Date Requested:January 14, 2011
Time Requested:03:12 PM
Agency: State Tax Department
CBD Number: Version: Bill Number: Resolution Number:
2011R1383 Introduced HB2485
CBD Subject: CNIT CREDIT FOR SCHOLARSHIP DONATION
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 provide a tax credit to corporations of up to fifty percent of their primary tax liability for contributing to scholarship funds.
    
    As written, this bill would allow Corporation Net Income Tax filers to reduce their tax liability by up to 50 percent via a tax credit for contributions to scholarship funds. The proposed bill would effectively create a mechanism for the State to fund donations for educational purposes and may result in an increase in scholarship donations. Other charitable organizations, such as religion, the arts, environment, etc., may see a drop in donations because scholarship donations would become more tax-preferred.
    
    According to our reading, the phrase “scholarship funds” may be subject to a very broad interpretation. In addition, many taxpayers would be able to qualify for the tax credit by making contributions to programs outside the State. Although we are unable to accurately estimate the revenue impact of this proposal, we believe the revenue reduction attributable to passage of this bill would be significant.
    
    Assuming that all Corporation Net Income Tax returns claiming the new credit would be accepted as filed, additional administrative costs for the State Tax Department would be minimal. However, if the State Tax Department is required to verify the amount of eligible credit, additional administrative costs to the State Tax Department could be significant.
    

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 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
3. Explanation of above estimates (including long-range effect):
    Passage of this bill would allow Corporation Net Income Tax filers to reduce their tax liability by up to 50 percent via a tax credit for contributions to scholarship funds. The proposed bill would effectively create a mechanism for the State to fund donations for educational purposes and may result in an increase in scholarship donations. Other charitable organizations, such as religion, the arts, environment, etc., may see a drop in donations because scholarship donations would become more tax-preferred.
    
    According to our reading, the phrase “scholarship funds” may be subject to a very broad interpretation. In addition, many taxpayers would be able to qualify for the tax credit by making contributions to programs outside the State. Although we are unable to accurately estimate the revenue impact of this proposal, we believe the revenue reduction attributable to passage of this bill would be significant.
    
    Assuming that all Corporation Net Income Tax returns claiming the new credit would be accepted as filed, additional administrative costs for the State Tax Department would be minimal. However, if the State Tax Department is required to verify the amount of eligible credit, additional administrative costs to the State Tax Department could be significant.
    


Memorandum
Person submitting Fiscal Note:
Mark Muchow
Email Address:
kerri.r.petry@wv.gov
    The stated purpose of this bill is to provide a tax credit to corporations of up to fifty percent of their primary tax liability for contributing to scholarship funds.
    
    As written, this bill provides a tax credit for application against the Corporation Net Income Tax liability for any taxpayers “who contribute to scholarship funds.” Since the bill does not define “scholarship fund,” or restrict the term in any way (e.g., accredited institutions, West Virginia-based programs, etc.), the potential utilization of the credit may be much greater than intended.