FISCAL NOTE

Date Requested: January 10, 2018
Time Requested: 02:51 PM
Agency: Tax & Revenue Department, WV State
CBD Number: Version: Bill Number: Resolution Number:
1360 Introduced SB105
CBD Subject:


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; this tax credit is against personal income tax in West Virginia and is awarded over a ten year period; employers are also allowed to claim the credit for employees that qualify for the credit; and in-state high schools, colleges and universities are required to inform and assist students with obtaining the tax credit.
    
    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, eligible employers who make loan payments for eligible employees are eligible for a tax credit. The State Tax Department does not have sufficient information to accurately estimate the amount of credits that would be taken for student loan payments. However, the loss would be substantial. As of Tax Year 2015, West Virginia residents claimed roughly $61.5 million in student loan interest deductions on their federal income tax returns with such deductions applying to their State personal income tax calculation. An approximate ratio of interest-to-principle suggests the impact of total balance remaining on current student loan debt could be roughly $850 million. Further information would be needed to assess the negative impact such a credit would have on revenues.
    
    Additional administrative costs incurred by the State Tax Department would be $41,000 in FY2020 and $35,000 in fiscal years thereafter.
    



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 0 35,000
Personal Services 0 0 35,000
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, eligible employers who make loan payments for eligible employees are eligible for a tax credit. The State Tax Department does not have sufficient information to accurately estimate the amount of credits that would be taken for student loan payments. However, the loss would be substantial. As of Tax Year 2015, West Virginia residents claimed roughly $61.5 million in student loan interest deductions on their federal income tax returns with such deductions applying to their State personal income tax calculation. An approximate ratio of interest-to-principle suggests the impact of total balance remaining on current student loan debt could be roughly $850 million. Further information would be needed to assess the negative impact such a credit would have on revenues.
    
    Additional administrative costs incurred by the State Tax Department would be $41,000 in FY2020 and $35,000 in fiscal years thereafter.
    



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; this tax credit is against personal property tax in West Virginia and is awarded over a ten year period; employers are also allowed to claim the credit for employees that qualify for the credit; and in-state high schools, colleges and universities are required to inform and assist students with obtaining the tax credit.
    
    As written, the proposed bill may place students attending a private institution at a financial disadvantage, since their available credit will be based on the average in-state tuition and mandatory fees for attendance across all accredited two- and four-year colleges and universities in West Virginia. Further, the proposed bill appears to create discriminatory classes in that for those students in science, technology, engineering, and mathematics (STEM) fields are allowed an uncapped refundable credit up to the amount paid.
    
    The term “the department” in proposed W.Va. Code §11-21-25(i) is undefined.
    
    



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