FISCAL NOTE
Date Requested: February 03, 2022
Time Requested: 04:14 PM |
| Agency: |
Tax & Revenue Department, WV State |
|---|
| CBD Number: |
Version: |
Bill Number: |
Resolution Number: |
| 2174 |
Introduced |
HB4546 |
|
|---|
| CBD Subject: |
Economic Development |
|---|
|
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 the Headquarters Relocation Tax Credit. The bill provides for a short title. The bill provides for an establishment of the tax credit. The bill lists certain conditions. The bill provides for a carry forward procedure for the tax credit. The bill forbids carry back provisions. Finally, the bill provides for an effective date for the tax credit.
According to our interpretation of this bill, effective July 1, 2022, when a business with a minimum worldwide revenue amount of at least $50 million relocates its headquarters or research and development facilities to West Virginia, it would be eligible for an income tax credit that can be carried forward for nine years. The amount of the proposed credit would be 50 percent of the costs incurred in relocating the business’s headquarters.
The proposed tax credit is very similar to an existing tax credit for locating a corporate headquarters in this State under the Economic Opportunity Tax Credit Act. The number of jobs required for the existing tax credit is 10 and the tax credit percentage varies from a low of 10% to a high of 30% depending on number of new jobs added by the corporate headquarters relocation. The Economic Opportunity Tax Credit also applies to qualified research and development facilities. Other than differences in the minimum criteria for tax credit qualification, the only other significant difference between this proposed tax credit and the existing tax credit relates to a required payroll allocation factor with the existing tax credit to determine the portion of corporation net income tax subject to tax credit offset. Given that the proposed tax credit is similar to existing tax credits, passage of this bill would have minimal fiscal consequences.
Additional administrative costs incurred by the State Tax Department would be $20,000 in FY2024 and $5,000 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 |
0 |
5,000 |
| Personal Services |
0 |
0 |
5,000 |
| 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 of this bill, effective July 1, 2022, when a business with a minimum worldwide revenue amount of at least $50 million relocates its headquarters or research and development facilities to West Virginia, it would be eligible for an income tax credit that can be carried forward for nine years. The amount of the proposed credit would be 50 percent of the costs incurred in relocating the business’s headquarters.
The current Economic Opportunity Tax Credit costs $3.0 million per year. The proposed tax credit is very similar to an existing tax credit for locating a corporate headquarters in this State under the Economic Opportunity Tax Credit Act. The number of jobs required for the existing tax credit is 10 and the tax credit percentage varies from a low of 10% to a high of 30% depending on number of new jobs added by the corporate headquarters relocation. The Economic Opportunity Tax Credit also applies to qualified research and development facilities. Other than differences in the minimum criteria for tax credit qualification, the only other significant difference between this proposed tax credit and the existing tax credit relates to a required payroll allocation factor with the existing tax credit to determine the portion of corporation net income tax subject to tax credit offset. Given that the proposed tax credit is similar to existing tax credits, passage of this bill would have minimal fiscal consequences.
Indiana has had a tax preference similar to the proposed credit since 2005 with an estimated cost of $10,000 per year.
Additional administrative costs incurred by the State Tax Department would be $20,000 in FY2024 and $5,000 in subsequent fiscal years.
Memorandum
The stated purpose of this bill is to create the Headquarters Relocation Tax Credit. The bill provides for a short title. The bill provides for an establishment of the tax credit. The bill lists certain conditions. The bill provides for a carry forward procedure for the tax credit. The bill forbids carry back provisions. Finally, the bill provides for an effective date for the tax credit.
The bill does not specify whether it applies to Personal Income Tax or Corporation Net Income Tax. There is no specification whether the employees need to be full-time or part-time. Further there is no language in this bill about the employees’ rates of compensation or level of expertise or responsibility. The term “headquarters” is not clearly explained in this bill. The bill would seem to allow, once the 75-employee threshold is attained, the corporate administration and management to work remotely from another state if its West Virginia facility is called a “headquarters”.
This bill does not set forth an application procedure nor does it provide any details as to how it is to be administered. It also does not provide for a legislative rule to clarify the details or resolve the ambiguities.
Person submitting Fiscal Note: Mark Muchow
Email Address: kerri.r.petry@wv.gov