Date Requested:March 25, 2005
Time Requested:12:18 PM
Agency: State Tax Department
CBD Number: Version: Bill Number: Resolution Number:
2005R2025 Intro HB3232
CBD Subject: Non-Resident Technical Change
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 make a technical change in the computation of personal income tax on income of nonresidents and part-year residents. Currently, tentative tax is multiplied by a fraction - West Virginia source income divided by federal adjusted gross income (AGI). Using federal AGI in the denominator causes an unreasonable tax liability for some taxpayers who have modifications to their federal AGI. The bill changes the denominator of the fraction from federal AGI to West Virginia AGI, which is federal AGI after the modifications required by W. Va. Code §§11-21-12 are made. This change will reduce the tax liability of nonresident and part-year residents who have income from sources not included in their federal AGI but included in their West Virginia AGI.
    
    As currently written, passage of this bill will increase General Revenue Fund collections by roughly $1.1 million per year beginning in FY 2006 and would cause an unreasonable tax liability for some taxpayers. However, if technical changes are made to the bill to properly accomplish its stated purpose to eliminate situations where an unreasonable tax liability is imposed on some taxpayers as a result of the statutory formula, the passage of this bill would result in no change in revenue.
    
    There would be no additional administrative costs for 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 1,100,000 1,100,000
3. Explanation of above estimates (including long-range effect):
    Passage of this bill would make a technical change in the computation of personal income tax on income of nonresidents and part-year residents. Currently, tentative tax is multiplied by a fraction - West Virginia source income divided by federal adjusted gross income (AGI). Using federal AGI in the denominator causes an unreasonable tax liability for some taxpayers who have modifications to their federal AGI. The bill changes the denominator of the fraction from federal AGI to West Virginia AGI, which is federal AGI after the modifications required by W. Va. Code §11-21-12 are made. This change will reduce the tax liability of nonresident and part-year residents who have income from sources not included in their federal AGI but included in their West Virginia AGI.
    
    As currently written, passage of this bill will increase General Revenue Fund collections by roughly $1.1 million per year beginning in FY 2006 and would cause an unreasonable tax liability for some taxpayers. However, if technical changes are made to the bill to properly accomplish its stated purpose to eliminate situations where an unreasonable tax liability is imposed on some taxpayers as a result of the statutory formula, the passage of this bill would result in no change in revenue.
    
    There would be no additional administrative costs for the Tax Department associated with passage of this bill.


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