FISCAL NOTE
Date Requested: January 17, 2018
Time Requested: 10:55 AM |
| Agency: |
Tax & Revenue Department, WV State |
|---|
| CBD Number: |
Version: |
Bill Number: |
Resolution Number: |
| 2027 |
Introduced |
HB2591 |
|
|---|
| CBD Subject: |
Taxation |
|---|
|
FUND(S):
General Revenue Fund
Sources of Revenue:
General Fund
Legislation creates:
Decreases Existing Revenue
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 temporary tax credit for small group employers to cover a tax credit of up to fifty percent of the costs of branding, marketing and advertising of agricultural or manufactured produced products or manufactured in West Virginia. The bill establishes limits. The bill provides that the credit be available for five years.
According to the provisions of this bill, any eligible small group employer with fewer than twenty-five employees is allowed a credit of up to 50 percent of the costs of branding, marketing and advertising of agricultural or manufactured products produced or manufactured in West Virginia. An eligible employer must also maintain its corporate headquarters in West Virginia. The total amount of tax credit that may be used in any tax year in combination with the owners of the eligible taxpayer may not exceed $10,000, and the total tax credits authorized to all applicants may not exceed $100,000 in a year. The bill provides for the tax credit to be applied against Business Franchise Tax, Corporation Net Income Tax or Personal Income Tax on business profits. The Business Franchise Tax was eliminated as of 2015. Therefore, tax credits would apply to income taxes with a maximum four-year carry-over period for unused tax credits. The annual cost of the program could easily approach the aggregate statutory cap of $100,000 beginning in FY2020. The proposed bill fails to provide guidance for handling aggregate tax credit claims in excess of the statutory $100,000 cap.
Additional administrative costs incurred by the State Tax Department would be $7,000 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 |
0 |
| Personal Services |
0 |
0 |
0 |
| 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 the provisions of this bill, any eligible small group employer with fewer than twenty-five employees is allowed a credit of up to 50 percent of the costs of branding, marketing and advertising of agricultural or manufactured products produced or manufactured in West Virginia. An eligible employer must also maintain its corporate headquarters in West Virginia. The total amount of tax credit that may be used in any tax year in combination with the owners of the eligible taxpayer may not exceed $10,000, and the total tax credits authorized to all applicants may not exceed $100,000 in a year. The bill provides for the tax credit to be applied against Business Franchise Tax, Corporation Net Income Tax or Personal Income Tax on business profits. The Business Franchise Tax was eliminated as of 2015. Therefore, tax credits would apply to income taxes with a maximum four-year carry-over period for unused tax credits. The annual cost of the program could easily approach the aggregate statutory cap of $100,000 beginning in FY2020. The proposed bill fails to provide guidance for handling aggregate tax credit claims in excess of the statutory $100,000 cap.
Additional administrative costs incurred by the State Tax Department would be $7,000 in FY2020.
Memorandum
The stated purpose of this bill is to provide a temporary tax credit for small group employers to cover a tax credit of up to fifty percent of the costs of branding, marketing and advertising of agricultural or manufactured products or manufactured in West Virginia. The bill establishes limits. The bill provides that the credit be available for five years.
The bill proposes creating a Small Business Tax Credit, incorrectly designated as a new section, designated as §11-13DD-1. This section is currently part of Article 13DD of the West Virginia Code, which is titled “West Virginia Farm to Food Bank Tax Credit”.
The requirement that a taxpayer “must maintain its corporate headquarters in West Virginia” is not defined and would be subject to argument and interpretation. Further, there is no requirement that the new or existing business be properly registered with the Tax Department to claim the tax credit.
If this proposed bill passed, it might face legal challenges as violating the “dormant” Commerce Clause which prohibits states from passing legislation that improperly burdens or discriminates against interstate commerce. This bill specifically provides a tax credit only for those businesses maintaining corporate headquarters in West Virginia.
The bill title is also defective. The bill title refers to “a new section” which is currently in use. It also does not refer to an effective date, the taxes to which the tax credit are to be applied, or its carryforward or forfeiture provisions. In other words, it does not sufficiently give notice as to the contents of the bill.
Person submitting Fiscal Note: Mark Muchow
Email Address: kerri.r.petry@wv.gov