Date Requested:July 31, 2011
Time Requested:06:08 PM
Agency: State Tax Department
CBD Number: Version: Bill Number: Resolution Number:
201114008H Introduced HB103
CBD Subject: COAL SEVERANCE TAX REVENUES
FUND(S)
General Revenue Fund, Coal County Reallocated Severance Tax Fund
Sources of Revenue
General Fund,Other Fund see above
Legislation creates:
A New Fund

Fiscal Note Summary

Effect this measure will have on costs and revenues of state government.

    The stated purpose of this bill is to reallocate and distribute up to 5% of the severance tax on coal to the counties from which the coal is produced up to $20 million per fiscal year. The percentages will be phased in at 1% per year beginning July 1, 2012 until the full 5% is to be distributed beginning July 1, 2016. The distributed funds may only be used by the county commission for economic development projects and infrastructure projects.
    
    As written, this bill would require that 5 percent of the Severance Tax on coal be dedicated for the benefit of counties from which the tax was generated. The amount dedicated for the period beginning July 1, 2012 is one percent and will increase by one percent each succeeding July 1 until capping at five percent. The dedicated revenue is to be distributed by the State Treasurer to the various counties in which the coal was located at the time it was removed from the ground. The money is to be distributed to the county commissions and may only be used for economic development and infrastructure projects. The bill also provides that the moneys resulting from the 5 percent calculation are to be deposited into the “Coal County Reallocated Severance Tax Fund,” as established and that the moneys in the fund are to be distributed to counties on the basis of coal production share.
    
    According to our interpretation tax, passage of this bill will not result in any change in total revenue, but a reallocation of revenue. While the Coal County Reallocated Severance Revenue Fund will receive roughly $4 million in FY2013, with annual increases of roughly $4.5 million to $5 million resulting in a total of roughly $20 million in FY2017 and each year thereafter, the General Revenue Fund would be reduced by corresponding amounts. The revenue estimates are based upon current production and price values. Due to the volatile nature of coal production and energy prices, the amount of revenue to be reallocated could fluctuate significantly from the indicated estimates. The bill provides that the maximum annual deposit to the Coal County Reallocated Severance Revenue Fund would be $20 million. While the current estimate of full implementation of the 5 percent reallocation is roughly $20 million, the cap for the maximum annual deposit would only come into play if energy prices increase over current near-term forecasts.
    
    The bill, as written, provides that the State Tax Commissioner is to retain $35,000 from the deposits to the Coal County Reallocated Severance Revenue Fund as a fee for the administration of the bill provisions.
    

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 require that 5 percent of the Severance Tax on coal be dedicated for the benefit of counties from which the tax was generated. The amount dedicated for the period beginning July 1, 2012 is one percent and will increase by one percent each succeeding July 1 until capping at five percent. The dedicated revenue is to be distributed by the State Treasurer to the various counties in which the coal was located at the time it was removed from the ground. The money is to be distributed to the county commissions and may only be used for economic development and infrastructure projects. The bill also provides that the moneys resulting from the 5 percent calculation are to be deposited into the “Coal County Reallocated Severance Tax Fund,” as established and that the moneys in the fund are to be distributed to counties on the basis of coal production share.
    
    According to our interpretation tax, passage of this bill will not result in any change in total revenue, but a reallocation of revenue. While the Coal County Reallocated Severance Revenue Fund will receive roughly $4 million in FY2013, with annual increases of roughly $4.5 million to $5 million resulting in a total of roughly $20 million in FY2017 and each year thereafter, the General Revenue Fund would be reduced by corresponding amounts. The revenue estimates are based upon current production and price values. Due to the volatile nature of coal production and energy prices, the amount of revenue to be reallocated could fluctuate significantly from the indicated estimates. The bill provides that the maximum annual deposit to the Coal County Reallocated Severance Revenue Fund would be $20 million. While the current estimate of full implementation of the 5 percent reallocation is roughly $20 million, the cap for the maximum annual deposit would only come into play if energy prices increase over current near-term forecasts.
    
    The bill, as written, provides that the State Tax Commissioner is to retain $35,000 from the deposits to the Coal County Reallocated Severance Revenue Fund as a fee for the administration of the bill provisions.
    


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