FISCAL NOTE
Date Requested: February 06, 2023
Time Requested: 12:49 PM |
| Agency: |
Tax & Revenue Department, WV State |
|---|
| CBD Number: |
Version: |
Bill Number: |
Resolution Number: |
| 3399 |
Introduced |
HB3301 |
|
|---|
| CBD Subject: |
Health |
|---|
|
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 create the “First Time Home Buyer Savings Account Act.” The bill provides for definitions. The bill creates a first time home buyer savings account. The bill provides for subtractions from federal adjusted gross income. The bill provides limits applicable to subtraction from federal adjusted gross income. The bill provides penalties for withdrawal of funds. The bill requires financial institution to provide account holder information certificate. The bill requires the Tax Commissioner to propose rules to implement this article. Finally, the bill states years to which this act applies.
Based on our interpretation, the proposed bill creates a decreasing Personal Income Tax modification for funds contributed by an account holder to a First-time Homebuyer Savings Account. The modification is limited to $5,000 for West Virginia residents who file an individual income tax return and $10,000 for West Virginia residents who file a joint income tax return. In addition, the modification is reduced for taxpayers with federal adjusted gross income of $150,000 or more for joint filers and $75,000 or more for other filers. The modification is phased out for joint filers with federal adjusted gross incomes of $200,000 or more and $100,000 or more for all other filers. The modification may be claimed for a period not to exceed 10 years with an aggregate total amount of account principal and earnings not to exceed $50,000. Withdrawals from the account which are not used to pay eligible costs related to the purchase of a single-family residence are subject to taxation and possible penalty. The proposed bill applies to tax years beginning on or after January 1, 2023, and before January 1, 2029. Funds contributed prior to January 1, 2027, continue to be exempt from taxation for the period and terms set forth in the bill. Based on our interpretation, passage of the proposed legislation would decrease General Revenue Fund collections by roughly $200,000 in FY2024 and subsequent fiscal years.
Additional administrative costs incurred by the Tax Department would be $35,000 in FY2024 and $10,000 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 |
35,000 |
10,000 |
| Personal Services |
0 |
10,000 |
10,000 |
| Current Expenses |
0 |
0 |
0 |
| Repairs and Alterations |
0 |
0 |
0 |
| Assets |
0 |
0 |
0 |
| Other |
0 |
25,000 |
0 |
| 2. Estimated Total Revenues |
0 |
0 |
0 |
Explanation of above estimates (including long-range effect):
Based on our interpretation, the proposed bill creates a decreasing Personal Income Tax modification for funds contributed by an account holder to a First-time Homebuyer Savings Account. The modification is limited to $5,000 for West Virginia residents who file an individual income tax return and $10,000 for West Virginia residents who file a joint income tax return. In addition, the modification is reduced for taxpayers with federal adjusted gross income of $150,000 or more for joint filers and $75,000 or more for other filers. The modification is phased out for joint filers with federal adjusted gross incomes of $200,000 or more and $100,000 or more for all other filers. The modification may be claimed for a period not to exceed 10 years with an aggregate total amount of account principal and earnings not to exceed $50,000. Withdrawals from the account which are not used to pay eligible costs related to the purchase of a single-family residence are subject to taxation and possible penalty. The proposed bill applies to tax years beginning on or after January 1, 2023, and before January 1, 2029. Funds contributed prior to January 1, 2027, continue to be exempt from taxation for the period and terms set forth in the bill. Based on our interpretation, passage of the proposed legislation would decrease General Revenue Fund collections by roughly $200,000 in FY2022 and subsequent fiscal years.
Additional administrative costs incurred by the Tax Department would be $35,000 in FY2024 and $10,000 in subsequent fiscal years.
Memorandum
The stated purpose of this bill is to create the “First Time Home Buyer Savings Account Act.” The bill provides for definitions. The bill creates a first time home buyer savings account. The bill provides for subtractions from federal adjusted gross income. The bill provides limits applicable to subtraction from federal adjusted gross income. The bill provides penalties for withdrawal of funds. The bill requires financial institution to provide account holder information certificate. The bill requires the Tax Commissioner to propose rules to implement this article. Finally, the bill states years to which this act applies.
Contributions to an account are allowed as a Personal Income Tax reducing modification, capped at $5,000 per year per individual taxpayer ($10,000 for joint account holders who file jointly). This cap is adjusted downward with limits based on total federal adjusted gross income. The bill refers to this as a “modification” in places, but other times as a “subtraction and exemption,” which is confusing. The bill should consistently refer to this as a modification reducing federal adjusted gross income.
Furthermore, there is no language stating that it is “reducing federal adjusted gross income to the extent included therein,” meaning that income should only be reduced to the extent that the reducing amount is included in the federal adjusted gross income.
This article applies to tax years beginning January 1, 2023 and before January 1, 2029. However, savings accounts created before the article expires may continue.
It is unclear how the Tax Department will determine that an account satisfies the requirements for a first-time home buyer account, that the accounts are used for eligible costs, or whether a penalty is owed.
Person submitting Fiscal Note: Mark Muchow
Email Address: kerri.r.petry@wv.gov