FISCAL NOTE
Date Requested: January 14, 2023
Time Requested: 02:48 PM |
| Agency: |
Tax & Revenue Department, WV State |
|---|
| CBD Number: |
Version: |
Bill Number: |
Resolution Number: |
| 1241 |
Introduced |
HB2065 |
|
|---|
| CBD Subject: |
|
|---|
|
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 a 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, 2023. 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 retroactively on or after July 1, 2022. The salvage value for new additions above $1 million would apply to both real property and tangible personal property. The heavy truck manufacturing sector would be favored over other manufacturing sectors with regard to property taxes on new investment. Any loss of revenue associated with this provision would apply largely to local property taxes. The property tax provisions of this bill are retroactive, and local governments could face the prospect of refunds for tax already assessed to the extent of new investment, if any, added in the prior year in excess of $1 million.
Additional administrative costs incurred by the State Tax Department would be $60,000 in FY2024 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 |
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, 2023. 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 retroactively on or after July 1, 2022. The salvage value for new additions above $1 million would apply to both real property and tangible personal property. The heavy truck manufacturing sector would be favored over other manufacturing sectors with regard to property taxes on new investment. Any loss of revenue associated with this provision would apply largely to local property taxes. The property tax provisions of this bill are retroactive, and local governments could face the prospect of refunds for tax already assessed to the extent of new investment, if any, added in the prior year in excess of $1 million.
Additional administrative costs incurred by the State Tax Department would be $60,000 in FY2024 and $5,000 in subsequent 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.
The title of the bill incorrectly refers to the bill “providing for certain exemptions.” The bill provides a new tax credit.
A new article, §11-13MM-1 et seq., relating to the “West Virginia Heavy-Duty Truck Excise Tax Elimination Act” would be enacted to encourage capital investment in manufacturing in this state.
A new tax credit would be provided for eligible taxpayers who invest a minimum of $2 million in new or expanded heavy duty truck manufacturing facilities. The bill states in §11-13MM-3 (Amount of credit allowed), subsection (b) (Amount of credit) that the amount of credit allowable is “100 percent of amount of federal excise tax paid in a tax year . . . attributable to and the consequence of the taxpayer’s qualified investment.” The bill, however, in the next sentence infers that the amount of credit allowable might be less than 100 percent: “[t]he product of this calculation establishes the maximum amount of credit allowable . . ..”
Person submitting Fiscal Note: Mark Muchow
Email Address: kerri.r.petry@wv.gov