FISCAL NOTE
Date Requested: January 30, 2026
Time Requested: 05:48 PM |
| Agency: |
Tax & Revenue Department, WV State |
|---|
| CBD Number: |
Version: |
Bill Number: |
Resolution Number: |
| 2750 |
Comm. Sub. |
HB4006 |
|
|---|
| CBD Subject: |
Economic Development |
|---|
|
FUND(S):
General Revenue Fund, local governments
Sources of Revenue:
General Fund local property tax revenue
Legislation creates:
Decreases Existing Revenue, Increases Existing Expenses, Creates New Program, Creates New Fund: Industrial Utility Development Fund, Job Development Investment Grant Prog
Fiscal Note Summary
Effect this measure will have on costs and revenues of state government.
The stated purpose of this bill is to foster the operations and growth of all facets of the aerospace industry in West Virginia.
The bill would establish the West Virginia Aerospace and Advanced Manufacturing Growth Act, the West Virginia Job Development Investment Grant Program, and the West Virginia MRO Workforce and Aviation Maintenance Education Act. Additionally, the bill updates W.Va. Code §11-6F, Special Method for Appraising Qualified Capital Additions to Manufacturing Facilities to include Aerospace facilities.
This fiscal note only addresses the portions of the proposed bill involving State Tax Division administration. These provisions would include the proposed West Virginia Job Development Investment Grant Program, and the inclusion of the aerospace sector under the special method for appraising qualified capital additions to the manufacturing program.
The West Virginia Job Development Investment Grant Program (Job Development Grant Program) is to be administered by the Division of Economic Development (the Division). The Division may enter into agreements with businesses that are “primarily” engaged in the aerospace industry to provide grants. The maximum amount of total annual liability for a grant awarded to an employer in any single calendar year is $12 million in a year and $15 million for a year in which a grant is awarded to a high-yield project.
The West Virginia Job Development Grant Program creates a special revenue account in the State Treasury designated the Job Development Investment Grant Program Account (Grant Program Account). The Grant Program Account will consist of all state income tax withholdings received from businesses that have entered into an economic development agreement with the state pursuant to the Job Development Grant Program, as well as all interest and income earned from investment of received withholdings. The account will also consist of any appropriations approved by the legislature and any monies received from external sources.
The language of the bill regarding state income tax withheld from employee wages by businesses does not limit the state income tax withheld to “new” employees. Therefore, potentially all state tax withheld from employee wages by a business approved for this program would be redirected to the Grant Program Account. Additionally, 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, the State would be in the position of refunding employee withholding to a taxpayer which was diverted to the Grant Program Account and not retained in General Revenue Fund.
The bill updates the special method for appraising qualified capital additions to manufacturing facilities to include Aerospace facilities. The bill provides definitions for “Aerospace” and “Aerospace facility”.
There is no effective date given in the bill; therefore, it would become effective 90 days from passage.
According to our interpretation, the proposed diversion of state income tax withheld from employee wages to the Grant Program Account would cause a significant loss to General Revenue Fund collections beginning in FY2027.
The reduction in local Property Tax Revenue due to the addition of Aerospace facilities under the special method for appraising manufacturing facilities is undeterminable. Additionally, the cost of adding aerospace activities to the qualified capital additions to manufacturing program would initially be $0 because of the requirement for a $50 million addition to an existing investment with an original cost of at least $100 million requirement. However, there would be potential for future claims with some undetermined cost to local governments in terms of lower property tax revenues given that there are no geographic requirements for the new facility to be near the location of an existing facility.
Additional administrative costs incurred by the State Tax Division would be $46,150 in FY2027 and $22,500 in 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 |
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):
The bill would establish the West Virginia Aerospace and Advanced Manufacturing Growth Act, the West Virginia Job Development Investment Grant Program, and the West Virginia MRO Workforce and Aviation Maintenance Education Act. Additionally, the bill updates W.Va. Code §11-6F, Special Method for Appraising Qualified Capital Additions to Manufacturing Facilities to include Aerospace facilities.
