FISCAL NOTE
Date Requested: February 15, 2022
Time Requested: 12:33 PM |
| Agency: |
Tax & Revenue Department, WV State |
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| CBD Number: |
Version: |
Bill Number: |
Resolution Number: |
| 2848 |
Introduced |
HB2096 |
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| CBD Subject: |
|
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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 restore the film tax credit in West Virginia.
According to our interpretation of this bill, the Film Tax Credit that was terminated by prior legislation effective January 26, 2018, would be reinstated and apply to all taxable years beginning after December 31, 2017. This bill is to be applied retroactively to all tax years prior to the enactment of the bill’s amendments. The proposed maximum Film Credit amount has increased from $5 million to $10 million per fiscal year provided that the State Development Office may allocate a greater amount of credit for any feature length film produced with “West Virginia” in the title or if the subject of the film is clearly identified as West Virginia. Additionally, qualified projects for this credit include other promotional videos, The proposed bill changes the minimum qualified expenditure amount from $25,000 per project to $50,000 per year. The credit allowance is still 27 percent with an additional four percent increase if 10 or more West Virginia residents are hired on film credit related projects on a full-time basis. Instead of the State Film Office, the State Development Office would be responsible for certification of the film credits. The proposed Film Credit would offset the Corporation Net Income Tax and the Personal Income Tax.
The average cost of the former Film Tax Credit between calendar years 2010 and 2018 was $1.8 million per year with a maximum credit amount during this time of $4.7 million. There is often significant delay between the allotment of tax credits and their utilization on tax returns given that most of these tax credits are sold to third parties. Based on past history and the retroactive application of tax credits back to 2018, passage of this bill would result in a loss to the General Revenue Fund of up to $4.0 million in FY2023 and up to $10.0 million per year thereafter. The minimum expenditure threshold to qualify for tax credits is a cumulative annual total of $50,000 for all projects. This minimum threshold remains low relative to other states offering similar tax incentives.
Additional administrative costs incurred by the State Tax Department would be $62,500 in FY2023 and $5,000 per year in subsequent fiscal years. These costs are significantly higher in FY2023 as this bill is applied retroactively to all tax years prior to the enactment of the bill’s amendments.
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 |
62,500 |
5,000 |
| Personal Services |
0 |
22,500 |
5,000 |
| Current Expenses |
0 |
0 |
0 |
| Repairs and Alterations |
0 |
0 |
0 |
| Assets |
0 |
0 |
0 |
| Other |
0 |
40,000 |
0 |
| 2. Estimated Total Revenues |
0 |
-4,000,000 |
-10,000,000 |
Explanation of above estimates (including long-range effect):
According to our interpretation of this bill, the Film Tax Credit that was terminated by prior legislation effective January 26, 2018, would be reinstated and apply to all taxable years beginning after December 31, 2017. This bill is to be applied retroactively to all tax years prior to the enactment of the bill’s amendments. The proposed maximum Film Credit amount has increased from $5 million to $10 million per fiscal year provided that the State Development Office may allocate a greater amount of credit for any feature length film produced with “West Virginia” in the title or if the subject of the film is clearly identified as West Virginia. Additionally, qualified projects for this credit include other promotional videos, The proposed bill changes the minimum qualified expenditure amount from $25,000 per project to $50,000 per year. The credit allowance is still 27 percent with an additional four percent increase if 10 or more West Virginia residents are hired on film credit related projects on a full-time basis. Instead of the State Film Office, the State Development Office would be responsible for certification of the film credits. The proposed Film Credit would offset the Corporation Net Income Tax and the Personal Income Tax.
The average cost of the former Film Tax Credit between calendar years 2010 and 2018 was $1.8 million per year with a maximum credit amount during this time of $4.7 million. There is often significant delay between the allotment of tax credits and their utilization on tax returns given that most of these tax credits are sold to third parties. Based on past history and the retroactive application of tax credits back to 2018, passage of this bill would result in a loss to the General Revenue Fund of up to $4.0 million in FY2023 and up to $10.0 million per year thereafter. The minimum expenditure threshold to qualify for tax credits is a cumulative annual total of $50,000 for all projects. This minimum threshold remains low relative to other states offering similar tax incentives.
Additional administrative costs incurred by the State Tax Department would be $62,500 in FY2023 and $5,000 per year in subsequent fiscal years. These costs are significantly higher in FY2023 as this bill is applied retroactively to all tax years prior to the enactment of the bill’s amendments.
Memorandum
The stated purpose of this bill is to restore the film tax credit in West Virginia.
This bill does not provide a start date for the restoration of the State Film Tax Credit. As written, one might interpret the bill that the Film Credit never stopped. It appears that the bill intends to be retroactive to Tax Year 2018 when the credit had been terminated.
The Development Office may allocate a greater amount of credit for any feature length film produced with “West Virginia” in the title or if the subject is clearly identified as West Virginia. It is unclear how this larger allocation would be implemented.
The bill allows every agency of the State that contracts for video production of advertising, promotional material, educational programs, or dramatic work to obtain bids from West Virginia production companies and marketing businesses in the solicitation of vendors for such projects. This legislation does not state how the agencies are to accomplish this or to what happens if no bids are available from West Virginia production companies or marketing businesses. There may be constitutional concerns regarding this provision.
Person submitting Fiscal Note: Mark Muchow
Email Address: kerri.r.petry@wv.gov