Date Requested:February 21, 2005
Time Requested:02:16 PM
Agency: State Tax Department
CBD Number: Version: Bill Number: Resolution Number:
2005R891 Intro HB2554
CBD Subject: Small Business Development Incentive Pro
FUND(S)
General Revenue Fund, State Road Fund, Selected Special Revenue Funds
Sources of Revenue
General Fund,Other 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 create the "Small Business Development Incentive Program for Internal Growth Act.” The bill exempts certain small businesses from paying business-related taxes if they qualify as start up businesses with limited resources.
    
    According to our interpretation, passage of this bill would result in some unquantifiable decrease in the General Revenue Fund and in potentially any State fund into which tax collections are deposited (e.g., State Road Fund, Medicaid State Share Fund, Special Medical School Fund). The bill provides that qualifying small businesses would receive an exemption from business related taxes for the business’ first five years, or until the business employed more than 50 persons. A qualifying small business is one in which the owner or owners have been residents of the State for one year, the owner has no other out-of-state business locations involving similar businesses, the business has 50 or fewer employees and no other businesses of its nature exists in the county or municipality where the business is to locate. Business related taxes exclude the Personal Income Tax, Workers’ Compensation premiums and Unemployment Compensation premiums.
    
    Passage of this bill would result in significant administrative costs to the Tax Department.

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):
    According to our interpretation, passage of this bill would result in some unquantifiable decrease in the General Revenue Fund and potentially any State fund into which tax collections are deposited (e.g., State Road Fund, Medicaid State Share Fund, Special Medical School Fund). The bill provides that qualifying small businesses would receive an exemption from business related taxes for the business’ first five years, or until the business employed more than 50 persons. A qualifying small business is one in which the owner or owners have been residents of the State for one year, the owner has no other out-of-state business locations involving similar businesses, the business has 50 or fewer employees and no other businesses of its nature exists in the county or municipality where the business is to locate. Business related taxes exclude the Personal Income Tax, Workers’ Compensation premiums and Unemployment Compensation premiums.
    
    Passage of this bill would result in significant administrative costs to the Tax Department. Additional administrative costs for the Tax Department would be attributable to tax schedule form development, postage and tax form processing costs, including the tracking of qualified tax exempt businesses. Also, significant personnel resources may be required to determine whether businesses applying for the exemption meet the specified qualifications.


Memorandum
Person submitting Fiscal Note:
Mark Muchow
Email Address:
kpetry@tax.state.wv.us
    The stated purpose of this bill is to create the "Small Business Development Incentive Program for Internal Growth Act.” The bill exempts certain small businesses from paying business-related taxes if they qualify as start up businesses with limited resources.
    
    The definition of “business related tax” includes any tax “required by the Department of Revenue” except Personal Income Tax. Workers’ Compensation premiums and Unemployment Compensation premiums. The State Tax Department administers certain taxes as required by the West Virginia Code. The collections of Workers’ Compensation premiums and Unemployment Compensation premiums are administered by other State agencies.
    
    The bill also provides that the “commissioner of the department of revenue” is required to propose legislative rules to implement the article. The State Tax Division (generally referred to as the State Tax Department) is a subdivision of the Department of Revenue and is administered by the Tax Commissioner.