FISCAL NOTE
Date Requested: January 28, 2026
Time Requested: 04:39 PM |
| Agency: |
Tax & Revenue Department, WV State |
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| CBD Number: |
Version: |
Bill Number: |
Resolution Number: |
| 1837 |
Introduced |
HB4883 |
|
|---|
| 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 personal income tax from overtime pay.
According to our interpretation, for tax years beginning on or after January 1, 2027, income received by a full-time hourly paid employee as compensation for work performed in excess of 40 hours per week would not be subject to West Virginia Personal Income Tax. Beyond the requirement that a full-time hourly employee work more than 40 hours during one or more weeks of the year, there are no additional definitions relating to the scope of this decreasing modification. The income exclusion would not be limited to overtime paid in accordance with the Fair Labor Standards Act (FLSA) or any other existing labor criteria relating to wage payment rules for employees working more than 40 hours per week. Based on the recent experience of a similar Law enacted in Alabama, the projected annual General Revenue Fund loss associated with passage of this bill would be expected to range somewhere between $70 million and $100 million or more beginning in FY2028. Some employee/employer behavior modification might be expected to better maximize the benefit associated with this income exclusion.
Additional administrative costs incurred by the State Tax Department would be $109,800 in FY2027 and $90,000 per year in FY2028 and thereafter.
Fiscal Note Detail
| Effect of Proposal |
Fiscal Year |
2026
Increase/Decrease
(use"-") |
2027
Increase/Decrease
(use"-") |
Fiscal Year
(Upon Full
Implementation) |
| 1. Estmated Total Cost |
0 |
109,800 |
90,000 |
| Personal Services |
0 |
90,000 |
90,000 |
| Current Expenses |
0 |
3,300 |
0 |
| Repairs and Alterations |
0 |
0 |
0 |
| Assets |
0 |
0 |
0 |
| Other |
0 |
16,500 |
0 |
| 2. Estimated Total Revenues |
0 |
0 |
-85,000,000 |
Explanation of above estimates (including long-range effect):
According to our interpretation, for tax years beginning on or after January 1, 2027, income received by a full-time hourly paid employee as compensation for work performed in excess of 40 hours per week would not be subject to West Virginia Personal Income Tax. Beyond the requirement that a full-time hourly employee work more than 40 hours during one or more weeks of the year, there are no additional definitions relating to the scope of this decreasing modification. The income exclusion would not be limited to overtime paid in accordance with the Fair Labor Standards Act (FLSA) or any other existing labor criteria relating to wage payment rules for employees working more than 40 hours per week. Based on the recent experience of a similar Law enacted in Alabama, the projected annual General Revenue Fund loss associated with passage of this bill would be expected to range somewhere between $70 million and $100 million or more beginning in FY2028. Some employee/employer behavior modification might be expected to better maximize the benefit associated with this income exclusion.
Additional administrative costs incurred by the State Tax Department would be $109,800 in FY2027 and $90,000 per year in FY2028 and thereafter.
Memorandum
The stated purpose of this bill is to exempt personal income tax from overtime pay.
The language of the bill lacks clarity. Rather than “exempting personal income tax from overtime” it would be more accurate to say that this bill exempts overtime pay from the personal income tax.
This bill does not define overtime pay. Perhaps a cross reference to W.Va. Code §21-5C-3 establishing overtime pay would be appropriate to clarify the definition.
This bill has no internal effective date. If this bill is intended to apply to tax years beginning or after January 1, 2026, there may arise administrative difficulties as tax forms and related materials will need to be updated to accommodate this new tax exemption.
Person submitting Fiscal Note: Mark Muchow
Email Address: RADfiscal@wv.gov