FISCAL NOTE
Date Requested: February 10, 2021
Time Requested: 04:38 PM |
| Agency: |
Tax & Revenue Department, WV State |
|---|
| CBD Number: |
Version: |
Bill Number: |
Resolution Number: |
| 1141 |
Introduced |
HB2187 |
|
|---|
| 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 provide an earned income tax credit against the personal income tax.
According to our interpretation, the proposed bill would allow a West Virginia Earned Income Tax Credit (EITC) equal to 15 percent of the Federal Earned Income Tax Credit beginning in TY2021. The proposed credit would be refundable when the credit exceeds the West Virginia personal income tax liability of a taxpayer in a given tax year. Refunds that are issued as a result of the proposed credit will be appropriated from the Temporary Assistance for Needy Families (TANF) Fund. This bill is expected to result in annual reductions of General Revenue Fund collections of at least $47.7 million beginning in FY2022.
A current proposal by the Federal House Ways and Means Committee would expand the Federal Earned Income Tax Credit to provide additional benefits to childless workers at an estimated cost of $13 billion. If this proposal became law, it would increase the revenue loss of the proposed West Virginia EITC by as much as $9.5 million per year. In addition, the West Virginia EITC would be tied into the Federal credit and West Virginia would automatically be subject to any future changes in the Federal Credit.
In order to use TANF funds for the EITC refunds it would require a TANF state plan amendment to be submitted and approved by the federal government before implementation since EITC refunds are not currently mentioned in our TANF state plan. The current and future availability of TANF monies to fund the refundable portion of the credit is unknown. It is estimated that roughly 90 percent, more than $43.0 million, would be refundable in the first year. TANF funds may be insufficient or unavailable to fully fund the refundable portion of the proposed tax credit.
Additional costs to the State Tax Department would be $189,000 in FY2022 and $160,000 for each year thereafter.
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 |
189,000 |
160,000 |
| Personal Services |
0 |
160,000 |
160,000 |
| Current Expenses |
0 |
0 |
0 |
| Repairs and Alterations |
0 |
0 |
0 |
| Assets |
0 |
4,000 |
0 |
| Other |
0 |
25,000 |
0 |
| 2. Estimated Total Revenues |
0 |
-47,700,000 |
-47,700,000 |
Explanation of above estimates (including long-range effect):
According to our interpretation, the proposed bill would allow a West Virginia Earned Income Tax Credit (EITC) equal to 15 percent of the Federal Earned Income Tax Credit beginning in TY2021. The proposed credit would be refundable when the credit exceeds the West Virginia personal income tax liability of a taxpayer in a given tax year. Refunds that are issued as a result of the proposed credit will be appropriated from the Temporary Assistance for Needy Families (TANF) Fund. This bill is expected to result in annual reductions of General Revenue Fund collections of at least $47.7 million beginning in FY2022.
For Tax Year 2018, more than 143,000 West Virginia resident federal returns included claims for Earned Income Tax Credit. More than 130,000 of those returns had refundable credit with an excess of 90 percent of the total amount of Earned Income Credit claims attributable to West Virginia Resident returns being refunded.
A current proposal by the Federal House Ways and Means Committee would expand the Federal Earned Income Tax Credit to provide additional benefits to childless workers at an estimated cost of $13 billion. If this proposal became law, it would increase the revenue loss of the proposed West Virginia EITC by as much as $9.5 million per year. In addition, the West Virginia EITC would be tied into the Federal credit and West Virginia would automatically be subject to any future changes in the Federal Credit.
In order to use TANF funds for the EITC refunds it would require a TANF state plan amendment to be submitted and approved by the federal government before implementation since EITC refunds are not currently mentioned in our TANF state plan. The current and future availability of TANF monies to fund the refundable portion of the credit is unknown. It is estimated that roughly 90 percent, more than $43.0 million, would be refundable in the first year. TANF funds may be insufficient or unavailable to fully fund the refundable portion of the proposed tax credit.
Additional costs to the State Tax Department would be $189,000 in FY2022 and $160,000 for each year thereafter.
Memorandum
Person submitting Fiscal Note: Mark Muchow
Email Address: kerri.r.petry@wv.gov