FISCAL NOTE
Date Requested: February 11, 2022
Time Requested: 04:17 PM |
| Agency: |
Tax & Revenue Department, WV State |
|---|
| CBD Number: |
Version: |
Bill Number: |
Resolution Number: |
| 2556 |
Introduced |
HB4652 |
|
|---|
| CBD Subject: |
Economic Development |
|---|
|
FUND(S):
General Revenue Fund, local governments
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 establish the Proficient Customer Service Communications Act and associated tax credit. The bill provides for a short title. The bill provides for legislative findings and purpose. The bill creates definitions. The bill establishes the call center tax credit. The bill provides for restrictions on investments. The bill provides for a penalty. The bill provides for the disclosure of tax credit. The bill provides for tax credit review and accountability. The bill creates rules. Finally, the bill provides for an effective date.
The provisions of this bill generally describe several possible tax incentives for qualified new call centers. This includes the development of property into a site for the purpose of building a call center. The bill suggests a call center tax credit in the form of a permanent Class 2 tax rate. Class 2 refers to local property tax rates, as opposed to a tax credit. Class 2 property is taxed at half the rate of all other properties. A voter approved Constitutional Amendment would be necessary to provide the lower tax rate for such call centers. The bill provides for an undefined salvage value tax credit for “machinery and equipment that have been fully depreciated and are no longer used as part of the production process.” A new call center is not likely to have fully depreciated equipment no longer used in the production process. The provisions of this bill suggest a tax credit equal to the amount of payroll tax collected by the call center. The term “payroll tax” is not defined. The bill also provides for a permanent tax credit based on investment. The permanent tax credit would offset tax liabilities associated with the business franchise tax, the corporation net income tax and personal income tax associated with pass-through business income. The provisions of this bill also state that no credit is allowed against any withholding tax. All projects must be preapproved by the Economic Development Authority who may approve no more than $1 million in tax credits each year. This bill would become effective on July 1, 2022. We are unable to evaluate the fiscal impact of this proposed bill as written.
Additional administrative costs incurred by the Tax Department would be $20,000 in FY 2023 and $5,000 in subsequent fiscal years.
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 |
20,000 |
5,000 |
| Personal Services |
0 |
0 |
5,000 |
| Current Expenses |
0 |
0 |
0 |
| Repairs and Alterations |
0 |
0 |
0 |
| Assets |
0 |
0 |
0 |
| Other |
0 |
20,000 |
0 |
| 2. Estimated Total Revenues |
0 |
0 |
0 |
Explanation of above estimates (including long-range effect):
The provisions of this bill generally describe several possible tax incentives for qualified new call centers. This includes the development of property into a site for the purpose of building a call center. The bill suggests a call center tax credit in the form of a permanent Class 2 tax rate. Class 2 refers to local property tax rates, as opposed to a tax credit. Class 2 property is taxed at half the rate of all other properties. A voter approved Constitutional Amendment would be necessary to provide the lower tax rate for such call centers. The bill provides for an undefined salvage value tax credit for “machinery and equipment that have been fully depreciated and are no longer used as part of the production process.” A new call center is not likely to have fully depreciated equipment no longer used in the production process. The provisions of this bill suggest a tax credit equal to the amount of payroll tax collected by the call center. The term “payroll tax” is not defined. The bill also provides for a permanent tax credit based on investment. The permanent tax credit would offset tax liabilities associated with the business franchise tax, the corporation net income tax and personal income tax associated with pass-through business income. The provisions of this bill also state that no credit is allowed against any withholding tax. All projects must be preapproved by the Economic Development Authority who may approve no more than $1 million in tax credits each year. This bill would become effective on July 1, 2022. We are unable to evaluate the fiscal impact of this proposed bill as written.
Additional administrative costs incurred by the Tax Department would be $20,000 in FY 2023 and $5,000 in subsequent fiscal years.
Memorandum
The stated purpose of this bill is to establish the Proficient Customer Service Communications Act and associated tax credit. The bill provides for a short title. The bill provides for legislative findings and purpose. The bill creates definitions. The bill establishes the call center tax credit. The bill provides for restrictions on investment. The bill provides for a penalty. The bill provides for the disclosure of tax credit. The bill provides for tax credit review and accountability. The bill creates rules. Finally, the bill provides for an effective date.
The bill purportedly establishes a proficient customer service communications tax credit, but it actually tries to establish multiple tax treatments. The bill allows “to every business … a tax credit for the taxable year in which the investment was made.” Although this sentence appears to limit the credit to the year of investment, the next sentence states that “any investment … shall be awarded this permanent tax credit,” giving the impression that the tax credit is ongoing over multiple years.
A taxpayer must apply to the economic development authority to be certified as eligible for the credit. The bill does not address any sharing of information between the economic development authority and the Tax Department.
The Tax Commissioner can require that eligible taxpayers provide “any information required … for the purpose of preparing the report,” and the bill provides that the confidentiality and disclosure provisions of §11-10-5d and §11-10-5s apply to that information. However, the bill also provides that “[n]otwithstanding any provision of this code to the contrary,” the Tax Commissioner is directed to “annually publish in the state register the name and address of every eligible taxpayer and the amount of any tax credit asserted under this article.” These two provisions are potentially in conflict.
The bill provides that investment shall be taxed as a Class II property, but this provision is not mentioned in the title of the bill, which constitutes a title defect.
Person submitting Fiscal Note: Mark Muchow
Email Address: kerri.r.petry@wv.gov