FISCAL NOTE

Date Requested: January 11, 2019
Time Requested: 03:02 PM
Agency: Tax & Revenue Department, WV State
CBD Number: Version: Bill Number: Resolution Number:
1176 Introduced HB2344
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 a tax credit for modifications to homes made more accessible for an elderly person or a person with a disability.
    
    Based on our interpretation, the proposed bill would provide a maximum credit of $5,000 per eligible claimant per year for either the purchase price of the purchase/construction of new residence or the cost of retrofitting/renovation an existing residence so long as that purchase, construction, retrofitting, or renovation improves accessibility of the home to a disabled or elderly individual. Eligible taxpayers would make application to the West Virginia Housing Development Fund for approval of a tax credit of up to $5,000. The bill does not provide any basis for determination of the amount of tax credit due a Taxpayer. The Housing Development Fund would approve tax credit amounts not exceeding $1 million per fiscal year. If the total amount of potential tax credit would exceed $1 million, then the Housing Development Fund would pro-rate the amount of tax credit for each Taxpayer to an amount that does not exceed $1 million in aggregate. The amount of potential tax credit would be capped at $500,000 for new residences and $500,000 for existing structures that are retrofitted. Taxpayers may use their credit to offset income tax liabilities. If the amount of the tax credit exceeds tax liability, the Taxpayer may carryover excess
    
    credits for a period of up to seven years. The amount of tax credit used several years in the future could potentially exceed the $1 million annual allocation cap due to accumulating carryovers of unused tax credits from prior years combined with new issued tax credits.
    
    Additional costs to the State Tax Department would be $40,000 in FY2021 and $20,000 in subsequent fiscal years. Additional costs for the Housing Development Authority, the authority responsible for the initial allocation of tax credits, are not included in this fiscal note.
    
    



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 0 20,000
Personal Services 0 0 20,000
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):


    Based on our interpretation, the proposed bill would provide a maximum credit of $5,000 per eligible claimant per year for either the purchase price of the purchase/construction of new residence or the cost of retrofitting/renovation an existing residence so long as that purchase, construction, retrofitting, or renovation improves accessibility of the home to a disabled or elderly individual. Eligible taxpayers would make application to the West Virginia Housing Development Fund for approval of a tax credit of up to $5,000. The bill does not provide any basis for determination of the amount of tax credit due a Taxpayer. The Housing Development Fund would approve tax credit amounts not exceeding $1 million per fiscal year. If the total amount of potential tax credit would exceed $1 million, then the Housing Development Fund would pro-rate the amount of tax credit for each Taxpayer to an amount that does not exceed $1 million in aggregate. The amount of potential tax credit would be capped at $500,000 for new residences and $500,000 for existing structures that are retrofitted. Taxpayers may use their credit to offset income tax liabilities. If the amount of the tax credit exceeds tax liability, the Taxpayer may carryover excess
    credits for a period of up to seven years. The amount of tax credit used several years in the future could potentially exceed the $1 million annual allocation cap due to accumulating carryovers of unused tax credits from prior years combined with new issued tax credits.
    
    Additional costs to the State Tax Department would be $40,000 in FY2021 and $20,000 in subsequent fiscal years. Additional costs for the Housing Development Authority, the authority responsible for the initial allocation of tax credits, are not included in this fiscal note.
    
    
     
    



Memorandum


    The stated purpose of this bill is to provide a tax credit for modifications to homes made more accessible for an elderly person or a person with a disability.
    
    This bill does not accomplish its purpose as there are some components that do not fit well with the administration of taxes. Furthermore, it is unclear whether the credit applies against Sales and Use Tax, Personal Income Tax and/or Corporation Net Income Tax.
    
    Subsection (a) of this bill states this credit applies to individuals, and references Article 15 of Chapter 11, which pertains to Sales and Use Tax. There is some ambiguity on whether there is supposed to be a Sales and Use Tax exemption or Personal Income Tax/Corporation Net Income Tax credit. Additionally, the credit is allowed for an individual purchasing a new residence or retrofitting an existing residence. The bill does not appear to clarify that the new individual must possess the “disability” or benefit from the “modifications”.
    
    Subsection (b) states this credit also applies to real estate developers. If this is a sales tax credit, this article potentially conflicts with the contracting rules in Articles 15 and 110 CSR 15, or duplicates the purchase for resale exemption in Article 15 and 110 CSR 15. Litigation would likely result.
    
    Subsection (f) will be difficult to administer. The credits are capped at $1 million, to be divided equally between new construction and retrofitting. If applications for one category total less than $500,000, then the remaining balance may be used to increase funds available for tax credits in the other category. If credit applications for more than the total amount of allotted credits are received, they are allocated on a pro rata basis. Under this structure, it appears no credits could be issued until after the end of each fiscal year. However, Personal Income Tax and some Corporation Net Income Tax filers file on a calendar year basis.
    



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