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 to provide a tax credit for ad valorem tax paid on manufacturing inventory, and other tangible personal property which will reduce either or both the amount of business franchise tax or corporate net income tax owed, effective the tax year beginning July 1, 2009.
According to our interpretation, passage of this bill would create refundable State tax credits for corporations equal to the amount of property taxes paid on new equipment placed in service on or after July 1, 2009. In addition, the bill would provide a one-year refundable tax credit equal to any personal property taxes paid by a foreign corporation during its first full-year of operation within this State. In both cases, the personal property taxes paid are not limited by the provisions of this bill to taxes paid to local jurisdictions in West Virginia. Additionally, it does not appear that a credit claim for ad valorem property tax applied against one of the taxes cited precludes a claim against the other tax. Contrary to the stated purpose, the provisions of this bill do not provide for a refundable State tax credit for local West Virginia property taxes paid on manufacturing inventory. The State Tax Department is unable to quantify the annual revenue loss to the State from these proposed tax changes. However, the annual cost would be significant and increasing over time as the State pays for an ever greater share of the total local property tax bill over time.
The Tax Department would experience a significant increase in administrative costs associated with the processing of refundable tax credits and associated annual refund claims by most corporations.
Fiscal Note Detail
| Effect of Proposal |
Fiscal Year |
2009
Increase/Decrease
(use"-") |
2010
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):
According to our interpretation, passage of this bill would create refundable State tax credits for corporations equal to the amount of property taxes paid on new equipment placed in service on or after July 1, 2009. In addition, the bill would provide a one-year refundable tax credit equal to any personal property taxes paid by a foreign corporation during its first full-year of operation within this State. In both cases, the personal property taxes paid are not limited by the provisions of this bill to taxes paid to local jurisdictions in West Virginia. Additionally, it does not appear that a credit claim for ad valorem property tax applied against one of the taxes cited precludes a claim against the other tax. Contrary to the stated purpose, the provisions of this bill do not provide for a refundable State tax credit for local West Virginia property taxes paid on manufacturing inventory. The State Tax Department is unable to quantify the annual revenue loss to the State from these proposed tax changes. However, the annual cost would be significant and increasing over time as the State pays for an ever greater share of the total local property tax bill over time.
Corporations pay a significant share of the total $250 million to $300 million in annual local personal property taxes paid by West Virginia businesses on machinery, equipment and inventory property. In addition, another $100 million in annual local public utility property tax payments may be classified as personal property taxes on machinery, equipment and inventory.
The Tax Department would experience a significant increase in administrative costs associated with the processing of refundable tax credits and associated annual refund claims by most corporations.
Memorandum
The stated purpose of this bill to provide a tax credit for ad valorem tax paid on manufacturing inventory, and other tangible personal property which will reduce either or both the amount of business franchise tax or corporate net income tax owed, effective the tax year beginning July 1, 2009.
As written, this bill does not appear to contain any restriction limiting the determination of the amount of the credit to ad valorem property taxes imposed by governments in West Virginia. Additionally, it does not appear that a credit claim for ad valorem property tax applied against one of the taxes cited precludes a claim against the other tax. Also, the proposed tax credit is only available to corporations, but not other forms of business organization. Although specifically cited in the stated purpose, as written, the bill does not provide for a tax credit for local manufacturing inventory taxes paid in West Virginia. The bill also uses the term “new incoming foreign corporation” without providing a definition for the term.
Person submitting Fiscal Note: Mark Muchow
Email Address: kpetry@tax.state.wv.us