Date Requested:March 29, 2013
Time Requested:09:00 AM
Agency: State Tax & Revenue Department
CBD Number: Version: Bill Number: Resolution Number:
2013R2932 Introduced HB3072
CBD Subject: TAX CREDIT TO COAL PRODUCERS
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 provide a tax credit to coal producers who sell coal to taxpayers who increase their consumption of West Virginia coal in this state for the purpose of increasing coal production and coal related employment in West Virginia.
    
     As written, this bill would create a tax credit in an amount equal to $3 per ton multiplied by the number of tons of qualified coal. The bill defines “qualified coal” as the number of tons of eligible coal consumed at a power plant or industrial facility located in West Virginia that are in excess of the number of tons of eligible coal consumed at the power plant or industrial facility during calendar year 2012. And, the bill defines “eligible coal” as coal produced from a mine located in West Virginia and upon which the Severance Tax imposed by W. Va. Code §11-13A-3b was paid. The bill provides for an adjustment in the credit allowed per ton of coal when the Severance Tax paid by a Taxpayer is less than $3 per ton. The proposed tax credit would be available to reduce the Severance Tax of eligible Taxpayers. Purchasers of eligible coal are to certify the number of tons of qualified coal purchased from eligible Taxpayers. The bill also establishes penalty and statute of limitation provisions regarding the proposed tax credit.
    
     According to our interpretation, the amount of the proposed tax credit may vary substantially from one year to the next. Due to the expected fluctuation in the amount of available tax credit, we are unable to accurately estimate to potential annual reduction in either the General Revenue Fund or local Severance Tax funds resulting from use of the proposed tax credit. However, the reduction could be significant given the volume of coal potentially consumed in West Virginia.
    
     Under the assumption that the State Tax Department would not be expected to evaluate the effectiveness of this proposed tax credit program, additional administrative costs to the State Tax Department associated with passage of this bill would be minimal. West Virginia businesses that purchase coal may incur additional administrative costs in the issuance of certifications required by the bill.

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 create a tax credit in an amount equal to $3 per ton multiplied by the number of tons of qualified coal. The bill defines “qualified coal” as the number of tons of eligible coal consumed at a power plant or industrial facility located in West Virginia that are in excess of the number of tons of eligible coal consumed at the power plant or industrial facility during calendar year 2012. And, the bill defines “eligible coal” as coal produced from a mine located in West Virginia and upon which the Severance Tax imposed by W. Va. Code §11-13A-3b was paid. The bill provides for an adjustment in the credit allowed per ton of coal when the Severance Tax paid by a Taxpayer is less than $3 per ton. The proposed tax credit would be available to reduce the Severance Tax of eligible Taxpayers. Purchasers of eligible coal are to certify the number of tons of qualified coal purchased from eligible Taxpayers. The bill also establishes penalty and statute of limitation provisions regarding the proposed tax credit.
    
     According to our interpretation, the amount of the proposed tax credit may vary substantially from one year to the next. Due to the expected fluctuation in the amount of available tax credit, we are unable to accurately estimate to potential annual reduction in the General Revenue Fund resulting from use of the proposed tax credit, but it is expected the reduction could be significant.
    
     Although the bill states as a legislative finding that “other coal producing states in the region offer incentives to businesses to consume coal produced in those states,” the proposed tax credit may actually result in additional states implementing retaliatory legislation that would reduce the consumption of West Virginia coal in those states. Since West Virginia produces more coal than is consumed in the State, the strength of the West Virginia coal industry largely depends upon free trade and exports to other states and foreign countries.
    
     Under the assumption that the State Tax Department would not be expected to evaluate the effectiveness of this proposed tax credit program, additional administrative costs to the State Tax Department associated with passage of this bill would be minimal. West Virginia businesses that purchase coal may incur additional administrative costs in the issuance of certifications required by the bill.


Memorandum
Person submitting Fiscal Note:
Mark B. Muchow
Email Address:
Roger.D.Cox@wv.gov
     The stated purpose of this bill is to provide a tax credit to coal producers who sell coal to taxpayers who increase their consumption of West Virginia coal in this state for the purpose of increasing coal production and coal related employment in West Virginia.
    
     As written, the bill provides that purchasers of eligible coal are to certify the number of tons of qualified coal purchased from eligible Taxpayers. However, the bill does not provide any guidance on how a purchaser determines the amount of coal consumed in excess of that consumed in the base year of 2012. Absent guidelines different purchasers may use different methods to determine the excess coal. For example, one purchaser may use a methodology that only considers the latest coal purchased while another purchaser use a methodology that considers coal purchased throughout the year for determining the excess purchases.