FISCAL NOTE

Date Requested: February 10, 2017
Time Requested: 01:35 PM
Agency: Tax & Revenue Department, WV State
CBD Number: Version: Bill Number: Resolution Number:
2162 Introduced SB250
CBD Subject: Professions and Occupations, 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 establish a tax credit for physicians who are new graduates and locate in West Virginia to practice medicine for at least six years. Based on our interpretation, the proposed bill would create a Personal Income Tax credit equal to the personal taxable income of physicians who locate in the State of West Virginia within 12 months of completion of an approved residency or fellowship program, among other requirements. As the provisions of the proposed bill do not make the credit refundable, the eligible amount is effectively restricted to each eligible physician’s personal income tax liability. It is difficult to anticipate how many physicians may qualify for this credit, much less to determine what those physicians’ taxable incomes may be. Based on limited data, we anticipate the proposed bill would result in a loss of up to $300,000 beginning in FY2019. Give that this credit can be taken annually for up to three consecutive years per eligible physician, it is possible revenue losses associated with this bill could increase to as much as $900,000 per year in subsequent years. There would be no additional administrative costs incurred by the State Tax Department for the remainder of FY2017 or in FY2018. It is anticipated the Department would incur $20,000 in FY2019 and $10,000 per year for each year thereafter.



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 10,000
Personal Services 0 0 0
Current Expenses 0 0 0
Repairs and Alterations 0 0 0
Assets 0 0 0
Other 0 0 10,000
2. Estimated Total Revenues 0 0 -900,000


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


Based on our interpretation, the proposed bill would create a Personal Income Tax credit equal to the personal taxable income of physicians who locate in the State of West Virginia within 12 months of completion of an approved residency or fellowship program, among other requirements. As the provisions of the proposed bill do not make the credit refundable, the eligible amount is effectively restricted to each eligible physician’s personal income tax liability. It is difficult to anticipate how many physicians may qualify for this credit, much less to determine what those physicians’ taxable incomes may be. Based on limited data, we anticipate the proposed bill would result in a loss of up to $300,000 beginning in FY2019. Give that this credit can be taken annually for up to three consecutive years per eligible physician, it is possible revenue losses associated with this bill could increase to as much as $900,000 per year in subsequent years. There would be no additional administrative costs incurred by the State Tax Department for the remainder of FY2017 or in FY2018. It is anticipated the Department would incur $20,000 in FY2019 and $10,000 per year for each year thereafter.



Memorandum


The stated purpose of this bill is to establish a tax credit for physicians who are new graduates and locate in West Virginia to practice medicine for at least six years. The proposed bill could benefit from some clarification. The bill fails to state whether a certain percentage of the physician’s services must be delivered in West Virginia, and does not address circumstances where physicians living in border areas out-of-state but lawfully practicing medicine in West Virginia would be allowed to claim out-of-state income. It is unclear whether the credit could apply to unearned income as well. The term “reasonably construed” as used in §11-13DD-8 is vague and undefined. The limitation of the credit to only physicians who graduated from eligible medical schools located in the United States may cause issue. Further, the credit does not appear to encompass every type of medical school and specialist, which could result in some confusion as to whether some medical specialties may qualify. A list of acceptable medical-related degrees, or the specific exclusion of certain types of medical practitioners, may be helpful. The relationship between the three-year period that the credit is claimed and the six-year requirement for eligible physicians to reside and practice medicine in West Virginia could be revised to clearly state whether these periods may overlap or must be contiguous.



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