Date Requested:February 11, 2005
Time Requested:03:04 PM
Agency: State Tax Department
CBD Number: Version: Bill Number: Resolution Number:
2005r699 intro hb2233
CBD Subject: small business tax credit
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 give small businesses a tax credit equal to any guaranty fee they pay to the Small Business Administration in order to obtain SBA financing or, as an alternative, a tax credit equal to 2% of any loan received by the small business from any other financial institution authorized to make business loans in this state. This is a one-time credit.
    
    Passage of this bill would provide small businesses with a tax credit equal to the guaranty fees paid to the federal Small Business Administration. According to federal administrators, these fees total roughly $575,000 per year in West Virginia. In addition, passage of the bill would provide an alternative credit equal to 2 percent of any loan received by a small business. We are unable to accurately estimate the loss of revenue to the General Revenue Fund due to this second credit.
    
    Additional administrative costs to the Tax Department would be minimal. Any additional administrative costs would be attributable to notifying taxpayers of the change.

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 5,000 0
Personal Services 0 0 0
Current Expenses 0 5,000 0
Repairs and Alterations 0 0 0
Assets 0 0 0
Other 0 0 0
2. Estimated Total Revenues 0 -575,000 -575,000
3. Explanation of above estimates (including long-range effect):
    Passage of this bill would provide small businesses with a tax credit equal to the guaranty fees paid to the federal Small Business Administration. According to federal administrators, these fees total approximately $575,000 per year in West Virginia. In addition, passage of the bill would provide an alternative credit equal to 2 percent of any loan received by a small business. We are unable to accurately estimate the loss of revenue to the General Revenue Fund due to this second credit.
    
    Additional administrative costs to the Tax Department would be approximately $5,000 for printing and promotion associated with notifying taxpayers of the change.


Memorandum
Person submitting Fiscal Note:
Mark Muchow
Email Address:
kpetry@tax.state.wv.us
    The credits are to be claimed against “the tax imposed by this chapter for businesses ....” However, there are numerous taxes imposed in Chapter 11 of the Code, and the bill does not specifically state which taxes the credit can be used against or in what order the credit is to be applied. The use of “the” implies that a specific tax was intended, but it would be speculative to choose a particular tax as the intended tax.
    
    For the alternative version of the tax, it is unclear whether the one-time credit limitation relates to each loan or whether the credit can only be taken once by each business regardless of the number of loans. The non-alternative version is seemingly available each time a guaranty fee has been paid for SBA guaranteed financing. Both versions of the credit have no carryover provisions.
    
    There is no internal effective date in the bill for the credit. Under W.Va. § 11-10-5p, the credit would be applicable to taxable years beginning on or after the effective date of the bill, i.e., tax year 2006.
    
    Also, according to the bill, a section designated §11-13V is to be created, but §11-13V was already added to the Code in the 1st 2005 Special Session.