FISCAL NOTE

Date Requested: February 07, 2020
Time Requested: 10:48 AM
Agency: Tax & Revenue Department, WV State
CBD Number: Version: Bill Number: Resolution Number:
3072 Introduced HB4741
CBD Subject: Motor Vehicles


FUND(S):

State Road Fund

Sources of Revenue:

Other Fund State Road 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 reduce the tax on motor fuel. The proposed legislation would reduce the flat rate excise tax on motor fuel from $0.205 to $0.200 per invoiced gallon and eliminate the minimum average wholesale price floor as it pertains to the calculation of the variable component. The elimination of the minimum average wholesale price floor will cause the variable component to fluctuate significantly. The effective date of the legislation is July 1, 2020. According to our interpretation and based on current fuel prices, the passage of the proposed legislation would reduce State Road Fund collections by roughly $58.0 million in FY2021 and $60.0 million in FY2022. Unless replacement funds are found, passage of this bill would result in a significant reduction in secondary road fund maintenance around the State. In West Virginia, the State is solely responsible for secondary road maintenance whereas local governments share that responsibility in most other states. Additional administrative costs incurred by the Motor Fuel Tax Administrative Fund would be $15,000 in FY2020. 



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 15,000 0 0
Personal Services 0 0 0
Current Expenses 0 0 0
Repairs and Alterations 0 0 0
Assets 0 0 0
Other 15,000 0 0
2. Estimated Total Revenues 0 -58,000,000 0


Explanation of above estimates (including long-range effect):


The proposed legislation would reduce the flat rate excise tax on motor fuel from $0.205 to $0.200 per invoiced gallon and eliminate the minimum average wholesale price floor as it pertains to the calculation of the variable component. The elimination of the minimum average wholesale price floor will cause the variable component to fluctuate significantly. The effective date of the legislation is July 1, 2020. According to our interpretation and based on current fuel prices, the passage of the proposed legislation would reduce State Road Fund collections by roughly $58.0 million in FY2021 and $60.0 million in FY2022. Unless replacement funds are found, passage of this bill would result in a significant reduction in secondary road fund maintenance around the State. In West Virginia, the State is solely responsible for secondary road maintenance whereas local governments share that responsibility in most other states. According to the latest report from the American Petroleum Institute, the current West Virginia tax rate on motor fuel used on highways is slightly less than the weighted national average and lower than Pennsylvania, Ohio and Maryland. The provisions of this bill would initially reduce the 35.7 cent per gallon tax by roughly 4.3 cents per gallon and add additional uncertainty to the variable tax component in future years. Additional administrative costs incurred by the Motor Fuel Tax Administrative Fund would be $15,000 in FY2020. 



Memorandum


The stated purpose of this bill is to reduce the tax on motor fuel. The bill would limit the Tax Commissioner’s ability to determine the variable rates, by requiring the Commissioner to go through the rule-making procedures in W.Va. Code §29A-3-1 et seq. in order to determine the average wholesale price for setting the variable rate component. It would do this by striking language in the current §11-14C-5(b)(3) allowing the Commissioner to make determination “without compliance” with the rulemaking procedures. This could have a material effect on the Commissioner’s ability to enforce compliance with the motor fuel tax. It would also impede the Tax Commissioner’s ability to make changes necessitated by market trends. The bill would also shift the burden of proof in legal challenges to the Commissioner’s determination of average wholesale price by removing the presumption that the Commissioner’s determination is correct. The bill is defective insofar as the bill title does not adequately reflect the effects of the bill; specifically, it does not make reference to the limitations it imposes on the Tax Commissioner’s ability to administer the tax.



    Person submitting Fiscal Note: Mark Muchow
    Email Address: kerri.r.petry@wv.gov