Date Requested:February 21, 2013
Time Requested:05:14 PM
Agency: State Tax & Revenue Department
CBD Number: Version: Bill Number: Resolution Number:
2013R1192 Introduced HB2101
CBD Subject: EXCLUSION FROM INCOME TAX INCREASED
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 state income tax liability for certain retired public employees who are permanently and totally disabled, and their surviving spouses; increase the amount of retirement income received from certain state and federal retirement systems that is excluded from the calculation of income subject to state personal income taxes.
    
    The bill, as written, increases the decreasing modification from $2,000 to $4,000 for benefits received under PERS and the Teachers’ Retirement System beginning with Tax Year 2011 and for benefits from federal retirement beginning with Tax Year 2012. In addition, the bill increases the maximum modification for senior citizens and those who are permanently and totally disabled to $16,000 if the person receives benefits from PERS or the Teachers’ Retirement System or military or federal retirement systems beginning with Tax Year 2012. Due to the fact that the changes in the bill are retroactive, passage of this bill would reduce General Revenue Fund collections by roughly $32.0 million in FY2014. The reduction in FY2014 collections would be attributable to roughly $19.6 million in refunds attributable to refunds for amended Tax Year 2011 and 2012 returns and $12.4 million for Tax Year 2013 returns. The anticipated retirements of members of the baby-boom generation will result in additional escalation of costs over time.
    
    Since passage of this bill would result in the processing of additional refunds in FY2014 due to amended returns, additional costs to the State Tax Department would be significant. Additional litigation by less favored groups may result in some increase in costs to the State Tax Department. In particular, additional preferential treatment for Tax Year 2011 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.

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, increases the decreasing modification from $2,000 to $4,000 for benefits received under PERS and the Teachers’ Retirement System beginning with Tax Year 2011 and for benefits from federal retirement beginning with Tax Year 2012. In addition, the bill increases the maximum modification for senior citizens and those who are permanently and totally disabled to $16,000 if the person receives benefits from PERS or the Teachers’ Retirement System or military or federal retirement systems beginning with Tax Year 2012. Due to the fact that the changes in the bill are retroactive, passage of this bill would reduce General Revenue Fund collections by roughly $32.0 million in FY2014. The reduction in FY2014 collections would be attributable to roughly $19.6 million in refunds attributable to refunds for amended Tax Year 2011 and 2012 returns and $12.4 million for Tax Year 2013 returns. The anticipated retirements of members of the baby-boom generation will result in additional escalation of costs over time.
    
    Since passage of this bill would result in the processing of additional refunds in FY2014 due to amended returns, additional costs to the State Tax Department would be significant. Additional litigation by less favored groups may result in some increase in costs to the State Tax Department. In particular, additional preferential treatment for Tax Year 2011 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.


Memorandum
Person submitting Fiscal Note:
Mark B. Muchow
Email Address:
Roger.D.Cox@wv.gov
    The stated purpose of this bill is to reduce state income tax liability for certain retired public employees who are permanently and totally disabled, and their surviving spouses; increase the amount of retirement income received from certain state and federal retirement systems that is excluded from the calculation of income subject to state personal income taxes.
    
    There is also concern that additional preferential treatment for Tax Year 2011 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 bill clarifies that the reduction of $8,000 for the surviving spouse of any person 65 or older or who had been certified as permanently and totally disabled remains applicable for tax years beginning prior to January 1, 2011 (Tax Year 2010 and earlier). For tax years beginning after December 31, 2011 (Tax Year 2012 and beyond), the surviving spouse modification increases to $16,000 if the person received benefits from the West Virginia Public Employees Retirement System, the West Virginia Teachers Retirement System or any federal retirement system. Tax Year 2011 is omitted from this section.