Date Requested:January 14, 2012
Time Requested:01:20 PM
Agency: State Tax Department
CBD Number: Version: Bill Number: Resolution Number:
2011R2393 Carry Over HB2937
CBD Subject: REDUCE CORPORATE NET INCOME TAX RATE
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 reduce the rate of tax on corporate net income to five and nine-tenths percent, effective January 1, 2012.
    
    According to our interpretation, this bill would set the tax rate for the Corporation Net Income Tax at 5.9 percent for tax years beginning on or after January 1, 2012. Passage of this bill as written would replace an existing schedule of tax rate changes that would reduce the Corporation Net Income Tax to 6.5 percent by 2014. According to our interpretation and based upon current estimates, the change in the tax rate would result in a $20 million reduction in the General Revenue Fund in FY2013. Due to the wide fluctuation of taxable corporation income due to changing economic conditions, passage of this bill would likely reduce the General Revenue Fund by $20 million to $40 million annually in subsequent years. Additionally, if the bill were to be enacted before the filing of many June estimated payments (normally the second of four estimated payments by calendar year taxpayers subject to estimated filing requirements), FY2012 General Revenue Fund collections could be reduced by $5 million to $10 million.
    
    Additional administrative costs to the State Tax Department associated with this bill would be roughly $30,000 in FY2012 and $30,000 in FY2013.

Fiscal Note Detail
Over-all effect
Effect of Proposal Fiscal Year
2012
Increase/Decrease
(use"-")
2013
Increase/Decrease
(use"-")
Fiscal Year
(Upon Full
Implementation)
1. Estmated Total Cost 30,000 30,000 0
Personal Services 0 0 0
Current Expenses 30,000 0 0
Repairs and Alterations 0 0 0
Assets 0 0 0
Other 0 30,000 0
2. Estimated Total Revenues 0 -20,000,000 0
3. Explanation of above estimates (including long-range effect):
    Passage of this bill would set the tax rate for the Corporation Net Income Tax at 5.9 percent for tax years beginning on or after January 1, 2012 replacing an existing schedule of tax rate changes that would reduce the Corporation Net Income Tax to 6.5 percent by 2014. According to our interpretation and based upon current estimates, the change in the tax rate would result in a $20 million reduction in the General Revenue Fund in FY2013. Due to the wide fluctuation of taxable corporation income due to changing economic conditions, passage of this bill would likely reduce the General Revenue Fund by $20 million to $40 million annually in subsequent years. Additionally, if the bill were to be enacted before the filing of many June estimated payments (normally the second of four estimated payments by calendar year taxpayers subject to estimated filing requirements), FY2012 General Revenue Fund collections could be reduced by $5 million to $10 million.
    
    Additional administrative costs to the State Tax Department associated with this bill would be roughly $30,000 in FY2012 and $30,000 in FY2013. The additional costs would include mailing a notification to taxpayers of the tax rate change and the update of computer audit programs.
    


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