Date Requested:February 21, 2011
Time Requested:01:57 PM
Agency: State Tax Department
CBD Number: Version: Bill Number: Resolution Number:
2011R2840 Introduced HB3228
CBD Subject: REFUNDABLE WV EARNED INCOME TAX CREDIT
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 low and moderate income workers with a refundable state tax credit based on the federal earned income tax credit. Current law provides for a nonrefundable tax credit based on federal poverty guidelines.
    
    As written, the bill would replace the Low-Income Family Tax Credit with the new credit named as the West Virginia Earned Income Tax Credit. The new credit would be in an amount equal to 10 percent of the earned income credit allowed under Section 32 of the federal Internal Revenue Code, and applicable to a qualifying Taxpayer’s Personal Income Tax liability, as reduced by all other available tax credits. Any West Virginia Earned Income Tax Credit in excess of the Taxpayer’s adjusted Personal Income Tax liability would be refunded to the Taxpayer. The bill also requires the State Tax Commissioner to make efforts every year to alert taxpayers who may be eligible to receive the credit.
    
    Based upon available information, it is estimated that Taxpayers would receive roughly $36.7 million per year from the West Virginia Earned Income Tax Credit. However, since the West Virginia Earned Income Tax Credit would replace roughly $18.0 million of Low-Income Family Tax Credit, the net reduction in revenue attributable to passage of this bill would be roughly $18.7 million per year beginning in FY2012.
    
    The State Tax Department will incur additional administrative costs associated with passage of this bill. One-time costs of roughly $200,000 would be incurred in FY2012 attributable to tax form revisions, computer program changes, and the required notification of potentially eligible Taxpayers. Annual administrative costs of roughly $40,000 will be incurred in subsequent years attributable to the notification of potentially eligible Taxpayers. If it is expected that claims of the credit are to be audited, additional administrative costs in FY2013 and beyond attributable to the establishment and operation of an audit program will 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 0 200,000 40,000
Personal Services 0 0 0
Current Expenses 0 40,000 40,000
Repairs and Alterations 0 0 0
Assets 0 0 0
Other 0 160,000 0
2. Estimated Total Revenues 0 -18,700,000 -18,700,000
3. Explanation of above estimates (including long-range effect):
    As written, the bill would replace the Low-Income Family Tax Credit with the new credit named as the West Virginia Earned Income Tax Credit. The new credit would be in an amount equal to 10 percent of the earned income credit allowed under Section 32 of the federal Internal Revenue Code, and applicable to a qualifying Taxpayer’s Personal Income Tax liability, as reduced by all other available tax credits. Any West Virginia Earned Income Tax Credit in excess of the Taxpayer’s adjusted Personal Income Tax liability would be refunded to the Taxpayer. The bill also requires the State Tax Commissioner to make efforts every year to alert taxpayers who may be eligible to receive the credit.
    
    Based upon available information, it is estimated that Taxpayers would receive roughly $36.7 million per year from the West Virginia Earned Income Tax Credit. However, since the West Virginia Earned Income Tax Credit would replace roughly $18.0 million of Low-Income Family Tax Credit, the net reduction in revenue attributable to passage of this bill would be roughly $18.7 million per year beginning in FY2012.
    
    Nearly 182,000 West Virginia taxpayers claimed more than $353 million in federal earned income tax credits in 2009. With recent enhancements, total federal earned income tax credits may rise to more than $380 million for tax year 2010. While roughly 130,000 Taxpayers will pay less tax or receive a refund via the proposed West Virginia Earned Income Tax Credit, more than 56,000 Taxpayers will pay more tax due to the elimination of the Low-Income Family Tax Credit.
    
    The State Tax Department will incur additional administrative costs associated with passage of this bill. One-time costs of roughly $200,000 would be incurred in FY2012 attributable to tax form revisions, computer program changes, and the required notification of potentially eligible Taxpayers. Annual administrative costs of roughly $40,000 will be incurred in subsequent years attributable to the notification of potentially eligible Taxpayers. If it is expected that claims of the credit are to be audited, additional administrative costs in FY2013 and beyond attributable to the establishment and operation of an audit program will 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 low and moderate income workers with a refundable state tax credit based on the federal earned income tax credit. Current law provides for a nonrefundable tax credit based on federal poverty guidelines.
    
    As written, the bill rewrites WV Code §11-21-22b, but does use strike-throughs to show language that would be stricken or underlining to show language that would be added.