FISCAL NOTE
Date Requested: January 14, 2026
Time Requested: 06:03 PM |
| Agency: |
Tax & Revenue Department, WV State |
|---|
| CBD Number: |
Version: |
Bill Number: |
Resolution Number: |
| 2281 |
Introduced |
SB1 |
|
|---|
| 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.
Amended Fiscal Note
The stated purpose of this bill is to create the Small Business Growth Program administered by the Department of Commerce by providing for the certification of capital investment authority, establishing insurance premium tax credit, providing tax credit claimant and recapture procedures, and prohibiting certain investments.
Per our interpretation, the bill would create the Small Business Growth Program which would be administered by the Department of Commerce. The legislation would create a credit against the West Virginia Insurance Premium Tax for an entity which makes an equity investment in a growth fund certified by the West Virginia Department of Commerce (the Department) which in turn invests the capital in eligible businesses. Businesses eligible to receive the funds must, at the time of the initial qualified investment, have fewer than 250 employees and their principal business operations in West Virginia. The credit is calculated annually by multiplying the purchase price paid to the growth fund for the capital investment by the applicable credit percentage for the credit allowance date, which is zero percent for the first two credit allowance dates and fifteen percent for the next four credit allowance dates. The ‘credit allowance date’ is defined as the date on which the Department certifies a growth fund’s capital investment and each of the five anniversary dates of such dates thereafter. The credit is nonrefundable, but it may be carried over for five subsequent tax years. The legislation authorizes the department to certify capital investments in amounts that would not authorize more than $15 million in credits to be claimed against state tax liability in any calendar year, excluding any credit amounts carried forward.
The proposed program would generally piggyback on the federal New Markets Tax Credits intended to increase capital for businesses and low-income communities by providing a tax incentive to investors. The current federal tax credit was set to expire at the end of 2025, but the credit was made permanent in the One Big Beautiful Bill Act. The federal credit is intended to provide private investors with a federal tax credit for investments made in business or economic development projects located in ‘distressed’ communities in specified census tracks. If a growth investor was eligible for both the thirty-nine percent federal credit and the state credit of sixty percent, they could receive a credit of up to ninety-nine percent of the amount they invested.
The tax against which this credit applies is administered by the Insurance Commission, not the State Tax Division. From a revenue perspective, the proposed bill could ultimately reduce General Revenue collections by up to $15 million on average per year beginning in FY2029 based on the maximum qualified equity investment limits within the proposed legislation. The projected fiscal impact depends on the ability of the growth fund investors and their affiliates to fully utilize the credits.
There would be no additional administrative costs incurred by the State Tax Division. The Insurance Commission would incur additional costs to administer this credit.
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 |
0 |
0 |
0 |
| Personal Services |
0 |
0 |
0 |
| Current Expenses |
0 |
0 |
0 |
| Repairs and Alterations |
0 |
0 |
0 |
| Assets |
0 |
0 |
0 |
| Other |
0 |
0 |
0 |
| 2. Estimated Total Revenues |
0 |
0 |
-15,000,000 |
Explanation of above estimates (including long-range effect):
Per our interpretation, the bill would create the Small Business Growth Program which would be administered by the Department of Commerce. The legislation would create a credit against the West Virginia Insurance Premium Tax for an entity which makes an equity investment in a growth fund certified by the West Virginia Department of Commerce (the Department) which in turn invests the capital in eligible businesses. Businesses eligible to receive the funds must, at the time of the initial qualified investment, have fewer than 250 employees and their principal business operations in West Virginia. The credit is calculated annually by multiplying the purchase price paid to the growth fund for the capital investment by the applicable credit percentage for the credit allowance date, which is zero percent for the first two credit allowance dates and fifteen percent for the next four credit allowance dates. The ‘credit allowance date’ is defined as the date on which the Department certifies a growth fund’s capital investment and each of the five anniversary dates of such dates thereafter. The credit is nonrefundable, but it may be carried over for five subsequent tax years. The legislation authorizes the department to certify capital investments in amounts that would not authorize more than $15 million in credits to be claimed against state tax liability in any calendar year, excluding any credit amounts carried forward.
