FISCAL NOTE
Date Requested: January 15, 2026
Time Requested: 04:09 PM |
| Agency: |
Tax & Revenue Department, WV State |
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| CBD Number: |
Version: |
Bill Number: |
Resolution Number: |
| 2270 |
Introduced |
HB4013 |
|
|---|
| CBD Subject: |
|
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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 the Mountaineer Flexible Tax Credit Act of 2026.
Per our interpretation, the bill would establish the Mountaineer Flexible Tax Credit Act of 2026 (Act). The Act creates a tax incentive, the Mountaineer Flex Tax Incentive, for qualified businesses which undertake a qualified economic development project in this state. The minimum requirements for the tax incentive are a qualified capital investment of at least $2.5 million and/or the creation of at least 10 new full-time jobs in the state. The qualified projects are limited to the following general types of enterprises: Warehouse or Distribution, Manufacturing, Assembly or Processing, Research and/or Development, Regional or National Headquarters, Air/Ship/Barge transportation, repair or maintenance, Data or Information processing, certain Technology Intensive businesses, Telecommunications, and Data Centers. The amount of tax incentive generated is based on the type and amount of the qualified investment and/or the number of new employees and their average wage as compared to the average state or county wage. The tax incentive may be used to offset State Sales and Use Tax, Personal Income Tax, Corporation Net Income Tax, Business and Occupation Tax, and State taxes withheld from employee wages. Only 20 percent of the total incentive awarded may be applied to offset up to 100 percent of state tax withheld from employee wages each year. The credit allowed by the Act is allowable for investments in this State made on or after July 1, 2027.
There are several attributes of the credit program which are different from other current investment programs such as the Economic Opportunity Tax credit and the Manufacturing Investment Tax credit. The Mountaineer Flexible Tax Credit (MFTC) does not calculate the value of the investments based on the asset’s useful life. Therefore, an investment with a useful life of 4 years would be valued the same as an investment with a 30-year useful life. Job creation is not a mandatory requirement for tax incentive qualification. The MFTC may be applied to offset the tax liabilities of affiliates of the credit earner. The credit is calculated and awarded when the project is certified, and the Mountaineer Flex Agreement is executed. Additionally, the credit may be used to offset any State Sales and Use Tax payable on purchase to the Tax Department, Personal Income Tax, the Corporation Net Income Tax, the Business and Occupation Tax, and withholding of state taxes required to be deducted and withheld from employee wages. Withholding taxes are considered to be ‘Trust’ taxes because they belong to the employee. In many cases, State taxes withheld from employee wages exceed the employee’s personal income tax liability and they are refunded. Therefore, any credit applied to withholding could cause the State to refund to the employee withholding tax which was not received due to application of the credit.
According to our interpretation, the credit generated by this bill could be used to offset multiple tax types, including state tax withheld from employee wages. Additionally, the credit can be used by not just the entity which earns the credit but also by their affiliates. The credit allowable for new jobs starts at 15 percent of the number of new jobs times the average pay per job and can go as high as 30 percent. The definition of “New full-time job” does not include a provision that the total number of jobs must increase, only that the employee is hired after the project certification date. However, the creation of 10 new jobs is not required to gain entitlement to the tax credits as long as the investment meets or exceeds $2.5 million in a single period. Due to the above outlined attributes of the legislation, the bill, if passed, could result in a decrease in General Revenue Fund collections of some significance due to a few claimants navigating to a complex tax incentive program. A few large-scale taxpayers with affiliates in the State would be the biggest potential beneficiaries.
Additional administrative costs incurred by the State Tax Division would be $46,150 in FY2027 and $22,500 in subsequent fiscal years. Additional administrative costs incurred by the Department of Commerce would also be significant.
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 |
46,150 |
22,500 |
| Personal Services |
0 |
22,500 |
22,500 |
| Current Expenses |
0 |
0 |
0 |
| Repairs and Alterations |
0 |
0 |
0 |
| Assets |
0 |
1,650 |
0 |
| Other |
0 |
22,000 |
0 |
| 2. Estimated Total Revenues |
0 |
0 |
0 |
Explanation of above estimates (including long-range effect):
Per our interpretation, the bill would establish the Mountaineer Flexible Tax Credit Act of 2026 (Act). The Act creates a tax incentive, the Mountaineer Flex Tax Incentive, for qualified businesses which undertake a qualified economic development project in this state. The minimum requirements for the tax incentive are a qualified capital investment of at least $2.5 million and/or the creation of at least 10 new full-time jobs in the state. The qualified projects are limited to the following general types of enterprises: Warehouse or Distribution, Manufacturing, Assembly or Processing, Research and/or Development, Regional or National Headquarters, Air/Ship/Barge transportation, repair or maintenance, Data or Information processing, certain Technology Intensive businesses, Telecommunications, and Data Centers. The amount of tax incentive generated is based on the type and amount of the qualified investment and/or the number of new employees and their average wage as compared to the average state or county wage. The tax incentive may be used to offset State Sales and Use Tax, Personal Income Tax, Corporation Net Income Tax, Business and Occupation Tax, and State taxes withheld from employee wages. Only 20 percent of the total incentive awarded may be applied to offset up to 100 percent of state tax withheld from employee wages each year. The credit allowed by the Act is allowable for investments in this State made on or after July 1, 2027.
