Date Requested:February 16, 2013
Time Requested:11:09 AM
Agency: State Tax & Revenue Department
CBD Number: Version: Bill Number: Resolution Number:
2013R1684 Introduced HB2202
CBD Subject: RETIREMENT TAX EXEMPT
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 exempt income received by retired public employees and retired teachers through their state retirement systems from personal income taxes.
    
    The bill, as written, creates a decreasing modification for all retirement income received in pensions and annuities from the Public Employees Retirement System or the West Virginia Teachers Retirement System. In addition, the bill places this new decreasing modification outside the calculations for the $8,000 senior citizens’ modification. The bill is effective for tax years beginning after December 31, 2013. Passage of this bill would result in a decrease in General Revenue Fund collections of $28.3 million beginning in FY2015. The anticipated retirements of members of the baby-boom generation will result in additional escalation of costs over time.
    
    Additional litigation by less favored groups may result in some increase in costs to the State Tax Department. In particular, additional preferential treatment for a large group of state and local government retirees relative to federal civil service retirees would conflict with the U.S. Supreme Court ruling in Davis v. Michigan. The situation could be remedied by increasing the modification for federal retirees to include all federal retirement income at an additional cost to the State of $10.3 million.
    

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 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):
    The bill, as written, creates a decreasing modification for all retirement income received in pensions and annuities from the Public Employees Retirement System or the West Virginia Teachers Retirement System. In addition, the bill places this new decreasing modification outside the calculations for the $8,000 senior citizens’ modification. The bill is effective for tax years beginning after December 31, 2013. Passage of this bill would result in a decrease in General Revenue Fund collections of $28.3 million beginning in FY2015. The anticipated retirements of members of the baby-boom generation will result in additional escalation of costs over time.
    
    Additional litigation by less favored groups may result in some increase in costs to the State Tax Department. In particular, additional preferential treatment for a large group of state and local government retirees relative to federal civil service retirees would conflict with the U.S. Supreme Court ruling in Davis v. Michigan. The situation could be remedied by increasing the modification for federal retirees to include all federal retirement income at an additional cost to the State of $10.3 million.
    


Memorandum
Person submitting Fiscal Note:
Mark B. Muchow
Email Address:
Roger.D.Cox@wv.gov
    The stated purpose of this bill is to exempt income received by retired public employees and retired teachers through their state retirement systems from personal income taxes.
    
    The bill is silent as to the present limitation of $2,000 in W. Va. Code §11-21-12(c)(5) of the same monies. The bill does not specify that a surviving spouse has the same modification but implies that result because the bill includes annuities.
    
    There is also concern that additional preferential treatment for a large group of state and local government retirees relative to federal civil service retirees would conflict with the U.S. Supreme Court ruling in Davis v. Michigan.