FISCAL NOTE
Date Requested: January 10, 2018
Time Requested: 02:50 PM |
| Agency: |
Tax & Revenue Department, WV State |
|---|
| CBD Number: |
Version: |
Bill Number: |
Resolution Number: |
| 1162 |
Introduced |
SB103 |
|
|---|
| CBD Subject: |
Professions and Occupations, Taxation |
|---|
|
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 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. We note there is a potential typing error in the intended effective date. As stated in the proposed bill, the effective date will be “for taxable years beginning July 1, 2018.” We presume the intent was to make the proposed credit effective for taxable years beginning on and after July 1, 2018, and proceed with that assumption. Alternate intent will change the estimates provided herein.
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 FY2020. Given 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 FY2018 or in FY2019. It is anticipated the Department would incur $15,000 per year beginning in FY2020.
Fiscal Note Detail
| Effect of Proposal |
Fiscal Year |
2018
Increase/Decrease
(use"-") |
2019
Increase/Decrease
(use"-") |
Fiscal Year
(Upon Full
Implementation) |
| 1. Estmated Total Cost |
0 |
0 |
15,000 |
| Personal Services |
0 |
0 |
10,000 |
| Current Expenses |
0 |
0 |
0 |
| Repairs and Alterations |
0 |
0 |
0 |
| Assets |
0 |
0 |
0 |
| Other |
0 |
0 |
5,000 |
| 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. We note there is a potential typing error in the intended effective date. As stated in the proposed bill, the effective date will be “for taxable years beginning July 1, 2018.” We presume the intent was to make the proposed credit effective for taxable years beginning on and after July 1, 2018, and proceed with that assumption. Alternate intent will change the estimates provided herein.
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 FY2020. Given 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 FY2018 or in FY2019. It is anticipated the Department would incur $15,000 per year beginning in FY2020.
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