FISCAL NOTE
Date Requested: February 11, 2022
Time Requested: 04:21 PM |
| Agency: |
Tax & Revenue Department, WV State |
|---|
| CBD Number: |
Version: |
Bill Number: |
Resolution Number: |
| 2009 |
Introduced |
HB4659 |
|
|---|
| CBD Subject: |
Taxation |
|---|
|
FUND(S):
General Revenue Fund, local governments
Sources of Revenue:
General Fund local property tax revenue
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 West Virginia Heavy Duty Truck Excise Tax Elimination Act. The bill stimulates economic growth in manufacturing industries by amending the definition of manufacturing for purposes of special method for appraising qualified capital additions to manufacturing facilities for property tax purposes. The bill amends the formula for calculating the credit allowed for manufacturing investment to include a heavy duty truck manufacturing facility. The bill provides for its administration and enforcement of the tax credit. Finally, the bill exempts certain taxes.
This bill would provide a tax credit for qualified taxpayers who invest in new or expanded heavy duty truck manufacturing facilities. The investment shall be a minimum of $2 million. The tax credit is worth up to 100 percent of the federal excise tax paid in a single tax year and is applicable against the state’s corporation net income tax and personal income tax, in that order. This bill would be effective on July 1, 2022. This bill would apply to such manufacturers that engage in retail sales. This bill would increase the existing manufacturing investment tax credit for certain defined heavy duty truck manufacturing facilities from five percent of qualified investment to 50 percent of qualified investment. This proposed change should have minimal impact given that most manufacturers are able to fully offset the maximum 60 percent of allowable income tax liability with use of the current five percent investment tax credit. The revenue impact of this bill is expected to be minimal as tax credits already exist that encourage such manufacturing in this state.
This bill also includes certified capital addition property of new or expanded heavy duty manufacturing facilities in the definition of property that is valued at salvage value in Article 6F. Salvage value is valued at 5 percent of the certified capital additional property’s original cost. The minimum investment threshold for a certified capital addition to a heavy duty truck manufacturing facility would be lowered from $50 million to $1 million effective July 1, 2022. The salvage value for new additions above $1 million would apply to both real property and tangible personal property. Any loss of revenue associated with this provision would apply largely to local property taxes.
Additional administrative costs incurred by the State Tax Department would be $60,000 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 |
60,000 |
5,000 |
| Personal Services |
0 |
15,000 |
5,000 |
| Current Expenses |
0 |
0 |
0 |
| Repairs and Alterations |
0 |
0 |
0 |
| Assets |
0 |
0 |
0 |
| Other |
0 |
45,000 |
0 |
| 2. Estimated Total Revenues |
0 |
0 |
0 |
Explanation of above estimates (including long-range effect):
This bill would provide a tax credit for qualified taxpayers who invest in new or expanded heavy duty truck manufacturing facilities. The investment shall be a minimum of $2 million. The tax credit is worth up to 100 percent of the federal excise tax paid in a single tax year and is applicable against the state’s corporation net income tax and personal income tax, in that order. This bill would be effective on July 1, 2022. This bill would apply to such manufacturers that engage in retail sales. This bill would increase the existing manufacturing investment tax credit for certain defined heavy duty truck manufacturing facilities from five percent of qualified investment to 50 percent of qualified investment. This proposed change should have minimal impact given that most manufacturers are able to fully offset the maximum 60 percent of allowable income tax liability with use of the current five percent investment tax credit. The revenue impact of this bill is expected to be minimal as tax credits already exist that encourage such manufacturing in this state.
This bill also includes certified capital addition property of new or expanded heavy duty manufacturing facilities in the definition of property that is valued at salvage value in Article 6F. Salvage value is valued at 5 percent of the certified capital additional property’s original cost. The minimum investment threshold for a certified capital addition to a heavy duty truck manufacturing facility would be lowered from $50 million to $1 million effective July 1, 2022. The salvage value for new additions above $1 million would apply to both real property and tangible personal property. Any loss of revenue associated with this provision would apply largely to local property taxes.
Additional administrative costs incurred by the State Tax Department would be $60,000 in FY2023 and $5,000 in subsequent fiscal years.
Memorandum
The stated purpose of this bill is to create the West Virginia Heavy Duty Truck Excise Tax Elimination Act. The bill stimulates economic growth in manufacturing industries by amending the definition of manufacturing for purposes of special method for appraising qualified capital additions to manufacturing facilities for property tax purposes. The bill amends the formula for calculating the credit allowed for manufacturing investment to include a heavy duty truck manufacturing facility. The bill provides for its administration and enforcement of the tax credit. Finally, the bill exempts certain taxes.
§11-13LL-4 includes the language, “attributable to the direct result of the taxpayer’s qualified investment.” Subsection (b) has a confusing formula to determine whether the CNIT due is attributable to the qualified investment. The amount of taxes due are multiplied “by a fraction, the numerator of which is all wages, salaries, and other compensation paid during the taxable year to all employees of the taxpayer employed in this state whose positions are directly attributable to the qualified investment. The denominator of the fraction is the wages, salaries, and other compensation paid during the taxable year to all employees of the taxpayer employed in this state.”
The formula in subsection (c) for PIT is similar: If the wages, salaries, and other compensation fraction formula provisions used in subsections (b) and (c) do not fairly represent the taxes “solely attributable and the direct result of qualified investment of the taxpayer” the Tax Commissioner may require: (1) separate accounting or identification; (2) adjustments to reflect all components of the tax liability; (3) the inclusion of one or more additional factors that will fairly represent the taxes solely attributable to and the direct result of the qualified investment; or (4) any other method to effectuate an equitable attribution of the taxes.
Person submitting Fiscal Note: Mark Muchow
Email Address: kerri.r.petry@wv.gov