FISCAL NOTE

Date Requested: January 20, 2022
Time Requested: 02:14 PM
Agency: Tax & Revenue Department, WV State
CBD Number: Version: Bill Number: Resolution Number:
1056 Introduced HB4306
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 remove certain deductions for modification of social security income in adjusted gross income. According to our interpretation of this bill, this bill exempts all Social Security benefits from personal income tax without any income restrictions by specifically removing the adjusted gross income stipulation from married filing jointly of $100,000 and single or married filing separately of $50,000. Under current law, a decreasing modification for Social Security benefits is allowed when the federal adjusted gross income of a married couple filing a joint return does not exceed $100,000, or $50,000 in the case of a single individual or a married individual filing a single return. Current statute allows 35 percent of the amount of Social Security benefits included in federal adjusted gross income for taxable years beginning on or after January 1, 2020, to be excluded for taxpayers in those income brackets. For taxable years beginning on or after January 1, 2021, this reduction increased to 65 percent and on January 1, 2022, it increases to 100 percent. Passage of this bill would reduce General Revenue Fund collections by roughly $27.0 million in FY2024. The provisions of this bill would exclude all federally taxable Social Security benefits from Personal Income Tax beginning in tax year 2023. The value of the proposed tax exclusion will grow over time as the population ages and the number of individuals receiving Social Security benefits increases. It is unclear whether the removal of the income eligibility limitations is retroactive. If the change is retroactive, taxpayers with taxable Social Security benefits and income above $100,000 for a joint return and $50,000 for single return could amend their returns for tax years 2020 and 2021, resulting in a larger reduction in revenue during the initial year. Additional administrative costs incurred by the State Tax Department would be $56,500 in FY2023 and $45,000 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 56,500 45,000
Personal Services 0 45,000 45,000
Current Expenses 0 0 0
Repairs and Alterations 0 0 0
Assets 0 1,500 0
Other 0 10,000 0
2. Estimated Total Revenues 0 0 -27,000,000


Explanation of above estimates (including long-range effect):


According to our interpretation of this bill, this bill exempts all Social Security benefits from personal income tax without any income restrictions by specifically removing the adjusted gross income stipulation from married filing jointly of $100,000 and single or married filing separately of $50,000. Under current law, a decreasing modification for Social Security benefits is allowed when the federal adjusted gross income of a married couple filing a joint return does not exceed $100,000, or $50,000 in the case of a single individual or a married individual filing a single return. Current statute allows 35 percent of the amount of Social Security benefits included in federal adjusted gross income for taxable years beginning on or after January 1, 2020, to be excluded for taxpayers in those income brackets. For taxable years beginning on or after January 1, 2021, this reduction increased to 65 percent and on January 1, 2022, it increases to 100 percent. Passage of this bill would reduce General Revenue Fund collections by roughly $27.0 million in FY2024. The provisions of this bill would exclude all federally taxable Social Security benefits from Personal Income Tax beginning in tax year 2023. The value of the proposed tax exclusion will grow over time as the population ages and the number of individuals receiving Social Security benefits increases. It is unclear whether the removal of the income eligibility limitations is retroactive. If the change is retroactive, taxpayers with taxable Social Security benefits and income above $100,000 for a joint return and $50,000 for single return could amend their returns for tax years 2020 and 2021, resulting in a larger reduction in revenue during the initial year. Additional administrative costs incurred by the State Tax Department would be $56,500 in FY2023 and $45,000 in subsequent fiscal years.



Memorandum


The stated purpose of this bill is to remove certain deductions for modification of social security income in adjusted gross income. This bill does not include an internal effective date, which may cause some confusion. It is unclear if the removal of the income eligibility caps is retroactive to tax year 2020 or 2021. Per W.Va. Code ยง11-10-5p, this bill would become effective against any taxpayer at the beginning of the next tax year. However, simply deleting the language imposing the income limitation could possibly result in taxpayers apply for a refund for prior tax years.



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