FISCAL NOTE

Date Requested: January 11, 2019
Time Requested: 02:59 PM
Agency: Tax & Revenue Department, WV State
CBD Number: Version: Bill Number: Resolution Number:
1166 Introduced HB2340
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 provide an earned income tax credit against the personal income tax. According to our interpretation, the proposed bill would allow a West Virginia Earned Income Tax Credit (EITC) equal to 15 percent of the federal Earned Income Tax Credit beginning in TY2019. The proposed credit would be refundable when the credit exceeds the West Virginia personal income tax liability of a taxpayer in a given tax year. Refunds that are issued as a result of the proposed credit will be appropriated from the Temporary Assistance for Needy Families (TANF) Fund. This bill is expected to result in annual reductions of General Revenue Fund collections of at least $54.4 million beginning in FY2020. In order to use TANF funds for the EITC refunds it would require a TANF state plan amendment to be submitted and approved by the federal government before implementation since EITC refunds are not currently mentioned in our TANF state plan. Currently there are limited TANF funds available in the short term that can fund the refundable aspect of this bill. However, the long-term funds may be insufficient or unavailable to fully fund the refundable portion of the proposed tax credit indefinitely. Lastly, there is current federal legislation proposed that may affect the use of TANF funds in the future. Additional costs to the State Tax Department would be $740,000 in FY2020 and $710,000 for each year thereafter. The significant increase in administration cost are due to the purchase of fraud review services to investigate the significant number of taxpayers that would claim the West Virginia Earned Income Tax Credit.



Fiscal Note Detail


Effect of Proposal Fiscal Year
2019
Increase/Decrease
(use"-")
2020
Increase/Decrease
(use"-")
Fiscal Year
(Upon Full
Implementation)
1. Estmated Total Cost 0 739,200 710,000
Personal Services 0 160,000 160,000
Current Expenses 0 0 0
Repairs and Alterations 0 0 0
Assets 0 4,200 0
Other 0 575,000 550,000
2. Estimated Total Revenues 0 -54,400,000 -54,400,000


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


According to our interpretation, the proposed bill would allow a West Virginia Earned Income Tax Credit (EITC) equal to 15 percent of the federal Earned Income Tax Credit beginning in TY2019. The proposed credit would be refundable when the credit exceeds the West Virginia personal income tax liability of a taxpayer in a given tax year. Refunds that are issued as a result of the proposed credit will be appropriated from the Temporary Assistance for Needy Families (TANF) Fund. This bill is expected to result in annual reductions of General Revenue Fund collections of at least $54.4 million beginning in FY2020. In order to use TANF funds for the EITC refunds it would require a TANF state plan amendment to be submitted and approved by the federal government before implementation since EITC refunds are not currently mentioned in our TANF state plan. Currently there are limited TANF funds available in the short term that can fund the refundable aspect of this bill. However, the long-term funds may be insufficient or unavailable to fully fund the refundable portion of the proposed tax credit indefinitely. Lastly, there is current federal legislation proposed that may affect the use of TANF funds in the future. Additional costs to the State Tax Department would be $740,000 in FY2020 and $710,000 for each year thereafter. The significant increase in administration cost are due to the purchase of fraud review services to investigate the significant number of taxpayers that would claim the West Virginia Earned Income Tax Credit.



Memorandum






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