FISCAL NOTE
Date Requested: January 31, 2024
Time Requested: 04:22 PM |
| Agency: |
Division of Regulatory and Fiscal Affairs, WV |
|---|
| 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
Fiscal Note Summary
Effect this measure will have on costs and revenues of state government.
Senate Bill 323 creates a tax credit related to child care expenses against personal income taxes for residents in West Virginia beginning January 1, 2025. This credit can only be claimed by residents who claimed child care eligible expenses on their federal tax return for children 12 years and under.
The amount of credit taxpayers can claim is based on the individual Federal Adjusted Gross Income (FAGI). If the individual FAGI is $30,000 or less they will be eligible to claim 50 percent, those with FAGI of $30,001 to $45,000 will be eligible to claim 30 percent, and those with FAGI of $45,001 to $65,000 will be eligible to claim 20 percent of the credit for child expenses that were claimed on the federal tax return. Individuals with a FAGI of $65,000 or more would be ineligible for this credit.
The Division of Regulatory and Fiscal Affairs estimates $1,066,620 could be claimed by eligible taxpayers.
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 |
-1,066,620 |
Explanation of above estimates (including long-range effect):
Senate Bill 323 would create a child tax credit related to child care expenses against personal income taxes for residents in the State beginning January 1, 2025. This credit can only be claimed by residents who claimed child care eligible expenses on their federal tax return for children who have not reached the age of 13 on December 31 of the tax year. Individuals who have a FAGI of $65,000 or more would be ineligible for this credit.
The Child and Dependent Care Credit (CDCC) is a federal tax credit for parents or caregivers to help cover the cost of qualifying care expense for children 12 years of age and younger or other qualifying dependents. The CCDC is generally worth 20 to 35 percent of child care expenses paid up to $3,000 for one qualifying dependent or $6,000 for two or more qualifying dependents. The amount of percentage that is given is based on income, and as income increases the percentage allowed decreases. Once adjusted gross income reaches $43,000 the maximum a taxpayer can claim is 20 percent of expenses paid.
To calculate the costs of SB 323, RAFA used 2019 Statement of Income data from the Internal Revenue Service. This data includes the number of returns filed in each federal income tax bracket with a breakdown of all credits by number of returns claimed and the total amount of credits claimed over those returns. Due to the availability of data and the implications of the pandemic, RAFA used IRS data from Tax Year 2019 and income brackets $65,000 and less.
RAFA estimates the amount of CDCC credited to West Virginia taxpayers in Tax Year 2019 totaled $1,066,620. The state and federal income brackets did not equal out for these figures. By restricting the federal income brackets and assuming equal distribution, new totals for the federal income brackets to match the West Virginia income tax brackets required for the bill were calculated. For income brackets $30,000 and less with 50 percent applied the credit amount totaled $300,400, income brackets $30,000 to $45,000 with 30 percent applied totaled $289,620 and, income brackets $45,000 to $65,000 with 20 percent applied totaled $476,600.
Memorandum
Although all 109,560 returns claiming this credit at the federal level would be eligible for this state tax credit, they may not all claim it. This would reduce the costs to the state.
An additional tax credit for child care could potentially provide an incentive for people to seek child care services. In effect, the increased demand for child care services may lead to improvements in the quality and availability of child care options as providers respond to market demand, increasing claims and the overall cost of this bill.
This bill could have slight administrative costs for the Tax Division of the West Virginia Department of Revenue.
Person submitting Fiscal Note: Peter Shirley
Email Address: peter.shirley@wvlegislature.gov