FISCAL NOTE

Date Requested: January 11, 2023
Time Requested: 09:04 PM
Agency: Tax & Revenue Department, WV State
CBD Number: Version: Bill Number: Resolution Number:
1353 Introduced HB2193
CBD Subject:


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 limitations on certain deductions for modification of social security income in adjusted gross income. According to our interpretation, passage of this bill would exempt all federally taxable Social Security benefits from personal income tax by removing income limitation language present in current law. 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. The language of the bill indicates that the changes apply to taxable years beginning after December 31, 2022. Per our interpretation, based on updated statistical data and Personal Income Tax rates currently in effect, passage of this bill would reduce General Revenue Fund collections by a minimal amount in FY2023, by $44.1 million in FY2024, and by increasing amounts in subsequent fiscal years. Additional administrative costs incurred by the State Tax Department would be $56,500 in FY 2024 and $45,000 in subsequent fiscal 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 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 -44,100,000 -46,000,000


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


According to our interpretation, passage of this bill would exempt all federally taxable Social Security benefits from personal income tax by removing income limitation language present in current law. 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. The language of the bill indicates that the changes apply to taxable years beginning after December 31, 2022. Per our interpretation, based on updated statistical data and Personal Income Tax rates currently in effect, passage of this bill would reduce General Revenue Fund collections by a minimal amount in FY2023, by $44.1 million in FY2024, and by increasing amounts in subsequent fiscal years. Additional administrative costs incurred by the State Tax Department would be $56,500 in FY 2024 and $45,000 in subsequent fiscal years.



Memorandum


The stated purpose of this bill is to remove limitations on certain deductions for modification of social security income in adjusted gross income. Current W. Va. Code §11-21-12(c)(8) sets forth a decreasing modification for social security benefits that is phased in over a three-year period, from 35% for taxable years beginning on or after 2020, to 65% for taxable years beginning on or after 2021, to 100% for taxable years beginning on or after 2022. This bill removes the language set forth in paragraph (D) that excludes taxpayers from taking the social security decreasing modification when the federal AGI of a married couple filing a joint return is over $100,000 or $50,000 for an individual filing a separate return. The bill deletes paragraph (D) without also deleting references to paragraph (D) in paragraphs (A), (B), and (C), which may cause some confusion. The last sentence of the Section, §11-21-12(g)(4), states “Changes in the language of this section enacted in the year 2023 shall apply to taxable years beginning after December 31, 2022. This wording may cause some confusion. In addition, deleting the language imposing the limitation could result in taxpayers applying for a refund for prior years.



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