FISCAL NOTE
Date Requested: March 16, 2021
Time Requested: 11:51 AM |
| Agency: |
Tax & Revenue Department, WV State |
|---|
| CBD Number: |
Version: |
Bill Number: |
Resolution Number: |
| 3184 |
Introduced |
HB3267 |
|
|---|
| CBD Subject: |
Taxation |
|---|
|
FUND(S):
General Revenue Fund, local governments
Sources of Revenue:
General Fund local property tax revenue
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 change the method of assessing inventory for taxing purposes.
The provisions of this bill would change the taxable status of inventory in West Virginia. Assuming that the assessment date of July 1 would still be applicable, inventory would only be reported if it had been in West Virginia for 180 days. Assuming all business avoid having inventory in State for the required period of time and all inventory would be exempt, there would be a decrease of roughly $88.0 million in revenue beginning in FY2023. The estimated revenue decrease would be more than $24.5 million to the State General Revenue Fund, $34.0 million to local county school boards, $23.6 million to county commissions and $5.9 million to municipalities. The distribution of estimated cost is based on information from taxes levied as reported in the Classified Assessed Valuations Taxes Levied for 2020 Tax Year publication of the State Tax Department and the incorporation of the calculation of local property tax share within the State Aid to Schools Formula.
Additional annual administrative costs would be $10,000 for local governments.
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 |
10,000 |
| 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 |
0 |
Explanation of above estimates (including long-range effect):
The provisions of this bill would change the taxable status of inventory in West Virginia. Assuming that the assessment date of July 1 would still be applicable, inventory would only be reported if it had been in West Virginia for 180 days. Assuming all business avoid having inventory in State for the required period of time and all inventory would be exempt, there would be a decrease of roughly $88.0 million in revenue beginning in FY2023. The estimated revenue decrease would be more than $24.5 million to the State General Revenue Fund, $34.0 million to local county school boards, $23.6 million to county commissions and $5.9 million to municipalities. The distribution of estimated cost is based on information from taxes levied as reported in the Classified Assessed Valuations Taxes Levied for 2020 Tax Year publication of the State Tax Department and the incorporation of the calculation of local property tax share within the State Aid to Schools Formula.
Additional annual administrative costs would be $10,000 for local governments.
Memorandum
The stated purpose of this bill is to change the method of assessing inventory for taxing purposes.
The proposed limitation on the assessment of “inventory property” could conflict with the requirement in W. Va. Code §11-3-1(a), which provides that “[a]ll property, except public service businesses assessed pursuant to article six of this chapter, shall be assessed annually as of July 1 at sixty percent of its true and actual value; that is to say, at the price for which the property would sell if voluntarily offered for sale by the owner thereof, upon the terms as the property, the value of which is sought to be ascertained, is usually sold, and not the price which might be realized if the property were sold at a forced sale.” Furthermore, it is contrary to language in W. Va. Code §11-1C-5, which states, in part, that “items of personal property are valued in the same manner…” Inventory property bought or acquired less than 180 days or 12 months prior to July 1 would not be assessed by that date. The delay in assessment until the property has been held for the prescribed amount of time, particularly as it relates to inventory commodities (i.e., grains and other agriculture products), could result in assessments lower than they would have been if assessed by July 1. Article X, Section 1 of the W. Va. Constitution requires taxation to be equal and uniform throughout the State, property to be taxed in proportion to its value, and no one species of property be taxed higher than any other species of property of equal value.
The bill may also be in conflict with the equal protection clause in Article III, Section 10 of the West Virginia Constitution. Application of the bill to “inventory property” only and the calculation of the number of days “inventory property” must be held before being assessed is arbitrary and speculative, and bears no direct relation to the actual amount of property tax due on any particular piece of property.
The bill provides no guidance as to when inventory property excluded from being assessed on July 1 would be assessed.
Person submitting Fiscal Note: Mark Muchow
Email Address: kerri.r.petry@wv.gov