FISCAL NOTE
Date Requested: January 25, 2022
Time Requested: 03:53 PM |
| Agency: |
Tax & Revenue Department, WV State |
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| CBD Number: |
Version: |
Bill Number: |
Resolution Number: |
| 2291 |
Introduced |
HB4367 |
|
|---|
| CBD Subject: |
Actions, Suits and Liens |
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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 offer tax credit against either personal or corporate income taxes for hiring women or minorities into executive, administrative, or professional jobs.
According to our interpretation of this bill, a tax credit of $200 against Personal Income Tax or Corporation Net Income Tax would be granted to the business owners that hire female or minority employees or who promotes an existing woman or minority employee into an executive, administrative, or professional position in the business per the United States Fair Labor Standards Act. The female or minority employee would have to retain an executive, administrative or professional position in the business for at least twelve months. This proposed tax credit can be applied to Corporation Net Income Tax and Personal Income Tax owed by the business over a two-year period following the period in which it was earned. This proposed credit would begin on July 1, 2022 and end on December 31, 2027. The Commissioner of Labor would certify a completed tax credit application from a business owner or executive and would issue certification acceptable to the State Tax Commissioner.
According to the US Census Bureau, in 2021 50.5 percent of the West Virginia population were women, 3.6 percent of the population was African American, 1.8 percent were mixed ethnicity, 1.7 percent were Hispanics and 0.8 percent were classified as Asian. Based on these percentages, roughly 150,000 people in West Virginia are classified as minorities and 900,000 people in the State are women. It would be difficult to estimate the number of West Virginia business owners who hire female or minority employees or who promote an existing woman or minority employee into an executive, administrative, or professional position. Further, many states who have women and minority job incentives do not have stand-alone credits, but rather incorporate these special incentives into existing business tax credits. Due to lack of key definitions necessary to fully measure eligibility, we are not able to accurately determine the loss to the General Revenue Fund in FY2023 and thereafter.
Additional administrative costs incurred by the State Tax Department are $51,500 in FY2023 and $40,000 per year in subsequent fiscal years.
Fiscal Note Detail
| Effect of Proposal |
Fiscal Year |
2022
Increase/Decrease
(use"-") |
2023
Increase/Decrease
(use"-") |
Fiscal Year
(Upon Full
Implementation) |
| 1. Estmated Total Cost |
0 |
51,500 |
40,000 |
| Personal Services |
0 |
40,000 |
40,000 |
| Current Expenses |
0 |
0 |
0 |
| Repairs and Alterations |
0 |
0 |
0 |
| Assets |
0 |
1,500 |
0 |
| Other |
0 |
10,000 |
0 |
| 2. Estimated Total Revenues |
0 |
0 |
0 |
Explanation of above estimates (including long-range effect):
According to our interpretation of this bill, a tax credit of $200 against Personal Income Tax or Corporation Net Income Tax would be granted to the business owners that hire female or minority employees or who promotes an existing woman or minority employee into an executive, administrative, or professional position in the business per the United States Fair Labor Standards Act. The female or minority employee would have to retain an executive, administrative or professional position in the business for at least twelve months. This proposed tax credit can be applied to Corporation Net Income Tax and Personal Income Tax owed by the business over a two-year period following the period in which it was earned. This proposed credit would begin on July 1, 2022 and end on December 31, 2027. The Commissioner of Labor would certify a completed tax credit application from a business owner or executive and would issue certification acceptable to the State Tax Commissioner.
According to the US Census Bureau, in 2021 50.5 percent of the West Virginia population were women, 3.6 percent of the population was African American, 1.8 percent were mixed ethnicity, 1.7 percent were Hispanics and 0.8 percent were classified as Asian. Based on these percentages, roughly 150,000 people in West Virginia are classified as minorities and 900,000 people in the State are women. It would be difficult to estimate the number of West Virginia business owners who hire female or minority employees or who promote an existing woman or minority employee into an executive, administrative, or professional position. Further, many states who have women and minority job incentives do not have stand-alone credits, but rather incorporate these special incentives into existing business tax credits. Due to lack of key definitions necessary to fully measure eligibility, we are not able to accurately determine the loss to the General Revenue Fund in FY2023 and thereafter.
Additional administrative costs incurred by the State Tax Department are $51,500 in FY2023 and $40,000 per year in subsequent fiscal years.
Memorandum
The stated purpose of this bill is to offer tax credit against either personal or corporate income taxes for hiring women or minorities into executive, administrative, or professional jobs.
This bill would be difficult to administer as currently written. Further, the bill title does not mention that the proposed tax credit terminates or that the Commissioner of Labor sends a certification.
The bill does not provide a definition for “owner of a business”. The owners of corporation are usually its shareholders. It is not clear whether every shareholder would be able to receive the proposed $200 credit against his or her personal income tax liability due to one hire, regardless of the percentage of shares owned. Likewise, there may be several partners in an LLC, and all may be eligible for this proposed tax credit.
The proposed tax credit against the Corporation Net Income Tax does not appear to be limited to those employees located in West Virginia. It appears that the credit may be claimed for individuals hired out-of-state. Therefore, the proposed credit could be become significant for larger companies.
This bill states that an employee must be in the position for twelve months, but the bill does not say what happens if this requirement is not met. It is unclear if the employee must be in the position for twelve months before the credit may be claimed or if the credit is lost if the qualified credit recipient does not retain the position for the required amount of time. It would be difficult for the Tax Department to monitor who has kept a position for twelve months. The bill also does not contain a recapture tax provision.
The proposed tax credit may not be claimed against the Personal Income Tax of the qualified taxpayer if their business claims a similar credit against Corporation Net Income Tax. It is not clear what type of credit qualifies as a similar credit. It is also unclear if the owner and corporation can both take credits based upon hiring different employees.
Person submitting Fiscal Note: Mark Muchow
Email Address: kerri.r.petry@wv.gov