FISCAL NOTE
Date Requested: March 24, 2025
Time Requested: 03:29 PM |
| Agency: |
Tax & Revenue Department, WV State |
|---|
| CBD Number: |
Version: |
Bill Number: |
Resolution Number: |
| 3986 |
Introduced |
SB933 |
|
|---|
| 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 stated purpose of this bill is to increase the amount of income and revenue before a business must obtain a business license; exempt independent contractors and sole proprietors from business licenses under certain requirements; increase the amount of annual revenue for businesses to be exempt from B&O taxes; and create the small business protection act.
According to our interpretation, this bill would increase the State business registration fee net income exemption threshold from $4,000 to $10,000. This bill also exempts municipal licenses and municipal business and occupation taxes for businesses with under $25,000 in revenue. The proposed Small Business Protection Act has no measurable fiscal implications, rather it is an explanation of how federal and State regulatory requirements create a larger disadvantage for small businesses relative to larger business competitors. Passage of this bill would decrease General Revenue Fund collections by $10,000 per year in FY2026 and thereafter. It would also decrease revenue collected by municipalities.
Additional administrative costs incurred by the State Tax Department would be $1,100 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 |
1,100 |
0 |
| Personal Services |
0 |
0 |
0 |
| Current Expenses |
0 |
0 |
0 |
| Repairs and Alterations |
0 |
0 |
0 |
| Assets |
0 |
0 |
0 |
| Other |
0 |
1,100 |
0 |
| 2. Estimated Total Revenues |
0 |
-10,000 |
-10,000 |
Explanation of above estimates (including long-range effect):
According to our interpretation, this bill would increase the State business registration fee net income exemption threshold from $4,000 to $10,000. This bill also exempts municipal licenses and municipal business and occupation taxes for businesses with under $25,000 in revenue. The proposed Small Business Protection Act has no measurable fiscal implications, rather it is an explanation of how federal and State regulatory requirements create a larger disadvantage for small businesses relative to larger business competitors. Passage of this bill would decrease General Revenue Fund collections by $10,000 per year in FY2026 and thereafter. It would also decrease revenue collected by municipalities.
Additional administrative costs incurred by the State Tax Department would be $1,100 in FY2026.
Memorandum
The stated purpose of this bill is to increase the amount of income and revenue before a business must obtain a business license; exempt independent contractors and sole proprietors from business licenses under certain requirements; increase the amount of annual revenue for businesses to be exempt from B&O taxes; and create the small business protection act
The change of language of gross income to net income may be problematic, because the calculation of net income is different than for gross income, and the net income is not limited to income from business activity. This would create some uncertainty about how to calculate net income.
This bill is unclear whether W.Va. Code §8-13-4(c) includes all businesses with revenues under $25,000 or whether the language, including businesses under $25,000, is limited to independent contractors and sole proprietors. The lack of definition for “independent contractor” may create some confusion.
The exemption of only those independent contractors or sole proprietors with revenues under $25,000 may be problematic as it may violate the constitutional guarantee of equal and uniform taxation. Businesses making over this threshold amount are excluded from the proposed exemption and this may run contrary to the State Constitution, which provides equal and uniform taxation and that both real and personal property would be taxed proportionately to its value.
While the Small Business Protection Act does not provide any details or outline a course of action for agencies to follow, it provides general mandatory guidelines for agencies to follow and adhere to. This approach is problematic because the proposed Act is broad, narrative based, and subject to a significant amount of interpretation. This proposed Act may be difficult to administer.
Person submitting Fiscal Note: Mark Muchow
Email Address: RADfiscal@wv.gov