Date Requested:January 31, 2011
Time Requested:01:44 PM
Agency: State Tax Department
CBD Number: Version: Bill Number: Resolution Number:
2011R2258 Introduced HB2950
CBD Subject: COST OF MANUFACTURING FACILITIES
FUND(S)
General Revenue Fund, local governments
Sources of Revenue
General Fund,Other Fund local property tax
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 reduce the disincentive for new capital investment by reducing the original cost requirement for a capital improvement to $20 million and to reduce the amount of required new investment to $10 million, and to limit it to personal property rather than both personal property and realty, in order to qualify for preferential treatment as a qualified capital addition.
    
    As written, this bill would amend definitions used in the special method for appraising qualified capital additions to manufacturing facilities. Effective January 1, 2012, qualification for the special method for appraising qualified capital additions to manufacturing facilities would require new investment of at least $10 million at or within two miles of a manufacturing facility owned or operated by the person making the investment which previously had an original cost of at least $20 million.
    
    According to our interpretation, new investment in personal property at a manufacturing facility is required. Therefore the changes proposed in this bill will not diminish revenue from current sources as the special method of appraisal would be used for the “new” investment and would not apply to the existing facility, unless the existing property previously qualified for the current program.
    
    Passage of the bill will have little or no direct effect on Property Tax revenue. While there will be some Property Tax revenue foregone due to the reduced valuation, for purposes of the Property Tax, the special method of appraisal would not reduce any tax derived from current sources. Based upon a simulation of recent capital additions at manufacturing facilities that would likely qualify for the special method of appraisal, the tax foregone was estimated to be less than $500,000. There will likely be other direct or indirect increases in tax revenue attributable to the new or expanded facility that may offset the tax revenue foregone.
    
    Additional administrative costs associated to the State Tax Department associated with passage of this bill would be minimal.
    

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):
    As written, this bill would amend definitions used in the special method for appraising qualified capital additions to manufacturing facilities. Effective January 1, 2012, qualification for the special method for appraising qualified capital additions to manufacturing facilities would require new investment of at least $10 million at or within two miles of a manufacturing facility owned or operated by the person making the investment which previously had an original cost of at least $20 million.
    
    According to our interpretation, new investment in personal property at a manufacturing facility is required. Therefore the changes proposed in this bill will not diminish revenue from current sources as the special method of appraisal would be used for the “new” investment and would not apply to the existing facility, unless the existing property previously qualified for the current program.
    
    Passage of the bill will have little or no direct effect on Property Tax revenue. While there will be some Property Tax revenue foregone due to the reduced valuation, for purposes of the Property Tax, the special method of appraisal would not reduce any tax derived from current sources. Based upon a simulation of recent capital additions at manufacturing facilities that would likely qualify for the special method of appraisal, the tax foregone was estimated to be less than $500,000. There will likely be other direct or indirect increases in tax revenue attributable to the new or expanded facility that may offset the tax revenue foregone.
    
    Additional administrative costs associated to the State Tax Department associated with passage of this bill would be minimal.
    


Memorandum
Person submitting Fiscal Note:
Mark Muchow
Email Address:
kerri.r.petry@wv.gov