FISCAL NOTE



FUND(S):

General Revenue Fund

Sources of Revenue:

General Fund

Legislation creates:

A New Program



Fiscal Note Summary


Effect this measure will have on costs and revenues of state government.


The stated purpose of the bill is to provide a nonrefundable earned income tax credit from the state personal income tax for taxpayers with qualifying children. The earned income tax credit is equal to 15% of the federal credit. According to our interpretation, passage of this bill would reduce General Revenue Fund collections by roughly $13.2 million per year beginning in Fiscal Year 2010. The credit would equal 15 percent of the earned income credit claimed on a taxpayer’s federal return for taxable years beginning on or after January 1, 2008. West Virginia credit amounts in excess of the taxpayer’s tax liability would be disregarded. A number of the taxpayers eligible for the proposed earned income tax credit are eligible for the Low-Income Family Tax Credit that was enacted in the November 2006 Special Session. The Low-Income Family Tax Credit provides a 50 percent credit for tax year 2007 and a 100 percent credit in subsequent years. Additional administrative costs to the State Tax Department would be approximately $60,000 per year.



Fiscal Note Detail


Effect of Proposal Fiscal Year
2008
Increase/Decrease
(use"-")
2009
Increase/Decrease
(use"-")
Fiscal Year
(Upon Full
Implementation)
1. Estmated Total Cost 0 10,000 60,000
Personal Services 0 0 50,000
Current Expenses 0 10,000 10,000
Repairs and Alterations 0 0 0
Assets 0 0 0
Other 0 0 0
2. Estimated Total Revenues 0 -13,200,000 -13,200,000


Explanation of above estimates (including long-range effect):


This bill would create a nonrefundable earned income tax credit from the state personal income tax for taxpayers with qualifying children. The earned income tax credit is equal to 15% of the federal credit. The bill requires the State Tax Commissioner to provide notice to eligible taxpayers regarding their eligibility for the credit and it also requires the State Tax Commissioner to prepare a written report regarding the credit. Approximately 40,000 taxpayers would be eligible to claim the credit provided by this bill. According to our interpretation, passage of this bill would reduce General Revenue Fund collections by roughly $13.2 million per year beginning in Fiscal Year 2010. The credit would equal 15 percent of the earned income credit claimed on a taxpayer’s federal return for taxable years beginning on or after January 1, 2008. West Virginia credit amounts in excess of the taxpayer’s tax liability would be disregarded. A number of the taxpayers eligible for the proposed earned income tax credit are eligible for the Low-Income Family Tax Credit that was enacted in the November 2006 Special Session. The Low-Income Family Tax Credit provides a 50 percent credit for tax year 2007 and a 100 percent credit in subsequent years. Additional administrative costs to the Tax Department would be approximately $60,000 per year. Computer programming, printing and postage costs would be incurred to alert taxpayers who may be eligible for the credit. Also, the requirement that the State Tax Commissioner prepare an annual report of statistical information on the credit will require the employment of one additional Tax Analyst.



Memorandum






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