FISCAL NOTE

Date Requested: January 09, 2019
Time Requested: 05:40 PM
Agency: Tax & Revenue Department, WV State
CBD Number: Version: Bill Number: Resolution Number:
1083 Introduced HB2156
CBD Subject: 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 the bill is to create a tax credit for improving facades in historic districts. The bill provides that individuals and corporations are entitled to a 25 percent tax credit of the replacement cost of a historic façade. According to our interpretation, passage of this bill would result in the creation of two separate tax preference provisions for the costs of improvement of a façade of a building with no historic value which is located within a historic district. For a Taxpayer subject to Personal Income Tax, the tax preference is a decreasing modification to income equal to 25 percent of the replacement cost of a façade of a building with no historic value. As a decreasing modification, a maximum tax benefit would be 6.5 percent of 25 percent of costs, or 1.625 percent of costs. For a Taxpayer subject to the Corporation Net Income Tax, the tax preference would equal 25 percent of the cost. The proposed bill fails to outline any standards or guidelines as to qualified facades or qualified costs other than a non-historic building location in a historic district. The local county commission or city council would decide what buildings qualify for State tax relief. By contract, qualified historic rehabilitation costs must be approved by the State Historic Preservation Office according to federal rehabilitation guidelines. We are unable to accurately estimate the cost of this bill given the subjective standards for qualification for State tax benefits. Additional administrative costs incurred by the State Tax Department would be $25,000 in FY2021 and $10,000 in subsequent fiscal years.



Fiscal Note Detail


Effect of Proposal Fiscal Year
2019
Increase/Decrease
(use"-")
2020
Increase/Decrease
(use"-")
Fiscal Year
(Upon Full
Implementation)
1. Estmated Total Cost 0 0 10,000
Personal Services 0 0 10,000
Current Expenses 0 0 0
Repairs and Alterations 0 0 0
Assets 0 0 0
Other 0 0 0
2. Estimated Total Revenues 0 0 0


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


According to our interpretation, passage of this bill would result in the creation of two separate tax preference provisions for the costs of improvement of a façade of a building with no historic value which is located within a historic district. For a Taxpayer subject to Personal Income Tax, the tax preference is a decreasing modification to income equal to 25 percent of the replacement cost of a façade of a building with no historic value. As a decreasing modification, a maximum tax benefit would be 6.5 percent of 25 percent of costs, or 1.625 percent of costs. For a Taxpayer subject to the Corporation Net Income Tax, the tax preference would equal 25 percent of the cost. The proposed bill fails to outline any standards or guidelines as to qualified facades or qualified costs other than a non-historic building location in a historic district. The local county commission or city council would decide what buildings qualify for State tax relief. By contract, qualified historic rehabilitation costs must be approved by the State Historic Preservation Office according to federal rehabilitation guidelines. We are unable to accurately estimate the cost of this bill given the subjective standards for qualification for State tax benefits. Additional administrative costs incurred by the State Tax Department would be $25,000 in FY2021 and $10,000 in subsequent fiscal years.



Memorandum


The stated purpose of the bill is to create a tax credit for improving facades in historic districts. The bill provides that individuals and corporations are entitled to a 25 percent tax credit of the replacement cost of a historic façade. The primary problem with this bill is that it relies on subjective standards and provides minimal guidance as to their application. This bill does not specify how county commissions or municipalities would determine whether a non-historic façade replacement would complement the facades of historic buildings within a State historic district. This bill shifts the historic district decision making authority from the WV Department of Arts, Culture and History to the counties and municipalities.



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