FISCAL NOTE

Date Requested: January 25, 2019
Time Requested: 10:23 AM
Agency: Tax & Revenue Department, WV State
CBD Number: Version: Bill Number: Resolution Number:
2530 Introduced HB2579
CBD Subject: Taxation


FUND(S):

General Revenue Fund

Sources of Revenue:

General Fund

Legislation creates:

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 clarify conflicts within the code and create uniformity relating to the collection of taxes, the priority of distribution of an estate and to limit the liability of a fiduciary charged with distribution of the estate.
    
    This bill alters the priority of sales tax liens and makes it clear that lien creditors and purchasers recording liens prior to the recordation of any state tax lien have priority over those tax liens that were recorded at a later date. The bill also removes the personal liability of a fiduciary charged with administration of property or an estate.
    
    Additional administrative costs would be $5,000 per year beginning in FY2020.
    
    



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 5,000 5,000
Personal Services 0 5,000 5,000
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):


    This bill alters the priority of sales tax liens and makes it clear that lien creditors and purchasers recording liens prior to the recordation of any state tax lien have priority over those tax liens that were recorded at a later date. The bill also removes the personal liability of a fiduciary charged with administration of property or an estate.
    
    Additional administrative costs would be $5,000 per year beginning in FY2020.
    



Memorandum


    The stated purpose of this bill is to clarify conflicts within the code and create uniformity relating to the collection of taxes, the priority of distribution of an estate and to limit the liability of a fiduciary charged with distribution of the estate.
    
    The changes make clear that “lien creditors” or “purchasers” recording liens prior to state tax liens have priority over state tax liens. That is, mortgagees have priority over later filed state tax liens – even trust tax liens. It also removes the personal liability of a fiduciary charged with administration of property of an estate.
    
    The proposed changes to W. Va. Code §11-15-18a would impact the enforcement of Sales Tax, commonly referred to as a "trust fund tax". "Trust fund taxes" are those a person or entity withholds or collects from another and holds in trust for the State until paid over to the Tax Commissioner. Consumers sales tax, collected by the vendor, is the property of the State while in the possession of the vendor, and prior to remittance to the State. A trust fund tax is always the property of the State. Employer withholding tax, withheld by the employer, is also the property of the State while in the possession of the employer, prior to remittance to the State.
    
    Under current law, if Sales Tax is part of a distribution of property or an estate, whether in bankruptcy, receivership or otherwise, the Sales Tax is the property of the State and is paid in priority to all other claims and liens (except Federal obligations).
    
    The proposed bill would allow a “prior” mortgage lien holder to receive a distribution of trust fund tax collected held by the debtor, but not yet remitted to the State because the mortgage lien was recorded prior to the tax lien -- notwithstanding the fact that the money always belonged to the State and was never the property of the debtor.
    
    The proposed changes to W. Va. Code §§11-10-11 and 11-15-18a regarding personal liability would abrogate the authority of the Tax Commissioner to impose fiduciary liability for failure to remit trust fund taxes.
    
    
    



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