FISCAL NOTE

Date Requested: January 17, 2023
Time Requested: 12:48 PM
Agency: Tax & Revenue Department, WV State
CBD Number: Version: Bill Number: Resolution Number:
2582 Introduced HB2623
CBD Subject: Environment


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 require lessees of West Virginia real estate who make natural resources royalty payments for in-state property to any nonresident lessor, to withhold West Virginia personal income tax on natural resources royalty payments. The bill provides exceptions, penalties, defines terms and grants rule-making authority. The bill provides that every lessee of West Virginia real estate who makes a natural resources royalty payment to a lessor who does not reside in West Virginia must withhold West Virginia personal income tax on the natural resources royalty payments to that lessor and remit the withheld amount to the Tax Commissioner. The withholding of the tax is optional with respect to payments to a lessor who receives less than $1,000 annually in natural resource royalty payments from the lessee and is at the discretion of the lessee. Royalty income from West Virginia properties are subject to West Virginia Personal Income Tax regardless of individual residency. The provisions of this bill may improve compliance. The provisions of the bill would be effective for all taxable years beginning after December 31, 2023. Based on our interpretation, the passage of the proposed legislation could increase General Revenue Fund collections by up to $950,000 in FY2024 and by up to $5.7 million in subsequent fiscal years based on energy prices as forecast by the Energy Information Administration. Additional administrative costs incurred by the Tax Department would be $15,000 in FY2024.



Fiscal Note Detail


Effect of Proposal Fiscal Year
2023
Increase/Decrease
(use"-")
2024
Increase/Decrease
(use"-")
Fiscal Year
(Upon Full
Implementation)
1. Estmated Total Cost 0 15,000 0
Personal Services 0 0 0
Current Expenses 0 0 0
Repairs and Alterations 0 0 0
Assets 0 0 0
Other 0 15,000 0
2. Estimated Total Revenues 0 950,000 5,700,000


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


The bill provides that every lessee of West Virginia real estate who makes a natural resources royalty payment to a lessor who does not reside in West Virginia must withhold West Virginia personal income tax on the natural resources royalty payments to that lessor and remit the withheld amount to the Tax Commissioner. The withholding of the tax is optional with respect to payments to a lessor who receives less than $1,000 annually in natural resource royalty payments from the lessee and is at the discretion of the lessee. Royalty income from West Virginia properties are subject to West Virginia Personal Income Tax regardless of individual residency. The provisions of this bill may improve compliance. The provisions of the bill would be effective for all taxable years beginning after December 31, 2023. Based on our interpretation, the passage of the proposed legislation could increase General Revenue Fund collections by up to $950,000 in FY2024 and by up to $5.7 million in subsequent fiscal years based on energy prices as forecast by the Energy Information Administration. Additional administrative costs incurred by the Tax Department would be $15,000 in FY2024.



Memorandum






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