FISCAL NOTE
Date Requested: January 14, 2023
Time Requested: 02:56 PM |
| Agency: |
Tax & Revenue Department, WV State |
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| CBD Number: |
Version: |
Bill Number: |
Resolution Number: |
| 1240 |
Introduced |
HB2064 |
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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 establish the Tourism and Commercial Opportunity Zone Tax Credit Act. The bill provides for a short title. The bill provides for legislative findings and purpose. The bill creates definitions. The bill establishes the Tourism and Commercial Opportunity Zone 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 provisions of this bill define the creation of tourism and commercial opportunity zones to be designated by a selection panel of the Secretaries of Economic Development, Tourism and Commerce or their designees as geographical areas within each county measured by a factor of 100 acres per 1,000 people. Projects within these zones as certified by the selection panel would qualify for tax benefits with a minimum investment of $250,000 maintained over a period of 10 years. The amount of sales tax collected would be allowed as a tax credit against the qualified investor’s income tax liability with maximum approved investment of $1 million per year per tourism and commercial zone investment company and maximum tax credit per qualified investment at no more than $50,000 per year. However, the provisions of this bill do not readily define qualified investments or the actual relationship between sales tax collected and the income tax credit. The bill also provides that minimum investments of $250,000 or more within a qualified tourism and commercial opportunity zone would be taxed as Class II property. Any investment of an improvement amount over $250,000 for a period of 10 years or longer shall receive a tax credit equal to the difference between their annual real property taxes paid on the development site and the amount they would have paid if the development site had been taxed as Class II property. Due to lack of definitions and other conflicting language within this bill, we are unable to provide any additional analysis beyond noting that the maximum annual income tax credit per Taxpayer may not exceed $50,000 tied somehow to the amount of sales tax collections associated with a qualified investment.
Additional administrative costs incurred by the State Tax Department would be $37,500 in FY2024 and $27,500 in subsequent years.
Fiscal Note Detail
| Effect of Proposal |
Fiscal Year |
2023
Increase/Decrease
(use"-") |
2024
Increase/Decrease
(use"-") |
Fiscal Year
(Upon Full
Implementation) |
| 1. Estmated Total Cost |
0 |
37,500 |
27,500 |
| Personal Services |
0 |
22,500 |
22,500 |
| Current Expenses |
0 |
0 |
0 |
| Repairs and Alterations |
0 |
0 |
0 |
| Assets |
0 |
0 |
0 |
| Other |
0 |
15,000 |
5,000 |
| 2. Estimated Total Revenues |
0 |
0 |
0 |
Explanation of above estimates (including long-range effect):
The provisions of this bill define the creation of tourism and commercial opportunity zones to be designated by a selection panel of the Secretaries of Economic Development, Tourism and Commerce or their designees as geographical areas within each county measured by a factor of 100 acres per 1,000 people. Projects within these zones as certified by the selection panel would qualify for tax benefits with a minimum investment of $250,000 maintained over a period of 10 years. The amount of sales tax collected would be allowed as a tax credit against the qualified investor’s income tax liability with maximum approved investment of $1 million per year per tourism and commercial zone investment company and maximum tax credit per qualified investment at no more than $50,000 per year. However, the provisions of this bill do not readily define qualified investments or the actual relationship between sales tax collected and the income tax credit. The bill also provides that minimum investments of $250,000 or more within a qualified tourism and commercial opportunity zone would be taxed as Class II property. Any investment of an improvement amount over $250,000 for a period of 10 years or longer shall receive a tax credit equal to the difference between their annual real property taxes paid on the development site and the amount they would have paid if the development site had been taxed as Class II property. Due to lack of definitions and other conflicting language within this bill, we are unable to provide any additional analysis beyond noting that the maximum annual income tax credit per Taxpayer may not exceed $50,000 tied somehow to the amount of sales tax collections associated with a qualified investment.
Additional administrative costs incurred by the State Tax Department would be $37,500 in FY2024 and $27,500 in subsequent years.
Memorandum
The stated purpose of this bill is to establish the Tourism and Commercial Opportunity Zone Tax Credit Act. The bill provides for a short title. The bill provides for legislative findings and purpose. The bill creates definitions. The bill establishes the Tourism and Commercial Opportunity Zone 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.
It is not clear how, if at all, the opportunity zone established in this bill corresponds to the federal opportunity zones set forth in IRC §1400Z-1. Tourism and Commercial Opportunity Zones will be designated by a selection panel “of the Secretaries of Economic Development, Tourism and Commerce as 100 acres of property or land to be developed/improved per 1,000 people, or a portion thereof. There is no selection process nor term limits for the panel.
This bill would likely result in litigation and would be difficult to administer.
Person submitting Fiscal Note: Mark Muchow
Email Address: kerri.r.petry@wv.gov