Date Requested:February 16, 2005
Time Requested:05:02 PM
Agency: State Tax Department
CBD Number: Version: Bill Number: Resolution Number:
2005R228 Intro SB201
CBD Subject: Long Term Care Tax Credit
FUND(S)
General Revenue Fund
Sources of Revenue
General Fund
Legislation creates:
A New Program

Fiscal Note Summary

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

    The stated purpose of this bill is to establish a tax credit of up to one hundred dollars and an itemized deduction of up to one thousand dollars for premiums paid for long-term care insurance.
    
    As written, this bill provides for a tax credit of up to $100 of any payment during the taxable year for premiums for long-term care insurance policy as defined by West Virginia Code §33-15A-4. The remaining amount of the premiums, up to $1,000, may be treated as a deduction from taxable income. According to our interpretation, passage of this bill would result in a reduction in the State General Revenue fund of approximately $8.4 million in Fiscal Year 2006 and $1.4 million in Fiscal Year 2007 and each year after that. The revenue loss is greater in Fiscal Year 2006 because the tax changes would be retroactive to January 1, 2000.
    
    Due to the bill’s retroactive application, the Tax Department would incur additional administrative costs of roughly $47,000 in fiscal year 2006.

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 47,060 0
Personal Services 0 34,560 0
Current Expenses 0 6,500 0
Repairs and Alterations 0 0 0
Assets 0 6,000 0
Other 0 0 0
2. Estimated Total Revenues 0 -8,400,000 -1,400,000
3. Explanation of above estimates (including long-range effect):
    As written, this bill provides for a tax credit of up to $100 of any payment during the taxable year for premiums for long-term care insurance policy as defined by West Virginia Code §33-15A-4. The remaining amount of the premiums, up to $1,000, may be treated as a deduction from taxable income. According to our interpretation, passage of this bill would result in a reduction in the State General Revenue fund of approximately $8.4 million in Fiscal Year 2006 and $1.4 million in Fiscal Year 2007 and each year after that. The revenue loss is greater in Fiscal Year 2006 because the tax changes would be retroactive to January 1, 2000.
    
    Due to the bill’s retroactive application, the Tax Department would incur additional administrative costs of roughly $47,000 in fiscal year 2006.


Memorandum
Person submitting Fiscal Note:
Mark Muchow
Email Address:
kpetry@tax.state.wv.us
    The stated purpose of this bill is to establish a tax credit of up to one hundred dollars and an itemized deduction of up to one thousand dollars for premiums paid for long-term care insurance.
    
    The bill replaces a reducing modification with an itemized deduction which would be unique in Article 21. It is unclear how or whether the difference in terminology would require different treatment for an itemized deduction than for a decreasing modification. It is also unclear how an itemized deduction would be administered when both a husband and wife are required to file returns but do not file joint returns.