FISCAL NOTE
Date Requested: February 18, 2021
Time Requested: 01:52 PM |
| Agency: |
Tax & Revenue Department, WV State |
|---|
| CBD Number: |
Version: |
Bill Number: |
Resolution Number: |
| 2233 |
Introduced |
SB344 |
|
|---|
| CBD Subject: |
Taxation |
|---|
|
FUND(S):
General Revenue Fund
Sources of Revenue:
General Fund
Legislation creates:
Decreases Existing Revenue
Fiscal Note Summary
Effect this measure will have on costs and revenues of state government.
The stated purpose of this bill to eliminate both the sunset date for the qualified rehabilitated buildings investment credit and the maximum amount allowable of the tax credit.
Under current Law, the 25% Qualified Rehabilitated Buildings Investment Tax Credit is set to expire after December 31, 2022. In addition, there is a $10 million tax credit limit on the amount of tax available for a single project, a $30 million limit on the amount of tax credit authorized in a single year and a $5 million allocation set aside for projects with tax credits of $500,000 or less. According to our interpretation, the provisions of this bill would eliminate the tax credit sunset date as well as these other limitations. In addition, the provisions of this bill would allow sharing of tax credits among shareholders or members of pass-through entities with flexible sharing agreements subject to approval of the Tax Commissioner. Recent data from the National Park Service for federal fiscal year 2019 indicate potential West Virginia tax credits of roughly $6.5 million for that year. Activity to date has been consistently less the current Law statutory limits. Therefore, the fiscal impact of passage of this bill is largely tied to the elimination of the sunset date at the end of 2022. The elimination of the sunset date would result in loss of revenue roughly equal to new tax credits authorized on or after January 1, 2023. Any revenue loss would not occur until Fiscal year 2024 at the earliest. We cannot quantify the amount of tax credits possibly issued in the future. However, past performance might indicate average future tax credits of less than $10 million per year. The major limitation of historic rehabilitation continues to be a general glut of commercial real estate in urban areas of the State.
There would be no additional administrative costs.
Fiscal Note Detail
| Effect of Proposal |
Fiscal Year |
2021
Increase/Decrease
(use"-") |
2022
Increase/Decrease
(use"-") |
Fiscal Year
(Upon Full
Implementation) |
| 1. Estmated Total Cost |
0 |
0 |
0 |
| Personal Services |
0 |
0 |
0 |
| 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):
Under current Law, the 25% Qualified Rehabilitated Buildings Investment Tax Credit is set to expire after December 31, 2022. In addition, there is a $10 million tax credit limit on the amount of tax available for a single project, a $30 million limit on the amount of tax credit authorized in a single year and a $5 million allocation set aside for projects with tax credits of $500,000 or less. According to our interpretation, the provisions of this bill would eliminate the tax credit sunset date as well as these other limitations. In addition, the provisions of this bill would allow sharing of tax credits among shareholders or members of pass-through entities with flexible sharing agreements subject to approval of the Tax Commissioner. Recent data from the National Park Service for federal fiscal year 2019 indicate potential West Virginia tax credits of roughly $6.5 million for that year. Activity to date has been consistently less the current Law statutory limits. Therefore, the fiscal impact of passage of this bill is largely tied to the elimination of the sunset date at the end of 2022. The elimination of the sunset date would result in loss of revenue roughly equal to new tax credits authorized on or after January 1, 2023. Any revenue loss would not occur until Fiscal year 2024 at the earliest. We cannot quantify the amount of tax credits possibly issued in the future. However, past performance might indicate average future tax credits of less than $10 million per year. The major limitation of historic rehabilitation continues to be a general glut of commercial real estate in urban areas of the State.
There would be no additional administrative costs.
Memorandum
The stated purpose of this bill to eliminate both the sunset date for the qualified rehabilitated buildings investment credit and the maximum amount allowable of the tax credit.
The title of the bill fails to mention the carryback and carryforward treatment of the tax credit, and the elimination of the language relocating the tax credit to another applicant. However, it could be argued that these two provisions are technical modifications.
The language regarding how the unused portion of the credit may be used is confusing as it applies to “carryback”. It appears to initially say that the unused portion of the credit qualifies for carryback treatment, but then states that “it may not be carried back.”
The bill also provides for “pass-through” of this credit effective “on and after January 1, 2001.” It may be that the drafter of this bill meant to use the year 2021 rather than 2001.
Person submitting Fiscal Note: Mark Muchow
Email Address: kerri.r.petry@wv.gov