FISCAL NOTE
Date Requested: January 11, 2022
Time Requested: 08:57 AM |
| Agency: |
Tax & Revenue Department, WV State |
|---|
| CBD Number: |
Version: |
Bill Number: |
Resolution Number: |
| 4002 |
Introduced |
HB101 |
|
|---|
| CBD Subject: |
Governor -- Bills Requested By |
|---|
|
FUND(S):
General Revenue Fund
Sources of Revenue:
General Fund
Legislation creates:
Fiscal Note Summary
Effect this measure will have on costs and revenues of state government.
The provisions of this bill would create a new tax credit for qualified manufacturing activities involving a minimum investment of $2 billion and minimum job creation of 500. The tax credit is equal to 50% of qualified investment with tax credits applying annually against the business entity taxes (currently income tax) of the qualified Taxpayer or combined group tax liability of a qualified unitary group. Excess tax credits are carried forward to future years until exhausted. This new tax credit is very similar to existing tax credits for the manufacturing sector, such as the Economic Opportunity Tax Credit and the Manufacturing Investment Tax Credit. The major difference between existing tax credits and this new tax credit involves length of tax credit carryovers. Existing tax credits generally apply for a period of 10 to 15 years whereas this tax credit applies until fully exhausted. In the event of future tax changes, this tax credit contains language to allow application against any new business tax possibly created in the future. This provision follows past Legislative practice to allow tax credits to apply to newly created taxes in a tax reform environment. When the West Virginia Business and Occupation Tax (i.e., a business gross receipts tax) was replaced with the corporation net income tax and business franchise tax in 1987, investment tax credits previously applicable against the Business and Occupation Tax were also allowed to apply against the newly created taxes.
The provisions of this bill would also expand the existing direct use sales tax exemption for manufacturing industry purchases to apply against all business input purchases by the qualified Taxpayer. The sales tax exemption would extend to purchases such as office equipment. The value of additional sales tax exemption should be minimal relative to the value of the existing direct use exemption available to all manufacturing activity in West Virginia.
Finally, the provisions of this bill provide the Taxpayer with an exemption from any local business taxes except for the local property tax.
There is no net fiscal cost associated with passage of this bill given the parameters necessary to qualify for such tax incentives. The investment necessary to qualify for the tax incentives very rarely occurs. Such investment will produce additional economic activity in the region and additional tax revenues for State and local governments beyond the value of the tax incentives.
Fiscal Note Detail
| Effect of Proposal |
Fiscal Year |
2022
Increase/Decrease
(use"-") |
2023
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):
The provisions of this bill would create a new tax credit for qualified manufacturing activities involving a minimum investment of $2 billion and minimum job creation of 500. The tax credit is equal to 50% of qualified investment with tax credits applying annually against the business entity taxes (currently income tax) of the qualified Taxpayer or combined group tax liability of a qualified unitary group. Excess tax credits are carried forward to future years until exhausted. This new tax credit is very similar to existing tax credits for the manufacturing sector, such as the Economic Opportunity Tax Credit and the Manufacturing Investment Tax Credit. The major difference between existing tax credits and this new tax credit involves length of tax credit carryovers. Existing tax credits generally apply for a period of 10 to 15 years whereas this tax credit applies until fully exhausted. In the event of future tax changes, this tax credit contains language to allow application against any new business tax possibly created in the future. This provision follows past Legislative practice to allow tax credits to apply to newly created taxes in a tax reform environment. When the West Virginia Business and Occupation Tax (i.e., a business gross receipts tax) was replaced with the corporation net income tax and business franchise tax in 1987, investment tax credits previously applicable against the Business and Occupation Tax were also allowed to apply against the newly created taxes.
The provisions of this bill would also expand the existing direct use sales tax exemption for manufacturing industry purchases to apply against all business input purchases by the qualified Taxpayer. The sales tax exemption would extend to purchases such as office equipment. The value of additional sales tax exemption should be minimal relative to the value of the existing direct use exemption available to all manufacturing activity in West Virginia.
Finally, the provisions of this bill provide the Taxpayer with an exemption from any local business taxes except for the local property tax.
There is no net fiscal cost associated with passage of this bill given the parameters necessary to qualify for such tax incentives. The investment necessary to qualify for the tax incentives very rarely occurs. Such investment will produce additional economic activity in the region and additional tax revenues for State and local governments beyond the value of the tax incentives.
Memorandum
Person submitting Fiscal Note: Mark Muchow
Email Address: kerri.r.petry@wv.gov