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 permit deed of trust or mortgage interest paid on taxpayers’ personal residence to be used for personal income tax purposes.
According to our interpretation of this proposal, this modification would be available to both those who claim itemized deductions for federal income tax purposes as well as non-itemizers. Also, the proposed modification applies to tax years beginning after December 31, 2008 (i.e., returns for tax year 2009 and later). Since many tax year 2009 Personal Income Tax returns will be filed before the bill would become law, most of the modification for tax year 2009 would need to be claimed on amended returns. If the provisions of the bill applied to both itemizers and non-itemizers, General Revenue Fund collections would be reduced by approximately $100 million in Fiscal Year 2011 and by roughly $56 million per year thereafter. If the provisions of this bill were applied to just itemizers, then its cost would be roughly $60 million in Fiscal Year 2011 and roughly $34 million per year thereafter. Although this bill contains language to limit the deduction to $4,000 per year, there is no provision to prohibit the carryover of home mortgage interest in excess of $4,000 to another tax year.
If there is a desire to audit some taxpayers who claim this modification, then additional administrative costs for the State Tax Department would be substantial. Otherwise, passage of this bill would result in no additional administrative costs for the State Tax Department.
Fiscal Note Detail
| Effect of Proposal |
Fiscal Year |
2010
Increase/Decrease
(use"-") |
2011
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 |
-100,000,000 |
-56,000,000 |
Explanation of above estimates (including long-range effect):
According to our interpretation of this proposal, this modification would be available to both those who claim itemized deductions for federal income tax purposes as well as non-itemizers. Also, the proposed modification applies to tax years beginning after December 31, 2008 (i.e., returns for tax year 2009 and later). Since many tax year 2009 Personal Income Tax returns will be filed before the bill would become law, most of the modification for tax year 2009 would need to be claimed on amended returns. If the provisions of the bill applied to both itemizers and non-itemizers, General Revenue Fund collections would be reduced by approximately $100 million in Fiscal Year 2011 and by roughly $56 million per year thereafter. If the provisions of this bill were applied to just itemizers, then its cost would be roughly $60 million in Fiscal Year 2011 and roughly $34 million per year thereafter. Although this bill contains language to limit the deduction to $4,000 per year, there is no provision to prohibit the carryover of home mortgage interest in excess of $4,000 to another tax year.
If there is a desire to audit some taxpayers who claim this modification, then additional administrative costs for the State Tax Department would be substantial. Otherwise, passage of this bill would result in no additional administrative costs for the State Tax Department.
Memorandum
The stated purpose of this bill is to permit deed of trust or mortgage interest paid on taxpayers’ personal residence to be used for personal income tax purposes.
Although this bill contains language to limit the deduction to $4,000 per year, there is no provision to prohibit the carryover of home mortgage interest in excess of $4,000 to another tax year. As written, the bill uses the phrase “personal residence” without providing a definition. Absent a definition, the phrase could possibly be interpreted to apply to more than one personal residence. Additionally, the terms “interest,” “mortgage,” and “deed of trust” are not defined. Also, some further clarification as to what type of loans and lenders are permissible for the “interest” decreasing modification is needed. As written, personal loans between related parties may qualify.
Person submitting Fiscal Note: Mark Muchow
Email Address: kerri.r.petry@wv.gov