FISCAL NOTE

Date Requested: February 08, 2022
Time Requested: 12:21 PM
Agency: Tax & Revenue Department, WV State
CBD Number: Version: Bill Number: Resolution Number:
2552 Introduced HB4568
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 allow phased rehabilitations of certified historic structures and to remove certain limitations on and allocations of tax credits allowed against corporation net income tax and personal income tax per year and per rehabilitation and phased rehabilitation of certified historic structures. According to our interpretation, this bill modifies the Qualified Rehabilitated Buildings Investment Tax Credit for certified historic structures by eliminating the allocations and maximum amounts of tax credits per project per fiscal year and authorizing phased rehabilitations for any project completed after July 1, 2022. The provisions of this bill would make two substantive changes to the Qualified Rehabilitated Buildings Investment Tax Credit. Limitations on amount of tax credits authorized in any single fiscal year would be eliminated. In addition, the bill would allow the issuance of tax credits for phased rehabilitation projects upon the completion of each phase but prior to the final Part 3 certification of completed work. A phased rehabilitation project consists of two or more distinct stages of development. The National Park Service currently allows federal credits to apply upon completion of each stage of phased project. However, there is a major difference between the federal tax credit and the State tax credit program. The federal program does not allow a transfer of tax credit to a third party, but the State program does allow for transfer or sale of tax credits to third parties. West Virginia Law provides for credit qualification upon the certification of the Part 3 request. The provisions of this bill will provide for tax credit recapture if an applicant fails to submit an approved historic preservation certification application Part 3 within 60 months of the date of the advisory determination by the National Park Service that such phase has been completed in accordance with the Secretary of the Interior standards for rehabilitation. Presumably, a tax credit recapture would apply to the applicant, but not to the purchaser(s) of the tax credit previously allotted. The ability to fully recapture a tax credit issued on an uncompleted project could be in some doubt in a situation where most tax credit was sold to third parties. The provisions of this bill should further increase the amounts of rehabilitation building tax credit claims each year with amounts of tax credits dependent on the size and number of approved projects. We are unable to readily quantify the amount of additional tax credit claims against income taxes. Additional administrative costs incurred by the State Tax Department would be $5,000 in FY2023.



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 5,000 0
Personal Services 0 0 0
Current Expenses 0 0 0
Repairs and Alterations 0 0 0
Assets 0 0 0
Other 0 5,000 0
2. Estimated Total Revenues 0 0 0


Explanation of above estimates (including long-range effect):


According to our interpretation, this bill modifies the Qualified Rehabilitated Buildings Investment Tax Credit for certified historic structures by eliminating the allocations and maximum amounts of tax credits per project per fiscal year and authorizing phased rehabilitations for any project completed after July 1, 2022. The provisions of this bill would make two substantive changes to the Qualified Rehabilitated Buildings Investment Tax Credit. Limitations on amount of tax credits authorized in any single fiscal year would be eliminated. In addition, the bill would allow the issuance of tax credits for phased rehabilitation projects upon the completion of each phase but prior to the final Part 3 certification of completed work. A phased rehabilitation project consists of two or more distinct stages of development. The National Park Service currently allows federal credits to apply upon completion of each stage of phased project. However, there is a major difference between the federal tax credit and the State tax credit program. The federal program does not allow a transfer of tax credit to a third party, but the State program does allow for transfer or sale of tax credits to third parties. West Virginia Law provides for credit qualification upon the certification of the Part 3 request. The provisions of this bill will provide for tax credit recapture if an applicant fails to submit an approved historic preservation certification application Part 3 within 60 months of the date of the advisory determination by the National Park Service that such phase has been completed in accordance with the Secretary of the Interior standards for rehabilitation. Presumably, a tax credit recapture would apply to the applicant, but not to the purchaser(s) of the tax credit previously allotted. The ability to fully recapture a tax credit issued on an uncompleted project could be in some doubt in a situation where most tax credit was sold to third parties. The provisions of this bill should further increase the amounts of rehabilitation building tax credit claims each year with amounts of tax credits dependent on the size and number of approved projects. We are unable to readily quantify the amount of additional tax credit claims against income taxes. Additional administrative costs incurred by the State Tax Department would be $5,000 in FY2023.



Memorandum


The stated purpose of this bill is to allow phased rehabilitations of certified historic structures and to remove certain limitations on and allocations of tax credits allowed against corporation net income tax and personal income tax per year and per rehabilitation and phased rehabilitation of certified historic structures. The proposed modification to the existing Qualified Rehabilitated Buildings Investment Tax Credit may be claimed for each completed phase of rehabilitation. This is inconsistent with the requirement that a project cannot be designated as a ‚Äúcertified rehabilitation‚ÄĚ until all the phases are completed and receive final certification.



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