FISCAL NOTE
Date Requested: January 24, 2022
Time Requested: 04:26 PM |
| Agency: |
Tax & Revenue Department, WV State |
|---|
| CBD Number: |
Version: |
Bill Number: |
Resolution Number: |
| 1924 |
Introduced |
HB4350 |
|
|---|
| 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 a tax credit for a small manufacturing, mining, or industrial business with less than 100 employees or that grosses less than $5 million a year. The tax credit is granted if a new labor-and capital-intensive heavy industry expands or develops in the State of West Virginia and draws employees within the boundaries of the State of West Virginia from existing small manufacturing, mining, or industrial businesses. The bill provides that these small businesses that are affected are entitled to a tax credit per employee lost equivalent to the employee’s or employees’ one year base salary.
According to our interpretation, this bill would create a tax credit against Business & Occupation Tax and Corporation Net Income Tax effective for tax years beginning on or after January 1, 2022. The qualified taxpayer for this proposed credit would be a small manufacturing, mining, or industrial business with less than 100 employees grossing less than $5.0 million a year that is negatively impacted by a new labor and capital-intensive heavy industry expanding or developing in the State. The amount of the credit is the amount per employee lost to the new industry, equivalent to one or more employees’ one-year base salary.
The tax credit would be available to a qualified small industrial taxpayer who loses employment and is able to show that the lost employment was directly attributable to the hiring of such employee by a new or expanding industrial taxpayer who qualifies for tax incentives. The tax credit would equal the amount of the lost employee’s annual salary. The eligible qualified small industrial business may also qualify for other existing tax incentives in addition to the proposed tax credit for employment reduction. The tax credit would first apply to the state business and occupation tax, a tax generally paid by public utility companies but not by manufacturing or mining companies. The tax credit would also apply against the corporation net income tax. We are unable to accurately measure the number of small manufacturing and mining businesses who might attempt to claim this tax credit. However, the revenue loss is likely to be minimal.
Additional administrative costs incurred by the State Tax Department would be $10,000 in FY2023 and $5,000 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 |
10,000 |
5,000 |
| Personal Services |
0 |
0 |
5,000 |
| Current Expenses |
0 |
0 |
0 |
| Repairs and Alterations |
0 |
0 |
0 |
| Assets |
0 |
0 |
0 |
| Other |
0 |
10,000 |
0 |
| 2. Estimated Total Revenues |
0 |
0 |
0 |
Explanation of above estimates (including long-range effect):
According to our interpretation, this bill would create a tax credit against Business & Occupation Tax and Corporation Net Income Tax effective for tax years beginning on or after January 1, 2022. The qualified taxpayer for this proposed credit would be a small manufacturing, mining, or industrial business with less than 100 employees grossing less than $5.0 million a year that is negatively impacted by a new labor and capital-intensive heavy industry expanding or developing in the State. The amount of the credit is the amount per employee lost to the new industry, equivalent to one or more employees’ one-year base salary.
The tax credit would be available to a qualified small industrial taxpayer who loses employment and is able to show that the lost employment was directly attributable to the hiring of such employee by a new or expanding industrial taxpayer who qualifies for tax incentives. The tax credit would equal the amount of the lost employee’s annual salary. The eligible qualified small industrial business may also qualify for other existing tax incentives in addition to the proposed tax credit for employment reduction. The tax credit would first apply to the state business and occupation tax, a tax generally paid by public utility companies but not by manufacturing or mining companies. The tax credit would also apply against the corporation net income tax. We are unable to accurately measure the number of small manufacturing and mining businesses who might attempt to claim this tax credit. However, the revenue loss is likely to be minimal.
Additional administrative costs incurred by the State Tax Department would be $10,000 in FY2023 and $5,000 in subsequent fiscal years.
Memorandum
The stated purpose of this bill is to create a tax credit for a small manufacturing, mining, or industrial business with less than 100 employees or that grosses less than $5 million a year. The tax credit is granted if a new labor-and capital-intensive heavy industry expands or develops in the State of West Virginia and draws employees within the boundaries of the State of West Virginia from existing small manufacturing, mining, or industrial businesses. The bill provides that these small businesses that are affected are entitled to a tax credit per employee lost equivalent to the employee’s or employees’ one year base salary.
The title does not include all actions of the bill, such as the grant of rule-making authority. The definition of “affiliate” needs to be more specific. Further, no standards are given to determine how the credit constraints of 100 employees and maximum gross receipts limits of $5.0 million per year are calculated. There also needs to be some clarification on the annual schedule including when it needs to be submitted and how the amounts of tax already paid are shown. Finally, having different standards for returns filed asserting this proposed credit will make it difficult to administer.
The proposed credit can be transferred to a successor if the successor remains in compliance with the article’s provisions for entitlement to the credit. This is not clear since entitlement appears to derive from losing an employee to another employer that has received an industrial tax credit. It not certain that a taxpayer cannot rehire the employee who left for a better job but then attempted to return to their former employer.
The internal effective date of this proposed tax credit is for tax years beginning on or after January 1, 2022, making it a retroactive credit. It is unclear as to what activity must occur after this effective date, such as employee departure or the filing of the annual schedule.
Person submitting Fiscal Note: Mark Muchow
Email Address: kerri.r.petry@wv.gov