FISCAL NOTE
Date Requested: February 16, 2017
Time Requested: 01:33 PM |
| Agency: |
Tax & Revenue Department, WV State |
|---|
| CBD Number: |
Version: |
Bill Number: |
Resolution Number: |
| 1389 |
Introduced |
HB2511 |
|
|---|
| CBD Subject: |
Crime |
|---|
|
FUND(S):
West Virginia Future Fund
Sources of Revenue:
Special 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 establishing industrial water extraction fees. The bill places a penny fee on a gallon of water extracted for industrial use. The bill places an additional penny fee on every gallon of water extracted for industrial use that is transported over state roads. The bill requires measuring of water withdrawals by a specified method. The bill defines terms and provides rule-making authority.
The proposed bill applies a 1 cent per gallon tax on water extracted for industrial use and an additional 1 cent per gallon tax on such water that is transported over any state road. Based on our interpretation, the tax on water extracted for industrial use would generate up to $581.0 million per year for the first full year of implementation based on data gathered from the West Virginia Department of Environmental Protection (DEP). This figure represents a maximum revenue estimate as “industrial use” is not clearly defined in the bill. Restrictions on what constitutes “industrial use” could reduce this estimate. These funds benefit the West Virginia Future Fund.
The tax on water withdrawn and transferred over state roads is estimated to generate at least $15.2 million per year for the first full year of implementation. This figure represents a conservative revenue estimate. Funds collected will be transferred to the counties.
There is no effective date noted in the proposed bill and the term “collection period” is not defined. Assuming a July 1, 2017 effective date and that the “collection period” is a month, total collections, including the local benefit, are estimated to be $546.5 million for FY 2018 and $596.2 million per year thereafter.
Additional administrative costs incurred by the State Tax Department are expected to be $43,000 for the current FY, $47,000 in FY 2018 and $42,000 for each year thereafter.
Fiscal Note Detail
| Effect of Proposal |
Fiscal Year |
2017
Increase/Decrease
(use"-") |
2018
Increase/Decrease
(use"-") |
Fiscal Year
(Upon Full
Implementation) |
| 1. Estmated Total Cost |
43,000 |
47,000 |
42,000 |
| Personal Services |
0 |
42,000 |
42,000 |
| Current Expenses |
0 |
0 |
0 |
| Repairs and Alterations |
0 |
0 |
0 |
| Assets |
0 |
5,000 |
0 |
| Other |
43,000 |
0 |
0 |
| 2. Estimated Total Revenues |
0 |
546,500,000 |
596,200,000 |
Explanation of above estimates (including long-range effect):
The proposed bill applies a 1 cent per gallon tax on water extracted for industrial use and an additional 1 cent per gallon tax on such water that is transported over any state road. Based on our interpretation, the first tax on water extracted for industrial use would generate up to $581.0 million per year for the first full year of implementation based on data gathered from the West Virginia Department of Environmental Protection (DEP). This figure represents a maximum revenue estimate as “industrial use” is not clearly defined in the bill. Restrictions on what constitutes “industrial use” could reduce this estimate. These funds benefit the West Virginia Future Fund.
The second tax on water withdrawn and transferred over state roads is estimated to generate at least $15.2 million per year for the first full year of implementation. This figure represents a conservative revenue estimate and will be transferred to the counties.
There is no effective date noted in the proposed bill and the term “collection period” is not defined. Assuming a July 1, 2017 effective date and that the “collection period” is a month, total collections, including the local benefit, are estimated to be $546.5 million for FY 2018 and $596.2 million per year thereafter.
Additional administrative costs incurred by the State Tax Department are expected to be $43,000 for the current FY, $47,000 in FY 2018 and $42,000 for each year thereafter.
Memorandum
The stated purpose of this bill is establishing industrial water extraction fees. The bill places a penny fee on every gallon of water extracted for industrial use. The bill places an additional penny fee on every gallon of water extracted for industrial use that is transported over state roads. The bill requires measuring of water withdrawals by a specified method. The bill defines terms and provides rule-making authority.
The proposed bill fails to define “industrial use” and “waters of the state.” The former could allow imposition of the fee on a broad number of business activities. Further, the bill does not define what is intended by the “cradle-to-grave monitoring system” to determine gallons withdrawn for industrial use. The language used in the proviso for the 1 cent fee on every gallon of water withdrawn from the waters of the state for industrial use: “that the withdrawn water is not intended to be returned to the hydrologic cycle,” is silent as to whom the “intent” applies.
There does not appear to be any provision in the bill for enforcement of the proposed statute. The bill also fails to provide penalties for failure to collect the proposed fees.
Using the term “fee” as opposed to “tax” could be considered a title defect and may lead to a Constitutional concern. The West Virginia Supreme Court of Appeals ruled in Cooper v. City of Charleston, 624 S.E.2d 716, 218 W. Va. 279 (WV 2005) that “[t]he primary purpose of a tax is to obtain revenue for the government, while the primary purpose of a fee is to cover the expense of providing a service or of regulation and supervision of certain activities.” The bill does not designate a particular service of activity for which the “water extraction fee” is to be spent.
Person submitting Fiscal Note: Mark Muchow
Email Address: kerri.r.petry@wv.gov