Date Requested:February 16, 2013
Time Requested:11:26 AM
Agency: State Tax & Revenue Department
CBD Number: Version: Bill Number: Resolution Number:
2013R1706 Introduced HB2217
CBD Subject: REDUCE CORPORATE NET INCOME TAX
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 reduce the rate of tax on corporate net income to 5.9 percent, effective the tax year beginning July 1, 2013.
    
     As written, the bill contains language stating “For taxable periods beginning on or after July 1, 2013, a tax is hereby imposed . . . at the rate of five and nine-tenths percent. This subsection supercedes and replaces subsections (4) of this section for the taxable year 2013 and thereafter.”
    
     According to our interpretation and assuming the tax rate for the Corporation Net Income Tax will be 5.9 percent for the 2013 tax year and beyond, passage of this bill as written would replace an existing schedule of tax rate changes that would reduce the Corporation Net Income Tax to 6.5 percent by 2014. Based upon current estimates, the change in the tax rate would result in a $15 million to $20 million reduction in the General Revenue Fund in FY2014. Due to the wide fluctuation of taxable corporation income due to changing economic conditions, passage of this bill would likely reduce the General Revenue Fund by $20 million to $40 million annually in subsequent years.
    
     Additional administrative costs to the State Tax Department associated with this bill would be roughly $30,000 in FY2013 and $30,000 in FY2014.

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 30,000 30,000 0
Personal Services 0 0 0
Current Expenses 30,000 0 0
Repairs and Alterations 0 0 0
Assets 0 0 0
Other 0 30,000 0
2. Estimated Total Revenues 0 0 0
3. Explanation of above estimates (including long-range effect):
     As written, the bill contains language stating “For taxable periods beginning on or after July 1, 2013, a tax is hereby imposed . . . at the rate of five and nine-tenths percent. This subsection supercedes and replaces subsections (4) of this section for the taxable year 2013 and thereafter.”
    
     According to our interpretation and assuming the tax rate for the Corporation Net Income Tax will be 5.9 percent for the 2013 tax year and beyond, passage of this bill as written would replace an existing schedule of tax rate changes that would reduce the Corporation Net Income Tax to 6.5 percent by 2014. Based upon current estimates, the change in the tax rate would result in a $15 million to $20 million reduction in the General Revenue Fund in FY2014. Due to the wide fluctuation of taxable corporation income due to changing economic conditions, passage of this bill would likely reduce the General Revenue Fund by $20 million to $40 million annually in subsequent years.
    
     Additional administrative costs to the State Tax Department associated with this bill would be roughly $30,000 in FY2013 and $30,000 in FY2014. The additional costs would include mailing a notification to taxpayers of the tax rate change and the update of computer audit programs.
    


Memorandum
Person submitting Fiscal Note:
Mark B. Muchow
Email Address:
Roger.D.Cox@wv.gov
     The stated purpose of this bill is to reduce the rate of tax on corporate net income to 5.9 percent, effective the tax year beginning July 1, 2013.
    
     As written, the bill contains language stating “For taxable periods beginning on or after July 1, 2013, a tax is hereby imposed . . . at the rate of five and nine-tenths percent. This subsection supercedes and replaces subsections (4) of this section for the taxable year 2013 and thereafter.” Since many taxpayers use a tax year that coincides with the calendar year, the proposed language may lead to some confusion as to when the rate reduction would actually occur.