FISCAL NOTE
Date Requested: March 10, 2021
Time Requested: 01:06 PM |
| Agency: |
Tax & Revenue Department, WV State |
|---|
| CBD Number: |
Version: |
Bill Number: |
Resolution Number: |
| 1977 |
Introduced |
HB2308 |
|
|---|
| CBD Subject: |
Education (Higher) |
|---|
|
FUND(S):
General Revenue Fund, Business PROMISE+ Scholarship Fund
Sources of Revenue:
General Fund Business PROMISE+ Scholarship Fund
Legislation creates:
Decreases Existing Revenue, Increases Existing Expenses, Creates New Fund: Business PROMISE+ Scholarship Fund
Fiscal Note Summary
Effect this measure will have on costs and revenues of state government.
The stated purpose of this bill is to implement the Business PROMISE+ scholarship.
According to our interpretation, this bill would allow employers in the State to fund scholarships for certain PROMISE-eligible applicants. An eligible student may receive an award from either the PROMISE Scholarship program or the Business PROMISE+ Scholarship program, but not both, in any single academic term. A sponsored student would receive a Business PROMISE+ Scholarship in an amount of up to $15,000 annually, but not to exceed the amount donated by the eligible business. Any West Virginia business that donates $10,000 or more to the Business PROMISE+ Scholarship Fund would be eligible for a tax credit of 50 percent of the donation to offset Corporation Net Income Tax liabilities.
It is difficult to determine how many businesses may elect to make donations to the Business PROMISE+ Scholarship Fund in exchange for a 50 percent tax credit and in what amounts those donations may be made. In addition, the proposed bill does not address whether tax credits earned may be carried forward to subsequent taxable periods. Various other states offer similar scholarship programs that tend to be directed toward private elementary and secondary education rather than higher education. Other states tend to include an overall cap to the amount of tax credits provided due to the uncertainty of taxpayer response to the tax incentives. This bill does not contain any proposed spending caps. For some context, during the 2019 academic year, 9,495 students received $43.38 million in PROMISE scholarships, averaging nearly $4,569 per student. Between 2015 and 2019 there was a 2.8% increase in the amount of PROMISE scholarships awarded. In total, the program has awarded more than $600 million in scholarships since its inception in 2002. Since 2010, eligible students have received the block award amount up to $4,750 or full tuition and fees, whichever is less.
Additional administrative costs incurred by the State Tax Department would be $60,000 in FY2023 and $45,000 per year in subsequent fiscal years. The provisions of the bill appear to require the Tax Commissioner to attempt to recoup scholarship dollars from students who fail to meet the State working requirement provisions, even though the program is otherwise managed by the Higher Education Policy Commission. The rate of success in recovering funds from recipients who choose to move out of state would be expected to be extremely low.
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 |
60,000 |
45,000 |
| Personal Services |
0 |
45,000 |
45,000 |
| Current Expenses |
0 |
0 |
0 |
| Repairs and Alterations |
0 |
0 |
0 |
| Assets |
0 |
0 |
0 |
| Other |
0 |
15,000 |
0 |
| 2. Estimated Total Revenues |
0 |
0 |
0 |
Explanation of above estimates (including long-range effect):
According to our interpretation, this bill would allow employers in the State to fund scholarships for certain PROMISE-eligible applicants. An eligible student may receive an award from either the PROMISE Scholarship program or the Business PROMISE+ Scholarship program, but not both, in any single academic term. A sponsored student would receive a Business PROMISE+ Scholarship in an amount of up to $15,000 annually, but not to exceed the amount donated by the eligible business. Any West Virginia business that donates $10,000 or more to the Business PROMISE+ Scholarship Fund would be eligible for a tax credit of 50 percent of the donation to offset Corporation Net Income Tax liabilities.
It is difficult to determine how many businesses may elect to make donations to the Business PROMISE+ Scholarship Fund in exchange for a 50 percent tax credit and in what amounts those donations may be made. In addition, the proposed bill does not address whether tax credits earned may be carried forward to subsequent taxable periods. Various other states offer similar scholarship programs that tend to be directed toward private elementary and secondary education rather than higher education. Other states tend to include an overall cap to the amount of tax credits provided due to the uncertainty of taxpayer response to the tax incentives. This bill does not contain any proposed spending caps. For some context, during the 2019 academic year, 9,495 students received $43.38 million in PROMISE scholarships, averaging nearly $4,569 per student. Between 2015 and 2019 there was a 2.8% increase in the amount of PROMISE scholarships awarded. In total, the program has awarded more than $600 million in scholarships since its inception in 2002. Since 2010, eligible students have received the block award amount up to $4,750 or full tuition and fees, whichever is less.
Additional administrative costs incurred by the State Tax Department would be $60,000 in FY2023 and $45,000 per year in subsequent fiscal years. The provisions of the bill appear to require the Tax Commissioner to attempt to recoup scholarship dollars from students who fail to meet the State working requirement provisions, even though the program is otherwise managed by the Higher Education Policy Commission. The rate of success in recovering funds from recipients who choose to move out of state would be expected to be extremely low.
Memorandum
The stated purpose of this bill is to implement the Business PROMISE+ scholarship.
This bill does not establish a maximum amount for which the tax credit can be claimed or address whether it is refundable. The bill is also silent as to credit carryover.
There is no effective date in the bill for which the tax credit first applies. The bill also needs to give the Tax Commissioner necessary authority to enter Memorandums of Understanding to comply with the work requirements of this bill.
The bill does not address what happens to tax credits claimed by businesses in situations where the scholarship recipients have failed to maintain the eligibility requirements for which the scholarship was granted and the tax credit claimed. Further, this bill does not limit the number of students a business may sponsor per qualified donation of $10,000 or more to the Business PROMISE+ Scholarship Fund.
The bill does not specify if the work experience provided to sponsored students by an eligible business is on a paid or unpaid basis or how many hours must be worked.
Person submitting Fiscal Note: Mark Muchow
Email Address: kerri.r.petry@wv.gov