Date Requested:February 11, 2005
Time Requested:02:45 PM
Agency: State Tax Department
CBD Number: Version: Bill Number: Resolution Number:
2005r448 intro hb2282
CBD Subject: exemption for retired federal empl
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 provide a state income tax exemption to retired federal employees.
    
    According to our interpretation, passage of this bill would reduce General Revenue Fund collections by up to $3.0 million in Fiscal Year 2006 and by up to $7.0 million in FY 2007 and each succeeding year.
    
    There would be a minimal increase in administrative costs to the Tax Department associated with the administration of the new income exclusion.

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 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 -3,000,000 -7,000,000
3. Explanation of above estimates (including long-range effect):
    For retired federal employees, this bill increases an existing federal civil service retirement income exclusion from $2,000 to the full amount of pension benefits.
    
    Passage of this bill would result in a decrease in General Revenue Fund collections of roughly $3.0 million in FY 2006 and roughly $7.0 million in FY 2007 and each succeeding year.
    
    Only ten states fully exempt public sector pension income from taxation. Sixteen states, including West Virginia, provide partial exemptions for public sector pensions. Fourteen states, including Ohio and Virginia, fully tax public sector pensions.
    
    Absent new litigation associated with additional disparate tax treatment of pension income, there would only be a minimal increase in administrative costs to the Tax Department associated with the administration of the new income exclusion.


Memorandum
Person submitting Fiscal Note:
Mark Muchow
Email Address:
kpetry@tax.state.wv.us
    The stated purpose of this bill is to provide a state income tax exemption to retired federal employees.
    
    This bill repeals an existing decreasing modification for the first $2,000 of retirement income received under a federal retirement system and enacts a new decreasing modification for all retirement income received by retired federal employees. While federal and State retired employees are currently treated in a similar manner, this bill provides retired federal employees an additional benefit. Passage of this bill may result in litigation where retired State employees will seek to be treated in the same manner as retired federal employees.