Date Requested:February 08, 2012
Time Requested:02:22 PM
Agency: State Tax Department
CBD Number: Version: Bill Number: Resolution Number:
2012R1250 Introduced HB4457
CBD Subject: NONPRODUCING MINERAL ESTATES
FUND(S)
General Revenue Fund, local funds
Sources of Revenue
General Fund,Other Fund local funds
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 eliminate the real property tax on nonproducing mineral estates and replace it with an additional one percent severance tax. The bill also makes findings and provides rule-making authority.
    
    As written, this bill would set the assessed value of nonproducing mineral properties to zero. The bill also provides that when a previously non-producing mineral property begins producing the property will be assessed as a producing property and a Severance Tax of one percent, in addition to the other Severance Taxes levied via the West Virginia Code, will be imposed. Additionally, the bill would require the State Tax Commissioner, within 60 days of collection, to distribute the one percent additional Severance Tax to the county(s) where the minerals were produced.
    
    According to our interpretation, the elimination of the Property Tax on nonproducing minerals would result in a reduction in local government revenue of roughly $16.9 million per year and a reduction in State Revenue of roughly $70,000 per year. The State Tax Department does not have sufficient information to accurately estimate the amount of the additional one percent Severance Tax that would be collected on the producing mineral Property Tax when the former nonproducing properties begin producing.
    
    While the elimination of the Property Tax on nonproducing minerals may result in some savings, the additional administrative costs to the State Tax Department attributable to the collection and distribution of the additional one percent Severance Tax would be significant. Implementation of the additional one percent Severance Tax will require revision of many tax returns and computer programs to properly segregate the new Severance Tax from existing Severance taxes, to collect county production information for all minerals, and to determine the amount of the new Severance Tax that will be distributed to each county.

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 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):
    Passage of this bill would set the assessed value of nonproducing mineral properties to zero. The bill also provides that when a previously non-producing mineral property begins producing the property will be assessed as a producing property and a Severance Tax of one percent, in addition to the other Severance Taxes levied via the West Virginia Code, will be imposed. Additionally, the bill would require the State Tax Commissioner, within 60 days of collection, to distribute the one percent additional Severance Tax to the county(s) where the minerals were produced.
    
    According to our interpretation, the elimination of the Property Tax on nonproducing minerals would result in a reduction in local government revenue of roughly $16.9 million per year and a reduction in State Revenue of roughly $70,000 per year. The State Tax Department does not have sufficient information to accurately estimate the amount of the additional one percent Severance Tax that would be collected on the producing mineral Property Tax when the former nonproducing properties begin producing.
    
    While the elimination of the Property Tax on nonproducing minerals may result in some savings, the additional administrative costs to the State Tax Department attributable to the collection and distribution of the additional one percent Severance Tax would be significant. Implementation of the additional one percent Severance Tax will require revision of many tax returns and computer programs to properly segregate the new Severance Tax from existing Severance taxes, to collect county production information for all minerals, and to determine the amount of the new Severance Tax that will be distributed to each county.
    


Memorandum
Person submitting Fiscal Note:
Mark Muchow
Email Address:
kerri.r.petry@wv.gov
    The stated purpose of this bill is to eliminate the real property tax on nonproducing mineral estates and replace it with an additional one percent severance tax. The bill also makes findings and provides rule-making authority.
    
    As written, the bill reads in part “Notwithstanding Article X of the Constitution of West Virginia, section nine of this article and any other provision of this code . . .” The dismissal of a portion of the Constitution of West Virginia would require a Constitutional amendment. Additionally, this bill would create a second tier of Severance Tax where currently producing properties are assessed only a base rate and where former nonproducing mineral properties that begin producing would be assessed the base rate plus an additional one percent tax. The two tier tax would appear to conflict with Constitutional strictures of equal and uniform taxation.