FISCAL NOTE
Date Requested: March 20, 2025
Time Requested: 01:47 PM |
| Agency: |
Tax & Revenue Department, WV State |
|---|
| CBD Number: |
Version: |
Bill Number: |
Resolution Number: |
| 3869 |
Introduced |
SB840 |
|
|---|
| CBD Subject: |
Taxation |
|---|
|
FUND(S):
General Revenue Fund
Sources of Revenue:
General Fund
Legislation creates:
Increases Revenue From Existing Sources, 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 provide for withholdings of estimated tax liabilities from natural resources royalty payments for nonresidents by lessees; provide exceptions to the tax withholding requirements under certain circumstances; provide that withheld amounts be paid by lessees to the Tax Commissioner on behalf of the nonresidents; providing for refunds to nonresidents for overpayment; require annual withholding statements, reconciliation, and filing requirements; require electronic filing under specified circumstances; provide criminal and civil penalties in certain circumstances for non-compliance; and provide for rule-making.
The bill provides that every lessee of West Virginia real estate who makes a natural resources royalty payment to a lessor who does not reside in West Virginia must withhold West Virginia personal income tax on the natural resources royalty payments to that lessor and remit the withheld amount to the Tax Commissioner. The withholding of the tax is optional with respect to payments to a lessor who receives less than $1,000 annually in natural resource royalty payments from the lessee and is at the discretion of the lessee. Royalty income from West Virginia properties is subject to West Virginia Personal Income Tax regardless of individual residency. The provisions of this bill may improve compliance. The provisions of the bill would be effective for all taxable years beginning after December 31, 2025.
Based on our interpretation, the passage of the proposed legislation could increase General Revenue Fund collections by between $3.0 million and $10 million per year when fully implemented depending on energy prices.
Additional administrative costs incurred by the Tax Division would be $5,500 in FY2026.
Fiscal Note Detail
| Effect of Proposal |
Fiscal Year |
2025
Increase/Decrease
(use"-") |
2026
Increase/Decrease
(use"-") |
Fiscal Year
(Upon Full
Implementation) |
| 1. Estmated Total Cost |
0 |
5,500 |
0 |
| Personal Services |
0 |
0 |
0 |
| Current Expenses |
0 |
0 |
0 |
| Repairs and Alterations |
0 |
0 |
0 |
| Assets |
0 |
0 |
0 |
| Other |
0 |
5,500 |
0 |
| 2. Estimated Total Revenues |
0 |
0 |
3,000,000 |
Explanation of above estimates (including long-range effect):
The bill provides that every lessee of West Virginia real estate who makes a natural resources royalty payment to a lessor who does not reside in West Virginia must withhold West Virginia personal income tax on the natural resources royalty payments to that lessor and remit the withheld amount to the Tax Commissioner. The withholding of the tax is optional with respect to payments to a lessor who receives less than $1,000 annually in natural resource royalty payments from the lessee and is at the discretion of the lessee. Royalty income from West Virginia properties is subject to West Virginia Personal Income Tax regardless of individual residency. The provisions of this bill may improve compliance. The provisions of the bill would be effective for all taxable years beginning after December 31, 2025.
Based on our interpretation, the passage of the proposed legislation could increase General Revenue Fund collections by between $3.0 million and $10 million per year when fully implemented depending on energy prices.
Additional administrative costs incurred by the Tax Division would be $5,500 in FY2026.
Memorandum
Person submitting Fiscal Note: Mark Muchow
Email Address: RADfiscal@wv.gov