FISCAL NOTE
Date Requested: February 25, 2025
Time Requested: 02:41 PM |
| Agency: |
Tax & Revenue Department, WV State |
|---|
| CBD Number: |
Version: |
Bill Number: |
Resolution Number: |
| 2776 |
Introduced |
HB2952 |
|
|---|
| 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 create and authorize a state child tax credit for eligible children.
Per our interpretation, the bill would create a refundable personal income tax credit for residents who claim a federal child tax credit, under Section 24 of the Internal Revenue Code, for an eligible child on their federal tax return. The bill, if passed, would be effective for tax years beginning on and after January 1, 2025.
As written, we are unable to provide an estimate of revenue loss. Per the bill, the credit would be “… 50% of the federal child and dependent care tax credit allowed to the person under the provisions of 26 U.S.C.§21.” The federal child tax credits and the federal child and dependent care tax credit are two different federal credit programs. For estimation purposes, it would be difficult to determine the amount of “federal child and dependent care tax credit allowed” which is attributable to residents who were also allowed a federal child tax credit. The current child and dependent care credit under W.Va. Code §11-21-26 is based on 50 percent of the federal child and dependent care tax credit allowed. The estimate for that credit program, without the additional requirement of receiving a federal child tax credit, is roughly $4.2 million per year. The current bill does not seek to repeal or amend the existing child and dependent care credit. This could create confusion and some taxpayers may seek to claim both credits.
Additional administrative costs incurred by the State Tax Department would be $29,150 in FY2026 and $11,000 in subsequent fiscal years.
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 |
29,150 |
11,000 |
| Personal Services |
0 |
11,000 |
11,000 |
| Current Expenses |
0 |
0 |
0 |
| Repairs and Alterations |
0 |
0 |
0 |
| Assets |
0 |
1,650 |
0 |
| Other |
0 |
16,500 |
0 |
| 2. Estimated Total Revenues |
0 |
0 |
0 |
Explanation of above estimates (including long-range effect):
Per our interpretation, the bill would create a refundable personal income tax credit for residents who claim a federal child tax credit, under Section 24 of the Internal Revenue Code, for an eligible child on their federal tax return. The bill, if passed, would be effective for tax years beginning on and after January 1, 2025.
As written, we are unable to provide an estimate of revenue loss. Per the bill, the credit would be “… 50% of the federal child and dependent care tax credit allowed to the person under the provisions of 26 U.S.C.§21.” The federal child tax credits and the federal child and dependent care tax credit are two different federal credit programs. For estimation purposes, it would be difficult to determine the amount of “federal child and dependent care tax credit allowed” which is attributable to residents who were also allowed a federal child tax credit. The current child and dependent care credit under W.Va. Code §11-21-26 is based on 50 percent of the federal child and dependent care tax credit allowed. The estimate for that credit program, without the additional requirement of receiving a federal child tax credit, is roughly $4.2 million per year. The current bill does not seek to repeal or amend the existing child and dependent care credit. This could create confusion and some taxpayers may seek to claim both credits.
Additional administrative costs incurred by the State Tax Department would be $29,150 in FY2026 and $11,000 in subsequent fiscal years.
Memorandum
The stated purpose of this bill is to create and authorize a state child tax credit for eligible children.
The use of “claims the credit” rather than “allowed [the credit]” is problematic. A taxpayer may claim a federal credit but not be entitled to it or they may “claim” the credit only to have it ultimately disallowed. [Emphasis added.]
The title state, “refundable child or childcare tax credit.” [Emphasis added.] However, the bill only attempts to create a “child tax credit”. This could be considered a title defect.
“Dependent care” is not defined in the bill or elsewhere in state law. However, as the credit is premised on the allowed federal tax credit, the federal definition will control. The bill’s credit is linked to the amount allowed to the taxpayer from application of the federal child and dependent care credit. The federal credit includes dependents, and not just children. This may permit a taxpayer to claim the state credit without having a child.
The bill refers to “federal child tax credits” throughout the bill; however, line 17 refers to the “federal child and dependent care credit”. These are two different federal credits; but the bill appears to refer to them interchangeably. The lack of proper terminology will lead to litigation, administrative difficulties and taxpayer confusion.
Person submitting Fiscal Note: Mark Muchow
Email Address: RADfiscal@wv.gov