FISCAL NOTE
Date Requested: March 02, 2021
Time Requested: 12:19 PM |
| Agency: |
Tax & Revenue Department, WV State |
|---|
| CBD Number: |
Version: |
Bill Number: |
Resolution Number: |
| 2415 |
Introduced |
HB2844 |
|
|---|
| 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 reduce the 40 percent limitation of tax credit allowed for manufacturing investment to 25 percent.
According to our interpretation of this bill, for tax years beginning on and after January 1, 2021, the tax credit offset for the Manufacturing Investment Tax Credit would be reduced from a 40 percent limitation of credit against Corporation Net Income Tax and Severance Tax liabilities to 25 percent. Therefore, the credit offset would be increased from 60 percent to 75 percent. Many of the qualified Manufacturing Investment Tax Credit taxpayers who pay Severance Tax are in the limestone or sandstone industry. The Severance Tax on limestone or sandstone terminated on July 1, 2019; therefore, the proposed changes to the Manufacturing Investment Tax Credit will primarily be related to Corporation Net Income Tax credit offsets. The Manufacturing Investment Tax Credit currently reduces General Revenue Fund collections by $4.0 million per year. Passage of this bill would result in an additional loss of roughly $1.0 million to the General Revenue Fund in FY2022 and each year thereafter.
Additional administrative costs incurred by the State Tax Department would be $20,000 in FY2022.
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 |
20,000 |
0 |
| Personal Services |
0 |
0 |
0 |
| Current Expenses |
0 |
0 |
0 |
| Repairs and Alterations |
0 |
0 |
0 |
| Assets |
0 |
0 |
0 |
| Other |
0 |
20,000 |
0 |
| 2. Estimated Total Revenues |
0 |
-1,000,000 |
-1,000,000 |
Explanation of above estimates (including long-range effect):
According to our interpretation of this bill, for tax years beginning on and after January 1, 2021, the tax credit offset for the Manufacturing Investment Tax Credit would be reduced from a 40 percent limitation of credit against Corporation Net Income Tax and Severance Tax liabilities to 25 percent. Therefore, the credit offset would be increased from 60 percent to 75 percent. Many of the qualified Manufacturing Investment Tax Credit taxpayers who pay Severance Tax are in the limestone or sandstone industry. The Severance Tax on limestone or sandstone terminated on July 1, 2019; therefore, the proposed changes to the Manufacturing Investment Tax Credit will primarily be related to Corporation Net Income Tax credit offsets. The Manufacturing Investment Tax Credit currently reduces General Revenue Fund collections by $4.0 million per year. Passage of this bill would result in an additional loss of roughly $1.0 million to the General Revenue Fund in FY2022 and each year thereafter.
Additional administrative costs incurred by the State Tax Department would be $20,000 in FY2022.
Memorandum
The stated purpose of this bill is to reduce the 40 percent limitation of tax credit allowed for manufacturing investment to 25 percent.
The bill erroneously refers to the Business Franchise Tax, which was terminated on January 1, 2015. The proposed changes to the Manufacturing Investment Tax Credit would only apply to Severance Tax and Corporation Net Income Tax.
Person submitting Fiscal Note: Mark Muchow
Email Address: kerri.r.petry@wv.gov