FISCAL NOTE
Date Requested: February 13, 2023
Time Requested: 04:55 PM |
| Agency: |
Tax & Revenue Department, WV State |
|---|
| CBD Number: |
Version: |
Bill Number: |
Resolution Number: |
| 3761 |
Introduced |
HB3409 |
|
|---|
| CBD Subject: |
Actions, Suits and Liens |
|---|
|
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 authorize application of the manufacturing investment tax credit and the manufacturing property tax adjustment credit against personal income tax.
According to our interpretation, for tax years beginning on or after January 1, 2024, a limited liability company, small business corporation, or partnership who has any unused manufacturing investment tax credit can use their remaining credit against conduit income derived from manufacturing. The amount of the proposed Personal Income Tax credit cannot exceed 60 percent of the conduit income. This proposed conduit income credit also extends to the Manufacturing Property Tax Adjustment Credit for both Corporation Net Income Tax and Personal Income Tax liabilities during tax years beginning on or after January 1, 2024. Prior to 2015, nearly 50 pass through entities per year were offsetting their Business Franchise Tax liabilities through the Manufacturing Investment Tax Credit and Manufacturing Property Tax Adjustment Credit. These pass-through entities would likely qualify for the proposed credit. Passage of this bill would reduce General Revenue Fund collections by nearly $1.0 million per year in FY2025 and subsequent fiscal years.
Additional administrative costs incurred by the State Tax Department would be $42,500 in FY2025 and $22,500 per year 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 |
0 |
22,500 |
| Personal Services |
0 |
0 |
22,500 |
| Current Expenses |
0 |
0 |
0 |
| Repairs and Alterations |
0 |
0 |
0 |
| Assets |
0 |
0 |
0 |
| Other |
0 |
0 |
0 |
| 2. Estimated Total Revenues |
0 |
0 |
-1,000,000 |
Explanation of above estimates (including long-range effect):
According to our interpretation, for tax years beginning on or after January 1, 2024, a limited liability company, small business corporation, or partnership who has any unused manufacturing investment tax credit can use their remaining credit against conduit income derived from manufacturing. The amount of the proposed Personal Income Tax credit cannot exceed 60 percent of the conduit income. This proposed conduit income credit also extends to the Manufacturing Property Tax Adjustment Credit for both Corporation Net Income Tax and Personal Income Tax liabilities during tax years beginning on or after January 1, 2024. Prior to 2015, nearly 50 pass through entities per year were offsetting their Business Franchise Tax liabilities through the Manufacturing Investment Tax Credit and Manufacturing Property Tax Adjustment Credit. These pass-through entities would likely qualify for the proposed credit. Passage of this bill would reduce General Revenue Fund collections by nearly $1.0 million per year in FY2025 and subsequent fiscal years.
Additional administrative costs incurred by the State Tax Department would be $42,500 in FY2025 and $22,500 per year in subsequent fiscal years.
Memorandum
The stated purpose of this bill is to authorize application of the manufacturing investment tax credit and the manufacturing property tax adjustment credit against personal income tax.
The bill provides a new definition of “eligible taxpayer” regarding the manufacturing investment tax credit but does not mention the definition of the current eligible taxpayer related to the original credit. It is unclear if the current definition in §11-13S-3(a)(1) would still be in effect or if it would be replaced in its entirety by the new definition if the bill becomes law.
Person submitting Fiscal Note: Mark Muchow
Email Address: kerri.r.petry@wv.gov