FISCAL NOTE
Date Requested: February 18, 2020
Time Requested: 08:28 AM |
| Agency: |
Tax & Revenue Department, WV State |
|---|
| CBD Number: |
Version: |
Bill Number: |
Resolution Number: |
| 3136 |
Introduced |
HB4922 |
|
|---|
| CBD Subject: |
Banking and Finance |
|---|
|
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 create the “First Time Home Buyer Savings Account Act”.
Per our interpretation, the proposed bill creates a decreasing Personal Income Tax modification for funds contributed by an account holder to a First-time Homebuyer Savings Account. The modification is limited to $5,000 for West Virginia residents who file an individual income tax return and $10,000 for West Virginia residents who file a joint income tax return. In addition, the modification is reduced for taxpayers with federal adjusted gross income of $150,000 or more for joint filers and $75,000 or more for other filers. The modification is phased out for joint filers with federal adjusted gross incomes of $200,000 or more and $100,000 or more for all other filers. The modification may be claimed for a period not to exceed 10 years with an aggregate total amount of account principal and earnings not to exceed $50,000. Withdrawals from the account which are not used to pay eligible costs related to the purchase of a single-family residence are subject to taxation and possible penalty. The proposed bill applies to tax years beginning on or after January 1, 2020, and before January 1, 2026. Funds contributed prior to January 1, 2025 continue to be exempt from taxation for the period and terms set forth in the bill. Based on our interpretation, passage of the proposed legislation would decrease General Revenue Fund collections by roughly $200,000 in FY2021 and subsequent fiscal years.
Additional administrative costs incurred by the Tax Department would be $30,000 in FY2021 and $5,000 in subsequent fiscal years.
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 |
30,000 |
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 |
25,000 |
0 |
| 2. Estimated Total Revenues |
0 |
-200,000 |
-200,000 |
Explanation of above estimates (including long-range effect):
Per our interpretation, the proposed bill creates a decreasing Personal Income Tax modification for funds contributed by an account holder to a First-time Homebuyer Savings Account. The modification is limited to $5,000 for West Virginia residents who file an individual income tax return and $10,000 for West Virginia residents who file a joint income tax return. In addition, the modification is reduced for taxpayers with federal adjusted gross income of $150,000 or more for joint filers and $75,000 or more for other filers. The modification is phased out for joint filers with federal adjusted gross incomes of $200,000 or more and $100,000 or more for all other filers. The modification may be claimed for a period not to exceed 10 years with an aggregate total amount of account principal and earnings not to exceed $50,000. Withdrawals from the account which are not used to pay eligible costs related to the purchase of a single-family residence are subject to taxation and possible penalty. The proposed bill applies to tax years beginning on or after January 1, 2020, and before January 1, 2026. Funds contributed prior to January 1, 2025 continue to be exempt from taxation for the period and terms set forth in the bill. Based on our interpretation, passage of the proposed legislation would decrease General Revenue Fund collections by roughly $200,000 in FY2021 and subsequent fiscal years.
Additional administrative costs incurred by the Tax Department would be $30,000 in FY2021 and $5,000 in subsequent fiscal years.
Memorandum
The stated purpose of this bill is to create the “First Time Home Buyer Savings Account Act”.
Though the first-time home buyer must be a West Virginia resident when establishing the account, there is no requirement that the purchased residence be in West Virginia.
The bill states that “in addition to the other modifications to federal taxable income contained in §21-21-1 et seq. of this code” there shall be subtracted from federal taxable income the amount of funds contributed to an account holder’s first-time savings account during the tax year, not to exceed $5,000 for an individual tax return or $10,000 for joint filers. The reference to §21-21-1 et seq. which occurs throughout the bill should be §11-21-1 et seq. In addition, a modification would not be against “federal taxable income,” but against “federal adjusted gross income.” Federal adjusted gross income is the starting point for determining West Virginia taxable income. The bill also refers to the modification as a “subtraction and exemption” which could be confusing.
There is no language in the bill stating that it is “reducing federal adjusted gross income to the extent included therein,’ meaning that income should only be reduced to the extent that the reducing amount is included in federal adjusted gross income. Proposed section 31-18F-5 which phases out the reducing modification depending on the federal adjusted gross income of the filer is confusing.
Before January 31 of each year, the financial institution is to provide the account holder with a certificate providing certain information. However, the financial institution is not required to track the use of the moneys or allocate funds among joint account holders. In addition, the financial institution is not responsible for determining that the account satisfies the requirements for a first-time home buyer account, that the accounts are used for eligible costs, or reporting or remitting taxes or penalties.
The bill title does not mention that the bill sunsets or that it has an internal effective date, although it generally states the years to which the bill applies.
Person submitting Fiscal Note: Mark Muchow
Email Address: kerri.r.petry@wv.gov