FISCAL NOTE

Date Requested: January 10, 2018
Time Requested: 03:01 PM
Agency: Tax & Revenue Department, WV State
CBD Number: Version: Bill Number: Resolution Number:
1266 Introduced SB126
CBD Subject: Taxation


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 create an earned income tax credit for low income workers; establish procedures for claiming credit; and define terms.
    
    According to our interpretation, the proposed bill would create a West Virginia Earned Income Tax Credit of up to $200 for low-income workers effective for the tax year beginning January 1, 2018. Eligible individuals must be residents of West Virginia and have a Federal Adjusted Gross Income (FAGI) of between $1,000 and $20,000 and that is at most 150 percent of the federal poverty guideline. The proposed bill could result in revenue losses to the General Revenue Fund of roughly $23.0 million in FY2019. We note that the language of the proposed bill suggests that this credit may be allowed for only TY2018. If the intent of the bill is to provide this credit for in taxable years beginning on and after January 1, 2018, revenue losses would continue beyond FY2019.
    
    Additional costs incurred by the State Tax Department are expected to be $71,000 in FY2019 and $64,000 for each year thereafter that the Credit applies.
    



Fiscal Note Detail


Effect of Proposal Fiscal Year
2018
Increase/Decrease
(use"-")
2019
Increase/Decrease
(use"-")
Fiscal Year
(Upon Full
Implementation)
1. Estmated Total Cost 0 71,000 0
Personal Services 0 64,000 0
Current Expenses 0 0 0
Repairs and Alterations 0 0 0
Assets 0 2,000 0
Other 0 5,000 0
2. Estimated Total Revenues 0 -23,000,000 0


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


    According to our interpretation, the proposed bill would create a West Virginia Earned Income Tax Credit of up to $200 for low-income workers effective for the tax year beginning January 1, 2018. Eligible individuals must be residents of West Virginia and have a Federal Adjusted Gross Income (FAGI) of between $1,000 and $20,000 and that is at most 150 percent of the federal poverty guideline. The proposed bill could result in revenue losses to the General Revenue Fund of roughly $23.0 million in FY2019. We note that the language of the proposed bill suggests that this credit may be allowed for only TY2018. If the intent of the bill is to provide this credit for in taxable years beginning on and after January 1, 2018, revenue losses would continue beyond FY2019.
    
    Additional costs incurred by the State Tax Department are expected to be $71,000 in FY2019 and $64,000 for each year thereafter that the Credit applies.
    



Memorandum


    The stated purpose of this bill is to create an earned income tax credit for low income workers; establish procedures for claiming credit; and define terms.
    
    The proposed bill is problematic in that it creates a new article, designated W. Va. Code §11-13D et seq., where an article concerning a tax credit for industrial purposes already exists. Further, the bill does not state against which tax the credit may be used.
    
    As written, the bill is unclear as to which tax year(s) the credit cam be used. Use of the phrase “[f]or the tax year beginning on January 1, 2018” can be interpreted as limiting use of the credit to Tax Year 2018 only. Language in the following section states “[t]the credit available under this article shall be claimed each year,” indicating that the credit is not limited to a single tax year.
    
    The proposed bill uses the term “family unit” with respect to the federal poverty guidelines. These guidelines use the term “number of persons in the household” instead. It is plausible a family unit could be larger or smaller than a household. Further, wording of the phrase “within not more than 90 days” is confusing.
    



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