Date Requested:March 21, 2013
Time Requested:02:32 PM
Agency: State Tax & Revenue Department
CBD Number: Version: Bill Number: Resolution Number:
2013R2831 Introduced HB3040
CBD Subject: MANUFACTURING ENTITIES
FUND(S)
General Revenue Fund, Local Government Funds
Sources of Revenue
General Fund,Other Fund Local Property Tax Revenu
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 manufacturing investment tax credit generally for small arms manufacturing. It amends the definition of manufacturing for purposes of special method for appraising qualified capital additions to manufacturing facilities for property tax purposes and the definition of manufacturing for purposes of manufacturing investment tax credit.
    
     As written, this bill would amend both the Special Method for Appraising Qualified Capital Additions to Manufacturing Facilities and the Manufacturing Investment Tax Credit by making changes related to businesses whose business activity has a sector identifier of the six-digit North American Industry Classification System Code (NAICS) numbers 332992 and 332994. The US Census Bureau defines NAICS number 332992 as “This U.S. industry comprises establishments primarily engaged in manufacturing small arms ammunition” and defines NAICS number 332994 as “This U.S. industry comprises establishments primarily engaged in manufacturing small arms, other ordnance, and/or ordnance accessories.” The bill proposes that on and after July 1, 2013, the investment levels to qualify for the Special Method for Appraising Qualified Capital Additions to Manufacturing Facilities would be lowered for businesses with NAICS numbers 332992 or 332994 to $1 million of new investment within two miles of a manufacturing facility owned or operated by the person making the capital addition that has a total original cost before the capital addition of at least $2 million (current law requires $50 million of new investment at a facility whose original investment was at least $100 for manufacturers and $10 million and $20 million for businesses with a NAICS number of 211112). According to our interpretation, the changes made by the bill related to the Manufacturing Investment Tax Credit would require businesses with NAICS numbers 332992 or 332994 that undertake construction, the value of which is greater than or equal to $500,000, to hire at least 75 percent of employees for said construction from the local labor market.
    
     According to our interpretation, new investment in personal property at a manufacturing facility is required for the Special Method for Appraising Qualified Capital Additions to Manufacturing Facilities. Therefore the changes proposed in this bill will not diminish Property Tax revenue from current sources as the special method of appraisal would be used for the “new” investment and would not apply to the existing facility, unless the existing property previously qualified for the current program. Passage of the bill will have little or no direct effect on Property Tax revenue. While there will be some Property Tax revenue foregone due to the reduced valuation, for purposes of the Property Tax, the special method of appraisal would not reduce any tax derived from current sources.
    
     The proposed changes to the Manufacturing Investment Tax Credit, according to our interpretation, will not diminish General Revenue Fund deposits since businesses with NAICS numbers 332992 or 332994 are currently eligible for the tax credit.
    
     Additional administrative costs for the State Tax Department associated with passage of this will would be minimal.
    

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):
     As written, this bill would amend both the Special Method for Appraising Qualified Capital Additions to Manufacturing Facilities and the Manufacturing Investment Tax Credit by making changes related to businesses whose business activity has a sector identifier of the six-digit North American Industry Classification System Code (NAICS) numbers 332992 and 332994. The US Census Bureau defines NAICS number 332992 as “This U.S. industry comprises establishments primarily engaged in manufacturing small arms ammunition” and defines NAICS number 332994 as “This U.S. industry comprises establishments primarily engaged in manufacturing small arms, other ordnance, and/or ordnance accessories.” The bill proposes that on and after July 1, 2013, the investment levels to qualify for the Special Method for Appraising Qualified Capital Additions to Manufacturing Facilities would be lowered for businesses with NAICS numbers 332992 or 332994 to $1 million of new investment within two miles of a manufacturing facility owned or operated by the person making the capital addition that has a total original cost before the capital addition of at least $2 million (current law requires $50 million of new investment at a facility whose original investment was at least $100 for manufacturers and $10 million and $20 million for businesses with a NAICS number of 211112). According to our interpretation, the changes made by the bill related to the Manufacturing Investment Tax Credit would require businesses with NAICS numbers 332992 or 332994 that undertake construction, the value of which is greater than or equal to $500,000, to hire at least 75 percent of employees for said construction from the local labor market.
    
     According to our interpretation, new investment in personal property at a manufacturing facility is required for the Special Method for Appraising Qualified Capital Additions to Manufacturing Facilities. Therefore the changes proposed in this bill will not diminish Property Tax revenue from current sources as the special method of appraisal would be used for the “new” investment and would not apply to the existing facility, unless the existing property previously qualified for the current program. Passage of the bill will have little or no direct effect on Property Tax revenue. While there will be some Property Tax revenue foregone due to the reduced valuation, for purposes of the Property Tax, the special method of appraisal would not reduce any tax derived from current sources.
    
     The proposed changes to the Manufacturing Investment Tax Credit, according to our interpretation, will not diminish General Revenue Fund deposits since businesses with NAICS numbers 332992 or 332994 are currently eligible for the tax credit.
    
     Additional administrative costs for the State Tax Department associated with passage of this will would be minimal.
    


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