FISCAL NOTE

Date Requested: February 18, 2016
Time Requested: 01:01 PM
Agency: Tax Department, State
CBD Number: Version: Bill Number: Resolution Number:
1328 Comm. Sub. SB16
CBD Subject: Taxation


FUND(S):

General Revenue Fund

Sources of Revenue:

General Fund

Legislation creates:

Neither Program nor Fund



Fiscal Note Summary


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


The purpose of this bill is generally to provide a tax credit for providing broadband service and wireless broadband service to unserved areas. The bill requires the Tax Commissioner to propose rules for legislative approval to administer this article. It also provides definitions; specifying amount, application, restrictions, timing and cap on tax credit; and permitting a carryover of credit to subsequent tax year. According to our interpretation, this bill would grant a credit against the corporate net income tax liability of any eligible taxpayer who provides broadband Internet service to locations within unserved areas in West Virginia, where the cost to provide broadband Internet service is not economically feasible. The amount of the tax credit available to these eligible taxpayers is $500 for each State location within unserved areas, to which the eligible taxpayer had made broadband service available. Per the committee substitute bill’s provisions, this tax credit would be reduced by any state or federal funding amounts the eligible taxpayer has received for that location within an unserved area. The credit is capped at $1.0 million per year for all eligible taxpayers in the aggregate. When the total amount of approved tax credits applied by all eligible taxpayers in the aggregate exceeds $1 million, the $500 credit amount per taxpayer and the total $1 million for all approved eligible broadband service provider locations would be reduced to a proportional amount per provisions of this committee substitute. According to data from the FCC, there are 5,011 unserved areas within West Virginia, where the cost to provide broadband Internet service is not economically feasible. Given that the bill provides aggregate tax credit approvals of no more than $1.0 million per year, the potential loss of General Revenue associated with passage of this bill would be up to $1.0 million per year beginning in FY2018. Additional administrative costs incurred by the State Tax Department would be $18,990 in FY2018 and $10,000 in FY2019 and thereafter.



Fiscal Note Detail


Effect of Proposal Fiscal Year
2016
Increase/Decrease
(use"-")
2017
Increase/Decrease
(use"-")
Fiscal Year
(Upon Full
Implementation)
1. Estmated Total Cost 0 0 10,000
Personal Services 0 0 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 0 0


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


Passage of this bill would provide a tax credit for providing broadband service and wireless broadband service to certain unserved areas in West Virginia. The bill requires the Tax Commissioner to propose rules for legislative approval to administer this article. It also provides definitions; specifying amount, application, restrictions, timing and cap on tax credit; and permitting a carryover of credit to subsequent tax year. According to our interpretation, this bill would grant a credit against the corporate net income tax liability of any eligible taxpayer who provides broadband Internet service to locations within unserved areas in West Virginia, where the cost to provide broadband Internet service is not economically feasible. The amount of the tax credit available to these eligible taxpayers is $500 for each State location within unserved areas, to which the eligible taxpayer had made broadband service available. Per the committee substitute bill’s provisions, this tax credit would be reduced by any state or federal funding amounts the eligible taxpayer has received for that location within an unserved area. The credit is capped at $1.0 million per year for all eligible taxpayers in the aggregate. When the total amount of approved tax credits applied by all eligible taxpayers in the aggregate exceeds $1 million, the $500 credit amount per taxpayer and the total $1 million for all approved eligible broadband service provider locations would be reduced to a proportional amount per provisions of this committee substitute. According to data from the FCC, there are 5,011 unserved areas within West Virginia, where the cost to provide broadband Internet service is not economically feasible. Given that the bill provides aggregate tax credit approvals of no more than $1.0 million per year, the potential loss of General Revenue associated with passage of this bill would be up to $1.0 million per year beginning in FY2018. Additional administrative costs incurred by the State Tax Department would be $18,990 in FY2018 and $10,000 in FY2019 and thereafter.



Memorandum


The purpose of this bill is generally to provide a tax credit for providing broadband service and wireless broadband service to unserved areas. The bill requires the Tax Commissioner to propose rules for legislative approval to administer this article. It also provides definitions; specifying amount, application, restrictions, timing and cap on tax credit; and permitting a carryover of credit to subsequent tax year. The text of the bill in sections 5 and 6 contains inconsistent language regarding possible usage of the credit other than the year the application was made and credit carryover. The definition of the term “broadband or broadband service” differs from the definition set forth in West Virginia Code §31-15C-2. The definition links the term to the data rates specified in 47 CFR 54.309; however, as the incentives provided under 47 CFR 54.309 were terminated as of January 1, 2012, it seems inappropriate to tie the WV statutory definition to those data rates, when this is a static number not likely to change, even though technology is constantly advancing the general data transmission rate. As amended, this bill attempts in subsection 3(2) to address the situation where a Taxpayer or broadband service provider may have the potential to “double dip” by receiving federal or state grants for broadband or other telecommunications development and then taking the tax credit calculated upon work done and expenditures made out of the same public money.



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