FISCAL NOTE
Date Requested: January 11, 2024
Time Requested: 08:35 PM |
| Agency: |
Tax & Revenue Department, WV State |
|---|
| CBD Number: |
Version: |
Bill Number: |
Resolution Number: |
| 1699 |
Introduced |
HB4283 |
|
|---|
| CBD Subject: |
|
|---|
|
FUND(S):
State Black Lung Fund, General Revenue Fund
Sources of Revenue:
General Fund State Black Lung Fund
Legislation creates:
Decreases Existing Revenue, Creates New Expense, Creates New Fund: State Black Lung Fund
Fiscal Note Summary
Effect this measure will have on costs and revenues of state government.
The stated purpose of this bill is to create the West Virginia Black Lung Program and granting entitlement for pain and suffering for occupational pneumoconiosis.
The provisions of this bill attempt to create a new State-funded Black Lung Benefit Program for miners and retirees who worked in coal mines for a period of at least 10 years. The program would be funded by new surtaxes on mining companies and certain electric power generation companies. This fiscal note only addresses the tax related provisions within this bill. Any costs associated with the new State-funded benefit program would come from the agency administering the new benefit program.
As written, the tax provisions of this bill may be too vague to be properly administered. However, based on our interpretation of Legislative intent, the bill would create the West Virginia Black Lung Program to be funded from an additional tax imposed on severance of natural resources and generation of electricity by wind and solar devices. The provisions of the bill attempt to impose a 10 percent surtax on the severance of coal, natural gas, and oil. Combined State and local severance taxes on coal, natural gas, and oil vary significantly from year to year due to various economic factors. Over the past four years, collections of tax on coal, natural gas, and oil varied from a low of roughly $260 million in Fiscal Year 2021 to a high of nearly $900 million in Fiscal Year 2023. The yield from Business and Occupation Taxes on wind power generation is generally less than $2 million per year. Based on past history, an additional 10 percent surtax on those activities would potentially yield between $26.0 million and $90.0 million per year for the new State-funded Black Lung Benefit Program.
According to our interpretation, the provisions of this bill would also allow a non-refundable personal income tax credit for taxpayers who received benefits from the new State-funded Black Lung Benefit Fund equal to the amount of payments received each year. The minimum annual payment would be $2,400 per year for someone with 10 to 15 years of exposure with the payment rising above $5,000 for someone with 30 or more years of exposure. According to federal statistics, there are currently 4,208 federal Black Lung claims in West Virginia. Data provided by Workforce WV indicates that there have been approximately 27,000 miners employed in the state, on average, over the past 15 years. However, due to vagueness in the language of the bill regarding the eligibility of the taxpayer claiming the credit, the estimated amount of revenue loss cannot reasonably be determined. The cost of the credit could easily exceed $48 million per year if most affected taxpayers have pre-credit State income tax liability of at least $2,400.
Additional administrative costs to the Tax Department would be $61,500 in FY2025, and $45,000 in subsequent fiscal years.
Fiscal Note Detail
| Effect of Proposal |
Fiscal Year |
2024
Increase/Decrease
(use"-") |
2025
Increase/Decrease
(use"-") |
Fiscal Year
(Upon Full
Implementation) |
| 1. Estmated Total Cost |
0 |
61,500 |
45,000 |
| Personal Services |
0 |
5,000 |
45,000 |
| Current Expenses |
0 |
0 |
0 |
| Repairs and Alterations |
0 |
0 |
0 |
| Assets |
0 |
1,500 |
0 |
| Other |
0 |
55,000 |
0 |
| 2. Estimated Total Revenues |
0 |
0 |
0 |
Explanation of above estimates (including long-range effect):
The provisions of this bill attempt to create a new State-funded Black Lung Benefit Program for miners and retirees who worked in coal mines for a period of at least 10 years. The program would be funded by new surtaxes on mining companies and certain electric power generation companies. This fiscal note only addresses the tax related provisions within this bill. Any costs associated with the new State-funded benefit program would come from the agency administering the new benefit program.
As written, the tax provisions of this bill may be too vague to be properly administered. However, based on our interpretation of Legislative intent, the bill would create the West Virginia Black Lung Program to be funded from an additional tax imposed on severance of natural resources and generation of electricity by wind and solar devices. The provisions of the bill attempt to impose a 10 percent surtax on the severance of coal, natural gas, and oil. Combined State and local severance taxes on coal, natural gas, and oil vary significantly from year to year due to various economic factors. Over the past four years, collections of tax on coal, natural gas, and oil varied from a low of roughly $260 million in Fiscal Year 2021 to a high of nearly $900 million in Fiscal Year 2023. The yield from Business and Occupation Taxes on wind power generation is generally less than $2 million per year. Based on past history, an additional 10 percent surtax on those activities would potentially yield between $26.0 million and $90.0 million per year for the new State-funded Black Lung Benefit Program.
According to our interpretation, the provisions of this bill would also allow a non-refundable personal income tax credit for taxpayers who received benefits from the new State-funded Black Lung Benefit Fund equal to the amount of payments received each year. The minimum annual payment would be $2,400 per year for someone with 10 to 15 years of exposure with the payment rising above $5,000 for someone with 30 or more years of exposure. According to federal statistics, there are currently 4,208 federal Black Lung claims in West Virginia. Data provided by Workforce WV indicates that there have been approximately 27,000 miners employed in the state, on average, over the past 15 years. However, due to vagueness in the language of the bill regarding the eligibility of the taxpayer claiming the credit, the estimated amount of revenue loss cannot reasonably be determined. The cost of the credit could easily exceed $48 million per year if most affected taxpayers have pre-credit State income tax liability of at least $2,400.
Additional administrative costs to the Tax Department would be $61,500 in FY2025 and $45,000 in subsequent fiscal years.
Memorandum
The stated purpose of this bill is to create the West Virginia Black Lung Program and granting entitlement for pain and suffering for occupational pneumoconiosis.
As written, the bill is too vague to be administered. It is unclear who would qualify for the Program and how someone would apply for the Program. Terms are not defined, and the bill is internally inconsistent. The personal income tax credit and the additional severance tax are also vague. There is not currently a severance tax on the generation of electricity by solar and wind devices, so it is unclear how an additional severance tax could be imposed. This bill does not attempt to coordinate the collection of the tax, with the deposit of the revenue in the Fund, with the date that payouts may be due from the Fund. There are also Constitutional concerns.
The bill does not state how the Tax Commissioner will be able to verify the number of years of inhaling dust particles for a particular taxpayer or what documentation the claimant will need to provide in order to claim the credit. The bill does not address whether the tax credit is refundable, or whether it may be carried forward or if it is forfeited if it is not used. The bill does not address the recapture of the credit if the credit is erroneously issued.
Person submitting Fiscal Note: Mark Muchow
Email Address: kerri.r.petry@wv.gov