FISCAL NOTE
Date Requested: January 11, 2024
Time Requested: 10:30 PM |
| Agency: |
Tax & Revenue Department, WV State |
|---|
| CBD Number: |
Version: |
Bill Number: |
Resolution Number: |
| 1089 |
Introduced |
HB4496 |
|
|---|
| CBD Subject: |
Taxation |
|---|
|
FUND(S):
Not Indicated in Bill
Sources of Revenue:
Other Fund
Legislation creates:
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 Small Business Payroll Tax Credit, a three-year program establishing a tax credit for up to five employees for new businesses with fewer than 15 employees; establishing a start date and end date; listing the amounts of credits for five employees; and requiring the Department of Economic Development to track the progress of this program and present a report.
According to our interpretation, the bill creates a “Small Business Payroll Tax Credit” for any business formed on or after July 1, 2024, which employs fewer than 15 employees. The business must be newly formed, cannot have existed in West Virginia with the same members at any period between 2014 and 2024, and cannot be a foreign corporation opening a subsidiary in West Virginia. The “Small Business Payroll Tax Credit” is set up as a three-year program beginning on July 1, 2024, and ending on December 31, 2026. The program will apply to tax years beginning January 1, 2024, January 1, 2025, and January 1, 2026. The amount of credit would be based on a percentage of the “payroll tax assessed against the employer for that employee’s salary” for the first five employees hired.
The legislation does not identify the tax against which the credit will be applied or the specific payroll taxes on which it will be based; therefore, it is not possible to estimate the impact on General Revenue Fund collections or whether there will be additional administrative costs incurred by the State Tax Department to administer the credit.
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 |
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 |
0 |
Explanation of above estimates (including long-range effect):
According to our interpretation, the bill creates a “Small Business Payroll Tax Credit” for any business formed on or after July 1, 2024, which employs fewer than 15 employees. The business must be newly formed, cannot have existed in West Virginia with the same members at any period between 2014 and 2024, and cannot be a foreign corporation opening a subsidiary in West Virginia. The “Small Business Payroll Tax Credit” is set up as a three-year program beginning on July 1, 2024, and ending on December 31, 2026. The program will apply to tax years beginning January 1, 2024, January 1, 2025, and January 1, 2026. The amount of credit would be based on a percentage of the “payroll tax assessed against the employer for that employee’s salary” for the first five employees hired.
The legislation does not identify the tax against which the credit will be applied or the specific payroll taxes on which it will be based; therefore, it is not possible to estimate the impact on General Revenue Fund collections or whether there will be additional administrative costs incurred by the State Tax Department to administer the credit.
Memorandum
The stated purpose of this bill is to create the Small Business Payroll Tax Credit, a three-year program establishing a tax credit for up to five employees for new businesses with fewer than 15 employees; establishing a start date and end date; listing the amounts of credits for five employees; and requiring the Department of Economic Development to track the progress of this program and present a report.
The bill is vague and does not address several issues necessary to qualify for or administer the credit:
● The specific tax against which the tax credit would be applied;
● Whether any of the employees needed to make a business eligible for the tax credit are required to be full-time or part-time;
● A definition of a “newly-formed” business;
● A definition of “members;”
● More specific language regarding the report to be done by the Department of Economic Development, such as when and to whom the report shall be presented.
The body of the bill contains language implying the tax credit is limited to five employees in §11-13NN-2(a) by use of a confusing schedule regarding various tax credit rates based on five employees as applied over a three-year period.
In §11-13NN-2(b), the bill refers to a “tax rebate” and the method for calculating it refers to the years the business has been registered and operating, not the date of hire of the employees.
The bill may have two title defects. First, the title of the bill has language limiting application of the tax credit to a maximum number of five employees employed by a business eligible for the tax credit. The body of the bill lacks similar language. Second, the characterization of the three-year program as a “trial period” in §11-13NN-4 is not mentioned in the title of the bill. This may be considered a title defect.
Person submitting Fiscal Note: Mark Muchow
Email Address: kerri.r.petry@wv.gov