FISCAL NOTE
Date Requested: January 31, 2023
Time Requested: 03:15 PM |
| Agency: |
Tax & Revenue Department, WV State |
|---|
| CBD Number: |
Version: |
Bill Number: |
Resolution Number: |
| 3282 |
Introduced |
HB2010 |
|
|---|
| 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 exempt the full amount of social security benefits from personal income taxation.
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. There is no internal effective date for the amendments; therefore, per §11-10-5p, they would be effective as of January 1, 2024.
Based on our interpretation and updated statistical and Personal Income Tax rates currently in effect, the passage of this bill would reduce General Revenue Fund collections by as much as $11.0 million in FY2024, by 46.0 million in FY2025, and by increasing amounts in subsequent fiscal years. The legislation removes income limitation language present in current law without including an effective date. Some taxpayers may seek to amend returns from prior periods to take advantage of decreasing modifications for social security income which began in TY2020.
Additional administrative costs incurred by the State Tax Department would be $56,500 in FY2024 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 |
-11,000,000 |
-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. There is no internal effective date for the amendments; therefore, per §11-10-5p, they would be effective as of January 1, 2024.
Based on our interpretation and updated statistical and Personal Income Tax rates currently in effect, the passage of this bill would reduce General Revenue Fund collections by as much as $11.0 million in FY2024, by 46.0 million in FY2025, and by increasing amounts in subsequent fiscal years. The legislation removes income limitation language present in current law without including an effective date. Some taxpayers may seek to amend returns from prior periods to take advantage of decreasing modifications for social security income which began in TY2020.
Additional administrative costs incurred by the State Tax Department would be $56,500 in FY2024 and $45,000 in subsequent fiscal years.
Memorandum
The stated purpose of this bill is to exempt the full amount of social security benefits from personal income taxation.
There is a defect in the title. The title of the bill describes the bill as “exempting the full amount of social security benefits received…. rather than the first $50,000 for individuals or $100,000 for couples.” This misstates current law, suggesting that the first $50,000 ($100,000 for joint filers) of social security benefits is exempt from personal income tax.
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. This bill would strike the income limitation language, thereby eliminating the income cap for eligibility for the decreasing modification.
The bill also strikes language in paragraphs (A), (B), and (C), stating that the provisions of those paragraphs are subject to the limitation in paragraph (D) (i.e., the $50,000/$100,000 cap on eligibility).
The bill does not provide an effective date for the proposed change. Under current law, the 100% decreasing modification applies to tax years on or after January 1, 2022, which raises the possibility of persons newly eligible for the modification filing an amended return for their 2022 taxes, claiming the modification retroactively.
Person submitting Fiscal Note: Mark Muchow
Email Address: kerri.r.petry@wv.gov