FISCAL NOTE
Date Requested: February 21, 2025
Time Requested: 02:40 PM |
| Agency: |
Tax & Revenue Department, WV State |
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| CBD Number: |
Version: |
Bill Number: |
Resolution Number: |
| 1951 |
Introduced |
HB2792 |
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| CBD Subject: |
|
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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 exempt social security benefits from personal income tax.
The bill lists two different effective dates. According to our interpretation, assuming the legislation is effective for taxable years beginning after December 31, 2024, any Social Security benefits received pursuant to Title 42 U.S.C., Chapter 7 for tax periods after that date would be eligible for a modification reducing federal adjusted gross income for personal income tax purposes. HB 4880 passed during the 2024 Legislative Session expanded the existing modification for Social Security benefits to married joint filers whose federal adjusted income exceeded $100,000, or $50,000 for single individuals or married individuals filing a separate return. The expansion of the modification in HB 4880 was to be phased-in over a three-year period at the following percentages: 35 percent in Tax Year 2024, 65 percent in Tax Year 2025, and 100 percent for taxable years beginning on and after January 1, 2026. The effect of the proposed legislation would be to move the currently scheduled 100 percent modification phase-in forward one tax period to Tax Year 2025.
Per our interpretation, the legislation would cause a one-time decrease in General Revenue Fund collections of roughly $19 million in FY2026. It should be noted, that if the proposed legislation is not effective until the later date listed in the bill, “…taxable years beginning after December 31, 2025,” the legislation would not impact General Revenue Fund collections.
Additional administrative costs incurred by the State Tax Department would be $11,000 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 |
11,000 |
0 |
| Personal Services |
0 |
0 |
0 |
| Current Expenses |
0 |
0 |
0 |
| Repairs and Alterations |
0 |
0 |
0 |
| Assets |
0 |
0 |
0 |
| Other |
0 |
11,000 |
0 |
| 2. Estimated Total Revenues |
0 |
-19,000,000 |
0 |
Explanation of above estimates (including long-range effect):
The bill lists two different effective dates. According to our interpretation, assuming the legislation is effective for taxable years beginning after December 31, 2024, any Social Security benefits received pursuant to Title 42 U.S.C., Chapter 7 for tax periods after that date would be eligible for a modification reducing federal adjusted gross income for personal income tax purposes. HB 4880 passed during the 2024 Legislative Session expanded the existing modification for Social Security benefits to married joint filers whose federal adjusted income exceeded $100,000, or $50,000 for single individuals or married individuals filing a separate return. The expansion of the modification in HB 4880 was to be phased-in over a three-year period at the following percentages: 35 percent in Tax Year 2024, 65 percent in Tax Year 2025, and 100 percent for taxable years beginning on and after January 1, 2026. The effect of the proposed legislation would be to move the currently scheduled 100 percent modification phase-in forward one tax period to Tax Year 2025.
Per our interpretation, the legislation would cause a one-time decrease in General Revenue Fund collections of roughly $19 million in FY2026. It should be noted, that if the proposed legislation is not effective until the later date listed in the bill, “…taxable years beginning after December 31, 2025,” the legislation would not impact General Revenue Fund collections.
Additional administrative costs incurred by the State Tax Department would be $11,000 in FY2026.
Memorandum
The stated purpose of this bill is to exempt social security benefits from personal income tax.
The bill creates new subdivision W.Va. Code §11-21-12(c)(7), providing a Personal Income Tax decreasing modification: “For taxable years beginning after December 31, 2024, any social security benefits received pursuant to Title 42 U.S.C., Chapter 7.”
Internally, the new §11-21-12(c)(7) conflicts with renumbered (c)(9)(D), both seemingly meant to become effective starting in tax year 2025 with different percentages of social security benefits being subject to the decreasing modification i.e., 100% (“any”) and 65% respectively.
There are two conflicting effective dates given in the bill. The last sentence of the bill-presumably attempting to set the effective date states, “Changes in the language of this section enacted in the year 2024 (sic) shall apply to taxable years beginning after December 31, 2025.” This effective date is in explicit conflict with the effective date set forth in the new subdivision 11-21-12(c)(7).
Internal citations to paragraphs of former subdivision (8) were not amended to correspond to new subdivisions (9) resulting in incorrect references and references to paragraphs that do not exist. The amendments to subsections in section (c) go from subdivision (9) to (11) omitting (10).
The new language of §11-21-12(c)(7) addresses social security benefits whereas subdivisions §11-21-12(c)(8)(A) through (C) address military benefits. Subdivision (c)(9) resumes addressing social security benefits which may lead to confusion.
The bill title and the bill’s purpose describe this as “exempting social security benefits from personal income tax.” This bill is not accurately described as an exemption, but, rather a decreasing modification to federal adjusted gross income for purposes of personal income tax.
Person submitting Fiscal Note: Mark Muchow
Email Address: RADfiscal@wv.gov