FISCAL NOTE

Date Requested: January 22, 2020
Time Requested: 02:52 PM
Agency: Tax & Revenue Department, WV State
CBD Number: Version: Bill Number: Resolution Number:
2300 Introduced HB4473
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 to facilitate the purchase of reliable and affordable vehicles to low-income working West Virginia men and women to expand access to employment opportunities. According to our interpretation of this bill, any individual or licensed automobile dealer subject to West Virginia taxes who donates an eligible vehicle certified by a qualified charitable organization is entitled to a refundable tax credit of up to $6,000 per vehicle donated. An eligible vehicle cannot be reported as a junk or salvage vehicle and cannot have any unperformed safety recalls. The automobile dealer must also provide an express warranty covering the full cost of both parts and labor necessary to repair any defect that impairs the motor vehicle’s safety or use for a minimum period of 90 days or 3,000 miles after the sale. For tax years 2020 through 2021, the proposed credit cannot exceed $300,000 and in subsequent years it cannot exceed $1.0 million. It appears that an eligible taxpayer can claim more than one tax credit for a donated vehicle. Currently, donated vehicles are eligible for the Neighborhood Investment Tax Credit. This portion of the Neighborhood Investment Tax Credit is roughly $17,000 per year. Automobile dealers are more likely to have a competitive advantage over individuals in claiming this proposed tax credit, as they are likely to donate older cars that are difficult for them to sell. Passage of this bill would result in a General Revenue Fund loss of up to $300,000 in FY2021 and FY2022 and up to $1.0 million in subsequent fiscal years. Additional administrative costs incurred by the State Tax Department would be $20,000 in FY2021 and $5,000 in subsequent fiscal years.



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 20,000 5,000
Personal Services 0 5,000 5,000
Current Expenses 0 0 0
Repairs and Alterations 0 0 0
Assets 0 0 0
Other 0 15,000 0
2. Estimated Total Revenues 0 -300,000 -1,000,000


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


According to our interpretation of this bill, any individual or licensed automobile dealer subject to West Virginia taxes who donates an eligible vehicle certified by a qualified charitable organization is entitled to a refundable tax credit of up to $6,000 per vehicle donated. An eligible vehicle cannot be reported as a junk or salvage vehicle and cannot have any unperformed safety recalls. The automobile dealer must also provide an express warranty covering the full cost of both parts and labor necessary to repair any defect that impairs the motor vehicle’s safety or use for a minimum period of 90 days or 3,000 miles after the sale. For tax years 2020 through 2021, the proposed credit cannot exceed $300,000 and in subsequent years it cannot exceed $1.0 million. It appears that an eligible taxpayer can claim more than one tax credit for a donated vehicle. Currently, donated vehicles are eligible for the Neighborhood Investment Tax Credit. This portion of the Neighborhood Investment Tax Credit is roughly $17,000 per year. Automobile dealers are more likely to have a competitive advantage over individuals in claiming this proposed tax credit, as they are likely to donate older cars that are difficult for them to sell. Passage of this bill would result in a General Revenue Fund loss of up to $300,000 in FY2021 and FY2022 and up to $1.0 million in subsequent fiscal years. Additional administrative costs incurred by the State Tax Department would be $20,000 in FY2021 and $5,000 in subsequent fiscal years.



Memorandum


The stated purpose of this bill is to establish a tax credit to facilitate the purchase of reliable and affordable vehicles to low-income working West Virginia men and women to expand access to employment opportunities. The bill does not accomplish its purpose. This bill neglects to specify to whom such eligible vehicles are to be donated in order to qualify the donor to the credit. It does not specify which taxes the credit may be used to offset against. There is no language in the bill to prevent a taxpayer from taking additional tax credits including the Neighborhood Investment Tax Credit which allows vehicle donations. The bill creates a confusing bureaucracy whereby a qualified charitable organization establishes the tax credit, but if more than one organization exists, places responsibility on both the Tax Commissioner and Executive Director of Legal Aid to administer the legal cap. While there is no explicit reference to the effective date, and no reference to the tax this credit applies to, the language in W.Va. Code §11-14D-3(c) seems to imply it begins January 1, 2020. The proposed program is to be administered by “a nonprofit association, which is eligible to file as a nonprofit under §501(c)(3) of the United State Code.” The phrase “eligible to file” is ambiguous, as it does not actually require the organization to be recognized by the IRS as an exempt organization under the Internal Revenue Code.



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