FISCAL NOTE

Date Requested: March 08, 2017
Time Requested: 02:58 PM
Agency: Tax & Revenue Department, WV State
CBD Number: Version: Bill Number: Resolution Number:
2793 Introduced HB2848
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 provide a tax credit for modifications to homes made more accessible for an elderly person or a person with a disability.
    
    Based on our interpretation, the proposed bill would provide a maximum credit of $5,000 per eligible claimant per year for either the purchase price of the purchase/construction of new residence or the cost of retrofitting/renovation an existing residence so long as that purchase, construction, retrofitting, or renovation improves accessibility of the home to a disabled or elderly individual. Eligible taxpayers would make application to the West Virginia Housing Development Fund for approval of a tax credit of up to $5,000. The bill does not provide any basis for determination of the amount of tax credit due a Taxpayer. The Housing Development Fund would approve tax credit amounts not exceeding $1 million per fiscal year. If the total amount of potential tax credit would exceed $1 million, then the Housing Development Fund would pro-rate the amount of tax credit for each Taxpayer to an amount that does not exceed $1 million in aggregate. The amount of potential tax credit would be capped at $500,000 for new residences and $500,000 for existing structures that are retrofitted. Taxpayers may use their credit to offset income tax liabilities. If the amount of the tax credit exceeds tax liability, the Taxpayer may carryover excess credits for a period of up to seven years. The amount of tax credit used several years in the future could potentially exceed the $1 million annual allocation cap due to accumulating carryovers of unused tax credits from prior years combined with new issued tax credits.
    
    Additional costs to the State Tax Department would be $10,000 in FY2020 and $5,000 in subsequent fiscal years. Additional costs for the Housing Development Authority, the authority responsible for the initial allocation of tax credits, are not included in this fiscal note.
    



Fiscal Note Detail


Effect of Proposal Fiscal Year
2018
Increase/Decrease
(use"-")
2019
Increase/Decrease
(use"-")
Fiscal Year
(Upon Full
Implementation)
1. Estmated Total Cost 0 0 5,000
Personal Services 0 0 5,000
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 0


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


    Based on our interpretation, the proposed bill would provide a maximum credit of $5,000 per eligible claimant per year for either the purchase price of the purchase/construction of new residence or the cost of retrofitting/renovation an existing residence so long as that purchase, construction, retrofitting, or renovation improves accessibility of the home to a disabled or elderly individual. Eligible taxpayers would make application to the West Virginia Housing Development Fund for approval of a tax credit of up to $5,000. The bill does not provide any basis for determination of the amount of tax credit due a Taxpayer. The Housing Development Fund would approve tax credit amounts not exceeding $1 million per fiscal year. If the total amount of potential tax credit would exceed $1 million, then the Housing Development Fund would pro-rate the amount of tax credit for each Taxpayer to an amount that does not exceed $1 million in aggregate. The amount of potential tax credit would be capped at $500,000 for new residences and $500,000 for existing structures that are retrofitted. Taxpayers may use their credit to offset income tax liabilities. If the amount of the tax credit exceeds tax liability, the Taxpayer may carryover excess credits for a period of up to seven years. The amount of tax credit used several years in the future could potentially exceed the $1 million annual allocation cap due to accumulating carryovers of unused tax credits from prior years combined with new issued tax credits.
    
    Additional costs to the State Tax Department would be $10,000 in FY2020 and $5,000 in subsequent fiscal years. Additional costs for the Housing Development Authority, the authority responsible for the initial allocation of tax credits, are not included in this fiscal note.
    



Memorandum


    The stated purpose of this bill is to provide a tax credit for modifications to homes made more accessible for an elderly person or a person with a disability.
    
    It is unclear whether the proposed bill applies against sales tax, income tax, or both. The former is mentioned in the bill (article 15 of Chapter 11) but Articles 21 and 24 of Chapter 11, related to the Personal Income Tax and the Corporation Net Income Tax, respectively, are not. Further, sales tax generally has exemptions rather than credits.
    
    The title of the bill should identify who can take the credit and against what tax. Providing definitions of the following terms would also be useful: “universal visitability”, director”, “total purchase price”, “affiliated entities”, “real estate developers”, “residence”, “individual,” and “accessibility.”
    
    If the intent is to provide a sales tax credit to real estate developers, this could potentially either conflict with the contradicting rules in Article 15 of Chapter 11 and 110CSR15, or could duplicate the purchase for resale exemption. This would likely result in litigation.
    
    The proposed bill applies restrictions on the cumulative amount of credit that can be issued within a given fiscal year, implying that credits could not be issued until the following fiscal year so appropriate caps or pro rata apportionment, as appropriate, can have taken place. This could cause issue with personal and corporate filers as all Personal Income Tax returns and some Corporation Net Income Tax returns are filed on a calendar year basis.
    
    
    



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