FISCAL NOTE
FUND(S):
General Revenue Fund
Sources of Revenue:
General Fund
Legislation creates:
A New Program
Fiscal Note Summary
Effect this measure will have on costs and revenues of state government.
The stated purpose of this bill is to give a tax credit to employers who provide or pay for child day care services for their employees’ dependent children.
According to our interpretation, passage of this bill would reduce General Revenue Fund tax collections by up to $4 million per year beginning in Fiscal Year 2005-2006. Employers would qualify for credit if they pay for day care services or if they establish their own day care centers. The credit would equal the lesser of 40% of day care expenditures or $65,000 for employers who pay for such services. Employers, who establish their own day care center, would qualify for a credit equal to the lesser of 60% of day care center expenditures or $65,000 during the initial year of operation. Thereafter, the credit would equal the lesser of 40% of annual day care center expenditures or $65,000.
The tax credit would apply to the employer’s corporation net income tax or personal income tax liability, whichever is applicable. Excess credits would be refundable. Although the bill includes language to make the provisions applicable to taxable years beginning after December 31, 2001 for the Personal Income Tax and to taxable years commencing after December 1, 2001 for the Corporation Net Income Tax, the aggregate credit claimed in any one fiscal year cannot exceed $4 million. If all eligible taxpayers claim the maximum $65,000 credit, then credit for any one year would be available to less than sixty-two employers.
Passage of this bill would result in additional administrative costs to the State Tax Department of $18,000 in Fiscal Year 2005-2006 and $20,000 per year for each fiscal year thereafter.
Fiscal Note Detail
| Effect of Proposal |
Fiscal Year |
2005
Increase/Decrease
(use"-") |
2006
Increase/Decrease
(use"-") |
Fiscal Year
(Upon Full
Implementation) |
| 1. Estmated Total Cost |
0 |
18,000 |
20,000 |
| Personal Services |
0 |
0 |
20,000 |
| Current Expenses |
0 |
6,000 |
0 |
| Repairs and Alterations |
0 |
0 |
0 |
| Assets |
0 |
12,000 |
0 |
| Other |
0 |
0 |
0 |
| 2. Estimated Total Revenues |
0 |
-4,000,000 |
-4,000,000 |
Explanation of above estimates (including long-range effect):
This bill establishes a maximum refundable credit of $65,000 per year for the establishment and operation of day care services. The total amount available for all day care service establishments is capped at $4 million per year. If all eligible taxpayers claim the maximum $65,000 credit, then credit for any one year would be available to less than sixty-two employers.
The Tax Department would incur additional administrative costs of $18,000 in Fiscal Year 2005-2006 and $20,000 per year for each fiscal year thereafter. The administrative costs would be for new forms development, tax return and tax refund processing and audit functions.
Memorandum
The stated purpose of this bill is to give a tax credit to employers who provide or pay for child day care services for their employees’ dependent children.
There are conflictive effective dates within this bill. In the Personal Income Tax section, the effective date is for tax years beginning after December 31, 2001. However, the effective date for the corporation credit is December 1, 2001. In addition, it is not clear as to whether the provisions of this bill would apply to a business organized as a limited liability company.
While the total amount of credit available for all day care service establishments is capped at $4 million per year, the bill fails to deal with the possibility and consequences of credit claims over $4 million per tax year.
Additionally, in proposed West Virginia Code §11-24-9d(d), the bill indicates that the aggregate amount of credits from proposed West Virginia Code §11-24-9d and proposed West Virginia Code §11-21-11 may not exceed $4,000,000. The correct references are West Virginia Code §11-24-9d and West Virginia Code §11-21-10b.
Person submitting Fiscal Note: Mark Muchow
Email Address: kpetry@tax.state.wv.us