FISCAL NOTE
Date Requested: March 27, 2025
Time Requested: 12:18 PM |
| Agency: |
Tax & Revenue Department, WV State |
|---|
| CBD Number: |
Version: |
Bill Number: |
Resolution Number: |
| 3358 |
Comm. Sub. |
SB701 |
|
|---|
| CBD Subject: |
Taxation |
|---|
|
FUND(S):
General Revenue Fund, Local Governments
Sources of Revenue:
Other Fund General Fund and Local Property Tax
Legislation creates:
Decreases Existing Revenue, Increases Existing Expenses
Fiscal Note Summary
Effect this measure will have on costs and revenues of state government.
Summarize in a clear and concise manner what impact this measure will have on costs and revenues of state government.
The purpose of this bill is to reclassify forestry equipment as Class I property to provide tax benefits to forestry businesses by acknowledging forestry as a part of agriculture and provides for a sales tax exemption for forestry equipment.
According to our interpretation, passage of this bill would result in forestry equipment being classified as Class I property and therefore exempt from Property Tax. As a result of this legislation, there would be a decrease of roughly $1.1 million in revenue annually. The estimated revenue loss would be roughly $330,000 to the State General Revenue Fund, $460,000 to local county school boards, and $310,000 to county commissions. The distribution of estimated cost is based on information from taxes levied as reported in the Classified Assessed Valuations Taxes Levied for 2024 Tax Year publication of the State Tax Department and the incorporation of the calculation of local property tax share within the State Aid to Schools Formula.
The bill also provides Consumers Sales Tax exemption for purchases of forestry equipment. The revenue impact from this sales tax exemption would be minimal. Most equipment purchased for forestry would be exempt from sales tax under current W. Va. Code §11-5-9(b)(2), which exempts sales of services, machinery, supplies, and materials directly used or consumed in the activities of manufacturing, transportation, transmission, communication, production of natural resources. Timber is considered a natural resource under the W. Va. Code of Rules §110-15-123. Forestry products outside of timber may constitute agricultural products and could be exempt from sales tax under W. Va. Code §11-15-9(8).
Additional one-time administrative costs for the State Tax Department associated with the Property Tax portion of this bill would be $50,000 for reprograming. Other additional costs to the State or local governments from this provision would be minimal. The State Tax Division would incur $1,100 in additional administrative costs in FY2025 as a result of the changes in the Consumers Sales Tax.
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 |
1,100 |
0 |
0 |
| Personal Services |
0 |
0 |
0 |
| Current Expenses |
0 |
0 |
0 |
| Repairs and Alterations |
0 |
0 |
0 |
| Assets |
0 |
0 |
0 |
| Other |
1,100 |
0 |
0 |
| 2. Estimated Total Revenues |
0 |
0 |
-1,100,000 |
Explanation of above estimates (including long-range effect):
Please explain increases and decreases in personal services, current expenses, repairs and alterations, assets, other costs and revenues, including assumptions and data sources and delineation between start-up and ongoing costs. Please also include a long-range schedule of costs and revenues if fiscal impact is expected to vary in future years.
According to our interpretation, passage of this bill would result in forestry equipment being classified as Class I property and therefore exempt from Property Tax. As a result of this legislation, there would be a decrease of roughly $1.1 million in revenue annually. The estimated revenue loss would be roughly $330,000 to the State General Revenue Fund, $460,000 to local county school boards, and $310,000 to county commissions. The distribution of estimated cost is based on information from taxes levied as reported in the Classified Assessed Valuations Taxes Levied for 2024 Tax Year publication of the State Tax Department and the incorporation of the calculation of local property tax share within the State Aid to Schools Formula.
The bill also provides Consumers Sales Tax exemption for purchases of forestry equipment. The revenue impact from this sales tax exemption would be minimal. Most equipment purchased for forestry would be exempt from sales tax under current W. Va. Code §11-5-9(b)(2), which exempts sales of services, machinery, supplies, and materials directly used or consumed in the activities of manufacturing, transportation, transmission, communication, production of natural resources. Timber is considered a natural resource under the W. Va. Code of Rules §110-15-123. Forestry products outside of timber may constitute agricultural products and could be exempt from sales tax under W. Va. Code §11-15-9(8).
Additional one-time administrative costs for the State Tax Department associated with the Property Tax portion of this bill would be $50,000 for reprograming. Other additional costs to the State or local governments from this provision would be minimal. The State Tax Division would incur $1,100 in additional administrative costs in FY2025 as a result of the changes in the Consumers Sales Tax.
Memorandum
Please identify any areas of vagueness, technical defects, reasons a bill would not have a fiscal impact, and/or any special issues not captured elsewhere on this form.
The purpose of this bill is to reclassify forestry equipment as Class I property to provide tax benefits to forestry businesses by acknowledging forestry as a part of agriculture and provides for a sales tax exemption for forestry equipment.
The bill states that “forestry equipment used in the harvesting, processing, or transportation of forest products shall be classified as Class I property, consistent with the classification of agricultural equipment.” However, W. Va. Code §11-8-5 requires that agricultural equipment be used exclusively for agricultural purposes to receive Class 1 status while §11-8-5a(c)(2) of this bill only requires trailers and machinery to be used primarily in forestry operations to qualify as forestry equipment. Therefore, under this bill, certain forestry equipment is held to a lower standard than agricultural equipment to be classified as Class 1 property.
Most sales covered by the sales tax exclusion in §11-15-8e of this bill would already be exempt under the current W. Va. Code such sales of forestry equipment as contemplated by this bill would likely qualify for the refundable exemption from sales tax under W. Va. Code §11-5-9(b)(2), which exempts “[s]ales of services, machinery, supplies, and materials directly used or consumed in the activities of manufacturing, transportation, transmission, communication, production of natural resources[.]” Timber is considered a natural resource under the W. Va. Code of Rules §110-15-123. Forestry products outside of timber may constitute agricultural products and could be exempt from sales tax under W. Va. Code §11-15-9(8).
Person submitting Fiscal Note: Mark Muchow
Email Address: radfiscal@wv.gov