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 subtract social security benefits from federal adjusted gross income to determine West Virginia adjusted gross income for purposes of personal income tax.
This bill proposes a Personal Income Tax decreasing modification for “Social Security Benefits.” While “Social Security Benefits” could include payments and indirect benefits from a number of programs, it is our interpretation that the initial statement of West Virginia Code §11-21-12(c) would limit the decreasing modification to those Social Security benefits included in federal adjusted gross income. The bill also indicates the decreasing modification would apply for taxable years beginning after December 31, 2010 (i.e., tax years 2011 and later). Since many tax returns for tax year 2011 will have been filed before the bill is passed, the retroactive application to tax year 2011 will require the filing of amended returns and the processing of additional refunds. Based upon the above interpretations, passage of this bill would reduce General Revenue Fund collections by roughly $120.5 million in Fiscal Year 2013 and by $54.8 million per year for each year thereafter. The reduction in Fiscal Year 2013 collections would be attributable to roughly $52 million in refunds attributable to refunds for amended tax year 2011 returns, roughly $54.8 million attributable to refunds and reduced estimated payments pertaining to tax year 2012, and roughly $13.7 million attributable to adjusted estimated payments for tax year 2013. The annual cost of this proposed tax exclusion will escalate over time as members of the baby-boom generation begin receiving Social Security benefits.
Since passage of this bill would result in the processing of nearly 100,000 additional refunds in Fiscal Year 2013, additional costs to the State Tax Department would be significant.
Fiscal Note Detail
| Effect of Proposal |
Fiscal Year |
2012
Increase/Decrease
(use"-") |
2013
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 |
-120,500,000 |
-54,800,000 |
Explanation of above estimates (including long-range effect):
This bill proposes a Personal Income Tax decreasing modification for “Social Security Benefits.” While “Social Security Benefits” could include payments and indirect benefits from a number of programs, it is our interpretation that the initial statement of West Virginia Code §11-21-12(c) would limit the decreasing modification to those Social Security benefits included in federal adjusted gross income. The bill also indicates the decreasing modification would apply for taxable years beginning after December 31, 2010 (i.e., tax years 2011 and later). Since many tax returns for tax year 2011 will have been filed before the bill is passed, the retroactive application to tax year 2011 will require the filing of amended returns and the processing of additional refunds. Based upon the above interpretations, passage of this bill would reduce General Revenue Fund collections by roughly $120.5 million in Fiscal Year 2013 and by $54.8 million per year for each year thereafter. The reduction in Fiscal Year 2013 collections would be attributable to roughly $52 million in refunds attributable to refunds for amended tax year 2011 returns, roughly $54.8 million attributable to refunds and reduced estimated payments pertaining to tax year 2012, and roughly $13.7 million attributable to adjusted estimated payments for tax year 2013. The annual cost of this proposed tax exclusion will escalate over time as members of the baby-boom generation begin receiving Social Security benefits.
According to IRS Statistics of Income Data for Tax Year 2009, 96,017 West Virginia residents included nearly $933 million of social security benefits in adjusted gross income. Taxable social security benefits are expected to rise to roughly $1,257 million by 2012.
Passage of this bill would result in the processing of nearly 100,000 additional refunds. The additional refunds would increase the number of Personal Income Tax refunds processed by the state tax department ion Fiscal Year 2013 by roughly 20 percent. Additional administrative costs for the State Tax Department in Fiscal year 2013 would be significant.
Memorandum
The stated purpose of this bill is to subtract social security benefits from federal adjusted gross income to determine West Virginia adjusted gross income for purposes of personal income tax.
As written, the proposed change applies “For taxable years beginning after December 31, 2010, . . .” The bill thus would apply to tax years 2011 and later. The inclusion of 2011 makes the proposed change retroactive, since many tax year 2011 returns will have been filed by the date the bill is passed. Since this is a carryover bill, it is not clear whether this was the intended application or whether a forward looking application was intended.
Person submitting Fiscal Note: Mark Muchow
Email Address: kerri.r.petry@wv.gov