FISCAL NOTE
Date Requested: January 16, 2020
Time Requested: 12:02 PM |
| Agency: |
Tax & Revenue Department, WV State |
|---|
| CBD Number: |
Version: |
Bill Number: |
Resolution Number: |
| 1442 |
Introduced |
HB4364 |
|
|---|
| CBD Subject: |
Economic Development |
|---|
|
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 provide a tax credit for an employer who hires a person who was convicted of a felony eligible for expungement.
According to our interpretation of this bill, an employer, who hires a convicted felon who has been released from confinement, and who has or is eligible to have his or her conviction expunged, is eligible for a tax credit against any Chapter 11 tax liability. The credit amount is equal to five percent of the salary of the person hired under the provisions of this proposed tax credit. It is important to note that if an eligible employer’s withholding tax were exempt under this bill, this tax liability would automatically shift to the hired employees, who are currently exempt from the employer’s withholding amounts under the current Chapter 11 provisions of the Personal Income Tax. Based on feedback from data on a federal tax credit program, we estimate roughly 400 individuals could be hired under this program in a year with a possible General Revenue Fund loss ranging from $0.5 million and $1.0 million per year depending on wages paid beginning in FY2022.
Additional administrative costs incurred by the State Tax Department are $25,000 in FY2022 and $10,000 in FY2023 and thereafter.
Fiscal Note Detail
| Effect of Proposal |
Fiscal Year |
2020
Increase/Decrease
(use"-") |
2021
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 of this bill, an employer, who hires a convicted felon who has been released from confinement, and who has or is eligible to have his or her conviction expunged, is eligible for a tax credit against any Chapter 11 tax liability. The credit amount is equal to five percent of the salary of the person hired under the provisions of this proposed tax credit. It is important to note that if an eligible employer’s withholding tax were exempt under this bill, this tax liability would automatically shift to the hired employees, who are currently exempt from the employer’s withholding amounts under the current Chapter 11 provisions of the Personal Income Tax. Based on feedback from data on a federal tax credit program, we estimate roughly 400 individuals could be hired under this program in a year with a possible General Revenue Fund loss ranging from $0.5 million and $1.0 million per year depending on wages paid beginning in FY2022.
The federal Work Opportunity Tax Credit (WOTC) allows a tax credit to employers who hire various groups of eligible workers including qualified veterans, TANF recipients, summer youth employees, designated community residents and qualified ex-felons. Under the federal provision of the Worker Opportunity Tax credit, a qualified ex-felon is defined as an individual who has been convicted of a felony under state or federal law and has a hiring date that is within one year of either the individual’s conviction or release from prison. According to the Congressional Research Service, the number of convicted felons who were certified by their employers who received the WOTC increased from 53,307 in FY2015 to 67,862 in FY2017, an increase of 27.3 percent.
Additional administrative costs incurred by the State Tax Department are $25,000 in FY2022 and $10,000 in FY2023 and thereafter.
Memorandum
The stated purpose of this bill is to provide a tax credit for an employer who hires a person who was convicted of a felony eligible for expungement.
This bill would be difficult to enforce as it does not specify which tax the credit can be claimed against. The taxes levied under Chapter 11 of the West Virginia Code include trust fund taxes, such as withholding tax and sales and use tax. Under the bill, an employer could collect the tax from the customer or employee and then claim the credit and keep what they collected. Property taxes are primarily administered by the counties. There is also a high probability of conflict with the Minimum Severance Tax on coal, natural gas and oil, whose revenues are distributed to the counties based on production and to the municipalities based on their corresponding population. This bill gives no authority to the State Tax Commissioner or the counties to administer this credit, which further makes the proposed tax credit difficult to legally enforce.
There are no provisions to claim this credit, effective date, duration of credit, carryback or carryforward, limitations, reporting requirements, or sunset provisions, which are common for tax credits.
Person submitting Fiscal Note: Mark Muchow
Email Address: kerri.r.petry@wv.gov