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 decrease the corporate income tax rate beginning in the year 2012 by eliminating the higher tax rate should the combined balance in the Revenue Fund Shortfall Reserve Fund and the Revenue Fund Shortfall Reserve Fund - Part B not equal or exceed ten percent of the General Revenue Fund. As written, this bill would repeal language that would forestall scheduled reductions in the Corporation Net Income Tax rate for tax years beginning on or after January 1, 2012, January 1, 2013, and January 1, 2014 in the event that the combined balance in the Revenue Fund Shortfall Reserve Fund and the Revenue Fund Shortfall Reserve Fund - Part B does not equal or exceed 10 percent of the General Revenue Fund. As of December 31, 2008, the combined balances of the two specified funds were in excess of 10 percent of projected General Revenue Fund totals presented in the State of West Virginia FY2010 Executive Budget. Under normal circumstances, the combined balance would be expected to remain above 10 percent and passage of this bill would have no revenue impact. However, deteriorating economic conditions that reduce collections or require an emergency expenditure from the funds may reduce the combined balance below the 10 percent threshold. In that event, the Corporation Net Income Tax rates assuming passage of the bill would be lower than the rates absence the proposal and there would be a reduction in potential revenue. Since we are unable to predict all the various circumstances that would reduce the ratio of the balance of the combined funds to the General Revenue Fund, we are unable to accurately predict the potential revenue loss attributable to passage of this bill. Additional administrative costs to the State Tax department associated with this bill would be minimal.

Fiscal Note Detail

Effect of Proposal	Fiscal Year
Effect of Proposal	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):

As written, this bill would repeal language that would forestall scheduled reductions in the Corporation Net Income Tax rate for tax years beginning on or after January 1, 2012, January 1, 2013, and January 1, 2014 in the event that the combined balance in the Revenue Fund Shortfall Reserve Fund and the Revenue Fund Shortfall Reserve Fund - Part B does not equal or exceed 10 percent of the General Revenue Fund. As of December 31, 2008, the combined balances of the two specified funds were in excess of 10 percent of projected General Revenue Fund totals presented in the State of West Virginia FY2010 Executive Budget. Under normal circumstances, the combined balance would be expected to remain above 10 percent and passage of this bill would have no revenue impact. However, deteriorating economic conditions that reduce collections or require an emergency expenditure from the funds may reduce the combined balance below the 10 percent threshold. In that event, the Corporation Net Income Tax rates assuming passage of the bill would be lower than the rates absence the proposal and there would be a reduction in potential revenue. Since we are unable to predict all the various circumstances that would reduce the ratio of the balance of the combined funds to the General Revenue Fund, we are unable to accurately predict the potential revenue loss attributable to passage of this bill. Additional administrative costs to the State Tax department associated with this bill would be minimal.

Memorandum

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