FISCAL NOTE

Date Requested: February 13, 2017
Time Requested: 02:03 PM
Agency: Tax & Revenue Department, WV State
CBD Number: Version: Bill Number: Resolution Number:
2030 Introduced HB2416
CBD Subject: Taxation


FUND(S):

General Revenue Fund

Sources of Revenue:

General 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 increase the tax credit allowed for rehabilitation of certified historic structures.
    
    Under current law, a 10 percent State tax credit applies to certified historic structures that also qualify for a 20 percent federal tax credit. The tax credit offsets both Personal Income Tax and Corporation Net Income Tax liabilities. According to the provisions of this bill, the credit allowed against Personal Income Tax and Corporation Net Income Tax liabilities for certified historic structures would be increased from 10 percent to 25 percent. Under the assumption that there is no increase in the current average amount of annual qualified rehabilitation expenditures, the increase in tax credit would result in a loss of roughly $1.6 million to the General Revenue Fund once the enhanced credits can be taken against West Virginia income tax liabilities after the rehabilitation work is completed.
    
    This estimate is based on prior trends of this credit. There is currently no available information to adequately project usage of the credit after a rate increase. While the possibility exists that utilization of the credit could increase with a larger credit allowance, any such shifts in utilization will be largely driven by market demand. Absent such an economic driver, the increased tax credit rate will have little effect on utilization. The demand for historic rehabilitation would be expected to be much greater in geographic areas with low rates of excess building capacity.
    
    Additional administrative costs incurred by the State Tax Department would be $500 for the first full year of implementation.
    
    



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 0 500
Personal Services 0 0 0
Current Expenses 0 0 0
Repairs and Alterations 0 0 0
Assets 0 0 0
Other 0 0 500
2. Estimated Total Revenues 0 0 -1,600,000


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


    Under current law, a 10 percent State tax credit applies to certified historic structures that also qualify for a 20 percent federal tax credit. The tax credit offsets both Personal Income Tax and Corporation Net Income Tax liabilities. According to the provisions of this bill, the credit allowed against Personal Income Tax and Corporation Net Income Tax liabilities for certified historic structures would be increased from 10 percent to 25 percent. Under the assumption that there is no increase in the current average amount of annual qualified rehabilitation expenditures, the increase in tax credit would result in a loss of roughly $1.6 million to the General Revenue Fund once the enhanced credits can be taken against West Virginia income tax liabilities after the rehabilitation work is completed.
    
    This estimate is based on prior trends of this credit. There is currently no available information to adequately project usage of the credit after a rate increase. While the possibility exists that utilization of the credit could increase with a larger credit allowance, any such shifts in utilization will be largely driven by market demand. Absent such an economic driver, the increased tax credit rate will have little effect on utilization. The demand for historic rehabilitation would be expected to be much greater in geographic areas with low rates of excess building capacity.
    
    Additional administrative costs incurred by the State Tax Department would be $500 for the first full year of implementation.
    
    



Memorandum


    



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