FISCAL NOTE

Date Requested: January 16, 2018
Time Requested: 03:06 PM
Agency: Tax & Revenue Department, WV State
CBD Number: Version: Bill Number: Resolution Number:
2007 Originating SB300
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 five-year tax credits for businesses locating on post coal mine sites. The bill defining terms. The bill sets eligibility requirements for the tax credit. The bill establishes amount of tax credit allowed. The bill establishes how the credit may be applied. The bill provides rule-making ability.
    
    Passage of this bill would result in a tax credit in the amount of fifty percent of a business entity’s capital expenditures at the post-mine site for a period of five years during which the entity’s principal place of business is located on a post coal mine site within this State. The entity must employ at least ten full-time employees. According to the provisions of this bill, “principal place of business” means the physical location at which the primary executive and administrative headquarters of the entity is located and from which the management of overall operations of the entity is directed.
    
    We are unable to quantify the revenue loss associated with passage of this bill. The term “post coal mine site” means property that has remained undeveloped for business purposes subsequent to coal mining operations on property within the bonded area of the last issued coal mine permit. These post-mine sites would presumably include both surface mining and underground mining properties. Some post-mine sites are currently being developed without state tax preferences and other sites are being developed with some form of State aid including both tax preferences and government financing programs. Those benefitting from alternative State economic development programs would also benefit from this additional tax preference. The provisions of the bill require the employment of ten full-time employees who are required to work thirty-two hours per week or more, but does not specify whether the location of such employment occurs within West Virginia or elsewhere. It appears that no new employment is required for entitlement to this tax credit.
    
    Additional administrative costs incurred by the State Tax Department would be $15,000 in FY2020 and $5,000 per year for 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 5,000
Personal Services 0 0 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):


    Passage of this bill would result in a tax credit in the amount of fifty percent of a business entity’s capital expenditures at the post-mine site for a period of five years during which the entity’s principal place of business is located on a post coal mine site within this State. The entity must employ at least ten full-time employees. According to the provisions of this bill, “principal place of business” means the physical location at which the primary executive and administrative headquarters of the entity is located and from which the management of overall operations of the entity is directed.
    
    We are unable to quantify the revenue loss associated with passage of this bill. The term “post coal mine site” means property that has remained undeveloped for business purposes subsequent to coal mining operations on property within the bonded area of the last issued coal mine permit. These post-mine sites would presumably include both surface mining and underground mining properties. Some post-mine sites are currently being developed without state tax preferences and other sites are being developed with some form of State aid including both tax preferences and government financing programs. Those benefitting from alternative State economic development programs would also benefit from this additional tax preference. The provisions of the bill require the employment of ten full-time employees who are required to work thirty-two hours per week or more, but does not specify whether the location of such employment occurs within West Virginia or elsewhere. It appears that no new employment is required for entitlement to this tax credit.
    
    Additional administrative costs incurred by the State Tax Department would be $15,000 in FY2020 and $5,000 per year for fiscal years thereafter.
    



Memorandum


    The stated purpose of this bill is to create five-year tax credits for businesses locating on post coal mine sites. The bill defining terms. The bill sets eligibility requirements for the tax credit. The bill establishes amount of tax credit allowed. The bill establishes how the credit may be applied. The bill provides rule-making ability.
    
    The bill does not provide definitions for “undeveloped for business purposes”, “coal mining operations” and “business entity”.
    
    The credit is applied against Corporation Net Income Tax and Personal Income Tax in that order. Few if any taxpayers would be subject to both. As written, this is a tax credit for specified businesses entities that employee at least ten full time employees and locate its primary place of business on a post coal mine site in this State. It is not clear if sole proprietors would qualify.
    
    It would be difficult for the Tax Department to administer the bill as written.
    



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