FISCAL NOTE

Date Requested: January 21, 2022
Time Requested: 04:09 PM
Agency: Tax & Revenue Department, WV State
CBD Number: Version: Bill Number: Resolution Number:
1946 Introduced HB4332
CBD Subject: Agriculture


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 enact the WV Farm Bill of 2022; provide additional powers to the commissioner; including increased powers to collect debts and interest owed the department; modify reporting requirements; establish the West Virginia Animal Remedy law; and clarify definition of agritourism. The only part of the proposed West Virginia Farm Bill of 2022 which affects the Tax Department is the increase in the credit limit of the West Virginia Farm to Food Bank Tax Credit from $2,500 to $5,000. According to our interpretation, the proposed bill would modify the West Virginia Farm to Food Bank Tax Credit, which became effective for donations occurring after December 31, 2017. Current law allows a credit of 30 percent of the value of donated agricultural products by farmers, not to exceed $2,500 during a taxable year or the Personal Income Tax or Corporation Net Income Tax liability of the taxpayer, whichever is less. Total cap of credit allowances per year is $200,000. The proposed bill would increase the credit limitation to $5,000 and would be applied retroactively to any donation of qualifying edible agricultural products to one or more nonprofit food programs in the State made on or after January 1, 2022. Based on our understanding, passage of this bill would result in a minimal decrease in revenue beginning in FY2023. Taxpayer participation in this program to date has been minimal. Farmers already receive a federal and state deduction for such donated agricultural products on federal Schedule F. However, farmers tend to generate little or no net income from Schedule F. The current tax credit generally offsets income taxes generated by farmers attributable to activities outside of farming. Only 1.9 percent of all income tax returns filed in West Virginia are filed by farmers each year. Additional administrative costs incurred by the State Tax Department would be $10,000 in FY2023.



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 10,000 0
Personal Services 0 0 0
Current Expenses 0 0 0
Repairs and Alterations 0 0 0
Assets 0 0 0
Other 0 10,000 0
2. Estimated Total Revenues 0 0 0


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


The only part of the proposed West Virginia Farm Bill of 2022 which affects the Tax Department is the increase in the credit limit of the West Virginia Farm to Food Bank Tax Credit from $2,500 to $5,000. According to our interpretation, the proposed bill would modify the West Virginia Farm to Food Bank Tax Credit, which became effective for donations occurring after December 31, 2017. Current law allows a credit of 30 percent of the value of donated agricultural products by farmers, not to exceed $2,500 during a taxable year or the Personal Income Tax or Corporation Net Income Tax liability of the taxpayer, whichever is less. Total cap of credit allowances per year is $200,000. The proposed bill would increase the credit limitation to $5,000 and would be applied retroactively to any donation of qualifying edible agricultural products to one or more nonprofit food programs in the State made on or after January 1, 2022. Based on our understanding, passage of this bill would result in a minimal decrease in revenue beginning in FY2023. Taxpayer participation in this program to date has been minimal. Farmers already receive a federal and state deduction for such donated agricultural products on federal Schedule F. However, farmers tend to generate little or no net income from Schedule F. The current tax credit generally offsets income taxes generated by farmers attributable to activities outside of farming. Only 1.9 percent of all income tax returns filed in West Virginia are filed by farmers each year. Additional administrative costs incurred by the State Tax Department would be $10,000 in FY2023.



Memorandum


The stated purpose of this bill is to enact the WV Farm Bill of 2022; provide additional powers to the commissioner; including increased powers to collect debts and interest owed the department; modify reporting requirements; establish the West Virginia Animal Remedy law; and clarify definition of agritourism. Most of this bill concerns code provisions that strictly concern the West Virginia Department of Agriculture. The only part of this bill that affects the Tax Department is the increase of the credit limit of the West Virginia Farm to Food Bank Tax Credit from $2,500 to $5,000. This bill also amends W.Va. Code ยง19-36-2 which allows agritourism to be considered part of agriculture. This clarification may have an impact on the determination of whether a farming operation that is heavily involved in agritourism qualifies for certain property tax exemptions or valuation methods. It is not clear whether agritourism alone may be enough of an agricultural use to warrant an agricultural property tax classification.



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