FISCAL NOTE

Date Requested: February 27, 2018
Time Requested: 10:55 AM
Agency: Tax & Revenue Department, WV State
CBD Number: Version: Bill Number: Resolution Number:
2612 Comm. Sub. HB4563
CBD Subject: Taxation


FUND(S):

General Revenue Fund, local governments

Sources of Revenue:

General Fund local governments

Legislation creates:





Fiscal Note Summary


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


The stated purpose of this bill is to remove the severance tax on oil and gas produced from low producing wells. According to our interpretation, this bill would exempt from Severance Tax any natural gas well that produces an average of less than 10,000 cubic feet of natural gas per day or from any oil well that produces an average of less than two and one-half barrels of oil per day for all taxable periods on or after January 1, 2018. Current statute allows low volume natural gas and oil Severance Tax exemptions for any natural well that produces an average of less than 5,000 cubic feet per day or any oil well that produces an average of less than one-half barrel of oil per day. This bill would expand the low volume exemption to more natural gas and oil wells. Passage of this bill would result in Severance Tax losses of approximately $3.9 million per year beginning in FY2019. Beginning in FY2020, the proposed bill would result in annual losses to the General Revenue Fund of roughly $3.5 million and would reduce oil and gas distributions to local governments by roughly $0.4 million each year. Additional administrative costs incurred by the State Tax Department would be $10,000 in FY2019 and each year thereafter.



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 10,000 10,000
Personal Services 0 10,000 10,000
Current Expenses 0 0 0
Repairs and Alterations 0 0 0
Assets 0 0 0
Other 0 0 0
2. Estimated Total Revenues 0 -3,900,000 -3,900,000


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


According to our interpretation, this bill would exempt from Severance Tax any natural gas well that produces an average of less than 10,000 cubic feet of natural gas per day or from any oil well that produces an average of less than two and one-half barrels of oil per day for all taxable periods on or after January 1, 2018. Current statute allows low volume natural gas and oil Severance Tax exemptions for any natural well that produces an average of less than 5,000 cubic feet per day or any oil well that produces an average of less than one-half barrel of oil per day. This bill would expand the low volume exemption to more natural gas and oil wells. Passage of this bill would result in Severance Tax losses of approximately $3.9 million per year beginning in FY2019. Beginning in FY2020, the proposed bill would result in annual losses to the General Revenue Fund of roughly $3.5 million and would reduce oil and gas distributions to local governments by roughly $0.4 million each year. Additional administrative costs incurred by the State Tax Department would be $10,000 in FY2019 and each year thereafter.



Memorandum


Please identify any areas of vagueness, technical defects, reasons a bill would not have a fiscal impact, and/or any special issues not captured elsewhere on this form.



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