FISCAL NOTE
FUND(S):
3041
Sources of Revenue:
Special Fund
Legislation creates:
Neither Program nor Fund
Fiscal Note Summary
Effect this measure will have on costs and revenues of state government.
This bill would allow banks to organize as limited liability companies. They are currently only allowed to organize as corporations, unlike any other industry or business which has an option to choose a different structure.
If passed, the bill would have no impact at all on funding for the Division of Banking. As to overall state revenue, we consulted a representative of the Tax Division and were told that any impact would be very difficult to quantify, for several reasons, but that any impact would likely be "small". (See Memorandum section below.)
Fiscal Note Detail
| 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 |
Explanation of above estimates (including long-range effect):
These numbers are for the Division of Banking and are based upon an assumption that passage of the bill will have no impact on the number of state-chartered banks operating in West Virginia at any given time or upon the amount of assets held by those banks. As a special revenue agency, the Division of Banking receives its funding from assessments and fees paid by the entities it regulates. The assessment of banks is based upon the amount of assets held by each bank and that amount should not be impacted by the organizational structure of the bank.
Memorandum
The reasons why the impact on state revenue is difficult to gauge include:
1.) Even if the bill passes, the IRS would have to revise its rule that state banks must be taxed as corporations even if they are LLCs.
2.) It is impossible to predict how many de novo banks would form in the coming years. We would expect that the LLC form of organization would be most attractive to a de novo bank rather than a more mature bank with a significant, established shareholder base.
3.) It is impossible to predict how many existing banks would elect to change from the corporate structure to an LLC, especialy since the Subchapter S rules have been revised to make it easier for banks with a limited number of shareholders to convert to Sub S status and
obtain the same pass-through tax benefits as an LLC.
Person submitting Fiscal Note: Bob Lamont
Email Address: blamont@wvdob.org