FISCAL NOTE
Date Requested: March 17, 2025
Time Requested: 04:50 PM |
| Agency: |
Tax & Revenue Department, WV State |
|---|
| CBD Number: |
Version: |
Bill Number: |
Resolution Number: |
| 3863 |
Introduced |
HB3451 |
|
|---|
| CBD Subject: |
Taxation |
|---|
|
FUND(S):
General Revenue Fund, Local Governments
Sources of Revenue:
Other Fund General Fund and Local Property Tax Revenue
Legislation creates:
Decreases Existing Revenue, Increases Existing Expenses
Fiscal Note Summary
Effect this measure will have on costs and revenues of state government.
Summarize in a clear and concise manner what impact this measure will have on costs and revenues of state government.
The stated purpose of this bill is to provide for a phased in increase in the homestead exemption; provide that change to exemption contingent on passage of constitutional amendment; remove cap on property tax books, and repeal limitation on levy rates when appraisal results in tax increase.
Under the provisions of this bill, the value of the Homestead Exemption would be increased from $20,000 to $25,000 beginning January 1, 2027. The exemption would be further increased to $30,000 on January 1, 2028, $35,000 on January 1, 2029, and to $40,000 on January 1, 2030.
This increase in the Homestead Exemption from $20,000 to $25,000 beginning on January 1, 2027 would result in a revenue loss of $11.8 million annually. The estimated revenue loss would be roughly $3.4 million to the State General Revenue Fund, $4.6 million to local county school boards, $3.1 million to county commissions and $700,000 to municipalities. The distribution of estimated cost is based on information from taxes levied as reported in the Classified Assessed Valuations Taxes Levied for 2024 Tax Year publication of the State Tax Department and the incorporation of the calculation of local property tax share within the State Aid to Schools Formula.
The Homestead Exemption would increase to $30,000 on January 1, 2028. This increase would result in a total revenue loss from current law of $23.1 million annually. The estimated revenue loss would be roughly $6.6 million to the State General Revenue Fund, $9.1 million to local county school boards, $6.1 million to county commissions and $1.3 million to municipalities.
The Homestead Exemption would further increase to $35,000 on January 1, 2029. This increase would result in a total revenue loss from current law of $33.6 million annually. The estimated revenue loss would be roughly $9.6 million to the State General Revenue Fund, $13.3 million to local county school boards, $8.8 million to county commissions and $1.9 million to municipalities.
The Homestead Exemption would increase to $40,000 on January 1, 2030. This increase would result in a total revenue loss from current law of $44.0 million annually. The estimated revenue loss would be roughly $12.6 million to the State General Revenue Fund, $17.4 million to local county school boards, $11.5 million to county commissions and $2.5 million to municipalities.
In addition, this bill removes the statutory caps on increases in Property Tax assessments in any year when the aggregate appraised value of property in a county or statewide exceeds a previous year’s projected property tax revenues. Passage of this bill could potentially increase revenue in some counties and municipalities, but we cannot estimate the revenue gains to these entities. For Tax Year 2024, twenty-nine counties and less than one hundred municipalities had lower rates due to the statutory caps on increases. Under current law, local governments can elect to forgo the tax rollback with a public hearing. There would be no impact on revenue for county boards of education or the State.
Additional one-time administrative costs for the State Tax Department would be $50,000. Other additional costs to the State or local governments would be minimal.
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 |
0 |
0 |
| Personal Services |
0 |
0 |
0 |
| Current Expenses |
0 |
0 |
0 |
| Repairs and Alterations |
0 |
0 |
0 |
| Assets |
0 |
0 |
0 |
| Other |
0 |
0 |
0 |
| 2. Estimated Total Revenues |
0 |
0 |
-44,000,000 |
Explanation of above estimates (including long-range effect):
Please explain increases and decreases in personal services, current expenses, repairs and alterations, assets, other costs and revenues, including assumptions and data sources and delineation between start-up and ongoing costs. Please also include a long-range schedule of costs and revenues if fiscal impact is expected to vary in future years.
This increase in the Homestead Exemption from $20,000 to $25,000 beginning on January 1, 2027 would result in a revenue loss of $11.8 million annually. The estimated revenue loss would be roughly $3.4 million to the State General Revenue Fund, $4.6 million to local county school boards, $3.1 million to county commissions and $700,000 to municipalities. The distribution of estimated cost is based on information from taxes levied as reported in the Classified Assessed Valuations Taxes Levied for 2024 Tax Year publication of the State Tax Department and the incorporation of the calculation of local property tax share within the State Aid to Schools Formula.
The Homestead Exemption would increase to $30,000 on January 1, 2028. This increase would result in a total revenue loss from current law of $23.1 million annually. The estimated revenue loss would be roughly $6.6 million to the State General Revenue Fund, $9.1 million to local county school boards, $6.1 million to county commissions and $1.3 million to municipalities.
The Homestead Exemption would further increase to $35,000 on January 1, 2029. This increase would result in a total revenue loss from current law of $33.6 million annually. The estimated revenue loss would be roughly $9.6 million to the State General Revenue Fund, $13.3 million to local county school boards, $8.8 million to county commissions and $1.9 million to municipalities.
The Homestead Exemption would increase to $40,000 on January 1, 2030. This increase would result in a total revenue loss from current law of $44.0 million annually. The estimated revenue loss would be roughly $12.6 million to the State General Revenue Fund, $17.4 million to local county school boards, $11.5 million to county commissions and $2.5 million to municipalities.
In most counties, decreased tax revenue due to an increase in the Homestead Exemption would likely be at least partially offset by higher tax rates and tax burdens on other types of property, including both real property taxes and personal property taxes on vehicles, business inventory, machinery and equipment.
In addition, this bill removes the statutory caps on increases in Property Tax assessments in any year when the aggregate appraised value of property in a county or statewide exceeds a previous year’s projected property tax revenues. Passage of this bill could potentially increase revenue in some counties and municipalities, but we cannot estimate the revenue gains to these entities. For Tax Year 2024, twenty-nine counties and less than one hundred municipalities had lower rates due to the statutory caps on increases. Under current law, local governments can elect to forgo the tax rollback with a public hearing. There would be no impact on revenue for county boards of education or the State.
Additional one-time administrative costs for the State Tax Department would be $50,000. Other additional costs to the State or local governments would be minimal.
Memorandum
Please identify any areas of vagueness, technical defects, reasons a bill would not have a fiscal impact, and/or any special issues not captured elsewhere on this form.
Person submitting Fiscal Note: Mark Muchow
Email Address: radfiscal@wv.gov