FISCAL NOTE
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 create a Voluntary Compliance Program based on listed transactions considered abusive by the Internal Revenue Service. The bill would impose penalties for: (1) Participating in or promoting abusive tax shelter transactions listed by the Internal Revenue Service for a reportable transaction understatement; (2) failing to report listed transactions; (3) failing to participate in the voluntary disclosure program; and (4) failing to register a tax shelter or maintain a required list. The bill would also increase the statute of limitations for assessments for failure to disclose a listed transaction.
As written, this bill requires the Tax Commissioner to establish a “Tax Shelter Voluntary Compliance Program” to be offered to eligible taxpayers from August 1, 2006 through November 1, 2006. The eligible taxpayers are those taxpayers who participated in tax avoidance transaction for taxable years beginning before January 1, 2006. According to our interpretation, passage of this bill would enhance compliance with the Personal Income Tax and Corporation Net Income Tax. While this program should increase Personal Income Tax and Corporation Net Income Tax collections, we cannot accurately estimate the additional revenue that would be deposited into the General Revenue Fund.
Additional administrative costs to the State Tax Department associated with this bill would be $195,000 in Fiscal Year 2006 and $390,000 in Fiscal Year 2007. These figures were included as part of the Governor’s budget.
Fiscal Note Detail
| Effect of Proposal |
Fiscal Year |
2006
Increase/Decrease
(use"-") |
2007
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 |
Explanation of above estimates (including long-range effect):
As written, this bill requires the Tax Commissioner to establish a “Tax Shelter Voluntary Compliance Program” to be offered to eligible taxpayers from August 1, 2006 through November 1, 2006. The eligible taxpayers are those taxpayers who participated in tax avoidance transaction for taxable years beginning before January 1, 2006. The bill would impose penalties for: (1) Participating in or promoting abusive tax shelter transactions listed by the Internal Revenue Service for a reportable transaction understatement; (2) failing to report listed transactions; (3) failing to participate in the voluntary disclosure program; and (4) failing to register a tax shelter or maintain a required list. The bill would also increase the statute of limitations for assessments for failure to disclose a listed transaction. According to our interpretation, passage of this bill would enhance compliance with the Personal Income Tax and Corporation Net Income Tax. While this program should increase Personal Income Tax and Corporation Net Income Tax collections, we cannot accurately estimate the additional revenue that would be deposited into the General Revenue Fund.
Additional administrative costs to the State Tax Department associated with this bill would be $195,000 in Fiscal Year 2006 and $390,000 in Fiscal Year 2007. These figures were included as part of the Governor’s budget.
Memorandum
Person submitting Fiscal Note: Mark Muchow
Email Address: kpetry@tax.state.wv.us