H. B. 4351
(By Delegates Guthrie, Campbell,
L. Phillips, Poore, Young, Skinner,
Sponaugle, Craig, Fragale, Skaff and Caputo)
[Introduced January 28, 2014; referred to the
Committee on Finance.]
A BILL to amend and reenact §11-10-5s of the Code of West Virginia, 1931, as amended; and to amend said code by adding thereto a new article, designated §11-10F-1, §11-10F-2, §11-10F-3, §11-10F-4, §11-10F-5, §11-10F-6, §11-10F-7, §11-10F-8, §11-10F-9, §11-10F-10 and §11-10F-11, all relating to creating a review process for tax expenditures; defining terms related to tax expenditures; addressing the expiration of current and future tax expenditures; creating rules for implementing tax expenditures; creating rules for renewing tax expenditures; creating a process for appraising tax expenditures; requiring the Governor to provide an annual report on tax expenditures; creating the Tax Expenditure Sunset Review Committee; setting up a process for committee hearings; requiring an annual committee report; and providing procedures for reviewing tax expenditures.
Be it enacted by the Legislature of West Virginia:
That §11-10-5s of the Code of West Virginia, 1931, as amended, be amended and reenacted; and that said code be amended by adding thereto a new article, designated §11-10F-1, §11-10F-2, §11-10F-3, §11-10F-4, §11-10F-5, §11-10F-6, §11-10F-7, §11-10F-8, §11-10F-9, §11-10F-10 and §11-10F-11, all to read as follows:
ARTICLE 10. WEST VIRGINIA TAX PROCEDURE AND ADMINISTRATION ACT.
§11-10-5s. Disclosure of certain taxpayer information.
(a) Purpose. – The Legislature hereby recognizes the importance of confidentiality of taxpayer information as a protection of taxpayers' privacy rights and to enhance voluntary compliance with the tax law. The Legislature also recognizes the citizens' right to accountable and efficient state government. To accomplish these ends, the Legislature hereby creates certain exceptions to the general principle of confidentiality of taxpayer information.
(b) Exceptions to confidentiality. –
(1) Notwithstanding any provision in this code to the contrary, the Tax Commissioner shall publish in the State Register the name and address of every taxpayer and the amount, by category, of any credit asserted on a tax return under articles thirteen-c, thirteen-d, thirteen-e, thirteen-f, thirteen-g, thirteen-q, thirteen-r and thirteen-s of this chapter and article one, chapter five-e of this code. The categories by dollar amount of credit received are as follows:
(A) More than $1 but not more than $50,000;
(B) More than $50,000 but not more than $100,000;
(C) More than $100,000 but not more than $250,000;
(D) More than $250,000 but not more than $500,000;
(E) More than $500,000 but not more than $1 million; and
(F) More than $1 million.
(2) Notwithstanding any provision in this code to the contrary, the Tax Commissioner shall publish in the State Register the following information regarding a compromise of a pending civil tax case that occurs on or after the effective date of this section in which the Tax Commissioner is required to seek the written recommendation of the Attorney General and the Attorney General has not recommended acceptance of the compromise or when the Tax Commissioner compromises a civil tax case for an amount that is more than $250,000 less than the assessment of tax owed made by the Tax Commissioner:
(A) The names and addresses of taxpayers that are parties to the compromise;
(B) A summary of the compromise;
(C) Any written advice or recommendation rendered by the Attorney General regarding the compromise; and
(D) Any written advice or recommendation rendered by the Tax Commissioner's staff.
Under no circumstances may the tax return of the taxpayer or any other information which would otherwise be confidential under other provisions of law be disclosed pursuant to the provisions of this subsection.
(3) Notwithstanding any provision in this code to the contrary, the Tax Commissioner may disclose any relevant return information to the prosecuting attorney for the county in which venue lies for a criminal tax offense when there is reasonable cause, based upon and substantiated by the return information, to believe that a criminal tax law has been or is being violated.
(4) Notwithstanding any provision in this code to the contrary, the Tax Commissioner may enter into written exchange of information agreements with the commissioners of Labor, Employment Security, Alcohol Beverage Control and Workers' Compensation Insurance and the Executive Director of Workforce West Virginia to disclose and receive timely return information. The Tax Commissioner may promulgate propose rules pursuant to chapter twenty-nine-a of this code regarding additional agencies with which written exchange of information agreements may be sought but may not promulgate emergency rules regarding these additional agencies. The agreements shall be published in the State Register and are only for the purpose of facilitating premium collection, tax collection and facilitating licensure requirements directly enforced, administered or collected by the respective agencies. The provisions of this subsection do not preclude or limit disclosure of tax information authorized by other provisions of this code. Confidential return information so disclosed remains confidential in the other agency to the extent provided by section five-d of this article and by other applicable federal or state laws.
