FISCAL NOTE
Date Requested: February 11, 2021
Time Requested: 02:37 PM |
| Agency: |
Tax & Revenue Department, WV State |
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| CBD Number: |
Version: |
Bill Number: |
Resolution Number: |
| 1575 |
Introduced |
HB2283 |
|
|---|
| 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 create a healthy living tax credit against the personal income tax.
The bill, as written, would allow the taxpayer to take a tax credit equal to 100 percent of qualified expenses up to $1,000 relating to healthy living. Qualified expenses include the purchase of exercise equipment, and the cost of membership at a gym or other similar facility, or other class involving physical activity including, but not limited to, sports, dance, or martial arts, and other expenses as determined by the Tax Commissioner to be expenses relating to healthy living.
According to our interpretation, the proposed tax credit would reduce General Revenue Fund collections by at least $85 million per year just for fitness club/gym related expenses beginning in FY2023. Due to the broad nature of defined eligible expenses and the high 100 percent rate of tax credit incentive, actual costs of such a tax credit could be significantly greater than $85 million per year.
Absent an effective date in the bill, this credit would be available for tax years beginning on or after January 1, 2022. Administrative costs would be $71,000 in FY2023 and $45,000 in subsequent fiscal years.
Fiscal Note Detail
| Effect of Proposal |
Fiscal Year |
2021
Increase/Decrease
(use"-") |
2022
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 |
-85,000,000 |
Explanation of above estimates (including long-range effect):
The bill, as written, would allow the taxpayer to take a tax credit equal to 100 percent of qualified expenses up to $1,000 relating to healthy living. Qualified expenses include the purchase of exercise equipment, and the cost of membership at a gym or other similar facility, or other class involving physical activity including, but not limited to, sports, dance, or martial arts, and other expenses as determined by the Tax Commissioner to be expenses relating to healthy living.
According to our interpretation, the proposed tax credit would reduce General Revenue Fund collections by at least $85 million per year just for fitness club/gym related expenses beginning in FY2023. Due to the broad nature of defined eligible expenses and the high 100 percent rate of tax credit incentive, actual costs of such a tax credit could be significantly greater than $85 million per year.
This bill identifies qualified expenses related to healthy living. The national average cost for gym membership, home exercise equipment, and group fitness classes is approximately $1,100. However, because West Virginia residents have lower levels of physical activity and income than the national average, the amount spent on these qualified expenses are likely to also be lower than the national average cost. According to data from the Bureau of Labor Statistics, 17.8 percent of West Virginia residents are engaged in sports and exercise on an average day. Nationwide, COVID-19 restrictions have resulted in the closure of a significant number of fitness facilities. According to a national survey, 34 percent of people who utilize gyms are planning to cancel their memberships due to the COVID-19 pandemic. In typical years, approximately 50 percent of new gym members cancel their memberships in the first half of the year. The majority of these former members do not plan to return to physical facilities and would prefer to exercise at home. Home exercise equipment purchases tend to be used for long periods of time and are often not replaced for several years. Therefore, these qualified expenses would decrease after the first year of implementation. In West Virginia, there are about 129 health and fitness clubs, or 7.6 facilities per 100,000 residents. With a population of approximately 1.7 million residents, and an estimated 5 percent of whom are expected to claim the Personal Income Tax credit, passage of this bill would result in a loss to the General Revenue Fund of $85 million.
Absent an effective date in the bill, this credit would be available for tax years beginning on or after January 1, 2022. Administrative costs would be $71,000 in FY2023 and $45,000 in subsequent fiscal years.
Memorandum
Person submitting Fiscal Note: Mark Muchow
Email Address: kerri.r.petry@wv.gov