Date Requested:February 11, 2005
Time Requested:02:37 PM
Agency: State Tax Department
CBD Number: Version: Bill Number: Resolution Number:
2005r324 intro hb2205
CBD Subject: federal interest income excluded
FUND(S)
General Revenue Fund
Sources of Revenue
General 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 exclude federal interest income when applying $8,000 income exclusion available to persons age 65 or older and to persons who are permanently and totally disabled regardless of age and making the change retroactive to tax years beginning after December 31, 2001.
    
    According to our interpretation, passage of this bill would prospectively reduce State General Revenue Fund collections by roughly $800,000 per year beginning in FY2005-2006. The provisions of the bill would apply to tax years beginning after December 31, 1998. Thus, the bill would grant the additional income tax exclusion retroactively for the 1999, 2000, 2001, 2002, 2003 and 2004 tax years. This retroactive tax change could potentially reduce State General Revenue Fund collections by another $7.6 million over a 12-15 month period beginning in early FY2005-2006.
    
    Under this bill, tax exempt interest earnings from federal obligations would no longer count against the additional $8,000 minimum income exclusion for senior citizens or disabled individuals.
    
    Due to the bill’s retroactive application, the Tax Department would incur additional administrative costs of roughly $38,000 next fiscal year.

Fiscal Note Detail
Over-all effect
Effect of Proposal Fiscal Year
2005
Increase/Decrease
(use"-")
2006
Increase/Decrease
(use"-")
Fiscal Year
(Upon Full
Implementation)
1. Estmated Total Cost 0 38,000 0
Personal Services 0 38,000 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 -7,600,000 -800,000
3. Explanation of above estimates (including long-range effect):
    This bill retroactively increases the maximum level of income exclusion by up to $8,000 ($16,000 on joint returns) for senior citizens and disabled individuals who receive tax exempt interest income from federal obligations. The bill would be effective for tax years beginning after December 31, 1998. Interest from federal obligations would no longer count against the $8,000 minimum income exclusion under the provisions of this bill. An estimated 3,000 to 3,500 individuals would benefit from a lower personal income tax liability due to the enhanced $8,000 income exclusion.
    
    Due to the bill’s retroactive application, the Tax Department would incur one-time additional administrative costs of roughly $38,000.
    


Memorandum
Person submitting Fiscal Note:
Mark Muchow
Email Address:
kpetry@tax.state.wv.us
    The stated purpose of this bill is to exclude federal interest income when applying $8,000 income exclusion available to persons age 65 or older and to persons who are permanently and totally disabled regardless of age and making the change retroactive to tax years beginning after December 31, 2001.
    
    Although language in the stated purpose indicates that the proposed change is retroactive to tax years beginning after December 31, 2001, the proposed statutory language in the bill indicates that the change applies to tax years beginning after December 31, 1998. Thus, the bill would grant the additional income tax exclusion retroactively for the 1999, 2000, 2001 and 2002 tax years.