FISCAL NOTE

Date Requested: March 08, 2017
Time Requested: 02:58 PM
Agency: Tax & Revenue Department, WV State
CBD Number: Version: Bill Number: Resolution Number:
2793 Introduced HB2848
CBD Subject: Taxation


FUND(S):

General Revenue Fund

Sources of Revenue:

General Fund

Legislation creates:

Neither Program nor Fund



Fiscal Note Summary


Effect this measure will have on costs and revenues of state government.


The stated purpose of this bill is to provide a tax credit for modifications to homes made more accessible for an elderly person or a person with a disability. Based on our interpretation, the proposed bill would provide a maximum credit of $5,000 per eligible claimant per year for the of either the purchase price of the purchase/construction of a new residence or the cost of retrofitting/renovation an existing residence, so long as that purchase, construction, retrofitting, or renovation improves accessibility of the home to a disabled or elderly individual. The total amount of credit issued in any fiscal year cannot exceed $1.0 million. Data from the U.S. Census Bureau suggest that more than 600,000 West Virginians, including children, qualify for the proposed credit due to either being disabled or being 62 years of age or older. This number excludes eligible real estate developers. If 200 individuals claim the maximum annual credit in any given fiscal year, the revenue impact to the General Revenue Fund would be $1.0 million. Cumulative annual credit exceeding $1.0 million for any given fiscal year would be prorated so that the amount of credit issued does not exceed the statutorily-imposed cap. As the bill provides no effective date and it appears the intent is to evaluate eligibility and issue credits after the end of a full fiscal year, it is anticipated this bill could affect revenues beginning in FY2019 if enacted. Additional costs to the State Tax Department include $14,000 in FY2019 and $5,000 in subsequent fiscal years.



Fiscal Note Detail


Effect of Proposal Fiscal Year
2017
Increase/Decrease
(use"-")
2018
Increase/Decrease
(use"-")
Fiscal Year
(Upon Full
Implementation)
1. Estmated Total Cost 0 0 14,000
Personal Services 0 0 5,000
Current Expenses 0 0 0
Repairs and Alterations 0 0 0
Assets 0 0 0
Other 0 0 9,000
2. Estimated Total Revenues 0 0 -1,000,000


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


Based on our interpretation, the proposed bill would provide a maximum credit of $5,000 per eligible claimant per year for the of either the purchase price of the purchase/construction of a new residence or the cost of retrofitting/renovation an existing residence, so long as that purchase, construction, retrofitting, or renovation improves accessibility of the home to a disabled or elderly individual. The total amount of credit issued in any fiscal year cannot exceed $1.0 million. Data from the U.S. Census Bureau suggest that more than 600,000 West Virginians, including children, qualify for the proposed credit due to either being disabled or being 62 years of age or older. This number excludes eligible real estate developers. If 200 individuals claim the maximum annual credit in any given fiscal year, the revenue impact to the General Revenue Fund would be $1.0 million. Cumulative annual credit exceeding $1.0 million for any given fiscal year would be prorated so that the amount of credit issued does not exceed the statutorily-imposed cap. As the bill provides no effective date and it appears the intent is to evaluate eligibility and issue credits after the end of a full fiscal year, it is anticipated this bill could affect revenues beginning in FY2019 if enacted. Additional costs to the State Tax Department include $14,000 in FY2019 and $5,000 in subsequent fiscal years. Additional costs for the Housing Development Authority, the authority responsible for the initial allocation of tax credits, are not included in this fiscal note.



Memorandum


The stated purpose of this bill is to provide a tax credit for modifications to homes made more accessible for an elderly person or a person with a disability. It is unclear whether the proposed bill applies against sales tax, income tax, or both. The former is mentioned in the bill (article 15 of Chapter 11) but Articles 21 and 24 of Chapter 11, related to the Personal Income Tax and the Corporation Net Income Tax, respectively, are not. Further, sales tax generally has exemptions rather than credits. The title of the proposed bill should identify who can take the credit and against what tax. Providing definitions of the following terms would be also useful: “universal visitability,” “director,” “total purchase price,” “affiliated entities,” “real estate developers,” “residence,” “individual,” and “accessibility.” If the intent is to provide a sales tax credit to real estate developers, this could potentially either conflict with the contradicting rules in Article 15 of Chapter 11 and 110CSR15, or could duplicate the purchase for resale exemption. This would likely result in litigation. The proposed bill applies restrictions on the cumulative amount of credit that can be issued in a given fiscal year, implying that credits could not be issued until the following fiscal year so appropriate caps or pro rata apportionment, as appropriate, can have taken place. This could cause issue with personal and corporate filers as all Personal Income Tax Returns and some Corporation Net Income Tax returns are filed on a calendar year basis.



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