FISCAL NOTE

Date Requested: February 23, 2021
Time Requested: 03:48 PM
Agency: Insurance Commission
CBD Number: Version: Bill Number: Resolution Number:
1490 Introduced HB2544
CBD Subject: Economic Development


FUND(S):

0480, 1330

Sources of Revenue:

General Fund

Legislation creates:

Decreases Existing Revenue



Fiscal Note Summary


Effect this measure will have on costs and revenues of state government.


House Bill 2544, if enacted, would create the Small Business Jumpstart Act and establish the transferability of tax credits and the requirements and criteria that the Development Office would use to establish and maintain the program. §31-15D-13 establishes the amount of the credits that can be utilized at $20,000,000 per annum during years four, five, six and seven of the program. It also limits the total amount of tax credits to be not more than $80,000,000 for the life of the program. Accordingly, the fiscal impact of House Bill 2544, if enacted, could create an $80,000,000 reduction in general revenue funds upon full implementation. The OIC is unable to estimate any offsetting economic development impact that would result from the passage of HB 25444. Additionally, we do not know if the full amount of the available credits would be utilized in any given year. If the full amount of the credits are not utilized, then the reduction in revenues would be less than the estimated $80,000,000. Please see the memorandum section of this fiscal note for additional comments.



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 0 0
Personal Services 0 0 0
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 -80,000,000


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


House Bill 2544 creates credits to premium taxes paid during years, four, five, six and seven of the program. HB 2544 specifies that the cap of the amount of credits that can be used per annum to be $20,000,000. HB 2544 also specifies that the total amount of the credits available under the program are not to exceed $80,000,000 over the four year period. The OIC is not able to estimate how many credits that Development Office would grant under the program, or any offsetting economic impact due to the program. Accordingly, the best estimate appears to be the statutorily specified allowed credit to estimate the reduction to premium tax revenues.



Memorandum


HB 2544 creates the WV Small Business Jumpstart Act. The Office of the Insurance Commissioner (OIC) estimates that the full implementation costs of HB 2544 may result in up to $80,000,000 of existing premium tax revenues that would not be collected by the OIC to pass through to General Revenue. HB 2544 would not impact the operations or expenses of the OIC. The OIC is not able to estimate the impact that the loss of revenue would have on the current programs funded by the premium taxes once passed through to General Revenue. The OIC notes these areas of HB 2544 that may require clarification or technical refinement in order to address the following: 1. The definition of “State Premium Tax” includes 33-3-14 (premium tax), 14a (additional premium tax on all lines), 15 (annuities tax, which was repealed effective 1/1/21), 16 (retaliatory) and 17 (minimum), and any other taxes imposed to make up for revenue lost as a result of the elimination or reduction of taxes imposed under those sections. By definition, “state premium tax liability” does not include 33-3-14d, which is the additional premium tax of 1% on fire and casualty insurance policies only that goes, in part, to fund the VFDs. The code provides that the 33-3-14d tax is distributed as follows - 65% of this tax is paid to a special account with the State Treasurer designated the Municipal Pensions and Protection Fund, 10% of the amount collected is paid to the Teachers Retirement System Reserve Fund, and 25% is paid to the Fire Protection Fund to be allocated by the Treasurer to Volunteer Fire Departments. If 33-3-14d is not included in the definition of “State Premium Tax,” then no credit should be issued for taxes owed under 33-3-14d and, therefore, there would be no effect on VFDs. It might add clarity to state specifically in 31-15D-11, i.e. that no credit will be issued to offset liabilities owed pursuant to 33-3-14d, instead of limiting that exclusion to the definition section. 2. The reference to tax credits issued pursuant to 33-3-14e of this code in the definition of “State Premium Tax” appears to be a drafting error. That code section does not exist and in the present version of this bill in 2021, the premium tax credit is issued in a newly created 31-15D-8. 3. Is the credit in 31-15D-11 is nonrefundable? Is there a limit on the number of years they can claim the credit if they leave the program? Clarification on the refundability aspects of the credit would enhance proper application of the tax credit program.



    Person submitting Fiscal Note: Melinda Kiss
    Email Address: Melinda.A.Kiss@wv.gov