FISCAL NOTE
Date Requested: January 12, 2024
Time Requested: 04:50 PM |
| Agency: |
Tax & Revenue Department, WV State |
|---|
| CBD Number: |
Version: |
Bill Number: |
Resolution Number: |
| 2885 |
Introduced |
SB323 |
|
|---|
| 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 create a tax credit related to childcare expenses.
Based on our interpretation, the legislation creates a refundable tax credit for childcare expenses for a resident individual who is eligible for the federal Child and Dependent Care Credit claimed on Internal Revenue Service Form 2441 for the same taxable year. The credit is calculated as a percentage of the federal income tax credit with the applicable percentage based on the resident individual’s federal adjusted gross income. The credit is limited to a resident individual with federal adjusted gross income of less than $65,000. The legislation does not address residents who file jointly. The legislation would be effective for taxable years beginning on and after January 1, 2025.
According to our interpretation, the legislation, if passed, would result in a decrease in General Revenue collections of $820,000 beginning in FY2026.
Additional administrative costs incurred by the State Tax Department would be $61,600 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 |
-820,000 |
Explanation of above estimates (including long-range effect):
Based on our interpretation, the legislation creates a refundable tax credit for childcare expenses for a resident individual who is eligible for the federal Child and Dependent Care Credit claimed on Internal Revenue Service Form 2441 for the same taxable year. The credit is calculated as a percentage of the federal income tax credit with the applicable percentage based on the resident individual’s federal adjusted gross income. The credit is limited to a resident individual with federal adjusted gross income of less than $65,000. The legislation does not address residents who file jointly. The legislation would be effective for taxable years beginning on and after January 1, 2025.
According to our interpretation, the legislation, if passed, would result in a decrease in General Revenue collections of $820,000 beginning in FY2026.
Additional administrative costs incurred by the State Tax Department would be $61,600 in FY2026 and $45,000 in subsequent fiscal years.
Memorandum
The stated purpose of this bill is to create a tax credit related to childcare expenses.
The bill would create a personal income tax credit for taxpayers who are residents of West Virginia, have one or more children under the age of thirteen during the year in which the credit is sought to be claimed, and presently claim a credit for “child and dependent care expenses” on the taxpayers’ federal return via an “IRS Form 2441.”
The term “qualified individual” in §11-21-27(f) is not defined and is not used anywhere else in the bill, but it may be a reference to IRS Form 2441, the instructions to which refer to a “qualified person” as a qualifying child or dependent, not the taxpayer.
The term “childcare eligible expenses credit” is used throughout the bill, but there may be an issue with this language due to vagueness. In §11-21-27(a), the term “childcare eligible expenses credit” is used to discuss a credit claimed on a federal tax return. There is no federal tax credit entitled “childcare eligible expenses credit.”
Subsection §11-21-27(f) states that the dependent child that the taxpayer incurred expenses on behalf of must not have reached the age of 13 on December 31st of the “tax year;” but there is no indication of which tax year is meant. However, the method of calculating the amount of credit available to an individual taxpayer relies upon the amount of credit received by a taxpayer for “Child and Dependent Care Expenses” reported via “IRS Form 2441” The IRS Form 2441 is the form designated for claiming a credit pursuant to I.R.C. §21, and I.R.C. §21 has been deemed to include expenses incurred while a child was under the age of 13. No exemption is in place for children that reach the age of 13 before December 31st.
Person submitting Fiscal Note: Mark Muchow
Email Address: kerri.r.petry@wv.gov