FISCAL NOTE

Date Requested: January 09, 2019
Time Requested: 05:42 PM
Agency: Tax & Revenue Department, WV State
CBD Number: Version: Bill Number: Resolution Number:
1276 Introduced SB84
CBD Subject: Education (Higher), 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 establish the “Stay in the state Act” tax credit that allows residents of this state who remain in state after graduating with an undergraduate or associate degree from a state institution to be granted a tax credit for the total cost of tuition and interest for student loans used to obtain their degree. The bill provides this tax credit is against personal income tax in West Virginia and is awarded over a 10-year period. The bill provides that employers are also allowed to claim the credit for employees that qualify for the credit. The bill provides that in-state high schools, colleges and universities are required to inform and assist students with obtaining the tax credit. Additional administrative costs incurred by the State Tax Department would be $107,160 upon full implementation.
    
    According to our interpretation, this bill would allow a Personal Income Tax credit for student loan payments made by graduates who work in West Virginia. In addition, a credit is allowed for employers who make loan payments for their employees. The State Tax Department does not have sufficient information to accurately estimate the amount of credits or decreasing modifications that would be taken for student loan payments. We are unable to accurately estimate the revenue loss to the General Revenue Fund attributable to passage of this bill, but the loss would be substantial.
    
    Additional administrative costs would be $107,000 in FY2021 and $80,000 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 80,000
Personal Services 0 0 80,000
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, this bill would allow a Personal Income Tax credit for student loan payments made by graduates who work in West Virginia. In addition, a credit is allowed for employers who make loan payments for their employees. The State Tax Department does not have sufficient information to accurately estimate the amount of credits or decreasing modifications that would be taken for student loan payments. We are unable to accurately estimate the revenue loss to the General Revenue Fund attributable to passage of this bill, but the loss would be substantial. In 2016, 57,960 returns claimed nearly $60 million in student loan interest deductions in West Virginia.
    
    Additional administrative costs would be $107,000 in FY2021 and $80,000 in subsequent fiscal years. The bill creates a fairly complicated tax credit against student loan payments made by college graduates who remain in West Virginia following graduation. Tax anticipates lengthy review of these credits and presumes they will be numerous. Significant support personnel will be needed.
    
    



Memorandum


    The stated purpose of this bill is to establish the “Stay in the state Act” tax credit that allows residents of this state who remain in state after graduating with an undergraduate or associate degree from a state institution to be granted a tax credit for the total cost of tuition and interest for student loans used to obtain their degree. The bill provides this tax credit is against personal income tax in West Virginia and is awarded over a 10-year period. The bill provides that employers are also allowed to claim the credit for employees that qualify for the credit. The bill provides that in-state high schools, colleges and universities are required to inform and assist students with obtaining the tax credit.
    
    The bill creates a fairly complicated tax credit against student loan payments made by college graduates who remain in West Virginia following graduation. The credit calculation methodology first makes an incorrect cross reference (to (d)(1) and (d)(2), where it appears to actually refer to e(1) and (e)(2)). The first of these cross references applies to a “benchmark loan payment” which appears to be fairly convoluted or an actual loan payment. The lesser of these numbers is to then be applied against a proration factor, the numerator of which is the number of credit hours earned after January 1, 2015 for a bachelors or associates degree, the denominator is the total number of credit hours. This calculation will be difficult to calculate as it will result in Tax needing to figure out whether a credit hour is earned in furtherance of such a degree. The credit is also not refundable, unless the degree was in science, technology, engineering or mathematics. This will further complicate review to determine whether such degree sufficiently qualifies under these fields. There are other convoluted rules related to eligibility that will be difficult to review and enforce.
    



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