FISCAL NOTE

Date Requested: February 23, 2021
Time Requested: 12:26 PM
Agency: Tax & Revenue Department, WV State
CBD Number: Version: Bill Number: Resolution Number:
2181 Introduced HB2641
CBD Subject:


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 “The Young Professional Tax Credits” for student loans. The bill provides that the credit applies to college graduates from ages 18 to 40 or until the student loan is repaid. The bill also provides for a refundable child care credit. The provisions of this bill would create two separate credits for taxpayers between ages 18 and 40. There is no definition of “college graduate” in this bill. This bill would allow for a credit against the state personal income tax for any taxpayer between the ages of 18 and 40 years who has student loan debts. The tax credit is equal to the accumulated amount of interest on the student loan for the taxable year. As an alternative, this bill would allow for a taxpayer, who is a college graduate with no student loan debt, to claim an annual credit of up to $1,000 against the state personal income tax. This credit may be claimed each year until either the taxpayer reaches the age of 40 years or leaves the State of West Virginia, whichever occurs first. We are unable to estimate the loss which would result from this provision of this bill. However, the revenue loss to General Revenue Fund would be very substantial. In TY2018, West Virginia taxpayers reported student loan interest paid deductions of $58.9 million. This bill would also allow for a refundable credit against the state personal income tax for any taxpayer between the ages of 18 and 40 years for childcare costs. This credit is equal to the federal deduction for dependent children of a college graduate who resides in West Virginia. The taxpayer claiming either credit must be a resident of the state for at least three years to be eligible. According to U.S. Census data, as of 2019 there were 473,127 West Virginia residents between the ages of 18 and 40 years. This bill would allow for a refundable credit against the state personal income tax for any taxpayer between the ages of 18 and 40 years for childcare costs equal to the federal deduction for dependent children. There is no current federal deduction for dependent children. However, there is a dependent child tax credit of $2,000 per eligible child for tax years prior to 2021 and a $3,000 child tax credit beginning in 2021. In 2018, the total amount of $2,000 child tax credits claimed on federal tax returns filed by West Virginia residents was more than $328.9 million. We are unable to determine the approximate number of taxpayers between the ages of 18 and 40 years who have dependent children and are college graduates. The revenue loss from the credit for federal deduction for dependent children would also be very substantial . Administrative costs would be $61,000 in FY2022 and $45,000 in subsequent 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 61,000 45,000
Personal Services 0 45,000 45,000
Current Expenses 0 0 0
Repairs and Alterations 0 0 0
Assets 0 1,000 0
Other 0 15,000 0
2. Estimated Total Revenues 0 0 0


Explanation of above estimates (including long-range effect):


The provisions of this bill would create two separate credits for taxpayers between ages 18 and 40. There is no definition of “college graduate” in this bill. This bill would allow for a credit against the state personal income tax for any taxpayer between the ages of 18 and 40 years who has student loan debts. The tax credit is equal to the accumulated amount of interest on the student loan for the taxable year. As an alternative, this bill would allow for a taxpayer, who is a college graduate with no student loan debt, to claim an annual credit of up to $1,000 against the state personal income tax. This credit may be claimed each year until either the taxpayer reaches the age of 40 years or leaves the State of West Virginia, whichever occurs first. We are unable to estimate the loss which would result from this provision of this bill. However, the revenue loss to General Revenue Fund would be very substantial. In TY2018, West Virginia taxpayers reported student loan interest paid deductions of $58.9 million. This bill would also allow for a refundable credit against the state personal income tax for any taxpayer between the ages of 18 and 40 years for childcare costs. This credit is equal to the federal deduction for dependent children of a college graduate who resides in West Virginia. The taxpayer claiming either credit must be a resident of the state for at least three years to be eligible. According to U.S. Census data, as of 2019 there were 473,127 West Virginia residents between the ages of 18 and 40 years. This bill would allow for a refundable credit against the state personal income tax for any taxpayer between the ages of 18 and 40 years for childcare costs equal to the federal deduction for dependent children. There is no current federal deduction for dependent children. However, there is a dependent child tax credit of $2,000 per eligible child for tax years prior to 2021 and a $3,000 child tax credit beginning in 2021. In 2018, the total amount of $2,000 child tax credits claimed on federal tax returns filed by West Virginia residents was more than $328.9 million. We are unable to determine the approximate number of taxpayers between the ages of 18 and 40 years who have dependent children and are college graduates. The revenue loss from the credit for federal deduction for dependent children would also be very substantial . Administrative costs would be $61,000 in FY2022 and $45,000 in subsequent years.



Memorandum


The stated purpose of this bill is to create “The Young Professional Tax Credits” for student loans. The bill provides that the credit applies to college graduates from ages 18 to 40 or until the student loan is repaid. The bill also provides for a refundable child care credit. It appears the first tax credit is for any taxpayer with student loan debt of any kind, private high school, trade school, or college. There is no requirement of being a college graduate, the age of 18 is the age of many high school graduates, and the title does not specify graduation from college. The refundable credit for child care requires the taxpayer to be a college graduate residing in this state. Since the refundable credit is based on the federal deduction for dependent children, it appears the refundable credit is for each dependent child. The bill creates a credit, rather than a declining modification from the eligible taxpayer’s federal adjusted gross income.



    Person submitting Fiscal Note: Mark Muchow
    Email Address: kerri.r.petry@wv.gov