FISCAL NOTE
Date Requested: January 11, 2023
Time Requested: 10:39 PM |
| Agency: |
Tax & Revenue Department, WV State |
|---|
| CBD Number: |
Version: |
Bill Number: |
Resolution Number: |
| 2000 |
Introduced |
SB85 |
|
|---|
| CBD Subject: |
Actions, Suits and Liens |
|---|
|
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 establish a tax credit for physicians who are new graduates and locate in West Virginia to practice medicine for at least six years.
Based upon our interpretation, the bill would create a non-refundable tax credit of up to 100 percent of the taxpayer’s taxable income for up to three consecutive years per eligible physician. West Virginia taxes less than 6.5 percent of an individual’s taxable income. Therefore, the proposed tax credit would eliminate 100 percent of any Personal Income Tax liability related to all income reported on an annual income tax return for any qualified physician, and spouse if applicable, for those tax years with more than 93.5 percent of the calculated credit unused. The credit would be allowed beginning in Tax Year 2024. Provisions of the bill would result in revenue loss of at least $4.0 million in FY2025. It should be noted, that given eligible physicians can claim the credit up to three years, the revenue loss could increase to more than $12.0 million per year.
Additional administrative costs would be $42,500 in FY 2025 and $5,000 in subsequent years.
Fiscal Note Detail
| Effect of Proposal |
Fiscal Year |
2023
Increase/Decrease
(use"-") |
2024
Increase/Decrease
(use"-") |
Fiscal Year
(Upon Full
Implementation) |
| 1. Estmated Total Cost |
0 |
0 |
42,500 |
| Personal Services |
0 |
0 |
22,500 |
| Current Expenses |
0 |
0 |
0 |
| Repairs and Alterations |
0 |
0 |
0 |
| Assets |
0 |
0 |
0 |
| Other |
0 |
0 |
20,000 |
| 2. Estimated Total Revenues |
0 |
0 |
-12,000,000 |
Explanation of above estimates (including long-range effect):
Based upon our interpretation, the bill would create a non-refundable tax credit of up to 100 percent of the taxpayer’s taxable income for up to three consecutive years per eligible physician. West Virginia taxes less than 6.5 percent of an individual’s taxable income. Therefore, the proposed tax credit would eliminate 100 percent of any Personal Income Tax liability related to all income reported on an annual income tax return for any qualified physician, and spouse if applicable, for those tax years with more than 93.5 percent of the calculated credit unused. The credit would be allowed beginning in Tax Year 2024. Provisions of the bill would result in revenue loss of at least $4.0 million in FY2025. It should be noted, that given eligible physicians can claim the credit up to three years, the revenue loss could increase to more than $12.0 million per year.
Additional administrative costs would be $42,500 in FY 2025 and $5,000 in subsequent years.
Memorandum
PThe stated purpose of this bill is to establish a tax credit for physicians who are new graduates and locate in West Virginia to practice medicine for at least six years.
The bill is unclear about how the amount of credit is determined. Section 4 provides that the credit may not exceed the taxpayer’s “personal taxable income,” but does not mention any lesser amount. Section 6 then states that the credit is applied “against the tax payable by the eligible taxpayer.” The bill apparently does not recognize the difference between “taxable income” and “tax payable,” or does not account for how to handle the difference.
Furthermore, section 5 provides that no carry back or carry forward is allowed, and that any unused tax credit is forfeited. However, the bill never states that the credit is non-refundable. If a physician has “personal taxable income” of $100,000, but has “tax payable” of $10,000, then it is unclear whether the credit amount is limited to $10,000 for that year.
The bill provides that “[t]his amount may be claimed only for three consecutive years.” The bill is unclear regarding what amount “this amount” refers to.
Section 7 allows the Tax Commissioner to propose legislative rules addressing residency requirements, time limits, forms, and a means to repay the credit if the physician does not remain and practice medicine in West Virginia for at least six years. It is unclear whether the Tax Commissioner thus has authority to impose a recapture tax.
Person submitting Fiscal Note: Mark Muchow
Email Address: kerri.r.petry@wv.gov