tax modification reducing federal adjusted gross income. The language of the bill seeks to apply the modification to West Virginia resident returns only. However, W.Va. Code §11-21-30, ‘Computation of tax on income of nonresidents and part-year residents’, subsection (a)(1) states in part “When determining tentative tax liability under this subdivision, a nonresident shall be allowed the same deductions, exemptions and credits that would be allowable if taxpayer were a resident individual, estate or trust,….” Therefore, the modification would exclude the first $20,000 of income on both resident and nonresident returns regardless of whether the return is an individual return, or a married filing jointly return. The legislation would be effective for all taxable years beginning on or after January 1, 2024.
Per our interpretation and based on current filing trends, the proposed legislation would decrease General Revenue Fund collections by a minimal amount in FY2024, $467.3 million in FY2025, and by increasing amounts in subsequent fiscal years. Currently only a small portion of married taxpayers file separately. The decrease in collections will be significantly higher if a larger percentage of married taxpayers chose to file separately to take advantage of the potential tax advantage.
Additional administrative costs incurred by the State Tax Department would be $123,000 in FY2025 and $90,000 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 |
123,000 |
90,000 |
| Personal Services |
0 |
90,000 |
90,000 |
| Current Expenses |
0 |
0 |
0 |
| Repairs and Alterations |
0 |
0 |
0 |
| Assets |
0 |
3,000 |
0 |
| Other |
0 |
30,000 |
0 |
| 2. Estimated Total Revenues |
0 |
-467,300,000 |
-471,300,000 |
Explanation of above estimates (including long-range effect):
According to our interpretation, the bill would create an additional personal income tax modification reducing federal adjusted gross income. The language of the bill seeks to apply the modification to West Virginia resident returns only. However, W.Va. Code §11-21-30, ‘Computation of tax on income of nonresidents and part-year residents’, subsection (a)(1) states in part “When determining tentative tax liability under this subdivision, a nonresident shall be allowed the same deductions, exemptions and credits that would be allowable if taxpayer were a resident individual, estate or trust,….” Therefore, the modification would exclude the first $20,000 of income on both resident and nonresident returns regardless of whether the return is an individual return, or a married filing jointly return. The legislation would be effective for all taxable years beginning on or after January 1, 2024.
Per our interpretation and based on current filing trends, the proposed legislation would decrease General Revenue Fund collections by a minimal amount in FY2024, $467.3 million in FY2025, and by increasing amounts in subsequent fiscal years. Currently only a small portion of married taxpayers file separately. The decrease in collections will be significantly higher if a larger percentage of married taxpayers chose to file separately to take advantage of the potential tax advantage.
Additional administrative costs incurred by the State Tax Department would be $123,000 in FY2025 and $90,000 in subsequent fiscal years.
Memorandum
The stated purpose of this bill is to exempt the first $20,000 of income of resident individuals from personal income taxation.
The bill has a title defect. The title provided states: “A BILL amend the Code of West Virginia, 1931, as amended, by adding thereto a new section designated §11-21-12o, relating to exempting the first $20,000 of income of resident individuals from personal income taxation.”
However, the bill provides an additional modification reducing federal adjusted gross income, which is not the same as a tax exemption. The title of this bill does not match the operative language of the legislation. Furthermore, the language of the reducing modification is confusing, in that it refers to “the first $20,000 of income,” while a true reducing modification applies regardless of whether the amount is the first, second, or last $20,000 of income received by the taxpayer.
Person submitting Fiscal Note: Mark Muchow
Email Address: kerri.r.petry@wv.gov