Date Requested:March 07, 2005
Time Requested:01:05 PM
Agency: State Tax Department
CBD Number: Version: Bill Number: Resolution Number:
2005R630 Intro SB464
CBD Subject: Business Franchise Repealed
FUND(S)
General Revenue Fund
Sources of Revenue
General Fund
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 gradually repeal the business franchise tax.
    
    Although the initial language indicates a seven-year repeal, this bill as written would presumably eliminate the Business Franchise Tax by a six-year repeal. Passage of this bill would result in a decline in the General Revenue Fund as shown in the table below. Although the tax is abolished for tax years beginning on or after July 1, 2011, current collection patterns indicate some residual collections would occur up to three years later.
    
    General Revenue Fund
    
    FY2006 ($6.0 million)
    
    FY2007 ($20.0 million)
    
    FY2008 ($37.0 million)
    
    FY2009 ($55.0 million)
    
    FY2010 ($75.0 million)
    
    FY2011 ($101.0 million)
    
    FY2012 ($128.0 million)
    
    FY2013 ($137.0 million)
    
    FY2014 ($142.0+ million)
    
    Additional administrative costs to the Tax Department associated with this bill would be roughly $34,000 in the current fiscal year and about $24,000 each fiscal year thereafter due to notifying taxpayers of the changes and programming costs.

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 33,662 23,662 23,662
Personal Services 0 0 0
Current Expenses 22,662 22,662 22,662
Repairs and Alterations 0 0 0
Assets 0 0 0
Other 11,000 1,000 1,000
2. Estimated Total Revenues 0 -6,000,000 -101,000,000
3. Explanation of above estimates (including long-range effect):
    Although the initial language indicates a seven-year repeal, this bill as written would presumably eliminate the Business Franchise Tax by a six-year repeal. Passage of this bill would result in a decline in the General Revenue Fund as shown in the table below. Although the tax is abolished for tax years beginning on or after July 1, 2011, current collection patterns indicate some residual collections would occur up to three years later.
    
    General Revenue Fund
    
    FY2006 ($6.0 million)
    
    FY2007 ($20.0 million)
    
    FY2008 ($37.0 million)
    
    FY2009 ($55.0 million)
    
    FY2010 ($75.0 million)
    
    FY2011 ($101.0 million)
    
    FY2012 ($128.0 million)
    
    FY2013 ($137.0 million)
    
    FY2014 ($142.0+ million)
    
     Additional administrative costs to the Tax Department associated with this bill would be $33,662 in the current fiscal year and $23,662 each fiscal year thereafter due to notifying taxpayers of the changes and programming costs.


Memorandum
Person submitting Fiscal Note:
Mark Muchow
Email Address:
kpetry@tax.state.wv.us
    The stated purpose of this bill is to gradually repeal the business franchise tax.
    
    The bill sets two different tax rates on July 1, 2011, which would be administratively problematic for the Department. In §11-23-6(b)(4), the bill states that “On or after the first day of July, two thousand six, the amount of tax due under this article shall be reduced at the beginning of each tax year by ten hundredths of one percent of the value of the tax base as determined under this article.” The next sentence states that “On or after the first day of July, two thousand eleven, there shall be no tax due under this article.” As a result, the bill reflects both a 0.1 percent Business Franchise rate on July 1, 2011 and a complete repeal of Business Franchise Tax on July 1, 2011.