(5) Notwithstanding any provision of this code to the contrary, the Tax Commissioner may enter into a written agreement with the State Treasurer to disclose to the State Treasurer the following business registration information:
(A) The names, addresses and federal employer identification numbers of businesses which have registered to do business in West Virginia; and
(B) The type of business activity and organization of those businesses.
Disclosure of this information shall begin as soon as practicable after the effective date of this subsection and may be used only for the purpose of recovery and disposition of unclaimed property in accordance with the provisions of article eight, chapter thirty-six of this code. The provisions of this subsection do not preclude or limit disclosure of tax information authorized by other provisions of this code. Confidential return information disclosed hereunder or thereunder remains confidential as provided by section five-d of this article and by other applicable federal or state laws.
(6) Notwithstanding any provision of this code to the contrary, the Tax Commissioner may disclose to the Attorney General any tax return, report, declaration or tax return information, including the identity of a taxpayer, that relates to any taxpayer's sales of tobacco products subject to state excise tax or to such sales of tobacco products that were manufactured or imported by a nonparticipating manufacturer as defined in section two, article nine-d of chapter sixteen of this code, for the purpose of enforcement of articles nine-b and nine-d, chapter sixteen of this code, or for the purpose of representing the State of West Virginia in any arbitration or litigation arising under the Tobacco Master Settlement Agreement or articles nine-b and nine-d, chapter sixteen of this code. Nothing herein shall authorize the disclosure of any taxpayer's income tax returns or business franchise tax returns, or authorize the use of the disclosed information for any purpose other than as specified herein.
(7) Notwithstanding any provision of this code to the contrary, the Attorney General, upon the consent of the Tax Commissioner, may disclose information provided by the Tax Commissioner under the authority of subdivision six of this subsection as follows:
(A) To a party or parties participating in arbitration or litigation arising under the terms of the Tobacco Master Settlement Agreement; or
(B) To a judge, arbitrator, administrative law judge, legal counsel or other officer, official or participant in proceedings for or relating to administration, implementation, enforcement, defense or settlement and arbitration of the provisions of articles nine-b and nine-d of chapter sixteen of this code.
(C) Notwithstanding any provision of this code to the contrary, the Attorney General may introduce into evidence or disclose the information in the arbitration or litigation proceedings or an action for administration, implementation, enforcement, defense or settlement and arbitration of the provisions of articles nine-b and nine-d of chapter sixteen of this code.
(D) This subdivision does not apply to a document, tax return or other information subject to disclosure restrictions imposed by federal statute or regulation.
(E) Any information disclosed pursuant to this subdivision is subject to the following restrictions:
(i) Specific identifiers shall first be redacted or otherwise removed from any such information that was reported by a taxpayer who is not a party to any proceeding, arbitration or litigation; and
(ii) No such disclosure shall may be made unless it is subject to a protective order or agreement restricting the use of the disclosed information to such proceeding, arbitration or litigation;
(F) For purposes of this section, “specific identifiers” shall mean means the name, address, telephone number, taxpayer identification number, logo, trademark or other markings unique to the taxpayer.
(8) Notwithstanding any provision of this code to the contrary, the Tax Commissioner may enter into a written exchange agreement with the Auditor to disclose certain taxpayer information to facilitate participation in the following:
(A) The federal offset program authorized by section thirty-seven, article one, chapter fourteen of this code; and
(B) The state offset program, as authorized by subsection (h), section thirty-seven, article one, chapter fourteen of this code, for the purpose of protecting return information as defined in section five-d, article ten of this chapter and collecting debts, fees and penalties due the state, its departments, agencies or institutions.
(C) The taxpayer information exchanged or disclosed pursuant to this subdivision is to be used only for the purpose of facilitating the collection of unpaid and delinquent tax liabilities through offset against state payments due and owing to taxpayers, vendors and contractors providing goods or services to the state, its departments, agencies or institutions.
(D) The Tax Commissioner may disclose the following taxpayer information:
(iii) Social Security number or tax identification number;
(iv) Amount of the tax liability; and
(v) Any other information required by the written agreement.
(E) Disclosure of this information begins as soon as practicable after the effective date of this subdivision.
