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 provide a tax credit for electric utilities that provide electric service to energy intensive industrial consumers under a special rate that is approved by the Public Service Commission, of which the primary ultimate economic beneficiary will be the energy intensive industrial consumer. Each taxpayer paying five percent coal severance tax would be entitled to a credit against that tax as determined by the Public Service Commission, in order to provide for a special rate for energy intensive industrial consumers in cases where such special rate would create a revenue shortfall to the electric utility providing such special rate, which would not be reasonable to allocate to other customers of the utility. The taxpayer claiming the tax credit must make equal payment to the electric utility providing the electric service to the energy intensive industrial consumer receiving the special rate. In no event may the amount of the tax credit exceed fifty million dollars in any year in respect of any individual special rate.
As written, this bill would create the “Energy Intensive Industrial Consumers Revitalization Tax Credit.” The bill provides that the tax credit is to be determined by the Public Service Commission and would be available to taxpayers subject to the full 5 percent Severance Tax on coal who supply coal to a West Virginia electric utility providing a special rate to one or more energy intensive industrial consumers of electric power. The total amount of credit would be limited to $50 million in any calendar year with the amount of credit available to an individual taxpayer could not exceed 93 percent of the taxpayer’s liability for the full 5 percent Severance Tax on coal. The taxpayer receiving the Energy Intensive Industrial Consumers Revitalization Tax Credit would, as a condition for receiving the credit, make payment of 97 percent of the credit amount to the public utility providing electric power to the special rate customer. The bill provides for the expiration of the newly created article providing for the credit ten years form the effective date of the article.
According to our interpretation and based on language in the bill, passage of this bill could result in an annual reduction in the General Revenue Fund Severance Taxes of up to $50 million for each year the proposed credit program is available. A portion of this reduction may be recouped by additional State tax collections associated with expanded industrial operations of the tax subsidized energy intensive industrial consumer. The payback level would vary depending up on the unique characteristics of the subsidized industrial consumer. The State Tax Department cannot accurately estimate the net fiscal consequences associated with the proposed tax credit.
Additional administrative costs to the State Tax Department associated with passage of this bill would be minimal. The Public Service Commission may incur additional administrative costs due to passage of this bill.
Fiscal Note Detail
| 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 |
-50,000,000 |
-50,000,000 |
Explanation of above estimates (including long-range effect):
As written, this bill would create the “Energy Intensive Industrial Consumers Revitalization Tax Credit.” The bill provides that the tax credit is to be determined by the Public Service Commission and would be available to taxpayers subject to the full 5 percent Severance Tax on coal who supply coal to a West Virginia electric utility providing a special rate to one or more energy intensive industrial consumers of electric power. The total amount of credit would be limited to $50 million in any calendar year with the amount of credit available to an individual taxpayer could not exceed 93 percent of the taxpayer’s liability for the full 5 percent Severance Tax on coal. The taxpayer receiving the Energy Intensive Industrial Consumers Revitalization Tax Credit would, as a condition for receiving the credit, make payment of 97 percent of the credit amount to the public utility providing electric power to the special rate customer. The bill provides for the expiration of the newly created article providing for the credit ten years form the effective date of the article.
According to our interpretation and based on language in the bill, passage of this bill could result in an annual reduction in the General Revenue Fund Severance Taxes of up to $50 million for each year the proposed credit program is available. A portion of this reduction may be recouped by additional State tax collections associated with expanded industrial operations of the tax subsidized energy intensive industrial consumer. The payback level would vary depending up on the unique characteristics of the subsidized industrial consumer. The State Tax Department cannot accurately estimate the net fiscal consequences associated with the proposed tax credit.
Additional administrative costs to the State Tax Department associated with passage of this bill would be minimal. The Public Service Commission may incur additional administrative costs due to passage of this bill.
Memorandum
The stated purpose of this bill is to provide a tax credit for electric utilities that provide electric service to energy intensive industrial consumers under a special rate that is approved by the Public Service Commission, of which the primary ultimate economic beneficiary will be the energy intensive industrial consumer. Each taxpayer paying five percent coal severance tax would be entitled to a credit against that tax as determined by the Public Service Commission, in order to provide for a special rate for energy intensive industrial consumers in cases where such special rate would create a revenue shortfall to the electric utility providing such special rate, which would not be reasonable to allocate to other customers of the utility. The taxpayer claiming the tax credit must make equal payment to the electric utility providing the electric service to the energy intensive industrial consumer receiving the special rate. In no event may the amount of the tax credit exceed fifty million dollars in any year in respect of any individual special rate.
As written, the bill requires taxpayers subject to the full 5 percent Severance Tax on coal to notify the State Tax Department of its election to participate in the proposed tax credit program and requires the State Tax Department to provide the Public Service Commission with information on the identity of the taxpayers electing to participate. However, the bill does not include provisions that would require the Public Service Commission to notify the State Tax Department of the amount of credit allocated to a taxpayer.
The bill’s stated purpose includes the statement “The taxpayer claiming the tax credit must make equal payment to the electric utility providing the electric service to the energy intensive industrial consumer receiving the special rate.” However, the language in the bill provides that the taxpayer claiming the tax credit would make a payment to the electric utility of 97 percent of the credit.
Person submitting Fiscal Note: Mark Muchow
Email Address: kerri.r.petry@wv.gov