Date Requested:February 15, 2013
Time Requested:03:15 PM
Agency: State Tax & Revenue Department
CBD Number: Version: Bill Number: Resolution Number:
2013R1243 Introduced HB2129
CBD Subject: ALTERNATIVE FUEL MOTOR VEHICLES
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 tax credits taken for the purchase of alternative fuel vehicles or conversion to alternative fuel vehicles or the construction of alternative fuel vehicle infrastructure to be transferred.
    
     As written, this bill would permit any entity, including a governmental entity, to transfer the right to the tax credit available for the purchase or conversion of alternative fuel vehicles or for the construction of alternative fuel vehicle refueling infrastructures, if the entity meets the definition of a taxpayer as defined in the tax credit statute. The bill provides that transferors or sellers must apply to the State Tax Department for approval of any transfer, sale or assignment of the tax credit. Additionally, the bill provides that the proceeds from the sale or transfer of the credit are exempt from the Consumers Sales and Service Tax, the Corporation Net Income Tax, and the Personal Income Tax.
    
     The Alternative-Fuel Motor Vehicles Tax Credit via W. Va. Code §11-6D-2(g) defines “taxpayer” as “any natural person, corporation, limited liability company or partnership subject to the tax imposed under article twenty-one, article twenty-three, or article twenty-four . . .” (i.e., Personal Income Tax, Business Franchise Tax, and Corporation net Income Tax). According to our interpretation, the proposed change would not include governmental entities because governmental entities are not taxpayers. The potential additional cost of this proposal over the long term would be minimal since the tax credit for non-governmental entities would likely have been used with or without a transfer, although the transfer would accelerate the use of the tax credit. Under Current law, potential annual tax credits associated with the Alternative-Fuel Motor Vehicles Tax Credit are in excess of $50 million per year. However, these credits would be used over a period of several years due to the limitations of tax liability. The estimate of actual cost in FY2013 is closer to $10 million. Acceleration of tax credit claims through the sale or transfer would move a greater portion of the total cost in future years to current years and would have a negative impact to the General Revenue Fund beginning in FY2014.
    
     However, if the proposal were amended to include governmental entities, the potential cost of this proposal could be significant since governments normally do not earn tax credits and the transfer of newly “earned credits” would represent additional costs to the State Treasury in excess of a normal tax credit program.
    
     Under existing law, taxpayers may receive tax credits equal to 35 percent of the purchase price of an alternative-fuel motor vehicle up to $7,500 for vehicles weighing less than 26,000 pounds and $25,000 for vehicles weighing more than 26,000 pounds. In addition, a taxpayer may receive a tax credit equal to 50 percent of the cost of installation of alternative fuel vehicle refueling infrastructure up to $250,000 per installation if not accessible to the public or $312,500 if accessible to the public. Allowing governments to sell credits for just a few buses, cars and refueling facilities could easily result in the creation of a few million dollars worth of State tax credits.
    
     Current law may actually discourage purchases of compressed natural gas vehicles because tax credits of similar size are available for flex fuel vehicles which would comprise much than more than 99 percent of all sales.
    
     Passage of this bill accelerating the cost of the Alternative-Fuel Motor Vehicles Tax Credit would also conflict with the Governor’s proposed bill regarding the Alternative-Fuel Motor Vehicles Tax Credit.
    
     Additional administrative costs to the State Tax Department associated with passage of this bill would be roughly $60,000 in FY 2014 and $50,000 per year thereafter.
    

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 60,000 50,000
Personal Services 0 50,000 50,000
Current Expenses 0 10,000 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 permit any entity, including a governmental entity, to transfer the right to the tax credit available for the purchase or conversion of alternative fuel vehicles or for the construction of alternative fuel vehicle refueling infrastructures, if the entity meets the definition of a taxpayer as defined in the tax credit statute. The bill provides that transferors or sellers must apply to the State Tax Department for approval of any transfer, sale or assignment of the tax credit. Additionally, the bill provides that the proceeds from the sale or transfer of the credit are exempt from the Consumers Sales and Service Tax, the Corporation Net Income Tax, and the Personal Income Tax.
    
     The Alternative-Fuel Motor Vehicles Tax Credit via W. Va. Code §11-6D-2(g) defines “taxpayer” as “any natural person, corporation, limited liability company or partnership subject to the tax imposed under article twenty-one, article twenty-three, or article twenty-four . . .” (i.e., Personal Income Tax, Business Franchise Tax, and Corporation net Income Tax). According to our interpretation, the proposed change would not include governmental entities because governmental entities are not taxpayers. The potential additional cost of this proposal over the long term would be minimal since the tax credit for non-governmental entities would likely have been used with or without a transfer, although the transfer would accelerate the use of the tax credit. Under Current law, potential annual tax credits associated with the Alternative-Fuel Motor Vehicles Tax Credit are in excess of $50 million per year. However, these credits would be used over a period of several years due to the limitations of tax liability. The estimate of actual cost in FY2013 is closer to $10 million. Acceleration of tax credit claims through the sale or transfer would move a greater portion of the total cost in future years to current years and would have a negative impact to the General Revenue Fund beginning in FY2014.
    
     However, if the proposal were amended to include governmental entities, the potential cost of this proposal could be significant since governments normally do not earn tax credits and the transfer of newly “earned credits” would represent additional costs to the State Treasury in excess of a normal tax credit program.
    
     Under existing law, taxpayers may receive tax credits equal to 35 percent of the purchase price of an alternative-fuel motor vehicle up to $7,500 for vehicles weighing less than 26,000 pounds and $25,000 for vehicles weighing more than 26,000 pounds. In addition, a taxpayer may receive a tax credit equal to 50 percent of the cost of installation of alternative fuel vehicle refueling infrastructure up to $250,000 per installation if not accessible to the public or $312,500 if accessible to the public. Allowing governments to sell credits for just a few buses, cars and refueling facilities could easily result in the creation of a few million dollars worth of State tax credits.
    
     Current law may actually discourage purchases of compressed natural gas vehicles because tax credits of similar size are available for flex fuel vehicles which would comprise much than more than 99 percent of all sales.
    
     Passage of this bill accelerating the cost of the Alternative-Fuel Motor Vehicles Tax Credit would also conflict with the Governor’s proposed bill regarding the Alternative-Fuel Motor Vehicles Tax Credit.
    
     Additional administrative costs to the State Tax Department associated with passage of this bill would be roughly $60,000 in FY 2014 and $50,000 per year thereafter.
    


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