(F) The provisions of this section do not preclude or limit disclosure of tax information authorized by other provisions of this code. Any confidential return information disclosed hereunder or thereunder remains confidential to the extent provided by section five-d of this article and by other applicable federal or state laws.
(c) Tax expenditure reports. – Beginning on January 15, 1992, and every January 15 thereafter, the Governor shall submit to the President of the Senate and the Speaker of the House of Delegates a tax expenditure report. This report shall expressly identify all tax expenditures. Within three-year cycles, the reports shall be considered together to analyze all tax expenditures by describing the annual revenue loss and benefits of the tax expenditure based upon information available to the Tax Commissioner. For purposes of this section, the term "tax expenditure" means a provision in the tax laws administered under this article including, but not limited to, exclusions, deductions, tax preferences, credits and deferrals designed to encourage certain kinds of activities or to aid taxpayers in special circumstances. The Tax Commissioner shall promulgate rules setting forth the procedure by which he or she will compile the reports and setting forth a priority for the order in which the reports will be compiled according to type of tax expenditure.
(d) (c) Federal and state return information confidential. – Notwithstanding any other provisions of this section or of this code, no return information made available to the Tax Commissioner by the Internal Revenue Service or department or agency of any other state may be disclosed to another person in a manner inconsistent with the provisions of Section 6103 of the Internal Revenue Code of 1986, as amended, or of the other states' confidentiality laws.
ARTICLE 10F. Tax Expenditure Sunset and Review Act.
§11-10F-1. Short title.
This article may be cited as the “Tax Expenditure Sunset and Review Act.”
(a) “Committee” means the Tax Expenditure Sunset Review Committee created by this article.
(b) “Tax expenditure" means any tax provision which exempts certain persons, income, goods, services, or property from the impact of established taxes, including, but not limited to those devices known as tax deductions, tax allowances, tax exclusions, tax credits and tax exemptions.
§11-10F-3. Expiration of future tax expenditures.
A tax expenditure created on or after July 1, 2014 expires with the end of the tax year five years following the year in which it was created, unless, before its expiration date, it is renewed by the Legislature. A tax expenditure does not apply to the taxable year that begins in the year the tax expenditure expires.
§11-10F-4. Tax expenditure creation rules.
Any provision of this code creating a tax expenditure shall specify:
(1) The purpose served by the tax expenditure;
(2) The date on which the tax expenditure expires;
(3) The class of taxpayers that will benefit from the tax expenditure; and
(4) Methods to be used to appraise the tax expenditure's effectiveness in serving its purpose.
§11-10F-5. Renewing tax expenditures.
(a) The Legislature may renew a tax expenditure by enacting an act that:
(1) Addresses only that subject;
(2) Fulfills the criteria specified in section four of this article, including specifying a new expiration date for the tax expenditure; and
(3) Improves the tax expenditure's effectiveness in serving its purpose, redefines the tax expenditure's purpose to serve or better serve a public need, improves the tax expenditure's effectiveness in promoting economic growth and development, reduces the amount of revenue lost as a result of the tax expenditure or reenacts the tax expenditure to continue it without change.
(b) A repeal of a tax expenditure that has expired may not be combined in an act renewing a tax expenditure.
§11-10F-6. Appraisal of tax expenditures.
Not later than July 1 of a tax expenditure’s third year, the Tax Commissioner shall notify the committee of the tax expenditure's expiration. The committee shall then prepare a schedule for appraising the tax expenditure so that the appraisal and the report required under section nine of this article is completed no later than July 1 of the calendar year before the tax expenditure expires. The schedule shall provide for a public hearing on the tax expenditure. The committee chair shall send a copy of the schedule to the Tax Commissioner and make the schedule available to the public.
§11-10F-7. Governor’s report on tax expenditures.
(a) No later than July 1 of each year, the Governor shall submit to the committee a tax expenditure report addressing each of the state’s tax expenditures. The report shall:
(1) Explain each tax expenditure's purpose;
(2) Express an opinion as to the public need for each tax expenditure;
(3) Express an opinion as to whether each tax expenditure has been impeded or enhanced by existing statutes;
(4) Describe how, if at all, each tax expenditure promotes economic growth and development;
(5) Provide an estimate of the amount of tax revenue lost each fiscal year as a result of each tax expenditure;
(6) Express an opinion as to whether each tax expenditure should be allowed to expire or be renewed; and
(7) Contain any other information relevant to the committee's appraisal of each tax expenditure.
