FISCAL NOTE
Date Requested: January 14, 2026
Time Requested: 07:36 PM |
| Agency: |
Tax & Revenue Department, WV State |
|---|
| CBD Number: |
Version: |
Bill Number: |
Resolution Number: |
| 1367 |
Introduced |
SB131 |
|
|---|
| 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 a credit against the severance tax to encourage private companies to make infrastructure improvements to highways, roads, and bridges in this state. The bill limits the total amount of road and highway infrastructure improvement credits which can be verified by the Secretary of Transportation. The bill seeks to encourage greater capital investment in coal production and processing facilities. The bill will increase economic opportunities in this state. The bill authorizes the claiming of the credits. Finally, the bill provides for an effective date.
The provisions of this bill would create two separate investment tax credit applications for the coal industry effective January 1, 2027. The bill creates a broad tax credit against coal severance taxes equal to 50 percent of qualified expenses necessary to operate a coal mine and related properties. The bill also creates a narrow 50 percent tax credit for qualified expenses of a surface mine associated with the development of a certified road or highway infrastructure improvement project up to a total limit of $50,000 based on a maximum certification of no more than $100,000 in eligible expenses. The resulting tax credits may be used to offset up to 20 percent of the Taxpayer’s coal severance tax liability with excess tax credits carried over for up to nine additional years. The broad tax credit equal to 50 percent of the qualified operating expenses of a mine should by itself be sufficient to fully offset 20 percent of coal severance tax liability without need for additional benefits from the narrower tax credit for highway improvement projects. The narrow tax credit for highway improvement projects would require pre-certification from the Secretary of Transportation with a limit of no more than $100,000 in total expenditures eligible for the tax credit. Beginning in FY2028, passage of this bill would result in an annual General Revenue Fund loss of roughly $43.0 million to $56.0 million per year based on current coal prices and current collection trends. Given the effective date of January 2027 of these proposed tax credits, a revenue loss ranging from $18.0 million to $23.0 million could be anticipated for the balance of FY2027 based on an expectation of claims against monthly tax payments.
We would anticipate no applications relating to development of a certified road or highway infrastructure improvement project due to both low limits on the proposed credit and the complexities associated with such an application. However, we would expect every coal company to reduce its tax bill by the 20 percent limitation due to the size of the tax credits for routine expenses. The industry already has another investment tax credit called the Coal Rebate Credit equal to 35 percent of qualified investment but with requirements of increased coal production and employment to qualify. The coal industry has already accumulated more than $317 million in potential tax credit under the Coal Rebate program. The provisions of this bill would reduce the industry tax rates by 20 percent through a complex tax credit mechanism rather than a straightforward tax rate cut.
Additional administrative costs incurred by the State Tax Department would be $22,000 in FY2026. $24,150 in FY2027, and $22,500 per year in FY2028 and subsequent fiscal years.
Fiscal Note Detail
| Effect of Proposal |
Fiscal Year |
2026
Increase/Decrease
(use"-") |
2027
Increase/Decrease
(use"-") |
Fiscal Year
(Upon Full
Implementation) |
| 1. Estmated Total Cost |
22,000 |
24,150 |
22,500 |
| Personal Services |
0 |
22,500 |
22,500 |
| Current Expenses |
0 |
1,650 |
0 |
| Repairs and Alterations |
0 |
0 |
0 |
| Assets |
0 |
0 |
0 |
| Other |
22,000 |
0 |
0 |
| 2. Estimated Total Revenues |
0 |
-20,500,000 |
-49,500,000 |
Explanation of above estimates (including long-range effect):
The provisions of this bill would create two separate investment tax credit applications for the coal industry effective January 1, 2027. The bill creates a broad tax credit against coal severance taxes equal to 50 percent of qualified expenses necessary to operate a coal mine and related properties. The bill also creates a narrow 50 percent tax credit for qualified expenses of a surface mine associated with the development of a certified road or highway infrastructure improvement project up to a total limit of $50,000 based on a maximum certification of no more than $100,000 in eligible expenses. The resulting tax credits may be used to offset up to 20 percent of the Taxpayer’s coal severance tax liability with excess tax credits carried over for up to nine additional years. The broad tax credit equal to 50 percent of the qualified operating expenses of a mine should by itself be sufficient to fully offset 20 percent of coal severance tax liability without need for additional benefits from the narrower tax credit for highway improvement projects. The narrow tax credit for highway improvement projects would require pre-certification from the Secretary of Transportation with a limit of no more than $100,000 in total expenditures eligible for the tax credit. Beginning in FY2028, passage of this bill would result in an annual General Revenue Fund loss of roughly $43.0 million to $56.0 million per year based on current coal prices and current collection trends. Given the effective date of January 2027 of these proposed tax credits, a revenue loss ranging from $18.0 million to $23.0 million could be anticipated for the balance of FY2027 based on an expectation of claims against monthly tax payments.
We would anticipate no applications relating to development of a certified road or highway infrastructure improvement project due to both low limits on the proposed credit and the complexities associated with such an application. However, we would expect every coal company to reduce its tax bill by the 20 percent limitation due to the size of the tax credits for routine expenses. The industry already has another investment tax credit called the Coal Rebate Credit equal to 35 percent of qualified investment but with requirements of increased coal production and employment to qualify. The coal industry has already accumulated more than $317 million in potential tax credit under the Coal Rebate program. The provisions of this bill would reduce the industry tax rates by 20 percent through a complex tax credit mechanism rather than a straightforward tax rate cut.
Additional administrative costs incurred by the State Tax Department would be $22,000 in FY2026. $24,150 in FY2027, and $22,500 per year in FY2028 and subsequent fiscal years.
Memorandum
The stated purpose of this bill is to create a credit against the severance tax to encourage private companies to make infrastructure improvements to highways, roads, and bridges in this state. The bill limits the total amount of road and highway infrastructure improvement credits which can be verified by the Secretary of Transportation. The bill seeks to encourage greater capital investment in coal production and processing facilities. The bill will increase economic opportunities in this state. The bill authorizes the claiming of the credits. Finally, the bill provides for an effective date.
The citation to the entirety of Article 13A could be problematic because Article 13A includes severance taxes for natural gas, oil, coalbed methane, and other natural resources in addition to coal. This is problematic because “the application of the credit” portion of the bill (proposed §11-13NN-4(c)) only states that the credit may be taken against the Severance Tax liability imposed by W.Va. Code §11-13A-3. Section 3 of Article 13A is the Severance Tax for coal; so, a taxpayer severing natural gas might fall within the definition of “eligible taxpayer” but not have any Severance Tax against which to take the proposed credit because the Severance Tax for natural gas is not in section 3 of Article 13A.
This bill does not provide a definition for “coal production and processing facility”. Further, use of phrase like “in furtherance of” and “not limited to” could be interpreted to make the list of covered expenditures very broad. There is also no comparable application process for qualified expenditures toward a coal production and processing facility.
The State Secretary of Transportation is authorized to certify a maximum of $100,000 for road or highway infrastructure improvements as being eligible for the proposed tax credit. It is unclear whether this $100,000 limit applies each year when the credit is made available or for the entirety of the life of the credit. It is also unclear whether the proposed credit applies to any single project, any single taxpayer, or the aggregate of all projects statewide. It is unclear whether the Secretary of Transportation is to award credits on a first-come, first-served basis or pick or choose the projects he or she considers to be most desirable.
The bill is silent if a taxpayer’s expenditure involves both road or highway infrastructure investment and a coal production and processing facilities investment.
Person submitting Fiscal Note: Mark Muchow
Email Address: RADfiscal@wv.gov