FISCAL NOTE
Date Requested: August 12, 2022
Time Requested: 11:05 AM |
| Agency: |
Tax & Revenue Department, WV State |
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| CBD Number: |
Version: |
Bill Number: |
Resolution Number: |
| 6004 |
Amendment |
SB3001 |
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| CBD Subject: |
|
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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.
There is no stated purpose noted in this bill.
This fiscal note only addresses the tax provisions within the bill.
Per our interpretation, the legislation, if passed, would increase a refundable one-time personal income tax credit from $4,000 to up to $5,000 based on qualified expenses paid by the taxpayer in the process of an adoption and add a $2,000 personal exemption for an unborn child. The taxpayer may elect to take the adoption credit as a refundable credit or to claim the credit over three successive tax years. The credit may not be carried back to any prior taxable year. The bill defines qualified adoption expenses as reasonable and necessary adoption fees, court costs, attorney fees and other expenses which are directly related to the legal adoption of an eligible child by the taxpayer. Adoptions of a child who is not a citizen or resident of the United States are not eligible for the tax credit. The amendments would be effective for taxable years beginning after December 31, 2022.
According to our interpretation, the legislation, if passed, would result in a decrease in General Revenue Fund collections of roughly $1,000,000 in FY2024 and in subsequent fiscal years. The wording of the proposed legislation restricts the ability of taxpayers to fully utilize the adoption credit because the amount of credit is limited to qualified adoption expenses paid by the taxpayer. Under current law, the $4,000 adoption tax credit is not tied to qualified adoption expenses. This limitation reduces the value of the credit for certain taxpayers who adopt a child with aid of the West Virginia Department of Health and Human Resources and would increase General Revenue Fund collections by roughly $100,000 per year. For estimation purposes, it is assumed that a taxpayer could not claim two personal exemptions for a child who is both conceived and born in the same tax year. Based on this assumption, the addition of a personal exemption for an unborn child would reduce General Revenue Fund collections by roughly $1.1 million per year.
Additional administrative costs incurred by the State Tax Department would be $5,000 in FY2024.
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 |
5,000 |
0 |
| Personal Services |
0 |
0 |
0 |
| Current Expenses |
0 |
0 |
0 |
| Repairs and Alterations |
0 |
0 |
0 |
| Assets |
0 |
0 |
0 |
| Other |
0 |
0 |
0 |
| 2. Estimated Total Revenues |
0 |
-1,000,000 |
-1,000,000 |
Explanation of above estimates (including long-range effect):
Per our interpretation, the legislation, if passed, would establish a refundable one-time personal income tax credit of up to $5,000 based on qualified expenses paid by the taxpayer in the process of an adoption and add a $2,000 personal exemption for an unborn child. The taxpayer may elect to take the adoption credit as a refundable credit or to claim the credit over three successive tax years. The credit may not be carried back to any prior taxable year. The bill defines qualified adoption expenses as reasonable and necessary adoption fees, court costs, attorney fees and other expenses which are directly related to the legal adoption of an eligible child by the taxpayer. Adoptions of a child who is not a citizen or resident of the United States are not eligible for the tax credit. The amendments would be effective for taxable years beginning after December 31, 2022.
According to our interpretation, the legislation, if passed, would result in a decrease in General Revenue Fund collections of roughly $1,000,000 in FY2024 and in subsequent fiscal years. The wording of the proposed legislation restricts the ability of taxpayers to fully utilize the adoption credit because the amount of credit is limited to qualified adoption expenses paid by the taxpayer.
This limitation reduces the value of the credit and would increase General Revenue Fund collections by roughly $100,000 per year. For estimation purposes, it is assumed that a taxpayer could not claim two personal exemptions for a child who is both conceived and born in the same tax year. Based on this assumption, the addition of a personal exemption for an unborn child would reduce General Revenue Fund collections by roughly $1.1 million per year.
Additional administrative costs incurred by the State Tax Department would be $5,000 in FY2024.
Memorandum
There is no stated purpose noted in this bill.
This summary is limited to the personal income tax implications of the bill.
The proposed legislation limits the tax credit to the higher of $5,000 or the amount of “qualified adoption expenses”. The credit does not apply to adoptions of children who are not residents or citizens of the United States; children of spouses; adoptions in violation of state or federal law; surrogate parenting arrangements; adoption of one’s spouse’s child, or adoptions for which expenses are reimbursed by an employer or otherwise.
The credit, at the election of the taxpayer, may be taken either as a refundable credit or over a period of three successive tax years. The credit may not be carried back to a prior tax year. Subsection (c) may be subject to multiple interpretations, it appears to mean that if the taxpayer incurs expenses prior to the year of adoption, the credit can be claimed in the year the adoption was final. If expenses are incurred in the year of adoption or after, then the taxpayer can claim the credit in the year the expense was incurred or paid. Subject to the $5,000 cap, this would mean that there could be multiple years in which a credit may be claimed: the year of the adoption and any other later year in which expenses were incurred. Additionally, the current credit is not connected to adoption expenses paid. Taxpayers who claimed the $4,000 credit in 2022, could potentially claim their “qualified adoption expenses” under the new credit law in 2023.
Beginning in tax year 2023, a resident individual shall be allowed a West Virginia exemption of $2,000 for an unborn child of the resident individual. This would permit a personal exemption in the year before the child is born. This varies from federal law where exemption for an unborn child is not allowed. It is akin to federal legislation introduced in the U.S. Congress in January 2022 permitting tax credits for an unborn child.
Person submitting Fiscal Note: Mark Muchow
Email Address: brooke.a.oxley@wv.gov