FISCAL NOTE
Date Requested: March 22, 2021
Time Requested: 01:05 PM |
| Agency: |
Tax & Revenue Department, WV State |
|---|
| CBD Number: |
Version: |
Bill Number: |
Resolution Number: |
| 1654 |
Introduced |
SB704 |
|
|---|
| 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 exemption from personal income tax for business owners in one community when their sole source of income is their business.
This bill would allow for individuals who own and operate a business in a Class IV city that borders another state, who reside in the county, and whose sole source of income is their business to be exempted from the payment of Personal Income Tax. The Personal Income Tax exemption would apply for tax years 2020 through 2025. The State Tax Department does not have sufficient data to determine the number of individuals who own a business in an applicable Class IV city, who reside in the county of the Class IV city and the owner’s sole source of income is the income from the business. Therefore, the amount of loss to General Revenue Fund cannot be determined.
Additional administrative costs incurred by the State Tax Department would be $20,000 in FY2022 and $15,000 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 |
20,000 |
15,000 |
| Personal Services |
0 |
15,000 |
15,000 |
| Current Expenses |
0 |
0 |
0 |
| Repairs and Alterations |
0 |
0 |
0 |
| Assets |
0 |
0 |
0 |
| Other |
0 |
5,000 |
0 |
| 2. Estimated Total Revenues |
0 |
0 |
0 |
Explanation of above estimates (including long-range effect):
This bill would allow for individuals who own and operate a business in a Class IV city that borders another state, who reside in the county, and whose sole source of income is their business to be exempted from the payment of Personal Income Tax. The Personal Income Tax exemption would apply for tax years 2020 through 2025. The State Tax Department does not have sufficient data to determine the number of individuals who own a business in an applicable Class IV city, who reside in the county of the Class IV city and the owner’s sole source of income is the income from the business. Therefore, the amount of loss to General Revenue Fund cannot be determined.
Additional administrative costs incurred by the State Tax Department would be $20,000 in FY2022 and $15,000 in subsequent years.
Memorandum
The stated purpose of this bill is to provide an exemption from personal income tax for business owners in one community when their sole source of income is their business.
The bill provides that “[i]ndividuals who own and operate a business in a Class IV city that borders another state, who reside in the county, and whose sole source of income is their business shall be exempt from payment of personal income tax.” The language thus appears to require that the business be located in a Class IV city that borders another state, but there is no definition of “borders.” A reasonable interpretation of “borders” would be that the boundaries of the city would have to abut the state boundaries. The bill’s language refers to “the county,” but it is unclear whether “the” county referred to is the county where the Class IV city is located. Placement of the new section in only Article 21 apparently disqualifies any C corporation. It is unclear if a pass-through entity would qualify.
The bill may be open to manipulation,in that the language of the bill does not require that the business location in a Class IV city bordering another state must be the only, or even the primary, business location. If a business primarily located in Charleston, for instance, established a location in Cabell County, no matter how insignificant, then the taxpayer might be said to “own and operate a business in a Class IV city bordering another state.”
The bill provides that “[t]he period of this exemption shall be for the tax years 2020 - 2025.” According to this language, the exemption is retroactive, as the 2020 tax year has already ended.
The Tax Commissioner is given authority to prescribe appropriate forms on which individuals claiming the exemption can document their qualification for the exemption; but there is no rule-making authority given.
Person submitting Fiscal Note: Mark Muchow
Email Address: kerri.r.petry@wv.gov