Date Requested:February 04, 2014
Time Requested:02:26 PM
Agency: State Tax & Revenue Department
CBD Number: Version: Bill Number: Resolution Number:
2014R2036 Introduced HB4396
CBD Subject: RELATING TO MOTOR FUEL TAXES
FUND(S)
State Road Fund
Sources of Revenue
Other Fund State Road Fund
Legislation creates:
A New Program

Fiscal Note Summary

Effect this measure will have on costs and revenues of state government.

     The stated purpose of this bill is to permit certain counties to participate in a limited time partial repeal of certain sections relating to Motor Fuel taxes.
    
     Passage of this bill would create the Fuel Tax Pilot Program. Provisions in the bill provide for a Fuel Tax Repeal Pilot Program Board which would establish eligibility criteria for the program, review applications for the program, and “recommend a partial repeal or reduction in the motor fuels taxes for each county participating in the Fuel Tax Repeal Pilot Program and each tax period studied.” The Board would select three counties (one border county with population under 10,000, one border county with population from 10,000 to 50,000, and one border county with population over 50,000) for the pilot program. For the selected counties, the Motor Fuel Excise Tax (flat rate) levied via W. Va. Code §11-14C and the Motor Fuel Sales Tax (variable rate) levied via W. Va. Code §11-15-3, W. Va. Code §11-15-18b, and W. Va. Code §11-15A-13a would be repealed for two fiscal years beginning July 1, 2015. The bill also provides that the Board is to file a report with the Legislature on the effectiveness of the program, its effect upon revenue, and recommendations concerning the future of the program.
    
     According to our interpretation, passage of this bill would suspend taxes related to motor fuel for three counties for two fiscal years. Additionally, it is our interpretation that passage of this bill would in effect establish dual motor fuel tax rates within the State (i.e., one tax rate applicable in the pilot program counties and another tax rate applicable in every other county). Since West Virginia is a participant in the International Fuel Tax Agreement (IFTA), the dual tax rates would create significant administrative issues and would inhibit other jurisdictions from properly collecting West Virginia taxes on IFTA registered motor carriers.
    
     A 2003 State Tax Department report entitled “Gasoline and Special Fuel Excise Tax Revenue by County” indicated that the “presence of an Interstate interchange results in higher gasoline and/or special fuel sales than would otherwise be expected.” The higher sales in counties with an Interstate interchange are due in part to purchases by out-of-state travelers. Since the three counties in which the motor fuel taxes would be suspended are not yet known, the State Tax Department cannot accurately estimate the potential reduction in the State Road Fund that would occur. However, the selection of counties with an Interstate interchange would result in a significantly greater reduction in revenue for the State Road Fund than counties without an interchange.
    
     The additional administrative costs to the State Tax Department associated with passage of the bill may be substantial depending upon how the repeal/suspension of taxes for selected counties is implemented. Also, the State Tax Department and the Division of Motor Vehicles would incur significant additional administrative costs if provisions of the bill impact participation in the International Fuel Tax Agreement. The Fuel Tax Repeal Pilot Program Board would also incur an unknown amount of administrative costs. And, motor fuel distributors would likely incur additional administrative costs in tracking fuel deliveries to counties in which the tax on the motor fuel is repealed/suspended.
    

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 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):
     Passage of this bill would create the Fuel Tax Pilot Program. Provisions in the bill provide for a Fuel Tax Repeal Pilot Program Board which would establish eligibility criteria for the program, review applications for the program, and “recommend a partial repeal or reduction in the motor fuels taxes for each county participating in the Fuel Tax Repeal Pilot Program and each tax period studied.” The Board would select three counties (one border county with population under 10,000, one border county with population from 10,000 to 50,000, and one border county with population over 50,000) for the pilot program. For the selected counties, the Motor Fuel Excise Tax (flat rate) levied via W. Va. Code §11-14C and the Motor Fuel Sales Tax (variable rate) levied via W. Va. Code §11-15-3, W. Va. Code §11-15-18b, and W. Va. Code §11-15A-13a would be repealed for two fiscal years beginning July 1, 2015. The bill also provides that the Board is to file a report with the Legislature on the effectiveness of the program, its effect upon revenue, and recommendations concerning the future of the program.
    
     According to our interpretation, passage of this bill would suspend taxes related to motor fuel for three counties for two fiscal years. Additionally, it is our interpretation that passage of this bill would in effect establish dual motor fuel tax rates within the State (i.e., one tax rate applicable in the pilot program counties and another tax rate applicable in every other county). Since West Virginia is a participant in the International Fuel Tax Agreement (IFTA), the dual tax rates would create significant administrative issues and would inhibit other jurisdictions from properly collecting West Virginia taxes on IFTA registered motor carriers.
    
     A 2003 State Tax Department report entitled “Gasoline and Special Fuel Excise Tax Revenue by County” indicated that the “presence of an Interstate interchange results in higher gasoline and/or special fuel sales than would otherwise be expected.” The higher sales in counties with an Interstate interchange are due in part to purchases by out-of-state travelers. Since the three counties in which the motor fuel taxes would be suspended are not yet known, the State Tax Department cannot accurately estimate the potential reduction in the State Road Fund that would occur. However, the selection of counties with an Interstate interchange would result in a significantly greater reduction in revenue for the State Road Fund than counties without an interchange.
    
     The additional administrative costs to the State Tax Department associated with passage of the bill may be substantial depending upon how the repeal/suspension of taxes for selected counties is implemented. Also, the State Tax Department and the Division of Motor Vehicles would incur significant additional administrative costs if provisions of the bill impact participation in the International Fuel Tax Agreement. The Fuel Tax Repeal Pilot Program Board would also incur an unknown amount of administrative costs. And, motor fuel distributors would likely incur additional administrative costs in tracking fuel deliveries to counties in which the tax on the motor fuel is repealed/suspended.
    


Memorandum
Person submitting Fiscal Note:
Mark B. Muchow
Email Address:
Roger.D.Cox@wv.gov
     The stated purpose of this bill is to permit certain counties to participate in a limited time partial repeal of certain sections relating to Motor Fuel taxes.
    
     Passage of this bill and implementation of its provisions would repeal/suspend taxes on motor fuel in three counties for two fiscal years. The proposal may be contrary to West Virginia Constitution, Article X, Section 1 which requires that taxation is to be equal and uniform throughout the State. Also, the bill appears to have an internal inconsistency. One power of the Board enumerated in proposed W. Va. Code §11-15C-2(c)(4) is to recommend a partial repeal or reduction in the motor fuels taxes for each participating county and the tax period studied. Proposed section 3 is titled, “Partial repeal of pertinent articles and sections,” but states that each provision of article 14C (the Motor Fuel Excise Tax) and the pertinent sales and use tax sections are repealed for the entire two fiscal years. And, while the bill preserves tax liabilities prior to July 1, 2015, it is unclear as to the status on and after July 1, 2017.