FISCAL NOTE
Date Requested: January 14, 2022
Time Requested: 10:31 AM |
| Agency: |
Tax & Revenue Department, WV State |
|---|
| CBD Number: |
Version: |
Bill Number: |
Resolution Number: |
| 1483 |
Introduced |
HB4088 |
|
|---|
| 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 create the Rare Earth Element and Critical Mineral Investment Tax Credit Act of 2022. The amount of credit depends upon the cost of the qualified investment property and the number of new jobs created. Property that qualifies for another tax credit in chapter 11 of the West Virginia Code is not eligible for credit under this bill. Similarly, qualified investment property under this bill is not eligible for another credit under Chapter 11 of the code. The bill includes rules for administration and enforcement of the credit. If enacted, the credit would apply to qualified investment property placed in service or use at a rare earth elements or critical minerals in this state. The bill provides for an effective date. Finally, the bill establishes clear legal right to the title of chemical compounds, elements, and substances that are derived from the treatment of acid-mine drainage on mined lands.
According to our interpretation, this bill creates a ten-year tax credit offsetting Personal Income Tax and Corporation Net Income Tax for qualified taxpayers who invest in rare earth elements and critical minerals. The proposed tax credit is very similar in structure to the existing Economic Opportunity Tax Credit with minor alterations including a variation in new jobs tax credit job percentages, minimum employment requirements, and a provision for a longer period of unused credit carryover (10 years versus 3 years beyond the initial 10-year application period). The proposed credit is allowed for qualified investment property placed in service or use on or after July 1, 2023. The qualified investment property cannot be used to qualify for other existing business tax credits. The bill also requires a Tax Credit Review and Accountability Report regarding the cost effectiveness of this proposed credit every three years beginning on February 1, 2027, which the Tax Commissioner would submit to the Governor, Senate President, and the House Speaker.
This bill also gives rule-making authority to the State Department of Environmental Protection related to the treatment of acid mine drainage that produces materials that may possibly contain rare earth elements. The treating party would receive a commercial benefit for value derived from the byproducts of acid mine drainage treatment.
Currently, there is no rare earth industry in the State. However, at least one rare earth business is planned for development at this time. Passage of this bill would result in minimal consequences to General Revenue Fund collections in FY2024 and subsequent fiscal years.
Additional administrative costs incurred by the State Tax Department would be $50,000 in FY2023 and $10,000 per year in subsequent fiscal years.
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 |
50,000 |
10,000 |
| Personal Services |
0 |
20,000 |
5,000 |
| Current Expenses |
0 |
0 |
0 |
| Repairs and Alterations |
0 |
0 |
0 |
| Assets |
0 |
0 |
0 |
| Other |
0 |
30,000 |
5,000 |
| 2. Estimated Total Revenues |
0 |
0 |
0 |
Explanation of above estimates (including long-range effect):
According to our interpretation, this bill creates a ten-year tax credit offsetting Personal Income Tax and Corporation Net Income Tax for qualified taxpayers who invest in rare earth elements and critical minerals. The proposed tax credit is very similar in structure to the existing Economic Opportunity Tax Credit with minor alterations including a variation in new jobs tax credit job percentages, minimum employment requirements, and a provision for a longer period of unused
credit carryover (10 years versus 3 years beyond the initial 10-year application period). The proposed credit is allowed for qualified investment property placed in service or use on or after July 1, 2023. The qualified investment property cannot be used to qualify for other existing business tax credits. The bill also requires a Tax Credit Review and Accountability Report regarding the cost effectiveness of this proposed credit every three years beginning on February 1, 2027, which the Tax Commissioner would submit to the Governor, Senate President, and the House Speaker.
This bill also gives rule-making authority to the State Department of Environmental Protection related to the treatment of acid mine drainage that produces materials that may possibly contain rare earth elements. The treating party would receive a commercial benefit for value derived from the byproducts of acid mine drainage treatment.
Currently, there is no rare earth industry in the State. However, at least one rare earth business is planned for development at this time. Passage of this bill would result in minimal consequences to General Revenue Fund collections in FY2024 and subsequent fiscal years.
Additional administrative costs incurred by the State Tax Department would be $50,000 in FY2023 and $10,000 per year in subsequent fiscal years.
Memorandum
The stated purpose of this bill is to create the Rare Earth Element and Critical Mineral Investment Tax Credit Act of 2022. The amount of credit depends upon the cost of the qualified investment property and the number of new jobs created. Property that qualifies for another tax credit in chapter 11 of the West Virginia Code is not eligible for credit under this bill. Similarly, qualified investment property under this bill is not eligible for another credit under Chapter 11 of the code. The bill includes rules for administration and enforcement of the credit. If enacted, the credit would apply to qualified investment property placed in service or use at a rare earth elements or critical minerals in this state. The bill provides for an effective date. Finally, the bill establishes clear legal right to the title of chemical compounds, elements, and substances that are derived from the treatment of acid-mine drainage on mined lands.
It is unclear whether a separate definition for rare earth elements is necessary when the definition of critical minerals appears to include rare earth elements. Further, the definition of “critical minerals” may be problematic as it does not explain what makes the minerals essential or what level of disruption is needed before a mineral is included in this definition. A rule would be needed to clarify these definitions.
In most sections of the bill, it implies that the effective date is July 1, 2022, but towards the end of the bill in the effective date subsection it is listed as July 1, 2023. This would need to be corrected.
Person submitting Fiscal Note: Mark Muchow
Email Address: kerri.r.petry@wv.gov