Date Requested:February 15, 2013
Time Requested:11:29 AM
Agency: State Tax & Revenue Department
CBD Number: Version: Bill Number: Resolution Number:
2013R1119 Introduced HB2373
CBD Subject: REFUNDABLE WV EARNED INCOME 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 provide low and moderate income workers with a refundable state tax credit based on the federal earned income tax credit. Current law provides for a nonrefundable tax credit based on federal poverty guidelines.
    
     As written, this bill would replace the Low-Income Family Tax Credit with a new tax credit named as the West Virginia Earned Income Tax Credit. The new tax credit would be in an amount equal to 10 percent of the earned income credit allowed under Section 32 of the federal Internal Revenue Code, and applicable to a qualifying Taxpayer’s Personal Income Tax liability, as reduced by all other available tax credits. Any West Virginia Earned Income Tax Credit in excess of the Taxpayer’s adjusted Personal Income Tax liability would be refunded to the Taxpayer. The bill also requires the State Tax Commissioner to make efforts every year to alert taxpayers who may be eligible to receive the tax credit.
    
     Based upon available information, it is estimated that Taxpayers would receive roughly $36.4 million per year from the West Virginia Earned Income Tax Credit. However, since the West Virginia Earned Income Tax Credit would replace roughly $16.3 million of Low-Income Family Tax Credit, the net reduction in revenue attributable to passage of this bill would be roughly $20.1 million per year beginning in FY2014.
    
     The State Tax Department will incur additional administrative costs associated with passage of this bill. One-time costs of roughly $200,000 would be incurred in FY2014 attributable to tax form revisions, computer program changes, and the required notification of potentially eligible Taxpayers. Annual administrative costs of roughly $40,000 will be incurred in subsequent years attributable to the notification of potentially eligible Taxpayers. If it is expected that claims of the tax credit are to be audited, additional administrative costs in FY2015 and beyond attributable to the establishment and operation of an audit program will be significant.
    

Fiscal Note Detail
Over-all effect
Effect of Proposal Fiscal Year
2013
Increase/Decrease
(use"-")
2014
Increase/Decrease
(use"-")
Fiscal Year
(Upon Full
Implementation)
1. Estmated Total Cost 0 200,000 40,000
Personal Services 0 40,000 40,000
Current Expenses 0 0 0
Repairs and Alterations 0 0 0
Assets 0 0 0
Other 0 160,000 0
2. Estimated Total Revenues 0 -20,100,000 -20,100,000
3. Explanation of above estimates (including long-range effect):
     As written, this bill would replace the Low-Income Family Tax Credit with a new tax credit named as the West Virginia Earned Income Tax Credit. The new tax credit would be in an amount equal to 10 percent of the earned income credit allowed under Section 32 of the federal Internal Revenue Code, and applicable to a qualifying Taxpayer’s Personal Income Tax liability, as reduced by all other available tax credits. Any West Virginia Earned Income Tax Credit in excess of the Taxpayer’s adjusted Personal Income Tax liability would be refunded to the Taxpayer. The bill also requires the State Tax Commissioner to make efforts every year to alert taxpayers who may be eligible to receive the tax credit.
    
     Based upon available information, it is estimated that Taxpayers would receive roughly $36.4 million per year from the West Virginia Earned Income Tax Credit. However, since the West Virginia Earned Income Tax Credit would replace roughly $16.3 million of Low-Income Family Tax Credit, the net reduction in revenue attributable to passage of this bill would be roughly $20.1 million per year beginning in FY2014.
    
     More than 163,000 West Virginia taxpayers claimed roughly $333 million in federal earned income tax credits in 2010. While roughly 183,000 Taxpayers will pay less tax or receive a refund via the proposed West Virginia Earned Income Tax Credit, more than 47,000 Taxpayers will pay more tax due to the elimination of the Low-Income Family Tax Credit.
    
     The State Tax Department will incur additional administrative costs associated with passage of this bill. One-time costs of roughly $200,000 would be incurred in FY2014 attributable to tax form revisions, computer program changes, and the required notification of potentially eligible Taxpayers. Annual administrative costs of roughly $40,000 will be incurred in subsequent years attributable to the notification of potentially eligible Taxpayers. If it is expected that claims of the tax credit are to be audited, additional administrative costs in FY2015 and beyond attributable to the establishment and operation of an audit program will be significant.
    


Memorandum
Person submitting Fiscal Note:
Roger D. Cox
Email Address:
Roger.D.Cox@wv.gov