FISCAL NOTE
Date Requested: February 28, 2025
Time Requested: 03:11 PM |
| Agency: |
Tax & Revenue Department, WV State |
|---|
| CBD Number: |
Version: |
Bill Number: |
Resolution Number: |
| 1326 |
Introduced |
HB3040 |
|
|---|
| CBD Subject: |
Taxation |
|---|
|
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 encourage and incentivize the installation, repair, and maintenance of environmental pollution control equipment at coal-fired electric generating units located in West Virginia and that serve West Virginia residents, by authorizing a credit against the business and occupation tax imposed on imposed on the business of generating electricity, thereby extending the life of coal-fired power plants, which will provide cheaper electricity to the State’s residents.
The proposed credit is equivalent to 35 percent of the amount of a taxpayer's expenditures incurred in installing, maintaining, or repairing environmental pollution control equipment during any given tax year and allows a maximum annual credit of 50 percent of the taxpayer’s Business & Occupation Tax liability. Based on current average annual investments, passage of this bill would reduce General Revenue Fund collections by nearly $35.0 million per year in FY2027 and subsequent fiscal years.
The West Virginia electric power generation industry has already benefitted from a state investment tax credit in place since 1969. The Industrial Expansion and Revitalization Tax Credit is a 10 percent investment tax credit pro-rated for use over a 10-year period. These tax credits reduced electric power industry taxes by roughly $20.0 million in 2024, and most of the tax credits were attributable to environmental remediation projects and over 95 percent of the tax credits were attributable to coal-fired electric power generation. The average annual qualified investment for the industry over the past decade was roughly $200 million for purposes of this tax credit.
Additional administrative costs incurred by the State Tax Department would be $22,000 in FY2026.
Fiscal Note Detail
| Effect of Proposal |
Fiscal Year |
2025
Increase/Decrease
(use"-") |
2026
Increase/Decrease
(use"-") |
Fiscal Year
(Upon Full
Implementation) |
| 1. Estmated Total Cost |
0 |
22,000 |
0 |
| Personal Services |
0 |
0 |
0 |
| Current Expenses |
0 |
0 |
0 |
| Repairs and Alterations |
0 |
0 |
0 |
| Assets |
0 |
0 |
0 |
| Other |
0 |
22,000 |
0 |
| 2. Estimated Total Revenues |
0 |
0 |
-35,000,000 |
Explanation of above estimates (including long-range effect):
The proposed credit is equivalent to 35 percent of the amount of a taxpayer's expenditures incurred in installing, maintaining, or repairing environmental pollution control equipment during any given tax year and allows a maximum annual credit of 50 percent of the taxpayer’s Business & Occupation Tax liability. Based on current average annual investments, passage of this bill would reduce General Revenue Fund collections by nearly $35.0 million per year in FY2027 and subsequent fiscal years.
The West Virginia electric power generation industry has already benefitted from a state investment tax credit in place since 1969. The Industrial Expansion and Revitalization Tax Credit is a 10 percent investment tax credit pro-rated for use over a 10-year period. These tax credits reduced electric power industry taxes by roughly $20.0 million in 2024, and most of the tax credits were attributable to environmental remediation projects and over 95 percent of the tax credits were attributable to coal-fired electric power generation. The average annual qualified investment for the industry over the past decade was roughly $200 million for purposes of this tax credit.
Additional administrative costs incurred by the State Tax Department would be $22,000 in FY2026.
Memorandum
The stated purpose of this bill is to encourage and incentivize the installation, repair, and maintenance of environmental pollution control equipment at coal-fired electric generating units located in West Virginia and that serve West Virginia residents, by authorizing a credit against the business and occupation tax imposed on imposed on the business of generating electricity, thereby extending the life of coal-fired power plants, which will provide cheaper electricity to the State’s residents.
There may be a typographical error in reference to W.Va. Code §11-13-20 as this section was repealed in 1978. This bill is likely referring to W.Va. Code §11-13-2o, which is the Business and Occupation Tax.
This bill is silent regarding whether any credit left unused after five years is forfeited. Eligibility for this proposed credit is limited to “coal fired electric generating units”. However, more than one type of coal generating unit exists, including co-fuel units and other combined co-generating units. The applicability of the credit to these facilities is unclear, as the imposition of the Business & Occupation Tax is not limited to coal-fired generating units.
Person submitting Fiscal Note: Mark Muchow
Email Address: RADfiscal@wv.gov