FISCAL NOTE
Date Requested: February 11, 2022 Time Requested: 04:21 PM |
Agency: |
Tax & Revenue Department, WV State |
CBD Number: |
Version: |
Bill Number: |
Resolution Number: |
2577 |
Introduced |
HB4658 |
|
CBD Subject: |
Economic Development |
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|
FUND(S):
General Revenue Fund
Sources of Revenue:
General Fund
Legislation creates:
Decreases Existing Revenue, Increases Existing Expenses
Fiscal Note Summary
Effect this measure will have on costs and revenues of state government.
The stated purpose of this bill is to create the Critical Mineral Reinvestment Tax Credit. The bill establishes a short title. The bill provides for legislative findings, purpose, and definitions. The bill provides for the amount of credit and limitations. The bill defines the credit allowed for opening or relocating a manufacturing facility or corporate headquarters in this state who use rare earth elements and critical minerals in the manufacturing of their products. The bill clarifies the credit allowable for certified projects. Finally, the bill provides for an effective date.
The provisions of this bill would create a new manufacturing investment tax credit tied to a minimum of 50 new jobs in a manufacturing facility that uses certain defined “rare earth” minerals in the manufacturing process. The tax credit would also apply to a relocation of a qualified corporate headquarters to West Virginia for a business using defined minerals in its manufacturing process. The tax credit is equal to 10% of qualified investment to be applied over a ten-year period. The tax credit would apply against the Corporation Net Income Tax. Passage of this bill would have minimal consequences since the new proposed tax credit largely duplicates existing tax credits providing the same net benefits to the manufacturing sector.
Additional administrative costs incurred by the State Tax Department would be $20,000 in FY2023 and $5,000 per year thereafter.
Fiscal Note Detail
Effect of Proposal |
Fiscal Year |
2022 Increase/Decrease (use"-") |
2023 Increase/Decrease (use"-") |
Fiscal Year (Upon Full Implementation) |
1. Estmated Total Cost |
0 |
20,000 |
5,000 |
Personal Services |
0 |
0 |
5,000 |
Current Expenses |
0 |
0 |
0 |
Repairs and Alterations |
0 |
0 |
0 |
Assets |
0 |
0 |
0 |
Other |
0 |
20,000 |
0 |
2. Estimated Total Revenues |
0 |
0 |
0 |
Explanation of above estimates (including long-range effect):
The provisions of this bill would create a new manufacturing investment tax credit tied to a minimum of 50 new jobs in a manufacturing facility that uses certain defined “rare earth” minerals in the manufacturing process. The tax credit would also apply to a relocation of a qualified corporate headquarters to West Virginia for a business using defined minerals in its manufacturing process. The tax credit is equal to 10% of qualified investment to be applied over a ten-year period. The tax credit would apply against the Corporation Net Income Tax. Passage of this bill would have minimal consequences since the new proposed tax credit largely duplicates existing tax credits providing the same net benefits to the manufacturing sector.
Additional administrative costs incurred by the State Tax Department would be $20,000 in FY2023 and $5,000 per year thereafter.
Memorandum
The stated purpose of this bill is to create the Critical Mineral Reinvestment Tax Credit. The bill establishes a short title. The bill provides for legislative findings, purpose, and definitions. The bill provides for the amount of credit and limitations. The bill defines the credit allowed for opening or relocating a manufacturing facility or corporate headquarters in this state who use rare earth elements and critical minerals in the manufacturing of their products. The bill clarifies the credit allowable for certified projects. Finally, the bill provides for an effective date.
It is unclear which taxes the credit is meant to apply to. Because of the ambiguous wording of this section, the credit could plausibly be claimed against property taxes, sales and service tax, use tax, the personal income tax of new employees, or any other tax that might be deemed "attributable to and the consequence of [the] investment." Additionally, the following clause of section 3 states,
The credit is only applicable to those manufacturing facilities, businesses, or corporate headquarters who utilize rare earth elements or critical minerals that were extracted and/or processed in West Virginia.
The "and/or" conjunction allows for the use of imported metals so long as they are somehow "processed" in West Virginia (the term is undefined in the bill).
Subsection 4 (c) of the bill provides that the amount of credit may be determined, at the taxpayer's election, by:
● Multiplying the qualified investment by its new jobs percentage "as determined under section seven of this article"; or,
● Multiplying its qualified investment by 10 percent.
The cross-reference to "section seven" is faulty; the proposed new article contains only six sections.
Although the bill’s purpose is to encourage the creation of a rare earth metals industry in West Virginia, the list of “critical metals” includes the base metals aluminum, nickel, zinc, and tin. Therefore, it appears that the proposed credit would be available to any manufacturer who uses these common metals, regardless of whether their manufacturing process uses any of the “rare earth” metals. Further, it is not clear from the language of this bill whether a taxpayer has a choice between extraction and processing of rare earth minerals, or they would be required to do both activities in order to qualify for this proposed credit.
Person submitting Fiscal Note: Mark Muchow
Email Address: kerri.r.petry@wv.gov