FISCAL NOTE
Date Requested: March 03, 2017
Time Requested: 10:33 AM |
| Agency: |
Tax & Revenue Department, WV State |
|---|
| CBD Number: |
Version: |
Bill Number: |
Resolution Number: |
| 2831 |
Introduced |
SB498 |
|
|---|
| CBD Subject: |
Taxation |
|---|
|
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 levy a five-tenths percent annual severance tax on Marcellus and Utica Gas which will be dedicated to retired public employees.
According to the provisions of this bill, a five-tenths percent annual severance tax on Marcellus and Utica natural gas will be dedicated to retired public employees. This tax would be effective on December 31, 2017 and available for support to retired public employees. We cannot estimate the revenue which would be generated to benefit public retirees.
Additional administrative costs incurred by the State Tax Department would be $55,000 in FY2018 and $25,000 in fiscal years 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 |
0 |
55,000 |
25,000 |
| Personal Services |
0 |
25,000 |
25,000 |
| Current Expenses |
0 |
0 |
0 |
| Repairs and Alterations |
0 |
0 |
0 |
| Assets |
0 |
0 |
0 |
| Other |
0 |
1,000 |
0 |
| 2. Estimated Total Revenues |
0 |
29,000 |
0 |
Explanation of above estimates (including long-range effect):
According to the provisions of this bill, a five-tenths percent annual severance tax on Marcellus and Utica natural gas will be dedicated to retired public employees. This tax would be effective on December 31, 2017 and available for support to retired public employees. We cannot estimate the revenue which would be generated to benefit public retirees.
Additional administrative costs incurred by the State Tax Department would be $55,000 in FY2018 and $25,000 in fiscal years thereafter.
Memorandum
The stated purpose of this bill is to levy a five-tenths percent annual severance tax on Marcellus and Utica Gas which will be dedicated to retired public employees.
This bill may be difficult to administer as the language in the bill is vague. The bill does not specify what the measure of the tax is. It is likely that the tax would be five-tenths percent of the gross value of natural gas, but this is not specified.
This bill does not create or specify a fund in the State Treasury for tax proceeds dedicated to retired public employees. The bill does not state whether this fund is a revolving fund that would carry over each year. It is unclear from the bill’s language how the tax proceeds will be used for retired public employees. The bill does not provide the Tax Department with enough direction on how to deposit these tax proceeds.
The West Virginia Code does not currently distinguish between the various formations in which natural gas may be extracted in determining the severance tax. However, if this bill were to pass, the Tax Department would need to know exactly from which formation natural gas was extracted. This would make the tax difficult to administer.
The bill states that the tax will “be effective December 31, 2017.” The changes in this bill were likely meant to start on tax years after December 31, 2017, rather than the last year of the 2017 tax year. It is not clear when this annual tax is to begin being collected.
The bill title is defective as the bill title does not state that the bill contains an effective date.
Person submitting Fiscal Note: Mark Muchow
Email Address: kerri.r.petry@wv.gov