FISCAL NOTE

Date Requested: March 14, 2017
Time Requested: 01:06 PM
Agency: Tax & Revenue Department, WV State
CBD Number: Version: Bill Number: Resolution Number:
2942 Introduced HB2998
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 stated purpose of this bill is to provide a tax credit and a loan insurance program for providing broadband to unserved and underserved areas of West Virginia. The bill requires the Tax Commissioner to propose rules for legislative approval to administer the tax credit provisions of the bill. It also provides definitions; determines the amount of tax credit; provides how the tax credit is taken and its application, including an annual cap on the tax credit and prohibition against a carryover or carryback to subsequent or previous tax years. The bill also provides for a loan to be made by the West Virginia Board of Treasury investments to the West Virginia Economic Development to establish a loan insurance program to insure repayment of debt obligations by broadband providers in West Virginia to provide broadband service to underserved areas of the state. According to our interpretation, this bill would provide a tax credit against an eligible taxpayer’s net income tax liability. It is not clear whether this refers to the Personal Income Tax or Corporation Net Income Tax liability. This credit is based on downstream and upstream broadband internet speeds. According to the FCC, there are 5,011 tiered areas in West Virginia with internet speeds of less than 25 megabits per second. The following chart list the tier blocks in West Virginia along with the allocated credit amounts based on a maximum credit amount of $1 million. West Virginia Underserved Broadband Area Internet Speed Credit Amount Tier 1 Underserved Area Downstream: <10 MBPS Upstream <1 MPBS $520,000 Tier 2 Underserved Area Downstream >10 MBPS, <25 MBPS Upstream >1 MPBS, <3 MPBS $430,000 Unserved Area No Broadband Internet Access $50,000 Total $1,000,000 Passage of this bill would result in a loss to the General Revenue Fund of $1 million or less in FY2018 and fiscal years thereafter. Any losses incurred by the West Virginia Board of Treasury would result in additional losses to the General Revenue Fund in FY2018 and fiscal years thereafter. Additional administrative costs incurred by the State Tax Department would be $18,000 in FY2018 and $5,000 in fiscal years thereafter.



Fiscal Note Detail


Effect of Proposal Fiscal Year
2017
Increase/Decrease
(use"-")
2018
Increase/Decrease
(use"-")
Fiscal Year
(Upon Full
Implementation)
1. Estmated Total Cost 0 18,000 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 13,000 0
2. Estimated Total Revenues 0 -1,000,000 -1,000,000


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


According to our interpretation, this bill would provide a tax credit against an eligible taxpayer’s net income tax liability. It is not clear whether this refers to the Personal Income Tax or Corporation Net Income Tax liability. This credit is based on downstream and upstream broadband internet speeds. According to the FCC, there are 5,011 tiered areas in West Virginia with internet speeds of less than 25 megabits per second. The following chart list the tier blocks in West Virginia along with the allocated credit amounts based on a maximum credit amount of $1 million. West Virginia Underserved Broadband Area Internet Speed Credit Amount Tier 1 Underserved Area Downstream: <10 MBPS Upstream <1 MPBS $520,000 Tier 2 Underserved Area Downstream >10 MBPS, <25 MBPS Upstream >1 MPBS, <3 MPBS $430,000 Unserved Area No Broadband Internet Access $50,000 Total $1,000,000 Passage of this bill would result in a loss to the General Revenue Fund of $1 million or less in FY2018 and fiscal years thereafter. Any losses incurred by the West Virginia Board of Treasury would result in additional losses to the General Revenue Fund. Additional administrative costs incurred by the State Tax Department would be $18,000 in FY2018 and $5,000 in fiscal years thereafter.



Memorandum


The stated purpose of this bill is to provide a tax credit and a loan insurance program for providing broadband to unserved and underserved areas of West Virginia. The bill requires the Tax Commissioner to propose rules for legislative approval to administer the tax credit provisions of the bill. It also provides definitions; determines the amount of tax credit; provides how the tax credit is taken and its application, including an annual cap on the tax credit and prohibition against a carryover or carryback to subsequent or previous tax years. The bill also provides for a loan to be made by the West Virginia Board of Treasury investments to the West Virginia Economic Development to establish a loan insurance program to insure repayment of debt obligations by broadband providers in West Virginia to provide broadband service to underserved areas of the state. Section 11-13DD-3 of the proposed bill does not clarify whether this credit is against the Personal Income Tax liability or Corporation Net Income Tax liability. The provision relating to insurance (amended §12-6C-11(h)) contains an error in its formula for calculating monthly payments made by the Economic Development Authority by calling for “a four hundred eight month amortization for any moneys borrowed by the West Virginia Economic Development Authority.” The proposed amendment to W.Va. Code §31-15-8 (a) (6) authorizes the Economic Development Authority to insure the repayment of debt for broadband service providers for “up to forty years.” This suggests that the amendment to §12-6C-11(h) should have read “four hundred eighty month amortization”, since this is equivalent to 40 years.



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