Date Requested:March 22, 2005
Time Requested:05:05 PM
Agency: State Tax Department
CBD Number: Version: Bill Number: Resolution Number:
2005R1909 Intro SB666
CBD Subject: Limiting Exemptions for Insurance Compan
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 limit the exemptions insurance companies and companies that pay the surcharge imposed by W.Va. Code §23-2C-3(f) have from Business Franchise Tax and Corporation Net Income Tax to the portion of the tax base which is based on income subject to a tax upon premiums.
    
    According to our interpretation, passage of this bill would result in a significant reduction to the General Revenue Fund. The reduction in revenue would be solely attributable to a new exclusion from Corporation Net Income Tax and Business Franchise Tax for self-insured employers who pay the Workers’ Compensation surtax. In addition to this change, the provisions of the bill also extend the current exclusions for Corporation Net Income Tax and Business Franchise Tax that are available to insurance companies to the Workers’ Compensation Mutual Fund and any other companies selling workers’ compensation policies in West Virginia. The final provision limits the current insurance exclusion from Corporation Net Income Tax and Business Franchise Tax to that portion of the companies’ activities that are subject to the Insurance Premiums Tax. Absent the significant revenue decrease associated with the change in exclusions for self-insured employers who pay the Workers’ Compensation surcharge, passage of the bill would result in a increase in revenue of approximately $5 million dollars annually. Due to the lack of an internal effective date the credit would first apply to tax years beginning on or after June 1, 2005.
    
    There would be no additional administrative costs to the Tax Department associated with passage of this bill.
    
    
    

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 stated purpose of this bill is to limit the exemptions insurance companies and companies that pay the surcharge imposed by W.Va. Code §23-2C-3(f) have from Business Franchise Tax and Corporation Net Income Tax to the portion of the tax base which is based on income subject to a tax upon premiums.
    
    According to our interpretation, passage of this bill would result in a significant reduction to the General Revenue Fund. The reduction in revenue would be solely attributable to a new exclusion from Corporation Net Income Tax and Business Franchise Tax for self-insured employers who pay the Workers’ Compensation surtax. In addition to this change, the provisions of the bill also extend the current exclusions for Corporation Net Income Tax and Business Franchise Tax that are available to insurance companies to the Workers’ Compensation Mutual Fund and any other companies selling workers’ compensation policies in West Virginia. The final provision limits the current insurance exclusion from Corporation Net Income Tax and Business Franchise Tax to that portion of the companies’ activities that are subject to the Insurance Premiums Tax. Absent the significant revenue decrease associated with the change in exclusions for self-insured employers who pay the Workers’ Compensation surcharge, passage of the bill would result in a increase in revenue of approximately $5 million dollars annually. Due to the lack of an internal effective date the credit would first apply to tax years beginning on or after June 1, 2005.
    
    There would be no additional administrative costs to the Tax Department associated with passage of this bill.
    


Memorandum
Person submitting Fiscal Note:
Mark Muchow
Email Address:
kpetry@tax.state.wv.us