FISCAL NOTE
Date Requested: February 07, 2020
Time Requested: 10:47 AM |
| Agency: |
Tax & Revenue Department, WV State |
|---|
| CBD Number: |
Version: |
Bill Number: |
Resolution Number: |
| 3077 |
Introduced |
HB4738 |
|
|---|
| CBD Subject: |
Elections |
|---|
|
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 the bill is to create a tax credit for improving facades in historic districts. The bill provides that individuals and corporations are entitled to a 25 percent tax credit of the replacement cost of a historic façade. The bill sets forth conditions.
According to our interpretation, passage of this bill would result in the creation of two separate tax preference provisions for the costs of improvement of a façade of a building with no historic value which is located within a historic district. For a Taxpayer subject to Personal Income Tax, the tax preference is a decreasing modification to income equal to 25 percent of the replacement cost of a façade of a building with no historic value. As a decreasing modification, a maximum tax benefit would be 6.5 percent of 25 percent of costs, or 1.625 percent of costs. For a Taxpayer subject to the Corporation Net Income Tax, the tax preference would equal 25 percent of the cost. The proposed bill fails to outline any standards or guidelines as to qualified facades or qualified costs other than a non-historic building location in a historic district. The local county commission or city council would decide what buildings qualify for State tax relief. By contract, qualified historic rehabilitation costs must be approved by the State Historic Preservation Office according to federal rehabilitation guidelines. We are unable to accurately estimate the cost of this bill given the subjective standards for qualification for State tax benefits.
Additional administrative costs incurred by the State Tax Department would be $30,000 in FY2022 and $10,000 in subsequent fiscal years.
Fiscal Note Detail
| Effect of Proposal |
Fiscal Year |
2020
Increase/Decrease
(use"-") |
2021
Increase/Decrease
(use"-") |
Fiscal Year
(Upon Full
Implementation) |
| 1. Estmated Total Cost |
0 |
0 |
10,000 |
| Personal Services |
0 |
0 |
10,000 |
| 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 |
0 |
Explanation of above estimates (including long-range effect):
According to our interpretation, passage of this bill would result in the creation of two separate tax preference provisions for the costs of improvement of a façade of a building with no historic value which is located within a historic district. For a Taxpayer subject to Personal Income Tax, the tax preference is a decreasing modification to income equal to 25 percent of the replacement cost of a façade of a building with no historic value. As a decreasing modification, a maximum tax benefit would be 6.5 percent of 25 percent of costs, or 1.625 percent of costs. For a Taxpayer subject to the Corporation Net Income Tax, the tax preference would equal 25 percent of the cost. The proposed bill fails to outline any standards or guidelines as to qualified facades or qualified costs other than a non-historic building location in a historic district. The local county commission or city council would decide what buildings qualify for State tax relief. By contract, qualified historic rehabilitation costs must be approved by the State Historic Preservation Office according to federal
rehabilitation guidelines. We are unable to accurately estimate the cost of this bill given the subjective standards for qualification for State tax benefits.
Additional administrative costs incurred by the State Tax Department would be $30,000 in FY2022 and $10,000 in subsequent fiscal years.
Memorandum
The stated purpose of the bill is to create a tax credit for improving facades in historic districts. The bill provides that individuals and corporations are entitled to a 25 percent tax credit of the replacement cost of a historic façade. The bill sets forth conditions.
This bill does not accomplish its purpose as a decreasing modification from federal adjusted gross income is created rather than a Personal Income Tax credit.
This proposed legislation is unclear about how the 25 percent of the replacement cost would be calculated, what purchases qualify, whether labor costs qualify, whether the credit is subject to carry forward or carryback, whether the credit is transferrable, when it is effective and when does it sunset. The bill is also silent regarding reporting requirements, the procedure to claim the credit, and record keeping requirements. The reference to W.Va. Code §11-21-12(c) seems misplaced in the bill, as it addresses military retirement.
The bill requires that the façade complement the historic district and materially improve the overall historic appearance. It is unclear if it is the Tax Commissioner’s responsibility to engage in this review which is well outside of tax administration. This bill assumes such determinations are made by counties and municipalities.
Person submitting Fiscal Note: Mark Muchow
Email Address: kerri.r.petry@wv.gov