Date Requested:January 24, 2007
Time Requested:04:35 PM
Agency: State Tax Department
CBD Number: Version: Bill Number: Resolution Number:
2007R0744 Introduced HB2475
CBD Subject: Income Tax Exemption for Correctional Retirees
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 reduce the State Income Tax for State Correctional Retirees by exempting state correctional officers’ retirement income from the federal adjusted gross income for calculating adjusted gross income for state income tax purposes.
    
    According to our interpretation, passage of this bill may provide a broader application of the exemption for retirement income than was indicated in the stated purpose. The State Tax Department does not have access to the information necessary to accurately estimate the potential reduction in the General Revenue Fund that would result from passage of this bill. However, the possible broad application of the exemption could result in a significant revenue reduction. There is no separate retirement fund for State correctional retirees. Additional litigation over disparate tax treatment of retirees would be expected.
    
    Assuming that all returns with the proposed exemption for taxable years beginning after December 31, 2006 would be accepted as filed, there would be no additional administrative costs to the State Tax Department associated with passage of this bill. However, application of the exemption to taxable years prior to 2007 would result in significant administrative costs for the processing of refunds.
    
Fiscal Note Detail
Over-all effect
Effect of Proposal Fiscal Year
2007
Increase/Decrease
(use"-")		 2008
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 reduce the State Income Tax for State Correctional Retirees by exempting state correctional officers’ retirement income from the federal adjusted gross income for calculating adjusted gross income for state income tax purposes.
    
    According to our interpretation, passage of this bill may provide a broader application of the exemption for retirement income than was indicated in the stated purpose. The State Tax Department does not have access to the information necessary to accurately estimate the potential reduction in the General Revenue Fund that would result from passage of this bill. However, the possible broad application of the exemption could result in a significant revenue reduction. There is no separate retirement fund for State correctional retirees. Additional litigation over disparate tax treatment of retirees would be expected.
    
    Assuming that all returns with the proposed exemption for taxable years beginning after December 31, 2006 would be accepted as filed, there would be no additional administrative costs to the State Tax Department associated with passage of this bill. However, application of the exemption to taxable years prior to 2007 would result in significant administrative costs for the processing of refunds.
    

Memorandum
Person submitting Fiscal Note:
Mark Muchow
Email Address:
kpetry@tax.state.wv.us
    The stated purpose of this bill is to reduce the State Income Tax for State Correctional Retirees by exempting state correctional officers’ retirement income from the federal adjusted gross income for calculating adjusted gross income for state income tax purposes.
    
    The proposed change in W. Va. Code §11-21-12(c)(6) refers to “any Retirement System for State Correctional Officers.” There does not appear to be a currently existing retirement system with that name. Since correctional officers are likely included in the Public Employees Retirement System, it is possible that it could be interpreted the exemption applies to all income in the form of pensions and annuities paid by the Public Employees Retirement System. The proposed change was inserted without a specified effective date, thus, it is possible the reducing modification would have a retroactive effect.