FISCAL NOTE
Date Requested: October 06, 2024
Time Requested: 06:12 PM |
| Agency: |
Tax & Revenue Department, WV State |
|---|
| CBD Number: |
Version: |
Bill Number: |
Resolution Number: |
| 5063 |
Introduced |
HB234 |
|
|---|
| 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 create and authorize a state child tax credit.
Per our interpretation, the bill would create a refundable personal income tax credit for residents who claim a federal child tax credit for an eligible child on their federal tax return. The amount of the credit is $1,000 per eligible child. The bill, if passed, would be effective for tax years beginning on and after January 1, 2024.
According to our interpretation, the proposed legislation would decrease General Revenue Fund collections by up to $287.5 million in FY2025 and in subsequent fiscal years.
Additional administrative costs incurred by the State Tax Department would be $106,500 in FY2025 and $20,000 in subsequent fiscal years.
Fiscal Note Detail
| Effect of Proposal |
Fiscal Year |
2024
Increase/Decrease
(use"-") |
2025
Increase/Decrease
(use"-") |
Fiscal Year
(Upon Full
Implementation) |
| 1. Estmated Total Cost |
0 |
106,500 |
20,000 |
| Personal Services |
0 |
90,000 |
20,000 |
| Current Expenses |
0 |
0 |
0 |
| Repairs and Alterations |
0 |
0 |
0 |
| Assets |
0 |
1,500 |
0 |
| Other |
0 |
15,000 |
0 |
| 2. Estimated Total Revenues |
0 |
-287,500,000 |
-287,500,000 |
Explanation of above estimates (including long-range effect):
Per our interpretation, the bill would create a refundable personal income tax credit for residents who claim a federal child tax credit for an eligible child on their federal tax return. The amount of the credit is $1,000 per eligible child. The bill, if passed, would be effective for tax years beginning on and after January 1, 2024.
According to our interpretation, the proposed legislation would decrease General Revenue Fund collections by up to $ 287.5 million in FY2025 and in subsequent fiscal years.
Additional administrative costs incurred by the State Tax Department would be $106,500 in FY2025 and $20,000 in subsequent fiscal years.
Memorandum
The stated purpose of this bill is to create and authorize a state child tax credit.
There is a possible issue with the clarity of subsection (c), which states:
(c) For tax years beginning on or after January 1, 2024, a refundable credit against the tax imposed by the provisions of this article is allowed against the tax liability under this article of a resident individual who claims a federal child tax credit for an eligible child on the individual’s federal tax return in the amount of $1,000.
Subdivision (b)(2) defines “[f]ederal child tax credit” to mean the federal child tax credit allowed under I.R.C. §24. The amount of the federal child tax credit allowed for an eligible child is $1,000 per child. Therefore, it appears to mean that this credit would allow an eligible taxpayer to claim a credit of $1,000 per child, but the bill’s language could be interpreted to mean $1,000 per taxpayer claiming the federal credit.
The bill will require significant programming changes to the Tax Division’s computer system and tax forms. Generally, development of current tax year forms, instructions, schedules, and programming begins in July and August. This bill would require new forms, instructions, schedules, and programming which will be needed by January. All new forms and programming require testing prior to finalization. This could result in delays to availability of the forms to taxpayers and potentially delays in processing returns and the refunds attributable to those returns.
The Tax Division’s Gentax system will have to be reprogrammed to complete two distinct tasks. First, Gentax must be programmed to scan and incorporate paper returns with the associated changes and new schedules into the system. Second, Gentax must be programmed to download and incorporate electronically filed returns with the associated changes and new schedules.
Additionally, all programming changes would need to be shared with vendors providing “Free File” options as well as those selling tax preparation software so they can make their own programming changes. Testing of those programs (and forms) must be done with the Tax Division and approved.
Person submitting Fiscal Note: Mark Muchow
Email Address: kerri.r.petry@wv.gov