FISCAL NOTE

Date Requested: February 23, 2021
Time Requested: 12:32 PM
Agency: Tax & Revenue Department, WV State
CBD Number: Version: Bill Number: Resolution Number:
2204 Introduced HB2669
CBD Subject:


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 create tax credits for persons and corporations that own or lease residential property where children reside or may reside that undertake lead abatement remediation projects; providing for a tax credit against personal income and corporate net income taxes for a percentage of the costs of the remediation; and allow for agency rule making to implement the verification of eligibility requirements for and the tax credit program. According to our interpretation, the provisions of this bill would provide eligible individuals and corporations with a tax credit based on the costs of certified lead paint abatement from certain residential use properties. The tax credit would be 75 percent of costs for projects completed between July 1, 2021 and June 30, 2023, 50 percent of costs for projects completed between July 1, 2023 and June 30, 2024, a 25 percent credit only on corporate tax returns for projects completed July 1, 2024 and June 30, 2025, and a 25 percent credit only on personal income tax returns for projects completed between July 1, 2025 and June 30, 2026. There is no ceiling on the amount of costs qualifying for income tax credits. The revenue loss associated with the proposed tax credits cannot readily be determined due to lack of information on the number of taxpayers who would qualify and the amount of lead abatement costs subject to the credit. It is predicted that lead paint abatement projects may increase with the passage of this bill since the tax credit would help defray expensive abatement costs According to the West Virginia Department of Health and Human Resources (DHHR) Lead Paint Abatement Program Manager, the last notification for a true abatement project was in 2015 for a historic home. West Virginia does not have any laws making lead paint abatement mandatory in homes, apartments, and daycares. Costs for hiring a lead paint abatement company can be expensive with total costs potentially exceeding $10,000 for a 2,000 square-foot home. Most property owners opt for interim controls like repainting and cleaning to deal with the lead paint issue. Additional administrative costs to the Tax Department would be approximately $20,000 in 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 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 0


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


According to our interpretation, the provisions of this bill would provide eligible individuals and corporations with a tax credit based on the costs of certified lead paint abatement from certain residential use properties. The tax credit would be 75 percent of costs for projects completed between July 1, 2021 and June 30, 2023, 50 percent of costs for projects completed between July 1, 2023 and June 30, 2024, a 25 percent credit only on corporate tax returns for projects completed July 1, 2024 and June 30, 2025, and a 25 percent credit only on personal income tax returns for projects completed between July 1, 2025 and June 30, 2026. There is no ceiling on the amount of costs qualifying for income tax credits. The revenue loss associated with the proposed tax credits cannot readily be determined due to lack of information on the number of taxpayers who would qualify and the amount of lead abatement costs subject to the credit. It is predicted that lead paint abatement projects may increase with the passage of this bill since the tax credit would help defray expensive abatement costs According to the West Virginia Department of Health and Human Resources (DHHR) Lead Paint Abatement Program Manager, the last notification for a true abatement project was in 2015 for a historic home. West Virginia does not have any laws making lead paint abatement mandatory in homes, apartments, and daycares. Costs for hiring a lead paint abatement company can be expensive with total costs potentially exceeding $10,000 for a 2,000 square-foot home. Most property owners opt for interim controls like repainting and cleaning to deal with the lead paint issue. Property owners also have the option of the Federal Renovation, Repair and Paint (RRP) law. Home remodeling and general repair fall under this category. General contractors should have RRP training to work on pre-1978 homes. Since they are not removing lead paint but usually removing the drywall, it is not as time consuming or expensive. Additional administrative costs to the Tax Department would be approximately $20,000 in FY2023.



Memorandum


The stated purpose of this bill is to create tax credits for persons and corporations that own or lease residential property where children reside or may reside that undertake lead abatement remediation projects; providing for a tax credit against personal income and corporate net income taxes for a percentage of the costs of the remediation; and allow for agency rule making to implement the verification of eligibility requirements for and the tax credit program. There are concerns with this bill. The bill states that the purpose of this bill is to create a tax credit for property where “children reside or may reside”, however, the tax credits as established in the bill only relate to child-occupied residences. There are also problems with the bill title. The bill title states that the bill establishes “personal and corporate tax credit to owners or occupiers of these residencies.” This is problematic, as the bill establishes tax credits against personal income tax and corporation net income tax for owners, operators, or lessors of child-occupied residential properties that pay for lead abatement projects; but there is no credit for occupiers. The bill title also does not address that the tax credit is forfeited if it is not used in the year that it is earned or that the bill requires DHHR to prescribe certain forms.



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