FISCAL NOTE
Date Requested: February 02, 2023
Time Requested: 02:46 PM |
| Agency: |
Tax & Revenue Department, WV State |
|---|
| CBD Number: |
Version: |
Bill Number: |
Resolution Number: |
| 3359 |
Amendment |
HB3209 |
|
|---|
| CBD Subject: |
Taxation |
|---|
|
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 provide tax credits to incentivize investments and improvements in blighted properties in West Virginia.
This bill would allow for a tax credit equal to the entirety of expenditures related to blighted property rehabilitation and improvement. The credit would apply to Corporation Net Income and Personal Income Taxes. The credit is available for both residential and nonresidential buildings located in this state. Any unused portion of the credit not taken in the taxable year would be qualified for carryback and carryforward treatment. This carryforward would be available for the next five tax years following the first tax year for which the credit entitlement is authorized. This credit would be available for any taxable year beginning on January 1, 2024.
According to a study by West Virginia University, there were over 17,000 structures in the state that were considered to be heavily blighted and in need of demolition as of 2018. Of those, approximately 13,300 were residential structures and 3,800 were commercial. More recent data from the Census Bureau’s American Community Survey suggests that there were 136,262 vacant buildings in West Virginia in 2021. Of those vacant structures, 55,600 were in good condition and 80,662 were likely to be in a state of disrepair. While there was no cost data for property rehabilitation readily available, WVU was able to estimate the cost range of the demolition of a single-family home of $10,000 - 15,000, assuming there are no contaminants that would need to be removed. Because of the high cost involved with property rehabilitation, the 100 percent tax credit and the number of potentially blighted properties in the state, the revenue impact of this bill cannot be readily quantified, but the loss would be significant. Under the provisions of this bill, the State would be solely responsible for 100 percent of private property rehabilitation costs through the proposed tax credit.
Administrative costs incurred by the State Tax Department would be $500 in FY2024, $66,500 in FY2025 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 |
500 |
45,000 |
| Personal Services |
0 |
0 |
45,000 |
| Current Expenses |
0 |
0 |
0 |
| Repairs and Alterations |
0 |
0 |
0 |
| Assets |
0 |
0 |
0 |
| Other |
0 |
500 |
0 |
| 2. Estimated Total Revenues |
0 |
0 |
0 |
Explanation of above estimates (including long-range effect):
This bill would allow for a tax credit equal to the entirety of expenditures related to blighted property rehabilitation and improvement. The credit would apply to Corporation Net Income and Personal Income Taxes. The credit is available for both residential and nonresidential buildings located in this state. Any unused portion of the credit not taken in the taxable year would be qualified for carryback and carryforward treatment. This carryforward would be available for the next five tax years following the first tax year for which the credit entitlement is authorized. This credit would be available for any taxable year beginning on January 1, 2024.
According to a study by West Virginia University, there were over 17,000 structures in the state that were considered to be heavily blighted and in need of demolition as of 2018. Of those, approximately 13,300 were residential structures and 3,800 were commercial. More recent data from the Census Bureau’s American Community Survey suggests that there were 136,262 vacant buildings in West Virginia in 2021. Of those vacant structures, 55,600 were in good condition and 80,662 were likely to be in a state of disrepair. While there was no cost data for property rehabilitation readily available, WVU was able to estimate the cost range of the demolition of a single-family home of $10,000 - 15,000, assuming there are no contaminants that would need to be removed. Because of the high cost involved with property rehabilitation, the 100 percent tax credit and the number of potentially blighted properties in the state, the revenue impact of this bill cannot be readily quantified, but the loss would be significant. Under the provisions of this bill, the State would be solely responsible for 100 percent of private property rehabilitation costs through the proposed tax credit.
Administrative costs incurred by the State Tax Department would be $500 in FY2024, $66,500 in FY2025 and $45,000 in subsequent fiscal years.
Memorandum
The stated purpose of this bill is to provide tax credits to incentivize investments and improvements in blighted properties in West Virginia.
This is not a refundable credit, but any unused credit may be carried forward for five years. The carryback treatment does not include limitations, and this will almost certainly result in litigation. Although the Tax Commissioner has rulemaking authority, there is the risk of exceeding statutory authority.
Pass-through entities can distribute the credits either pro rata or by agreement. Taxpayers eligible for the credit may transfer, sell, or assign the credits. The placement of this language makes it unclear whether only pass-through entities are entitled to transfer, sell, or assign the credits.
Person submitting Fiscal Note: Mark Muchow
Email Address: kerri.r.petry@wv.gov