FISCAL NOTE
Date Requested: March 08, 2021
Time Requested: 11:51 AM |
| Agency: |
Tax & Revenue Department, WV State |
|---|
| CBD Number: |
Version: |
Bill Number: |
Resolution Number: |
| 2762 |
Introduced |
HB2974 |
|
|---|
| CBD Subject: |
Taxation |
|---|
|
FUND(S):
General Revenue Fund, local governments
Sources of Revenue:
General Fund local property tax
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 allow an exemption from payment of a school excess levy to an owner of a residence whose annual household income is at or below the latest federal poverty guidelines.
The revenue impact of this proposal on Property Tax collections cannot be accurately determined. We have no data on the number of taxpayers who are at or below the latest federal poverty guidelines as measured by the proposed criteria of this bill or the values of their property.
Additional administrative costs to the State Tax Department would be minimal. County assessors would incur additional costs to process claims for the poverty exemption.
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):
The revenue impact of this proposal on Property Tax collections cannot be accurately determined. We have no data on the number of taxpayers who are at or below the latest federal poverty guidelines as measured by the proposed criteria of this bill or the values of their property.
According to available U.S. Census data, roughly 16% of West Virginia residents live in poverty and more than 73% of all residents own their own homes. Homeowners are a bit less likely to live in poverty than those who rent their housing. However, these statistics suggest that up to 10% of all homeowners may possibly have total income at or below the federal poverty guidelines. The provisions of this bill would exempt homeowners who have household income at or below the federal poverty guideline from payment of local school excess levy property taxes on their home with use of income tax returns as proof of income level even though income tax returns do not include total household income. Therefore, it is likely that several households with income above the federal poverty guideline levels would also effectively qualify for the proposed property tax exemption.
In West Virginia, voters directly account for nearly 39% of all property taxes imposed in the State with the actual share ranging from 0% in six separate counties to as high as 46% in Cabell County. School excess levies account for roughly 80% of all voter approved property taxes. School bond levies account for another 5.7% of total voter approved taxes. Voters are more likely to approve of additional property taxes in locations where a significant share of the resulting tax is imposed on properties other than their own owner-occupied homes. The removal of this type of voter approved tax liability from a significant number of voters would likely promote more excess levies and higher excess levy property tax rates in those counties with available cap space. In Fiscal Year 2021, voter-imposed school excess property tax rates existed in 44 of the 55 counties with only 23 of those counties imposing the maximum allowable tax rate. Class II property (owner-occupied residential and farms) accounted for just 21.3% of the estimated $602.7 million in statewide school excess levy property taxes.
The provisions of this bill would result in lower local county school board revenues in the 23 counties imposing the maximum excess levy rate. Voters in the remaining 21 counties with school excess levy rates could choose to increase those tax rates to make up any lost revenue. The provisions of this bill would have no impact on residents in the remaining 11 counties, unless the incentives associated with the proposed change would lead voters in those counties to impose new school excess levy property tax rates.
Additional administrative costs to the State Tax Department would be minimal. County assessors would incur additional costs to process claims for the poverty exemption.
Memorandum
The stated purpose of this bill is to allow an exemption from payment of a school excess levy to an owner of a residence whose annual household income is at or below the latest federal poverty guidelines.
A primary concern is whether the Legislature has the authority under West Virginia Constitution Article X, Section 1, to exempt this type of property from ad valorem taxation. Other than specified exemptions provided for in the Constitution or in adopted amendments to the Constitution (e.g., Class I intangibles, freeport inventories, farm personal property), only property used for certain activities (i.e., educational, literary, scientific, religious or charitable purposes) may be exempted.
The bill does not require proof of income for claimant not required to file a federal tax return. This is vague regarding the specific proof of income a claimant or any persona residing in the residence needs to provide to claim the exemption.
Person submitting Fiscal Note: Mark Muchow
Email Address: kerri.r.petry@wv.gov