FISCAL NOTE
Date Requested: March 07, 2023
Time Requested: 03:36 PM |
| Agency: |
Tax & Revenue Department, WV State |
|---|
| CBD Number: |
Version: |
Bill Number: |
Resolution Number: |
| 3279 |
Comm. Sub. |
HB3168 |
|
|---|
| CBD Subject: |
Economic Development |
|---|
|
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 purpose of this bill is to modernize the Tourism Development Act to account for issues in global supply chains, labor markets, and other issues resulting in delays in construction in the future to ensure investment in West Virginia tourism is competitive with other states and accessible long term.
The tourism development tax credit and tourism development expansion project tax credits provide eligible tourism developments approved by the Department of Economic Development with tax credits generally equal to 25 percent of approved development costs. However, some projects located at or near a permit area for a surface mine or on or adjacent to recreational property owned or leased by the state or federal government may qualify for a 35 percent tax credit. Under Current Law, these tax credits are pro-rated over a ten-year period to offset additional sales taxes collected from consumers. The eligible Taxpayer retains the eligible sales tax collections and does not remit those qualified tax collections to the State. Current Law extends the eligible tax credit period for an additional three years for the vendor to retain capture any unused tax credits against sales tax collections for the extended period. Any remaining tax credits after 13 years of application are forfeited.
There are two significant changes in this bill. The first change expanded the definition of projects qualifying for the enhanced 35 percent tax credit to include a site that is individually listed in the national register of historic places or is in a national register historic district or within five miles of recreational property owned or leased by the state or federal government. The bill also provides for the Department of Economic Development to extend the 10-year period to 25 years upon request of an approved company. Any credit remaining after 25 years is forfeited. The length of tax credit claimed is effectively extended from 13 years under current Law to 25 years.
These changes are designed to benefit tourism development projects with low sales tax collections relative to qualified investment by allowing for extension of the tax credit application period beyond the current 13-year limit to a new limit of up to 25 years. In TY2022, there were 10 separate Taxpayers claiming tourism development tax credits with a total of slightly more than $3.6 million in sales tax retained. The total amount of tax credits claimed should rise over time as new projects are added and existing projects are extended for longer durations under the provisions of this bill.
Additional administrative costs incurred by the State Tax Department would be $10,000 in FY2024.
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 |
10,000 |
0 |
| Personal Services |
0 |
0 |
0 |
| Current Expenses |
0 |
0 |
0 |
| Repairs and Alterations |
0 |
0 |
0 |
| Assets |
0 |
0 |
0 |
| Other |
0 |
10,000 |
0 |
| 2. Estimated Total Revenues |
0 |
0 |
0 |
Explanation of above estimates (including long-range effect):
The tourism development tax credit and tourism development expansion project tax credits provide eligible tourism developments approved by the Department of Economic Development with tax credits generally equal to 25 percent of approved development costs. However, some projects located at or near a permit area for a surface mine or on or adjacent to recreational property owned or leased by the state or federal government may qualify for a 35 percent tax credit. Under Current Law, these tax credits are pro-rated over a ten-year period to offset additional sales taxes collected from consumers. The eligible Taxpayer retains the eligible sales tax collections and does not remit those qualified tax collections to the State. Current Law extends the eligible tax credit period for an additional three years for the vendor to retain capture any unused tax credits against sales tax collections for the extended period. Any remaining tax credits after 13 years of application are forfeited.
There are two significant changes in this bill. The first change expanded the definition of projects qualifying for the enhanced 35 percent tax credit to include a site that is individually listed in the national register of historic places or is in a national register historic district or within five miles of recreational property owned or leased by the state or federal government. The bill also provides for the Department of Economic Development to extend the 10-year period to 25 years upon request of an approved company. Any credit remaining after 25 years is forfeited. The length of tax credit claimed is effectively extended from 13 years under current Law to 25 years.
These changes are designed to benefit tourism development projects with low sales tax collections relative to qualified investment by allowing for extension of the tax credit application period beyond the current 13-year limit to a new limit of up to 25 years. In TY2022, there were 10 separate Taxpayers claiming tourism development tax credits with a total of slightly more than $3.6 million in sales tax retained. The total amount of tax credits claimed should rise over time as new projects are added and existing projects are extended for longer durations under the provisions of this bill.
Additional administrative costs incurred by the State Tax Department would be $10,000 in FY2024.
Memorandum
The purpose of this bill is to modernize the Tourism Development Act to account for issues in global supply chains, labor markets, and other issues resulting in delays in construction in the future to ensure investment in West Virginia tourism is competitive with other states and accessible long term.
There is a potential title defect in this bill. The bill’s title states that the bill is “removing provisions for carryforward, carryback, and forfeiture of credits.” While this statement is correct with regard to credit carryforward, the bill as it stands as the committee substitute retains prohibitions on carryback and forfeiture of credit although those prohibitions are restated in new language after deleting the current language. This misstatement in the title may constitute an easily fixed title defect.
The bill adds new language that allows an approved company to elect not to use the tax credit for any reason, but any such election “may not impact the approved company’s eligibility under this article or affect its designation as a Tourism Development District.” Use of the word “may” instead of “shall” in this context may be confusing.
Person submitting Fiscal Note: Mark Muchow
Email Address: kerri.r.petry@wv.gov