FISCAL NOTE
Date Requested: February 10, 2021
Time Requested: 04:41 PM |
| Agency: |
Tax & Revenue Department, WV State |
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| CBD Number: |
Version: |
Bill Number: |
Resolution Number: |
| 1242 |
Introduced |
HB2208 |
|
|---|
| 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 exempt social security benefits from personal income tax.
According to our interpretation of this bill, this bill exempts all Social Security benefits from personal income tax for taxable years beginning after December 31, 2020. Under current law, a decreasing modification for Social Security benefits is allowed when the federal adjusted gross income of a married couple filing a joint return does not exceed $100,000, or $50,000 in the case of a single individual or a married individual filing a single return. Current statute allows 35 percent of the amount of Social Security benefits included in federal adjusted gross income for taxable years beginning on or after January 1, 2020 to be excluded for taxpayers in those income brackets. For taxable years beginning on or after January 1,2021, this reduction increase to 65 percent and on January 1, 2022 it increases to 100 percent.
Passage of this bill would reduce General Revenue Fund collections by roughly $86.0 million in FY2022 and $70.8 million in FY2023 and subsequent fiscal years. The provisions of this bill would exclude all federally taxable Social Security benefits from State taxable income regardless of income level and would remove the exclusion from the calculation of a separate $8,000 standard decreasing modification for those age 65 or older. The value of the proposed tax exclusion will grow over time as the population ages and the number of individuals receiving Social Security benefits increases.
Additional administrative costs incurred by the State Tax Department would be $5,000 in FY2022 and FY2023.
Fiscal Note Detail
| Effect of Proposal |
Fiscal Year |
2021
Increase/Decrease
(use"-") |
2022
Increase/Decrease
(use"-") |
Fiscal Year
(Upon Full
Implementation) |
| 1. Estmated Total Cost |
0 |
5,000 |
0 |
| Personal Services |
0 |
0 |
0 |
| Current Expenses |
0 |
0 |
0 |
| Repairs and Alterations |
0 |
0 |
0 |
| Assets |
0 |
0 |
0 |
| Other |
0 |
5,000 |
0 |
| 2. Estimated Total Revenues |
0 |
-86,000,000 |
-70,800,000 |
Explanation of above estimates (including long-range effect):
According to our interpretation of this bill, this bill exempts all Social Security benefits from personal income tax for taxable years beginning after December 31, 2020. Under current law, a decreasing modification for Social Security benefits is allowed when the federal adjusted gross income of a married couple filing a joint return does not exceed $100,000, or $50,000 in the case of a single individual or a married individual filing a single return. Current statute allows 35 percent of the amount of Social Security benefits included in federal adjusted gross income for taxable years beginning on or after January 1, 2020 to be excluded for taxpayers in those income brackets. For taxable years beginning on or after January 1,2021, this reduction increase to 65 percent and on January 1, 2022 it increases to 100 percent.
Passage of this bill would reduce General Revenue Fund collections by roughly $86.0 million in FY2022 and $70.8 million in FY2023 and subsequent fiscal years. The provisions of this bill would exclude all federally taxable Social Security benefits from State taxable income regardless of income level and would remove the exclusion from the calculation of a separate $8,000 standard decreasing modification for those age 65 or older. The value of the proposed tax exclusion will grow over time as the population ages and the number of individuals receiving Social Security benefits increases.
Additional administrative costs incurred by the State Tax Department would be $5,000 in FY2022 and FY2023.
Memorandum
The stated purpose of this bill is to exempt social security benefits from personal income tax.
The bill amends an old version of W. Va. Code §11-21-12. The version of the Code in this bill does not include the amendments from the 2019 Legislative Session, in which a new subsection W. Va. Code §11-21-12(c)(8) was added, providing a modification for Social Security benefits.
The bill title and the bill’s purpose describe this as “exempting social security benefits from personal income tax.” However, it is not accurately described as an exemption, but rather as a modification allowing taxpayers to subtract Social Security benefits from their federal adjusted gross income, to the extent included therein, for purposes of personal income tax. However, the effect would be that Social Security benefits would not be subject to West Virginia Personal Income Tax.
As written, it appears that an eligible taxpayer may be able to take the modification under the proposed statute for their Social Security benefits as well as claim the $8,000 modification on a different source of income, which is not true for the current Social Security modification.
The bill title fails to mention an internal effective date. Further, this bill does not define “social security benefits.” The proposed bill covers all the benefits received under 42 U.S.C. Chapter 7, which is known as the Social Security Act. Furthermore, the Social Security benefits provided under the current federal statute may change and as result the bill may run into legal issues.
Person submitting Fiscal Note: Mark Muchow
Email Address: kerri.r.petry@wv.gov