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 allow individuals to utilize any portion of their federal civil service retirement pension based on credit for military service to reduce their federal adjusted gross income for West Virginia personal income tax purposes, as well as not prohibiting a claimant from obtaining this modification if the claimant can provide to the State Tax Commissioner a screen print or short form letter from the United States Office of Personnel Management, or its successor, with information pertaining to applicable particular credit for their military service towards their federal civil service retirement pension. According to our interpretation, any individual whose federal civil service retirement benefit is based on credit for their military service would be allowed to claim a decreasing modification in an amount equal to the portion of the retirement benefit attributable to their military service. The modification proposed by this bill would be in addition to the existing $2,000 decreasing modification for federal civil service retirement benefits. Also, the proposed modification would not be included in the determination of the decreasing modification for persons who are age 65 or older or who are disabled. The State Tax Department does not have access to information on the amount of federal civil service retirement benefits that are attributable to military service. While we are unable to accurately estimate the potential revenue impact of this bill, the revenue loss could be significant due to the large veteran population in the State. Additional litigation over disparate tax treatment of retirees would be expected. Passage of this bill may require the State Tax Department to alter normal tax return processing in order to determine the portion of a taxpayer’s federal civil service pension that is attributable to their military service. The additional administrative costs could be significant.



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, any individual whose federal civil service retirement benefit is based on credit for their military service would be allowed to claim a decreasing modification in an amount equal to the portion of the retirement benefit attributable to their military service. The modification proposed by this bill would be in addition to the existing $2,000 decreasing modification for federal civil service retirement benefits. Also, the proposed modification would not be included in the determination of the decreasing modification for persons who are age 65 or older or who are disabled. The State Tax Department does not have access to information on the amount of federal civil service retirement benefits that are attributable to military service. While we are unable to accurately estimate the potential revenue impact of this bill, the revenue loss could be significant due to the large veteran population in the State. Additional litigation over disparate tax treatment of retirees would be expected. Passage of this bill may require the State Tax Department to alter normal tax return processing in order to determine the portion of a taxpayer’s federal civil service pension that is attributable to their military service. The additional administrative costs could be significant.



Memorandum


The stated purpose of this bill is to allow individuals to utilize any portion of their federal civil service retirement pension based on credit for military service to reduce their federal adjusted gross income for West Virginia personal income tax purposes, as well as not prohibiting a claimant from obtaining this modification if the claimant can provide to the State Tax Commissioner a screen print or short form letter from the United States Office of Personnel Management, or its successor, with information pertaining to applicable particular credit for their military service towards their federal civil service retirement pension. The proposed change in this bill may create a disparity between a number of different groups of retirees based upon the source of pension income. Additional litigation by less favored groups may result.



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