FISCAL NOTE

Date Requested: January 23, 2020
Time Requested: 03:24 PM
Agency: Tax & Revenue Department, WV State
CBD Number: Version: Bill Number: Resolution Number:
2541 Introduced HB4462
CBD Subject: Taxation


FUND(S):

General Revenue Fund

Sources of Revenue:

General Fund

Legislation creates:





Fiscal Note Summary


Effect this measure will have on costs and revenues of state government.


According to our interpretation, the provisions of this bill would establish a tax base for taxation of commercial facilities with solar photovoltaic generation units at eight percent of nameplate capacity. The proposed capacity tax base attempts to reflect the portion of a twenty-four hour day with useable sunlight for electric power generation relative to the taxation of baseload plants that operate on a twenty-four hour basis. Passage of this bill would have no immediate impact on State revenues because there are no existing units designed to specifically sell output commercially within the State at this time. However, if such an industry develops in response to consumer tastes for such energy at market prices, then the State would begin collecting tax revenues from the operation of such facilities. Solar energy generation currently accounts for less than 0.02% of total electric power generation in West Virginia with all generation associated with roughly 900 separate installations on roofs of homes and certain businesses. Most of this power is directly consumed by the homeowner or business with such installation. These homeowners and businesses would not be affected by the proposed bill because they are not in the business of selling electricity commercially and any tax on their capacity would be lower than the standard tax exemption credit for the business and occupation tax. Additional administrative costs incurred by the State Tax Department would be minimal.



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 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 our interpretation, the provisions of this bill would establish a tax base for taxation of commercial facilities with solar photovoltaic generation units at eight percent of nameplate capacity. The proposed capacity tax base attempts to reflect the portion of a twenty-four hour day with useable sunlight for electric power generation relative to the taxation of baseload plants that operate on a twenty-four hour basis. Passage of this bill would have no immediate impact on State revenues because there are no existing units designed to specifically sell output commercially within the State at this time. However, if such an industry develops in response to consumer tastes for such energy at market prices, then the State would begin collecting tax revenues from the operation of such facilities. Solar energy generation currently accounts for less than 0.02% of total electric power generation in West Virginia with all generation associated with roughly 900 separate installations on roofs of homes and certain businesses. Most of this power is directly consumed by the homeowner or business with such installation. These homeowners and businesses would not be affected by the proposed bill because they are not in the business of selling electricity commercially and any tax on their capacity would be lower than the standard tax exemption credit for the business and occupation tax. Additional administrative costs incurred by the State Tax Department would be minimal.



Memorandum


The stated purpose of this bill is to clarify the calculation of business and occupation tax rates on solar generating units to match those of other renewable electric facilities. This bill does not appear to match solar generation rates to those of other renewable electric facilities. Further, the bill title states that the bill clarifies that “the rate of tax for generating units utilizing solar photovoltaic methods shall equal eight percent of official capacity of the unit”. The eight percent number is the taxable generating capacity, not the tax rate. The bill does not define “solar photovoltaic methods” and may make it difficult to administer. It appears that solar photovoltaic methods may use solar panels, and may differ from concentrated solar power, which used mirrors or lenses to concentrate sunlight into a receiver. A definition may be useful in order to determine what methods are being contemplated under the bill.



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