FISCAL NOTE

Date Requested: January 09, 2020
Time Requested: 11:22 AM
Agency: Tax & Revenue Department, WV State
CBD Number: Version: Bill Number: Resolution Number:
1654 Introduced HB4014
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 new graduates of an in-state or out-of-state higher educational institution, community or technical college, or trade school, a $1,000 tax credit on the income tax of the graduate for five taxable years; providing rule-making authority to the Tax Commissioner; and removing expired language from this section.
    
    According to our interpretation, the proposed bill would allow a tax credit of $1,000 a year for five years for college graduates who complete a two-year, four-year, or post-graduate degree program. Qualifying students may receive up to three credits for completing qualifying degree programs. The proposed bill would result in a General Revenue Fund loss of at least $8.4 million for each year of qualifying graduates for a period of five years with the total annual loss gradually rising to a peak of at least $42.2 million per year by FY2025 and each year thereafter. Due to the lack of any internal effective dates, the tax provisions of this bill would first become effective for tax years beginning in 2021.The bill also lacks an effective date for when a qualifying graduate must first graduate to be eligible for the tax credit. This fiscal note assumes that the provisions of this bill would either apply to those who graduate sometime after December 31, 2019 or possibly after June 7, 2020 (i.e., 90 days after passage). Under the assumption that the tax credit applies to new graduates after December 31, 2019, there would be both graduates in 2020 and graduates in 2021 claiming tax credits on their tax returns for Tax Year 2021. Therefore, the first-year cost in FY2022 could be close to $18.2 million.
    
    Additional administrative costs incurred by the State Tax Department would be $88,000 in FY2022 and $80,000 per year for each year thereafter.  
    



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 0 80,000
Personal Services 0 0 80,000
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):


    According to our interpretation, the proposed bill would allow a tax credit of $1,000 a year for five years for college graduates who complete a two-year, four-year, or post-graduate degree program. Qualifying students may receive up to three credits for completing qualifying degree programs. The proposed bill would result in a General Revenue Fund loss of at least $8.4 million for each year of qualifying graduates for a period of five years with the total annual loss gradually rising to a peak of at least $42.2 million per year by FY2025 and each year thereafter. Due to the lack of any internal effective dates, the tax provisions of this bill would first become effective for tax years beginning in 2021.The bill also lacks an effective date for when a qualifying graduate must first graduate to be eligible for the tax credit. This fiscal note assumes that the provisions of this bill would either apply to those who graduate sometime after December 31, 2019 or possibly after June 7, 2020 (i.e., 90 days after passage). Under the assumption that the tax credit applies to new graduates after December 31, 2019, there would be both graduates in 2020 and graduates in 2021 claiming tax credits on their tax returns for Tax Year 2021. Therefore, the first-year cost in FY2022 could be close to $18.2 million.
    
    Additional administrative costs incurred by the State Tax Department would be $88,000 in FY2022 and $80,000 per year for each year thereafter.
    



Memorandum


    The stated purpose of this bill is to provide new graduates of an in-state or out-of-state higher educational institution, community or technical college, or trade school, a $1,000 tax credit on the income tax of the graduate for five taxable years; providing rule-making authority to the Tax Commissioner; and removing expired language from this section.
    
    The bill has a title defect. The bill title states that the bill provides a $1,000 tax credit on the personal property tax of the graduate. However, the bill actually allows a tax credit against personal income tax.
    
    



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