FISCAL NOTE

Date Requested: February 10, 2020
Time Requested: 11:08 AM
Agency: Tax & Revenue Department, WV State
CBD Number: Version: Bill Number: Resolution Number:
3084 Introduced HB4775
CBD Subject: Taxation


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 reinstate the film tax credits removed by the Legislature in 2018. According to our interpretation of this bill, the Film Tax Credit would be reinstated and apply to all taxable years after December 31, 2019 and also retroactively to all tax years prior to the enactment of the bill’s amendments. Eligible film investment expenditures would need to be made after December 31, 2019. Prior law had allocated up to $5 million per year in tax credits for qualified film production. The average cost of the former Film Tax Credit between calendar years 2010 and 2018 was $1.8 million per year with a maximum credit amount during this same period of $4.7 million per year. There is often significant delay between the allotment of tax credits and their utilization on tax returns given that most of these tax credits are sold to third parties. Passage of this bill could result in a loss to the General Revenue Fund of roughly $5 million in FY2021 and in subsequent fiscal years. Additional administrative costs incurred by the State Tax Department would be $5,000 in FY2021 and thereafter.



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 5,000 5,000
Personal Services 0 5,000 5,000
Current Expenses 0 0 0
Repairs and Alterations 0 0 0
Assets 0 0 0
Other 0 0 0
2. Estimated Total Revenues 0 -5,000,000 -5,000,000


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


According to our interpretation of this bill, the Film Tax Credit would be reinstated and apply to all taxable years after December 31, 2019 and also retroactively to all tax years prior to the enactment of the bill’s amendments. Eligible film investment expenditures would need to be made after December 31, 2019. Prior law had allocated up to $5 million per year in tax credits for qualified film production. The average cost of the former Film Tax Credit between calendar years 2010 and 2018 was $1.8 million per year with a maximum credit amount during this same period of $4.7 million per year. There is often significant delay between the allotment of tax credits and their utilization on tax returns given that most of these tax credits are sold to third parties. Passage of this bill could result in a loss to the General Revenue Fund of roughly $5 million in FY2021 and in subsequent fiscal years. Additional administrative costs incurred by the State Tax Department would be $5,000 in FY2021 and thereafter.



Memorandum


The stated purpose of this bill is to reinstate the film tax credits removed by the Legislature in 2018. There are some concerns with this bill. The bill strikes the language related to the prior credit. As some film credit remains from prior tax years, it is unclear whether the striking of the language eliminates any prior credit. There may be administrative challenges to potentially untangle credit applicants’ attempts to deal with the previous elimination of the Film Credit while applying the credit retroactively as if the repeal did not happen. It is unclear whether this bill also reestablishes the Film Office, since the language ceasing its operations has been stricken. Furthermore, it is uncertain how these film credits would be claimed without the operation of the Film Office given the current language in the W.Va. Code. The bill title does not state that the reinstatement of the film tax credits is retroactive. The retroactivity of this bill should be stated in the bill title. Also, the bill title does not state whether the bill reestablishes the Film Office.



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