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 eliminate penalties associated with the underpayment of taxes owed from a person who is a resident individual, provided a personal income tax is timely filed and payment of any tax due is made at that time.
As written, this bill would eliminate penalties for underpayment of estimated taxes for resident individuals who timely file their Personal Income Tax return and make payment of any tax due at the time the return is filed. According to our interpretation, passage of this bill would result in a loss of roughly $16.7 million in State revenue. The direct loss of underpayment penalty revenue would be roughly $6.4 million per year. However, passage of this bill would also result in an expected change in taxpayer behavior with regard to making estimated tax payments. In the absence of a penalty for failure to make such payments, many taxpayers would forego making estimated payments altogether. The potential revenue loss attributable to the interest that would have been earned on estimated payments made throughout the year would be an additional $10.3 million per year.
There would be no additional administrative costs to the State Tax Department associated with passage of this bill.
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 |
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 |
-16,700,000 |
-16,700,000 |
Explanation of above estimates (including long-range effect):
As written, this bill would eliminate penalties for underpayment of estimated taxes for resident individuals who timely file their Personal Income Tax return and make payment of any tax due at the time the return is filed. According to our interpretation, passage of this bill would result in a loss of roughly $16.7 million in State revenue. The direct loss of underpayment penalty revenue would be roughly $6.4 million per year. However, passage of this bill would also result in an expected change in taxpayer behavior with regard to making estimated tax payments. In the absence of a penalty for failure to make such payments, many taxpayers would forego making estimated payments altogether. The potential revenue loss attributable to the interest that would have been earned on estimated payments made throughout the year would be an additional $10.3 million per year.
There would be no additional administrative costs to the State Tax Department associated with passage of this bill.
Memorandum
Person submitting Fiscal Note: Mark Muchow
Email Address: kpetry@tax.state.wv.us