Date Requested:January 13, 2011
Time Requested:06:35 PM
Agency: State Tax Department
CBD Number: Version: Bill Number: Resolution Number:
2011R1741 Introduced HB2030
CBD Subject: SEVERANCE TAX ON SURFACE MINING
FUND(S)
Special Reclamation Fund, General Revenue Fund, Workers' Compensation Debt Reduction Fund, local governments
Sources of Revenue
General Fund,Other 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 impose a severance tax on surface mining activities with proceeds dedicated to the surface mine reclamation fund.
    
    Passage of this bill will increase Special Reclamation Fund revenue by roughly $164 million to $169 million per year. The imposition of the new tax on surface mining is also expected to reduce surface mine production. This will result in a $6 million to $10 million annual loss in regular Severance Tax revenue to the General Revenue Fund, a $500,000 to $700,000 annual loss in regular Severance Tax revenue to local governments, and a $1 million to $2 million annual loss in Workers’ Compensation Debt Reduction Severance Tax revenue to the Workers’ Compensation Debt Reduction Fund.
    
    Additional administrative costs to the State Tax Department associated with this bill would be roughly $160,000.
    

Fiscal Note Detail
Over-all effect
Effect of Proposal Fiscal Year
2011
Increase/Decrease
(use"-")
2012
Increase/Decrease
(use"-")
Fiscal Year
(Upon Full
Implementation)
1. Estmated Total Cost 160,000 0 0
Personal Services 0 0 0
Current Expenses 0 0 0
Repairs and Alterations 0 0 0
Assets 0 0 0
Other 160,000 0 0
2. Estimated Total Revenues 0 0 0
3. Explanation of above estimates (including long-range effect):
    Passage of this bill would impose an additional Severance Tax of 5 percent on surface-mined coal with the revenue from the tax dedicated to the Special Reclamation Fund. Deposits to the Special Reclamation Fund would increase by roughly $164 million to $169 million per year. The imposition of the new tax on surface mining is also expected to reduce surface mine production. This will result in a $6 million to $10 million annual loss in regular Severance Tax revenue to the General Revenue Fund, a $500,000 to $700,000 annual loss in regular Severance Tax revenue to local governments, and a $1 million to $2 million annual loss in Workers’ Compensation Debt Reduction Severance Tax revenue to the Workers’ Compensation Debt Reduction Fund.
    
    Additional administrative costs to the State Tax Department associated with this bill would be roughly $160,000. The additional costs would be primarily due to computer programming expenses to add a new tax to the Department’s Integrated Tax System. Also, some costs would be incurred for forms development and notification to taxpayers of the new tax.


Memorandum
Person submitting Fiscal Note:
Mark Muchow
Email Address:
kerri.r.petry@wv.gov
    The stated purpose of this bill is to impose a severance tax on surface mining activities with proceeds dedicated to the surface mine reclamation fund.
    
    As written, the language in the body of the bill indicates that the bill intends to create an additional tax, however, the title of the bill does not reflect that it is an additional tax.
    
    The bill refers to section §22-3-11 of the Code. That section of the Code makes no mention of the “surface mine reclamation fund.” It is assumed that the bill is intended to refer to the Special Reclamation Fund which does appear in section §22-3-11. The language of the bill should be changed to conform to the remainder of the Code.
    
    The bill calls for the new tax to be effective after May 31, 2011. Such a shortened time frame may create problems in the initial administration of the new tax.