(b) The committee shall hold hearings on any tax expenditures required of it under section six of this article. The committee may by a majority vote choose to hold hearings on any other tax expenditures covered in the Governor’s report.
§11-10F-8. Creation of the Sunset Review Committee.
(a) There is created the Tax Expenditure Sunset Review Committee composed of nine members. The President of the Senate, within fifteen days after the start of the first regular session of the 2015 Legislature shall appoint three members of the Senate to the committee, not more than two of whom are members of the same political party. The Speaker of the House of Delegates, within fifteen days after the start of the first regular session of the 2015 Legislature, shall appoint three members of the House of Delegates to the committee, not more than two of whom are members of the same political party. The Governor, within fifteen days after the start of the first regular session of the 2015 Legislature shall appoint three members to the committee.
(b) Legislative members of the committee hold office until their successors are appointed or until they cease to be members of the Senate or House of Delegates, whichever occurs first. Members appointed by the Governor hold office for terms ending on December 31 of each even-numbered year. A member appointed by the Governor continues to hold office after the expiration of the member's term until the member's successor is appointed, or until forty-five days have elapsed, whichever occurs first.
(c) Within thirty days of all members of the committee being appointed, the committee shall meet and elect from its membership a chair and vice-chair. Members shall select a new chair and vice-chair after new committee members are appointed in succeeding even-numbered years.
(d) A vacancy on the committee shall be filled in the same manner as the original appointment. A member appointed to fill a vacancy occurring before the expiration of the term to which the member's predecessor was appointed holds office for the remainder of the unexpired term.
(e) Members of the committee serve without compensation, but shall be reimbursed for any expenses they incur in the performance of the committee’s duties.
(f) The committee shall meet as often as necessary to perform its duties.
(g) Five members of the committee constitutes a quorum. So long as a quorum is present, a vacancy on the committee does not impair the ability of the remaining members to perform the committee's duties.
§11-10F-9. Sunset Review Committee hearings.
At a time after July 1 of every year and at a place inside the State Capitol, the committee shall hold a public hearing on all tax expenditures addressed in the Governor’s report set forth in section seven of this article. At the hearing, any person may present testimony or tangible evidence relevant to the tax expenditures being considered. After the hearing, the committee shall appraise the tax expenditures. In making its appraisals, the committee shall consider the Governor’s report and any knowledge gleaned from the hearing, but is not limited to these sources. Upon the committee's request, the State Tax Department and any other state agency shall provide the committee with any information in its possession the committee requires to appraise the tax expenditure. The Joint Committee on Government and Finance shall provide drafting and clerical support to the committee.
§11-10F-10. Sunset Review Committee report.
(a) No later than January 1 of the year following of its hearings appraising tax expenditures, the committee shall prepare an annual report for release that contains:
(1) A statement of the purpose served by each tax expenditure;
(2) An appraisal of the tax expenditures’ effectiveness in serving their various purposes;
(3) An evaluation of whether each tax expenditures’ purpose serves a public need;
(4) An evaluation of whether other statutes have enhanced or impeded each tax expenditures’ effectiveness in serving its purpose;
(5) An appraisal of whether each tax expenditure promotes economic growth and development;
(6) An estimate of the amount of revenue lost each fiscal year from each tax expenditure;
(7) A recommendation as to whether the tax expenditure should be allowed to expire or be renewed; and
(8) Any other information the committee considers relevant.
(b) In an appendix to its report, the committee shall include a draft of a bill that would implement its recommendation and, if the tax expenditure is recommended for renewal, complies with section five of thus article. If the committee recommends renewal of the tax expenditure, the appendix shall include a commentary to the bill draft explaining how renewal of the tax expenditure complies with section five of this article.
(c) The committee shall provide a copy of the report to the Governor, the Tax Commissioner and each member of the Legislature. The report is a public record.
§11-10F-11. Procedures for reviewing tax expenditures.
On or before January 15, 2015, the Governor shall prepare a list of the tax expenditures in existence on January 1, 2015, and make the list public. Upon the appointment of the committee, it shall schedule a hearing on all tax expenditures existing as of January 1, 2015. The committee shall then prepare a report appraising all the existing tax expenditures for release no later than January 1, 2016.
NOTE: The purpose of this bill is to promote transparency in the tax expenditure process, and to provide a review process for tax expenditures.
Strike-throughs indicate language that would be stricken from the present law, and underscoring indicates new language that would be added.
Article 10F is new; therefore, it has been completely underscored.