There are several attributes of the credit program which are different from other current investment programs such as the Economic Opportunity Tax credit and the Manufacturing Investment Tax credit. The Mountaineer Flexible Tax Credit (MFTC) does not calculate the value of the investments based on the asset’s useful life. Therefore, an investment with a useful life of 4 years would be valued the same as an investment with a 30-year useful life. Job creation is not a mandatory requirement for tax incentive qualification. The MFTC may be applied to offset the tax liabilities of affiliates of the credit earner. The credit is calculated and awarded when the project is certified, and the Mountaineer Flex Agreement is executed. Additionally, the credit may be used to offset any State Sales and Use Tax payable on purchase to the Tax Department, Personal Income Tax, the Corporation Net Income Tax, the Business and Occupation Tax, and withholding of state taxes required to be deducted and withheld from employee wages. Withholding taxes are considered to be ‘Trust’ taxes because they belong to the employee. In many cases, State taxes withheld from employee wages exceed the employee’s personal income tax liability and they are refunded. Therefore, any credit applied to withholding could cause the State to refund to the employee withholding tax which was not received due to application of the credit.
According to our interpretation, the credit generated by this bill could be used to offset multiple tax types, including state tax withheld from employee wages. Additionally, the credit can be used by not just the entity which earns the credit but also by their affiliates. The credit allowable for new jobs starts at 15 percent of the number of new jobs times the average pay per job and can go as high as 30 percent. The definition of “New full-time job” does not include a provision that the total number of jobs must increase, only that the employee is hired after the project certification date. However, the creation of 10 new jobs is not required to gain entitlement to the tax credits as long as the investment meets or exceeds $2.5 million in a single period. Due to the above outlined attributes of the legislation, the bill, if passed, could result in a decrease in General Revenue Fund collections of some significance due to a few claimants navigating to a complex tax incentive program. A few large-scale taxpayers with affiliates in the State would be the biggest potential beneficiaries.
Additional administrative costs incurred by the State Tax Division would be $46,150 in FY2027 and $22,500 in subsequent fiscal years. Additional administrative costs incurred by the Department of Commerce would also be significant.
Memorandum
The stated purpose of this bill is to create the Mountaineer Flexible Tax Credit Act of 2026.
The Tax Division’s expertise is limited to those duties subject to the authority of the Tax Commissioner. While this bill is to be administered with the assistance of the Tax Division, the primary authority for administering the bill rests with the Department of Commerce. This summary is limited to issues directly relating to the duties of the Tax Commissioner.
The bill is ambiguous and possibly contradictory regarding application of the credit. According to one portion of the bill, the credit may be applied against the West Virginia Personal Income Tax withheld from paychecks of the taxpayer’s employees. However, §11-13NN-5(c) states that an entity may apply the credit created by this bill to offset state taxes except for “withholding tax required to be deducted and withheld from employee wages[.]”
The term “withholding tax” is utilized in several areas throughout the bill. However, there is no West Virginia withholding tax. There is a duty to withhold West Virginia Personal Income Tax under W.Va. Code §11-21-71, but that does not create a “withholding tax.” This could create confusion.
It may be unduly burdensome to permit a credit against West Virginia Sales and Use Tax, West Virginia Corporation Net Income Tax, West Virginia Personal Income Tax, and West Virginia Business and Occupation Tax due to the various deadlines and manners of filing.
The bill is problematic as structured due to the fact that the “withholding tax” is actually West Virginia Personal Income Tax withheld from an employee’s paycheck as required by W.Va. Code §11-21-71. Pursuant to the code, these “withholding tax” funds must be remitted to the state on behalf of the employee in order for the employee to claim the withheld amount against the employee’s West Virginia Personal Income Tax Liability. While those funds are held by the employer, they are effectively being held in trust on behalf of the employee. Therefore, not only are they not the employer’s funds, but allowing such a credit would create significant issues for employees when they attempt to pay their West Virginia Personal Income Tax.
Person submitting Fiscal Note: Mark Muchow
Email Address: RADfiscal@wv.gov