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 tax credit on expenditures directly related to the production of film or commercials upon approval of the West Virginia Development Office.
As written, this bill would permit eligible film production companies to claim a tax credit in an amount equaling up to 31 percent of direct production and post production expenditures made in West Virginia. For eligible expenditures occurring on or after December 31, 2007 and for tax years beginning prior to January 1, 2010, the base credit percentage is 27 percent with an additional 4 percent available if certain hiring levels are obtained. For tax years beginning on of after January 1, 2010, the base credit percentage is 22 percent with an additional 4 percent available if certain hiring levels are obtained. Eligible film production companies would be able to apply the credit against Business Franchise Tax, Corporation Net Income Tax, and Personal Income Tax liabilities. The eligible claimants would be able to receive a refund of any credit amount in excess of tax liability. Additionally, the bill provides that no more than $10 million in credit be allocated in any tax year. According to our interpretation and based upon current levels of film production activity in West Virginia, passage of this bill would result in a decline in the General Revenue Fund of roughly $50,000 per year. Assuming that passage of this credit would result in increased film production activity in the State, the cost of the credit above $50,000 per year may be largely offset by revenue from taxes levied on secondary activities (e.g., wages of individual workers, lodging and meals, etc.).
Additional administrative costs to the State Tax Department would be approximately $60,000 in Fiscal Year 2008 and approximately $50,000 per year thereafter.
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 |
60,000 |
50,000 |
| Personal Services |
0 |
50,000 |
50,000 |
| Current Expenses |
0 |
0 |
0 |
| Repairs and Alterations |
0 |
0 |
0 |
| Assets |
0 |
10,000 |
0 |
| Other |
0 |
0 |
0 |
| 2. Estimated Total Revenues |
0 |
0 |
0 |
Explanation of above estimates (including long-range effect):
Passage of this bill would create a tax credit on expenditures directly related to the production of film or commercials upon approval of the West Virginia Development Office. As written, this bill would permit eligible film production companies to claim a tax credit in an amount equaling up to 31 percent of direct production and post production expenditures made in West Virginia. For eligible expenditures occurring on or after December 31, 2007 and for tax years beginning prior to January 1, 2010, the base credit percentage is 27 percent with an additional 4 percent available if certain hiring levels are obtained. For tax years beginning on of after January 1, 2010, the base credit percentage is 22 percent with an additional 4 percent available if certain hiring levels are obtained. Eligible film production companies would be able to apply the credit against Business Franchise Tax, Corporation Net Income Tax, and Personal Income Tax liabilities. The eligible claimants would be able to receive a refund of any credit amount in excess of tax liability. Additionally, the bill provides that no more than $10 million in credit be allocated in any tax year. According to our interpretation and based upon current levels of film production activity in West Virginia, passage of this bill would result in a decline in the General Revenue Fund of roughly $50,000 per year. Assuming that passage of this credit would result in increased film production activity in the State, the cost of the credit above $50,000 per year may be largely offset by revenue from taxes levied on secondary activities (e.g., wages of individual workers, lodging and meals, etc.).
Additional administrative costs to the State Tax Department would be approximately $60,000 in Fiscal Year 2008 and approximately $50,000 per year thereafter. The requirement that the State Tax Commissioner prepare a tax credit review and accountability report evaluating the cost effectiveness of the Film Industry Investment Act will require the employment of one additional Tax Analyst. Also, expenditures would be made to purchase computer and office equipment for the new employee.
Memorandum
The stated purpose of this bill is to create a tax credit on expenditures directly related to the production of film or commercials upon approval of the West Virginia Development Office.
As written, the bill provides for two potential additional credit percentages based upon hiring levels of West Virginia residents. However, the bill does not provide a definition of “resident” for use in determining if the required levels have been met. Also, it appears that the two additional credit percentage criteria (one numeric and on percentage based) are not mutually exclusive. That is, employees hired to satisfy the percentage level criteria could also be counted toward meeting the numeric level criteria.
Person submitting Fiscal Note: Mark Muchow
Email Address: kpetry@tax.state.wv.us