FISCAL NOTE

Date Requested: February 14, 2018
Time Requested: 01:59 PM
Agency: Tax & Revenue Department, WV State
CBD Number: Version: Bill Number: Resolution Number:
2489 Introduced SB538
CBD Subject:


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 credit against personal income tax for classroom teachers for nonreimbursed costs of supplies. The bill sets a maximum credit of $500. According to our interpretation, the proposed bill would allow a credit against the Personal Income Tax of up to $500 per teacher per year to classroom teachers for non-reimbursed classroom supplies. The proposed bill specifies that qualifying teachers must be in grades pre-K through 12. However, the bill is silent on a number of other provisions, including but not limited to whether a qualifying teacher may teach in a public or private school, if the teacher must be a West Virginia resident, or if the teacher must teach in a West Virginia school. Absent further guidance, these questions make determination of a reasonable revenue loss estimate difficult. For the purpose of this analysis, we assume a qualifying teacher must teach in a West Virginia-based primary or secondary school and that teachers in either public or private settings would qualify. Alternate interpretation or intent will affect revenue losses. Based on our understanding, the proposed bill would result in losses to the General Revenue Fund of roughly $10.2 million per year beginning in FY2020. However, this number could vary widely if the actual base of qualifying teachers is either constrained or broadened. In addition, it should be noted that current Law allows a federal and state deduction of similar expenses, up to $250 for each year, for instructors in the State. There were 17,600 claims totaling nearly $4.5 million in deductions in TY2015, representing less than full participation from eligible instructors. The proposed bill keeps this deduction and adds an additional credit. The added incentive could likely increase participation, thus increasing the number of deduction claims each year. The State Tax Department would incur $82,000 in additional administrative costs in FY2020 and $70,000 per year in subsequent fiscal years.



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 70,000
Personal Services 0 0 70,000
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):


According to our interpretation, the proposed bill would allow a credit against the Personal Income Tax of up to $500 per teacher per year to classroom teachers for non-reimbursed classroom supplies. The proposed bill specifies that qualifying teachers must be in grades pre-K through 12. However, the bill is silent on a number of other provisions, including but not limited to whether a qualifying teacher may teach in a public or private school, if the teacher must be a West Virginia resident, or if the teacher must teach in a West Virginia school. Absent further guidance, these questions make determination of a reasonable revenue loss estimate difficult. For the purpose of this analysis, we assume a qualifying teacher must teach in a West Virginia-based primary or secondary school and that teachers in either public or private settings would qualify. Alternate interpretation or intent will affect revenue losses. Based on our understanding, the proposed bill would result in losses to the General Revenue Fund of roughly $10.2 million per year beginning in FY2020. However, this number could vary widely if the actual base of qualifying teachers is either constrained or broadened. In addition, it should be noted that current Law allows a federal and state deduction of similar expenses, up to $250 for each year, for instructors in the State. There were 17,600 claims totaling nearly $4.5 million in deductions in TY2015, representing less than full participation from eligible instructors. The proposed bill keeps this deduction and adds an additional credit. The added incentive could likely increase participation, thus increasing the number of deduction claims each year. The State Tax Department would incur $82,000 in additional administrative costs in FY2020 and $70,000 per year in subsequent fiscal years.



Memorandum


The stated purpose of this bill is to provide a credit against personal income tax for classroom teachers for nonreimbursed costs of supplies. The bill sets a maximum credit of $500. As written, the proposed bill does not define several terms, including “classroom teachers” and “classroom supplies,” which would be necessary to properly administer such a tax credit. The proposed bill makes no distinction between public or private education and does not expressly allow or prohibit teachers in special circumstances that may qualify (e.g., teacher’s aides, those working in juvenile detention centers, and teachers providing services to homebound students). Language of the proposed bill does not provide sufficient guidance as to residency or school location requirements. As written, the proposed bill does not appear to limit the tax credit to classroom teachers in this State. It is plausible that a West Virginia resident who teaches in a neighboring state or a non-resident teacher who has to file a Personal Income Tax return in West Virginia may qualify. The bill implies, but does not explicitly state, that the tax credit is equal to the amount that the teacher spent on classroom supplies up to $500. Further, it would be extremely difficult for the Tax Department to verify that the money was spent on classroom supplies. The bill is silent as to whether the tax credit is refundable or if it may be carried back to prior periods or forward to subsequent periods. The bill is also silent as to a specified rulemaking authority.



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