FISCAL NOTE
Date Requested: February 11, 2022
Time Requested: 04:19 PM |
| Agency: |
Tax & Revenue Department, WV State |
|---|
| CBD Number: |
Version: |
Bill Number: |
Resolution Number: |
| 2008 |
Introduced |
HB4654 |
|
|---|
| CBD Subject: |
Economic Development |
|---|
|
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 Downstream Steel, Aluminum, and Metal Product Manufacturing Act of 2022. The bill stimulates economic growth in manufacturing industries by amending the definition of manufacturing for purposes of special method for appraising qualified capital additions by manufacturing facilities for property tax purposes. The bill amends the formula for calculating the credit allowed for manufacturing investment to include steel, aluminum, and other metallurgical products. The bill provides for its administration and enforcement of the tax credit. Finally, the bill exempts certain taxes.
The provisions of this bill make two substantive changes to current Law. The bill would increase the existing manufacturing investment tax credit for certain defined metals manufacturers from 5% of qualified investment to 50% of qualified investment. This proposed change should have minimal impact given that most manufacturers are able to fully offset the maximum 60% of allowable income tax liability with use of the current 5% investment tax credit. The provisions of this bill would also add a new investment tax credit for metals manufacturing in addition to the two tax credits available under current Law. The proposed new tax credit is like the Economic Opportunity Tax Credit except for the removal of any requirement for employment increase. While qualified investment is defined in the new proposed Downstream Steel, Aluminum and Metal Product Manufacturing Investment Tax Credit, the actual calculation of amount of tax credit available due to such qualified investment is missing. The proposed tax credit would offset up to 100% of business income tax attributable to the qualified investment as determined by a payroll apportionment factor with employment attributable to the qualified investment in the numerator and total employment of the Taxpayer in the denominator. Passage of this bill would have minimal impact given that the proposed tax credit largely duplicates existing available tax credits for this industry.
Additional administrative costs incurred by the State Tax Department would be $20,000 in FY2023 and $5,000 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 |
20,000 |
0 |
| Personal Services |
0 |
0 |
5,000 |
| Current Expenses |
0 |
0 |
0 |
| Repairs and Alterations |
0 |
0 |
0 |
| Assets |
0 |
0 |
0 |
| Other |
0 |
20,000 |
0 |
| 2. Estimated Total Revenues |
0 |
0 |
0 |
Explanation of above estimates (including long-range effect):
The provisions of this bill make two substantive changes to current Law. The bill would increase the existing manufacturing investment tax credit for certain defined metals manufacturers from 5% of qualified investment to 50% of qualified investment. This proposed change should have minimal impact given that most manufacturers are able to fully offset the maximum 60% of allowable income tax liability with use of the current 5% investment tax credit. The provisions of this bill would also add a new investment tax credit for metals manufacturing in addition to the two tax credits available under current Law. The proposed new tax credit is like the Economic Opportunity Tax Credit except for the removal of any requirement for employment increase. While qualified investment is defined in the new proposed Downstream Steel, Aluminum and Metal Product Manufacturing Investment Tax Credit, the actual calculation of amount of tax credit available due to such qualified investment is missing. The proposed tax credit would offset up to 100% of business income tax attributable to the qualified investment as determined by a payroll apportionment factor with employment attributable to the qualified investment in the numerator and total employment of the Taxpayer in the denominator. Passage of this bill would have minimal impact given that the proposed tax credit largely duplicates existing available tax credits for this industry.
Additional administrative costs incurred by the State Tax Department would be $20,000 in FY2023 and $5,000 per year in subsequent fiscal years.
Memorandum
The stated purpose of this bill is to create the Downstream Steel, Aluminum, and Metal Product Manufacturing Act of 2022. The bill stimulates economic growth in manufacturing industries by amending the definition of manufacturing for purposes of special method for appraising qualified capital additions by manufacturing facilities for property tax purposes. The bill amends the formula for calculating the credit allowed for manufacturing investment to include steel, aluminum, and other metallurgical products. The bill provides for its administration and enforcement of the tax credit. Finally, the bill exempts certain taxes.
This bill erroneously makes a reference to tire manufacturing facility in their definition of “aluminum or aluminum product manufacturing facility”. A similar anomaly occurs in the definitions of “metal or metal product manufacturing facility” or “steel or steel product manufacturing facility”.
The bill defines “qualified activity”, but the term does not appear elsewhere in the bill. However, the NAICS designations listed as “qualified activities” within the definition include the following:
• 441320 - Retail Tire Dealers
• 326211 – Tire manufacturing
• 326212 – Tire retreading
• 314994 – Rope, cordage, twine, tire cord and tire cord fabric mills
• 423130 – Tire and tube merchant wholesalers
• 339920 – Sporting and athletic goods manufacturing
• 325414 – Biological product (except diagnostic) manufacturing
• 311119 – Other animal food manufacturing
• 324110 – Petroleum refineries
Additionally, NAICS code 331320 referring to nonferrous metal processing should be replaced with 331420 which refers to copper alloying, to fit into logical consequence with the other code numbers listed in that category.
Person submitting Fiscal Note: Mark Muchow
Email Address: kerri.r.petry@wv.gov