The proposed program would generally piggyback on the federal New Markets Tax Credits intended to increase capital for businesses and low-income communities by providing a tax incentive to investors. The current federal tax credit was set to expire at the end of 2025, but the credit was made permanent in the One Big Beautiful Bill Act. The federal credit is intended to provide private investors with a federal tax credit for investments made in business or economic development projects located in ‘distressed’ communities in specified census tracks. If a growth investor was eligible for both the thirty-nine percent federal credit and the state credit of sixty percent, they could receive a credit of up to ninety-nine percent of the amount they invested.
Our neighboring states of Kentucky and Ohio also offer a similar tax credit on qualified equity investments at the same thirty-nine percent rate as the federal Markets Tax Credit over a seven-year period at a rate of zero percent for the first two years, seven percent for the third year, and eight percent in years four through seven. Both states cap their annual credits at $10 million. At a rate of thirty-nine percent, total potential private sector investment tied to a $10 million cap would be $15.6 million per year for total combined potential capital of $25.6 million. At a rate of sixty percent, total potential private sector investment tied to West Virginia’s proposed $15 million cap would be only $10 million per year for total combined potential capital of $25.0 million. The West Virginia program would involve a greater share of government sector participation relative to private sector participation. The timing of tax credits would also be accelerated under the proposed West Virginia tax credit program with sixty percent claimed over the first six years versus thirty-nine percent over seven years regarding both the federal tax credit and the current tax credits offered in both Kentucky and Ohio.
The tax against which this credit applies is administered by the Insurance Commission, not the State Tax Division. From a revenue perspective, the proposed bill could ultimately reduce General Revenue collections by up to $15 million on average per year beginning in FY2029 based on the maximum qualified equity investment limits within the proposed legislation. The projected fiscal impact depends on the ability of the growth fund investors and their affiliates to fully utilize the credits.
There would be no additional administrative costs incurred by the State Tax Division. The Insurance Commission would incur additional costs to administer this credit.
Memorandum
The stated purpose of this bill is to create the Small Business Growth Program administered by the Department of Commerce by providing for the certification of capital investment authority, establishing insurance premium tax credit, providing tax credit claimant and recapture procedures, and prohibiting certain investments.
The bill establishes a tax credit to be taken against the entity’s “state tax liability” under §33-3-14, §33-3-14a, §33-3-15, §33-3-16, or §33-3-17 or any other insurance premium or retaliatory tax imposed on an insurance company. This credit may be used to fully offset any retaliatory tax imposed on an insurance company by the state. The tax is limited to taxes imposed on insurers, so no taxes administered by the Tax Commissioner are implicated and the Department of Commerce administers the program.
The bill’s application to “any other insurance premium or retaliatory tax imposed on an insurance company by the state” may be cause for concern, as this language may allow the credit to be applied against taxes beyond the five explicitly enumerated. For example, W.Va. Code §33-3-4d imposes an “additional fire and casualty premium tax” to provide “additional revenue for municipal policemen’s and firemen’s pension and relief funds and the Teachers Retirement System Reserve Fund and for volunteer and part-time volunteer fire companies and departments,” and this tax is not among those specifically enumerated in the bill.
Under §5B-12-2(b)(7), a business may be “deemed” to have principal operations in West Virginia if it agrees to relocate using the investment proceeds and meets the requirements within 180 days after receiving a qualified investment. This timeline may require strict monitoring to ensure compliance.
The definition of “state tax liability” in §5B-12-2(b)(13) permits the credit to offset retaliatory taxes imposed on insurance companies. Retaliatory taxes are generally intended to equalize the tax burden between states and allowing the credit to offset them may reduce the state’s leverage in interstate tax competition.
Person submitting Fiscal Note: Mark Muchow
Email Address: RADfiscal@wv.gov