Date Requested:February 20, 2012
Time Requested:01:45 PM
Agency: State Tax Department
CBD Number: Version: Bill Number: Resolution Number:
2012R2291 Introduced SB654
CBD Subject: COAL SEVERANCE TAX CREDIT
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 permit West Virginia coal companies a reprieve from severance tax in an amount equal to money spent for wages, equipment and supplies in the county where the coal is extracted.
    
    As written, the bill states “coal companies operating in West Virginia shall receive a reprieve from severance tax on revenues from coal extraction in an amount equal to the amount of funds expended by the coal company for wages, equipment and supplies in the county where the coal is extracted.” Assuming that the expenditures on wages, equipment, and supplies would be deducted from the revenues from coal extraction subject to the Severance Tax, and not from the Severance Tax on coal itself, it is our interpretation that passage of this bill would reduce the Severance Tax attributable to coal by roughly $183 million in FY2013 and by a similar amount each succeeding year. Additionally, assuming the additional tax on coal for the benefit of counties and municipalities and the dedication to the Infrastructure Fund are not impacted by this bill, the General Revenue Fund would be reduced by $183 million in FY2013 and by a similar amount each succeeding year.
    
    Additional administrative costs to the State Tax Department associated with passage of this bill would be minimal. However, if the intent is to associate the “amount of funds expended by the coal company for wages, equipment and supplies in the county” directly with revenue by county, the additional administrative costs will be significant.

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 -183,000,000 -183,000,000
3. Explanation of above estimates (including long-range effect):
    As written, the bill states “coal companies operating in West Virginia shall receive a reprieve from severance tax on revenues from coal extraction in an amount equal to the amount of funds expended by the coal company for wages, equipment and supplies in the county where the coal is extracted.” Assuming that the expenditures on wages, equipment, and supplies would be deducted from the revenues from coal extraction subject to the Severance Tax, and not from the Severance Tax on coal itself, it is our interpretation that passage of this bill would reduce the Severance Tax attributable to coal by roughly $183 million in FY2013 and by a similar amount each succeeding year. Additionally, assuming the additional tax on coal for the benefit of counties and municipalities and the dedication to the Infrastructure Fund are not impacted by this bill, the General Revenue Fund would be reduced by $183 million in FY2013 and by a similar amount each succeeding year.
    
    Additional administrative costs to the State Tax Department associated with passage of this bill would be minimal. However, if the intent is to associate the “amount of funds expended by the coal company for wages, equipment and supplies in the county” directly with revenue by county, the additional administrative costs will be significant.
    
    


Memorandum
Person submitting Fiscal Note:
Mark Muchow
Email Address:
kerri.r.petry@wv.gov
    The stated purpose of this bill is to permit West Virginia coal companies a reprieve from severance tax in an amount equal to money spent for wages, equipment and supplies in the county where the coal is extracted.
    
    The bill header includes the following statement “A bill . . . relating to providing a severance tax holiday to West Virginia coal companies.” In general use, a tax holiday is a change for a specific period of time. The bill, as written, appears to provide a deduction that has neither a start date nor an end date. That is, the deduction appears to be permanent.