FISCAL NOTE

Date Requested: January 18, 2022
Time Requested: 02:17 PM
Agency: Tax & Revenue Department, WV State
CBD Number: Version: Bill Number: Resolution Number:
1078 Introduced SB105
CBD Subject:


FUND(S):

General Revenue Fund, State Road Fund

Sources of Revenue:

General Fund State Road Fund

Legislation creates:





Fiscal Note Summary


Effect this measure will have on costs and revenues of state government.


The stated purpose of this bill is to return to the Division of Highways the sales tax collected from contractors for materials used in Highways construction and maintenance. According to our interpretation, the provisions of this bill would reinstate an annual revenue transfer from the State General Revenue Fund to the State Road Fund beginning in Fiscal Year 2022. The amount of the annual revenue transfer is variable each year depending on a formula equal to 6 percent of 40 percent of total gross funds expended by the Division of Highways during the fiscal year for construction and maintenance of highway projects. Even though the revenue transfer provision is expressed as a sales tax exemption for materials purchased by contractors, no such tax exemption is created for contractors. Based on estimates received from the West Virginia Division of Highways, the proposed legislation would decrease General Revenue Fund collections by as much as $15.0 million in FY2022, $19.5 million in FY2023, and $18.5 million in FY2024. The legislation was unclear as to whether the reimbursement would cover the entire FY2022 period or the period on and after January 1, 2022. It is anticipated that future transfers would vary considerably from year to year. The revenue loss to the State General Revenue Fund is offset by revenue gain to the State Road Fund associated with the annual required revenue transfer. There would be no additional administrative costs incurred by the Tax Department.



Fiscal Note Detail


Effect of Proposal Fiscal Year
2022
Increase/Decrease
(use"-")
2023
Increase/Decrease
(use"-")
Fiscal Year
(Upon Full
Implementation)
1. Estmated Total Cost 0 0 0
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):


According to our interpretation, the provisions of this bill would reinstate an annual revenue transfer from the State General Revenue Fund to the State Road Fund beginning in Fiscal Year 2022. The amount of the annual revenue transfer is variable each year depending on a formula equal to 6 percent of 40 percent of total gross funds expended by the Division of Highways during the fiscal year for construction and maintenance of highway projects. Even though the revenue transfer provision is expressed as a sales tax exemption for materials purchased by contractors, no such tax exemption is created for contractors. Based on estimates received from the West Virginia Division of Highways, the proposed legislation would decrease General Revenue Fund collections by as much as $15.0 million in FY2022, $19.5 million in FY2023, and $18.5 million in FY2024. The legislation was unclear as to whether the reimbursement would cover the entire FY2022 period or the period on and after January 1, 2022. It is anticipated that future transfers would vary considerably from year to year. The revenue loss to the State General Revenue Fund is offset by revenue gain to the State Road Fund associated with the annual required revenue transfer. There would be no additional administrative costs incurred by the Tax Department.



Memorandum


The stated purpose of this bill is to return to the Division of Highways the sales tax collected from contractors for materials used in Highway construction and maintenance projects. The bill provides that “by June 15 of each fiscal year” the Division of Highways must provide the Tax Commissioner with an itemized list of highways’ contract projects with the amount of funds expended for construction and maintenance. The bill also amends §11-15-9(c) to make the changes effective “upon passage of this act” for periods “on and after January 1, 2022,” rendering the changes in §11-15-9(b)(6) retroactive to that date. If the bill passes in the Legislature’s regular session, the language of the bill appears to require that the Division of Highways provide a list to the Tax Commissioner on June 15, 2022 to cover the 2021-2022 fiscal year. The bill does not address how or whether the first half of the 2021-2022 fiscal year (that part of the fiscal year from July 1, 2021 through December 31, 2021) should be reflected on the Division of Highways list. The bill appears to delete by omission current W.Va. Code §11-15-9(a)(50).That section is not struck through; it is simply not included as part of the existing statute that the bill seeks to amend. If this omission is not corrected, the exemption will effectively be repealed. If it is one intent of the bill to repeal section 11-15-9(a)(50), then failure to mention that in the title is a constitutional defect.



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