FISCAL NOTE
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 create a nonrefundable tax credit to provide transitional relief to eligible taxpayers who incurred West Virginia net operating loss carryovers prior to the thirty-first day of December, two thousand six, to ensure that the value of such net operating loss carryovers are not impaired by the corporate ne income tax rate changes in two thousand six.
As written, this bill would allow taxpayers subject to the Business and Occupation Tax on electric power generation and/or distribution to claim a nonrefundable credit against their Corporation Net Income Tax liability in an amount equal to one-quarter percent (0.25%) of the taxpayer’s West Virginia net operating loss carryovers that existed on December 31, 2006. For those taxpayers (generally regulated public utilities) that book their net operating loss as an asset equal to the West Virginia Corporation Net Income Tax rate times the net operating loss, passage of this bill would essentially restore the future tax benefit of the net operating loss at the level that existed before the reduction in the tax rate from 9 percent to 8.75 percent, effective for tax years beginning on or after January 1, 2007. According to our interpretation, passage of this bill will offset unintended results of the recently enacted tax rate reduction. That is, a tax benefit earned in prior years will not be reduced due to laws taking effect after the benefit was earned. This bill will result in an unknown future reduction in State revenue.
Additional administrative costs to the State Tax Department associated with this bill would be minimal.
Fiscal Note Detail
| 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 |
Explanation of above estimates (including long-range effect):
As written, this bill would allow taxpayers subject to the Business and Occupation Tax on electric power generation and/or distribution to claim a nonrefundable credit against their Corporation Net Income Tax liability in an amount equal to one-quarter percent (0.25%) of the taxpayer’s West Virginia net operating loss carryovers that existed on December 31, 2006. For those taxpayers (generally regulated public utilities) that book their net operating loss as an asset equal to the West Virginia Corporation Net Income Tax rate times the net operating loss, passage of this bill would essentially restore the future tax benefit of the net operating loss at the level that existed before the reduction in the tax rate from 9 percent to 8.75 percent, effective for tax years beginning on or after January 1, 2007. According to our interpretation, passage of this bill will offset unintended results of the recently enacted tax rate reduction. That is, a tax benefit earned in prior years will not be reduced due to laws taking effect after the benefit was earned. This bill will result in an unknown future reduction in State revenue.
Additional administrative costs to the State Tax Department associated with this bill would be minimal.
Memorandum
Person submitting Fiscal Note: Mark Muchow
Email Address: kpetry@tax.state.wv.us