FISCAL NOTE

Date Requested: January 30, 2019
Time Requested: 02:48 PM
Agency: Tax & Revenue Department, WV State
CBD Number: Version: Bill Number: Resolution Number:
2775 Introduced HB2767
CBD Subject:


FUND(S):

General Revenue Fund, local governments

Sources of Revenue:

General Fund local governments

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 reduce the severance tax on thermal steam coal to two percent. According to our interpretation, the passage of the bill would result in a 60 percent reduction in the Severance Tax rate on the gross value of steam or thermal coal from 5.0 percent to 2.0 percent effective March 31, 2019. This proposed two percent Severance Tax rate would also include the 0.35 percent additional severance tax on coal for the benefit of counties and municipalities. Passage of the bill would result in a $15.3 million loss to the General Revenue Fund in FY2019 and a $87.1 million loss per year beginning in FY2020. In addition to the loss to the General Revenue Fund, coal-producing county revenues under the additional 5.0 percent coal revenue sharing program would decrease by roughly $4.6 million per year beginning in FY2020. Additional administrative costs incurred by the State Tax Department would be $30,000 in FY2019 and FY2020 and $10,000 each fiscal year thereafter.



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 30,000 35,000 10,000
Personal Services 5,000 10,000 10,000
Current Expenses 0 0 0
Repairs and Alterations 0 0 0
Assets 0 0 0
Other 25,000 25,000 0
2. Estimated Total Revenues -15,300,000 -91,700,000 -91,700,000


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


According to our interpretation, the passage of the bill would result in a 60 percent reduction in the Severance Tax rate on the gross value of steam or thermal coal from 5.0 percent to 2.0 percent effective March 31, 2019. This proposed two percent Severance Tax rate would also include the 0.35 percent additional severance tax on coal for the benefit of counties and municipalities. Passage of the bill would result in a $15.3 million loss to the General Revenue Fund in FY2019 and a $87.1 million loss per year beginning in FY2020. In addition to the loss to the General Revenue Fund, coal-producing county revenues under the additional 5.0 percent coal revenue sharing program would decrease by roughly $4.6 million per year beginning in FY2020. Some West Virginia coal may be used as either steam coal or metallurgical coal. In certain cases, the producer may not necessarily know the actual use of the coal until a later time beyond the initial point of sale. Additional administrative costs incurred by the State Tax Department would be $30,000 in FY2019 and FY2020 and $10,000 each fiscal year thereafter.



Memorandum






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