FISCAL NOTE

Date Requested: February 08, 2017
Time Requested: 06:07 PM
Agency: Tax & Revenue Department, WV State
CBD Number: Version: Bill Number: Resolution Number:
1482 Introduced HB2203
CBD Subject: Taxation


FUND(S):

State Road Fund

Sources of Revenue:

Other Fund State Road Fund

Legislation creates:

Neither Program nor Fund



Fiscal Note Summary


Effect this measure will have on costs and revenues of state government.


The stated purpose of this bill is to reduce the tax on motor fuel. Based on our interpretation, the proposed bill would remove the variable Motor Fuel Excise Tax and instead impose a single Motor Fuel Excise Tax of $0.20 per gallon or gallon equivalent of fuel. As the proposed bill does not provide an effective date, it is anticipated the change would be in effect 90 days after passage. Assuming an effective date of June 1, 2017, the impact of this bill on the State Road Fund would be a net loss of $172.4 million dollars in FY2018 and $176.9 million dollars for each year thereafter. Should the effective date for this bill be at a later time than June 1 (e.g., July 1, 2017) a partial-year estimate would be appropriate for the FY2018 revenue impact. It is important to note the above estimates assume a total elimination of the variable rate component from the Motor Fuel Excise Tax. According to our interpretation, the bill eliminates the variable rate component for alternative fuels only. Absent any guidance as to how the average wholesale price would be determined, it is unclear what the variable component imposed on conventional motor fuels would be. Thus, the impact of such a change cannot be determined. The State Tax Department would incur additional costs of $10,000 in FY2018 as a result of this change. No additional costs are expected thereafter. 



Fiscal Note Detail


Effect of Proposal Fiscal Year
2017
Increase/Decrease
(use"-")
2018
Increase/Decrease
(use"-")
Fiscal Year
(Upon Full
Implementation)
1. Estmated Total Cost 0 10,000 0
Personal Services 0 0 0
Current Expenses 0 0 0
Repairs and Alterations 0 0 0
Assets 0 0 0
Other 0 10,000 0
2. Estimated Total Revenues 0 -172,400,000 -176,900,000


Explanation of above estimates (including long-range effect):


Based on our interpretation, the proposed bill would remove the variable Motor Fuel Excise Tax and instead impose a single Motor Fuel Excise Tax of $0.20 per gallon or gallon equivalent of fuel. As the proposed bill does not provide an effective date, it is anticipated the change would be in effect 90 days after passage. Assuming an effective date of June 1, 2017, the impact of this bill on the State Road Fund would be a net loss of $172.4 million dollars in FY2018 and $176.9 million dollars for each year thereafter. Should the effective date for this bill be at a later time than June 1 (e.g., July 1, 2017) a partial-year estimate would be appropriate for the FY2018 revenue impact. It is important to note the above estimates assume a total elimination of the variable rate component from the Motor Fuel Excise Tax. According to our interpretation, the bill eliminates the variable rate component for alternative fuels only. Absent any guidance as to how the average wholesale price would be determined, it is unclear what the variable component imposed on conventional motor fuels would be. Thus, the impact of such a change cannot be determined. The State Tax Department would incur additional costs of $10,000 in FY2018 as a result of this change. No additional costs are expected thereafter



Memorandum


The stated purpose of this bill is to reduce the tax on motor fuel. In striking language related to the procedure for determining the average wholesale price of motor fuel for the purposes of setting the rate of the variable tax component (West Virginia Code §11-14C-5), the proposed bill fails to consider the cross-reference to these procedures in West Virginia Code §11-15-18b). The bill would eliminate the Tax Commissioner’s ability to determine the variable rates by requiring the Commissioner to go through the rule-making procedures in West Virginia Code §29A-3-1 et seq. in order to determine the average wholesale price for setting the variable rate component. It would do so by striking language in the current §11-14C-5(b)(3) allowing the Commissioner to make the determination “without compliance” with the rule-making procedures. This could have a material effect on the Commissioner’s ability to enforce compliance with the Motor Fuel Excise Tax and would impede the Commissioner’s ability to make changes necessitated by market trends. As written, the proposed bill would shift the burden of proof in legal challenges to the Commissioner’s determination of average wholesale price by removing the presumption that the Commissioner’s determination is correct. Further, the bill’s title fails to include an effective date for the changes and does not adequately reflect the effects of the bill, specifically the removal of the variable component on the tax of alternative fuels and the limitations it imposes on the Commissioner’s ability to administer the tax.



    Person submitting Fiscal Note: Mark Muchow
    Email Address: kerri.r.petry@wv.gov