FISCAL NOTE
Date Requested: March 06, 2023
Time Requested: 08:38 AM |
| Agency: |
Tax & Revenue Department, WV State |
|---|
| CBD Number: |
Version: |
Bill Number: |
Resolution Number: |
| 2259 |
Comm. Sub. |
SB151 |
|
|---|
| CBD Subject: |
Taxation |
|---|
|
FUND(S):
General Revenue Fund
Sources of Revenue:
General Fund
Legislation creates:
Increases Existing Expenses
Fiscal Note Summary
Effect this measure will have on costs and revenues of state government.
The bill has no stated purpose.
Based on our interpretation, the legislation, if passed, would allow qualifying Pass-through entities to “elect” to be subject to the Personal Income Tax at the entity level for taxable years beginning on and after January 1, 2022. A “Pass-through entity” is defined as any partnership or other business entity that is not subject to the Corporation Net Income Tax. The rate of tax imposed on an electing pass-through entity would be equal to the top marginal Personal Income Tax rate and it would be imposed on the apportioned West Virginia income of the entity.
In addition, the bill allows for a credit against a taxpayer’s aggregate Personal Income Tax liability for a taxpayer who is an owner of an electing pass-through entity. The credit is equal to the owner’s proportionate share of the tax levied and remitted by the owner’s electing pass-through entity for the taxable year. The credit is claimed in the taxpayer’s taxable year that includes the last day of the electing pass-through entity’s taxable year for which the tax was paid. Credit in excess of the aggregate amount of tax otherwise due may be carried forward by the taxpayer for up to five taxable years.
Per our interpretation, there may be a short-term increase in General Revenue collections due to tax being calculated at the maximum Personal Income Tax rate and without inclusion of a specific Taxpayer’s adjustments, modifications, and other tax credits. However, over the longer-term, the impact of the proposed legislation on General Revenue Fund collections should be revenue neutral.
Additional administrative costs incurred by the State Tax Department would be $15,000 in FY2023.
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 |
15,000 |
0 |
0 |
| Personal Services |
0 |
0 |
0 |
| Current Expenses |
0 |
0 |
0 |
| Repairs and Alterations |
0 |
0 |
0 |
| Assets |
0 |
0 |
0 |
| Other |
15,000 |
0 |
0 |
| 2. Estimated Total Revenues |
0 |
0 |
0 |
Explanation of above estimates (including long-range effect):
Based on our interpretation, the legislation, if passed, would allow qualifying Pass-through entities to “elect” to be subject to the Personal Income Tax at the entity level for taxable years beginning on and after January 1, 2022. A “Pass-through entity” is defined as any partnership or other business entity that is not subject to the Corporation Net Income Tax. The rate of tax imposed on an electing pass-through entity would be equal to the top marginal Personal Income Tax rate and it would be imposed on the apportioned West Virginia income of the entity.
In addition, the bill allows for a credit against a taxpayer’s aggregate Personal Income Tax liability for a taxpayer who is an owner of an electing pass-through entity. The credit is equal to the owner’s proportionate share of the tax levied and remitted by the owner’s electing pass-through entity for the taxable year. The credit is claimed in the taxpayer’s taxable year that includes the last day of the electing pass-through entity’s taxable year for which the tax was paid. Credit in excess of the aggregate amount of tax otherwise due may be carried forward by the taxpayer for up to five taxable years.
Per our interpretation, there may be a short-term increase in General Revenue collections due to tax being calculated at the maximum Personal Income Tax rate and without inclusion of a specific Taxpayer’s adjustments, modifications, and other tax credits. However, over the longer-term, the impact of the proposed legislation on General Revenue Fund collections should be revenue neutral.
Additional administrative costs incurred by the State Tax Department would be $15,000 in FY2023.
Memorandum
Person submitting Fiscal Note: Mark Muchow
Email Address: kerri.r.petry@wv.gov