Date Requested:January 09, 2014
Time Requested:11:58 AM
Agency: State Tax & Revenue Department
CBD Number: Version: Bill Number: Resolution Number:
2014R1029 Introduced SB26
CBD Subject: TAX CREDIT FOR EMERGENCY GENERATORS
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 tax credits for use of emergency generators with mobile unit hookups by businesses with a minimum of fifty locations in this state. The bill places restrictions, permits carryover and requires rulemaking.
    
     As written, any taxpayer that operates a business with a minimum of fifty locations in this state and has installed or causes to be installed an emergency generator with a mobile unit hookup on property located in this state and owned by the taxpayer or used as a place of business after July 1, 2014, shall be allowed a credit against their Personal Income Tax liability, Corporate Net Income Tax liability, or Business Franchise Tax liability in an amount equal to 60 percent of the cost to purchase and install the system up to a maximum amount of $15,000. However, a taxpayer may claim the credit for no more than two emergency generators in each county in which the businesses are located. Further, if the amount of the credit exceeds the taxpayer’s Personal Income Tax liability, Corporate Net Income Tax liability, or Business Franchise Tax liability for the taxable year, the amount which exceeds the tax liability may be carried over and applied as a credit against the Personal Income Tax liability, Corporate Net Income Tax liability, or Business Franchise Tax liability of the taxpayer to each of the next taxable years unless sooner used. In order to receive the tax credit for an emergency generator, the generator must be wired to the electrical panel in the building with insulating back-flow and shut off protection.
    
     Based upon current statistics of businesses with a minimum of 50 locations within West Virginia, the total potential value of the tax credit could be nearly $11 million based upon 704 installations. The State Tax Department also does not have sufficient information to estimate how long the installation of qualifying generators would take. In addition, some of these Taxpayers may already have installed generators as part of their normal business plan without the benefit of the additional State subsidy. The proposed State subsidy is fairly substantial and would likely influence Taxpayer behavior. Thus, the actual level of annual reduction in the General Revenue Fund cannot be accurately estimated on a fiscal year basis.
    
     Additional administrative costs in FY 2015 would be approximately $5,000 associated with the implementation and testing associated with the reporting requirements of the bill.
    

Fiscal Note Detail
Over-all effect
Effect of Proposal Fiscal Year
2014
Increase/Decrease
(use"-")
2015
Increase/Decrease
(use"-")
Fiscal Year
(Upon Full
Implementation)
1. Estmated Total Cost 0 5,000 0
Personal Services 0 0 0
Current Expenses 0 0 0
Repairs and Alterations 0 0 0
Assets 0 0 0
Other 0 5,000 0
2. Estimated Total Revenues 0 0 -11,000,000
3. Explanation of above estimates (including long-range effect):
     As written, any taxpayer that operates a business with a minimum of fifty locations in this state and has installed or causes to be installed an emergency generator with a mobile unit hookup on property located in this state and owned by the taxpayer or used as a place of business after July 1, 2014, shall be allowed a credit against their Personal Income Tax liability, Corporate Net Income Tax liability, or Business Franchise Tax liability in an amount equal to 60 percent of the cost to purchase and install the system up to a maximum amount of $15,000. However, a taxpayer may claim the credit for no more than two emergency generators in each county in which the businesses are located. Further, if the amount of the credit exceeds the taxpayer’s Personal Income Tax liability, Corporate Net Income Tax liability, or Business Franchise Tax liability for the taxable year, the amount which exceeds the tax liability may be carried over and applied as a credit against the Personal Income Tax liability, Corporate Net Income Tax Liability, or Business Franchise Tax Liability of the taxpayer to each of the next taxable years unless sooner used. In order to receive the tax credit for an emergency generator, the generator must be wired to the electrical panel in the building with insulating back-flow and shut off protection.
    
     There were a total of 15 Taxpayers with at least 50 business locations in West Virginia as of February 2014. These businesses include banks and retailers and reported over 1,323 locations statewide. The bill’s provision that a Taxpayer may not claim the proposed tax credit for no more than two emergency generators in each county would limit the number of potential tax credit locations to 704.
    
    


Memorandum
Person submitting Fiscal Note:
Mark.B.Muchow
Email Address:
Roger.D.Cox@wv.gov
     The stated purpose of this bill is to provide tax credits for use of emergency generators with mobile unit hookups by businesses with a minimum of fifty locations in this state. The bill places restrictions, permits carryover and requires rulemaking.
    
     There may be a title defect given that the title describes “use of emergency generators” whereas the remainder of the bill refers primarily to “installation” of the generators.
    
     The bill uses the terms “emergency generators,” “mobile unit hookups,” “system,” and “recapture of the credit” without providing definitions. As written, the bill provides that the “emergency generator” is to be installed with an undefined “mobile hookup” which infers a temporary, movable operation, but also requires that the generator be “wired to the electrical panel” in the building which sounds more permanent. This may lead to some confusion regarding what type of installation qualifies for the tax credit.