FISCAL NOTE



FUND(S):

General Revenue Fund, local governments

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 encourage economic development and job creation by creating the West Virginia Project Launch Pad Act; to provide criteria for establishment of West Virginia project launchpads in certain areas by the Governor; allow county commissions and county councils to apply for launchpad designations; provide the process for application and approval of launchpads; and to provide economic benefits for businesses locating or expanding in launchpads including state and local tax relief and other economic benefits. The bill prohibits businesses in a launchpad from employing illegal aliens, engaging in illegal activity, and being delinquent in payment of state and local taxes; permits the transfer of economic benefits to successor businesses; and requires businesses to comply with applicable zoning laws and state and local building and other codes. The bill also provides for the recapture of taxes and other economic benefits under specified circumstances; requires the promulgation of rules and regulations; imposes civil and criminal penalties for noncompliance; and requires periodic reports to the Governor and the Legislature. Additionally, the bill provides a special method for appraising property in a launchpad for economic development, including providing a new method of valuation of launchpad property; providing for an initial determination of value by the assessor and for protest and appeals; and requiring periodic reports to Governor and Legislature. Finally, the bill creates the "Promoting West Virginia Employment Act" and provides qualification for certain economic benefits provided under the act upon application and review; it also specifies an annual cap on benefits; provides for recapture of benefits; provides for administration and enforcement of the article including the issuance of regulations; and requires periodic reports to Governor and Legislature. As written, the bill would create up to ten launchpad areas in economically depressed areas of the State. For businesses using an emerging technology, an innovative business technology or a state-of the-art technology in these launchpad areas, the bill would create a credit against tax liability attributable to business activity conducted within launchpad areas; would set the valuation, for Property Tax purposes, of personal property and improvements to real property at 5 percent of the original cost, and would provide an exemption for eligible businesses from sales and use taxes on tangible personal property (excluding motor fuels and motor vehicles, unless the vehicle is an alternative fuel vehicle) and custom software and services purchased for use or consumption by the eligible taxpayer in the qualified business activity. It should be noted that these businesses may also be eligible for other tax credits currently available. The bill also allows qualified businesses to retain a portion of the withholding taxes for individuals employed in the new jobs. In addition, the bill also allows a decreasing modification from federal adjusted gross income for residents of the launchpad or for income sourced to the launchpad activity. The State Tax Department does not have sufficient data to estimate the potential revenue impact of these proposed credits and modifications or the proposed Property Tax valuation. In addition to adding new economic development tax credits and exemptions for launchpad areas to the current list of existing programs, the provisions of the bill also add significant complexity to the Tax Code with additional compliance costs for taxpayers. Also, residents who live within the launchpad area would be largely exempt from State income taxes, even if the income is not attributable to qualified business activity within the launchpad. Finally, there may be some cost related to the provision allowing certain employers to keep a portion of employee withholding taxes. Additional administrative costs to the State Tax Department associated with passage of this bill would be approximately $158,000 in the first year in which Project Launchpad credits are available and $111,000 in subsequent years. Also, county assessors and the Department of Commerce may incur additional administrative costs attributable to passage of this bill.



Fiscal Note Detail


Effect of Proposal Fiscal Year
2014
Increase/Decrease
(use"-")
2015
Increase/Decrease
(use"-")
Fiscal Year
(Upon Full
Implementation)
1. Estmated Total Cost 0 0 110,000
Personal Services 0 0 0
Current Expenses 0 0 0
Repairs and Alterations 0 0 0
Assets 0 0 0
Other 0 0 110,000
2. Estimated Total Revenues 0 0 0


Explanation of above estimates (including long-range effect):


As written, the bill would create up to ten launchpad areas in economically depressed areas of the State. For businesses using an emerging technology, an innovative business technology or a state-of the-art technology in these launchpad areas, the bill would create a credit against tax liability attributable to business activity conducted within launchpad areas; would set the valuation, for Property Tax purposes, of personal property and improvements to real property at 5 percent of the original cost, and would provide an exemption for eligible businesses from sales and use taxes on tangible personal property (excluding motor fuels and motor vehicles, unless the vehicle is an alternative fuel vehicle) and custom software and services purchased for use or consumption by the eligible taxpayer in the qualified business activity. It should be noted that these businesses may also be eligible for other tax credits currently available. The bill also allows qualified businesses to retain a portion of the withholding taxes for individuals employed in the new jobs. In addition, the bill also allows a decreasing modification from federal adjusted gross income for residents of the launchpad or for income sourced to the launchpad activity. The State Tax Department does not have sufficient data to estimate the potential revenue impact of these proposed credits and modifications or the proposed Property Tax valuation. In addition to adding new economic development tax credits and exemptions for launchpad areas to the current list of existing programs, the provisions of the bill also add significant complexity to the Tax Code with additional compliance costs for taxpayers. Also, residents who live within the launchpad area would be largely exempt from State income taxes, even if the income is not attributable to qualified business activity within the launchpad. Finally, there may be some cost related to the provision allowing certain employers to keep a portion of employee withholding taxes. Additional administrative costs to the State Tax Department associated with passage of this bill would be approximately $158,000 in the first year in which Project Launchpad credits are available and $111,000 in subsequent years. Also, county assessors and the Department of Commerce may incur additional administrative costs attributable to passage of this bill.



Memorandum


The stated purpose of this bill is to encourage economic development and job creation by creating the West Virginia Project Launch Pad Act; to provide criteria for establishment of West Virginia project launchpads in certain areas by the Governor; allow county commissions and county councils to apply for launchpad designations; provide the process for application and approval of launchpads; and to provide economic benefits for businesses locating or expanding in launchpads including state and local tax relief and other economic benefits. The bill prohibits businesses in a launchpad from employing illegal aliens, engaging in illegal activity, and being delinquent in payment of state and local taxes; permits the transfer of economic benefits to successor businesses; and requires businesses to comply with applicable zoning laws and state and local building and other codes. The bill also provides for the recapture of taxes and other economic benefits under specified circumstances; requires the promulgation of rules and regulations; imposes civil and criminal penalties for noncompliance; and requires periodic reports to the Governor and the Legislature. Additionally, the bill provides a special method for appraising property in a launchpad for economic development, including providing a new method of valuation of launchpad property; providing for an initial determination of value by the assessor and for protest and appeals; and requiring periodic reports to Governor and Legislature. Finally, the bill creates the "Promoting West Virginia Employment Act" and provides qualification for certain economic benefits provided under the act upon application and review; it also specifies an annual cap on benefits; provides for recapture of benefits; provides for administration and enforcement of the article including the issuance of regulations; and requires periodic reports to Governor and Legislature. In the section of the bill that relates to industrial property, the initial determination should begin with the State Tax Commissioner, not the county assessor, given that the State Tax Department appraises such property.



    Person submitting Fiscal Note: Mark B. Muchow
    Email Address: Roger.D.Cox@wv.gov