FISCAL NOTE

Date Requested: January 10, 2020
Time Requested: 03:44 PM
Agency: Tax & Revenue Department, WV State
CBD Number: Version: Bill Number: Resolution Number:
1008 Introduced SB44
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 establish a tax credit for eligible taxpayers for employing eligible individuals in recovery from a substance use disorder. The bill sets a $2,000 cap per year credit for each individual. The bill establishes requirements. The bill defines terms. The bill requires rule-making. According to our interpretation, the proposed bill provides a Corporation Net Income Tax credit to eligible corporations who hire eligible individuals in recovery from a substance abuse disorder in part-time and full-time positions in the State. The tax credit would equal $1 per hour multiplied by the number of hours worked by each eligible individual up to a maximum of 2,000 hours per employee during their period of employment beginning on or after January 1, 2021. A relapse in an individual’s state of wellness would not make the individual ineligible as long as such individual shows a continued commitment to recovery that aligns with an individual’s relapse prevention plan, discharge plan, and/or recovery. The provisions of this bill would place the Tax Department in charge of administering this new program. The Tax Department cannot accurately estimate the number of eligible businesses that would qualify for this tax credit or the amount of tax credit claimed in any single year. Given the complexity of the program, the amount of tax credit claimed would likely be far less than $1 million per year. However, there is always a high degree of uncertainty regarding Taxpayer behavior in response to new incentive programs. The proposed bill is nearly identical to a similar bill enacted by the State of New York. We note that New York State decided to cap the size of its new program likely due to the uncertainty of such response. Additional administrative costs incurred by the State Tax Department would be $83,600 in FY2021 and $70,000 in each fiscal year thereafter. There is doubt as to whether the Tax Department has the expertise to certify treatment providers and to properly track those recovering from substance abuse.



Fiscal Note Detail


Effect of Proposal Fiscal Year
2020
Increase/Decrease
(use"-")
2021
Increase/Decrease
(use"-")
Fiscal Year
(Upon Full
Implementation)
1. Estmated Total Cost 0 83,600 70,000
Personal Services 0 50,000 50,000
Current Expenses 0 0 0
Repairs and Alterations 0 0 0
Assets 0 3,600 0
Other 0 30,000 20,000
2. Estimated Total Revenues 0 0 0


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


According to our interpretation, the proposed bill provides a Corporation Net Income Tax credit to eligible corporations who hire eligible individuals in recovery from a substance abuse disorder in part-time and full-time positions in the State. The tax credit would equal $1 per hour multiplied by the number of hours worked by each eligible individual up to a maximum of 2,000 hours per employee during their period of employment beginning on or after January 1, 2021. A relapse in an individual’s state of wellness would not make the individual ineligible as long as such individual shows a continued commitment to recovery that aligns with an individual’s relapse prevention plan, discharge plan, and/or recovery. The provisions of this bill would place the Tax Department in charge of administering this new program. The Tax Department cannot accurately estimate the number of eligible businesses that would qualify for this tax credit or the amount of tax credit claimed in any single year. Given the complexity of the program, the amount of tax credit claimed would likely be far less than $1 million per year. However, there is always a high degree of uncertainty regarding Taxpayer behavior in response to new incentive programs. The proposed bill is nearly identical to a similar bill recently enacted by the State of New York. The New York Law provides that the tax credit program and its reporting and monitoring requirements be administered by the New York State Office of Alcoholism and Substance Abuse Services (NYS OASAS) with the added requirement that employers allow the New York State Department of Taxation and Finance to share tax information with the NYS OASAS to help it achieve its mission. NYS OASAS determines the amount of tax credit available to the eligible employer and provides such information to the Tax agency for proper accounting on state income tax returns. The provisions of this bill would place the Tax Commissioner in charge of such responsibilities. This proposed bill imposes numerous duties on the Tax Commissioner, including • Writing a legislative rule for determining the eligibility of recovering employees, • Certifying the eligibility of employers for the credit, • Certifying treatment providers, • Creating application forms for employers, • Monitoring compliance, • Computing the amount of credit allowed for individuals, • Issuing certificates of tax credit, • Reviewing claims submitted by employers, • Creating an annual report of • The number of eligible taxpayers participating in the program, • Unique identifying information for each eligible taxpayer, • The number of eligible employees under the program, • Unique identifying information for each eligible employee, • The number of hours worked by eligible employees under the program, • The total dollar amount of claims for credit, and • The dollar amount of credit granted to each eligible taxpayer. The numerous duties imposed on the Tax Commissioner by the bill may create administrative difficulties. The Tax Department may not possess the expertise necessary to properly certify treatment providers and to properly track eligible individuals recovering from substance abuse. Additional administrative costs incurred by the State Tax Department would be $83,600 in FY2021 and $70,000 in each fiscal year thereafter.



Memorandum


The stated purpose of this bill is to establish a tax credit for eligible taxpayers for employing eligible individuals in recovery from a substance use disorder. The bill sets a $2,000 cap per year credit for each individual. The bill establishes requirements. The bill defines terms. The bill requires rule-making. There are some concerns with this proposed legislation. The bill would create administrative difficulties in allowing the Tax Commissioner to determine whether an employer provided a recovery supportive environment for their employees evidenced by a formal working relationship with a local recovery or treatment provider that would need to be certified by the Tax Commissioner. This provision of the bill would appear to require the Tax Commissioner to certify local recovery or treatment providers, which is something outside of the expertise of the Tax Commissioner. Although the bill requires the Tax Commissioner to create an annual report about the program, it does not state the purpose of the report or who is to receive the report. This credit applies only to the Corporation Net Income Tax. Since the credit cannot be taken against the Personal Income Tax, it would no benefit sole proprietorships, partnerships and limited liability companies who hired eligible individuals in recovery from substance use disorder.



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