FISCAL NOTE

Date Requested: February 03, 2020
Time Requested: 02:42 PM
Agency: Tax & Revenue Department, WV State
CBD Number: Version: Bill Number: Resolution Number:
2372 Comm. Sub. SB619
CBD Subject: Taxation


FUND(S):

State Road Fund

Sources of Revenue:

Other Fund State Road Fund

Legislation creates:

Increases Revenue From Existing Sources, 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 create an annual adjustment to the motor fuel excise tax and provide for a mechanism for calculating the adjustment.
    
    Per our interpretation, the proposed bill would require an annual adjustment of the flat-rate component of the Motor Fuel Excise Tax. The adjustment would be based on the percentage increase in the average Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W) for the third quarter of the current calendar year over the third quarter of the previous year. An adjustment would only occur if there was an increase in the Index. The adjustment would be calculated and become effective on December 1 of each year after the effective date of July 1, 2020. Based on our interpretation, the effect of the bill would be cumulative, and the passage of the proposed legislation would increase State Road Fund collections by $1.6 million in FY2021 and $4.9 million in FY2022 with additional inflationary increases thereafter.
    
    Additional administrative costs incurred by the Motor Fuel Tax Administrative Fund would be $60,000 in FY2021 and subsequent fiscal years.
    



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 60,000 60,000
Personal Services 0 40,000 40,000
Current Expenses 0 0 0
Repairs and Alterations 0 0 0
Assets 0 0 0
Other 0 20,000 20,000
2. Estimated Total Revenues 0 -1,600,000 0


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


    Per our interpretation, the proposed bill would require an annual adjustment of the flat-rate component of the Motor Fuel Excise Tax. The adjustment would be based on the percentage increase in the average Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W) for the third quarter of the current calendar year over the third quarter of the previous year. An adjustment would only occur if there was an increase in the Index. The adjustment would be calculated and become effective on December 1 of each year after the effective date of July 1, 2020. Based on our interpretation, the effect of the bill would be cumulative, and the passage of the proposed legislation would increase State Road Fund collections by $1.6 million in FY2021 and $4.9 million in FY2022 with additional inflationary increases thereafter.
    
    Additional administrative costs incurred by the Motor Fuel Tax Administrative Fund would be $60,000 in FY2021 and subsequent fiscal years.
    



Memorandum


    The stated purpose of this bill is to create an annual adjustment to the motor fuel excise tax and provide for a mechanism for calculating the adjustment.
    
    The bill would require an annual adjustment of the flat-rate component of the Motor Fuel Excise Tax which would become effective on December 1. The bill would, in effect, convert the “flat” rate into another variable rate. The basis and timing of the adjustments made under the bill would create administrative difficulties, both for the Tax Division and for the parties charged with paying the tax.
    
    Currently, the variable rate of the tax is adjusted annually, based on the average wholesale price of motor fuel during the previous year. The Tax Commissioner is required to give thirty days’ notice of a change in the variable rate, and the change becomes effective on January 1 of the following year. The proposed bill would give taxpayers no prior notice of changes in the “flat” rate, and the effective date of such changes would be different than the effective date for changes in the variable tax. This could create administrative difficulties, both for the Tax Division and for Taxpayers who would now have to adjust their rates twice annually, within a period of thirty-one days.
    
    



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