This fiscal note only addresses the portions of the proposed bill involving State Tax Division administration. These provisions would include the proposed West Virginia Job Development Investment Grant Program, and the inclusion of the aerospace sector under the special method for appraising qualified capital additions to the manufacturing program.
The West Virginia Job Development Investment Grant Program (Job Development Grant Program) is to be administered by the Division of Economic Development (the Division). The Division may enter into agreements with businesses that are “primarily” engaged in the aerospace industry to provide grants. The maximum amount of total annual liability for a grant awarded to an employer in any single calendar year is $12 million in a year and $15 million for a year in which a grant is awarded to a high-yield project.
The West Virginia Job Development Grant Program creates a special revenue account in the State Treasury designated the Job Development Investment Grant Program Account (Grant Program Account). The Grant Program Account will consist of all state income tax withholdings received from businesses that have entered into an economic development agreement with the state pursuant to the Job Development Grant Program, as well as all interest and income earned from investment of received withholdings. The account will also consist of any appropriations approved by the legislature and any monies received from external sources.
The language of the bill regarding state income tax withheld from employee wages by businesses does not limit the state income tax withheld to “new” employees. Therefore, potentially all state tax withheld from employee wages by a business approved for this program would be redirected to the Grant Program Account. Additionally, 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, the State would be in the position of refunding employee withholding to a taxpayer which was diverted to the Grant Program Account and not retained in General Revenue Fund.
The bill updates the special method for appraising qualified capital additions to manufacturing facilities to include Aerospace facilities. The bill provides definitions for “Aerospace” and “Aerospace facility”.
There is no effective date given in the bill; therefore, it would become effective 90 days from passage.
According to our interpretation, the proposed diversion of state income tax withheld from employee wages to the Grant Program Account would cause a significant loss to General Revenue Fund collections beginning in FY2027.
The reduction in local Property Tax Revenue due to the addition of Aerospace facilities under the special method for appraising manufacturing facilities is undeterminable. Additionally, the cost of adding aerospace activities to the qualified capital additions to manufacturing program would initially be $0 because of the requirement for a $50 million addition to an existing investment with an original cost of at least $100 million requirement. However, there would be potential for future claims with some undetermined cost to local governments in terms of lower property tax revenues given that there are no geographic requirements for the new facility to be near the location of an existing facility.
Additional administrative costs incurred by the State Tax Division would be $46,150 in FY2027 and $22,500 in subsequent fiscal years.
Memorandum
The stated purpose of this bill is to foster the operations and growth of all facets of the aerospace industry in West Virginia.
The definition of “withholdings” in §5B-13-2 is ambiguous. The bill states withholdings “means the amount withheld by a business from the wages of employees in eligible positions and, if applicable, expanded positions.” It is unclear whether this refers exclusively to amounts withheld for tax purposes. These ambiguities may cause significant problems as withholdings are directly used to determine the amount of the grant applicable to a business under article 13. This ambiguity may also increase administrative difficulties due to which stipulates that “if the Division [of Economic Development] finds that the business has manipulated or attempted to manipulate employee withholdings with the purpose of increasing the amount of a grant, the Division shall immediately terminate the agreement and take action to recapture any grant funds disbursed in any year in which the Division finds the business manipulated or attempted to manipulate employee withholdings with the purpose of increasing the amount of the grant.”
The condition in §5B-13-3(a)(1) requires that the project proposed will create a “net increase in employment in this state.” It is unclear whether “net increase in employment in this state” refers to the business’s net state employment or the total number of people employed in the state.
Many of the conditions in article 13 are very broad, which may cause administrative difficulties. This issue is somewhat mitigated by the provision in §5B-13-3(a) that the Division of Economic Development, in consultation with the Attorney General, shall develop criteria to determine whether the conditions are satisfied.
Person submitting Fiscal Note: Mark Muchow
Email Address: RADfiscal@wv.gov