Date Requested:February 16, 2005
Time Requested:01:58 PM
Agency: State Tax Department
CBD Number: Version: Bill Number: Resolution Number:
2005R775 Intro HB2120
CBD Subject: Charitable Property Partially Used for P
FUND(S)
General Revenue Fund, local government
Sources of Revenue
General Fund,Other Fund local property tax
Legislation creates:
Neither Program nor Fund

Fiscal Note Summary

Effect this measure will have on costs and revenues of state government.

    The stated purpose of this bill is to provide a special method for appraising certain charitable property that is leased for profit, based on its rental payments received.
    
    The implementation of this bill would result in an unknown annual revenue decrease to state and local governments in property tax revenues. The Tax Department does not have sufficient data to enable the quantification of this loss.
    
    There would be a minimal increase in costs to the Tax Department and local governments.

Fiscal Note Detail
Over-all effect
Effect of Proposal Fiscal Year
2005
Increase/Decrease
(use"-")
2006
Increase/Decrease
(use"-")
Fiscal Year
(Upon Full
Implementation)
1. Estmated Total Cost 0 0 0
Personal Services 0 0 0
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
3. Explanation of above estimates (including long-range effect):
    The implementation of this bill would result in an unknown annual revenue decrease to state and local governments in property tax revenues. The Tax Department does not have data readily available indicating facilities used for charitable purposes that are leased out for profit. In addition, the Tax Department does not have rental data which would enable a determination of property values based on discounted rents.
    
    There would be a minimal increase in administrative costs to county assessor’s offices and the Tax Department.


Memorandum
Person submitting Fiscal Note:
Mark Muchow
Email Address:
kpetry@tax.state.wv.us
    West Virginia Code §11-3-9(12) exempts from ad valorem taxation property that is used for charitable purposes and not held or leased out for profit. The bill provides a method for appraising qualified charitable rental property which is defined as real property owned by a charitable organization that would be exempt from ad valorem taxation under Section 11-3-9(12) if it was not being held or leased out for profit. The bill therefore establishes the value of that type of property; however, because the market rental value is to be the value of the property, there would be no independently assessable value of leaseholds.
    
    The bill defines “market rental value” which under the new Section 11-6H-2 is to be the value of certified qualified charitable rental property. Market rental value is the annual rental value “determined by the state tax commissioner”; however, the annual rent paid pursuant to an arms-length lease is presumed to be its market rental value. County assessors are required by West Virginia Code §11-1C-1 et seq. to collect this type of information and make the determination of annual market rental value for a given piece of property. This bill duplicates those activities.
    
    The bill establishes a procedure whereby a person may seek from the Tax Commissioner a designation of property as certified charitable rental property and a determination of the market rental value for that property. This procedure appears to bypass the county assessor who under Article 3 has the first determination as to whether property is exempt. If the designation of property as exempt is made by the Tax Commissioner without involvement of the assessor, the assessor is prevented from carrying out duties required by statute. If the assessor determines that property owned by a charitable organization is not exempt because it is held or leased out for profit, there is no reason for the Tax Commissioner to designate the property as “qualified charitable rental property” because the assessor has already made that decision. There is currently a statutory procedure in place for the review of property values. The inconsistencies in this bill may create confusion and possible conflicts between State and county officials.