FISCAL NOTE
Date Requested: January 11, 2024
Time Requested: 10:55 PM |
| Agency: |
Tax & Revenue Department, WV State |
|---|
| CBD Number: |
Version: |
Bill Number: |
Resolution Number: |
| 1595 |
Introduced |
HB4568 |
|
|---|
| CBD Subject: |
Taxation |
|---|
|
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 the full amount of social security benefits from personal income taxation.
According to our interpretation, passage of this bill would exempt all federally taxable Social Security benefits from personal income tax by removing income limitation language present in current law. Under current law, a decreasing modification for Social Security benefits is allowed when the federal adjusted gross income of a married couple filing a joint return does not exceed $100,000, or $50,000 in the case of a single individual or a married individual filing a single return.
There is no internal effective date for the amendments; therefore, per §11-10-5p, they would be effective as of January 1, 2025.
Based on our interpretation, based on updated statistical and Personal Income Tax rates currently in effect, the passage of this bill would reduce General Revenue Fund collections by a minimal amount in FY2025, by 37.7 million in FY2026, and by increasing amounts in subsequent fiscal years. The legislation removes income limitation language present in current law without including an effective date. Some taxpayers may seek to amend returns from prior periods to take advantage of decreasing modifications for social security income which began in TY2020.
Additional administrative costs incurred by the State 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 |
45,000 |
45,000 |
| Current Expenses |
0 |
0 |
0 |
| Repairs and Alterations |
0 |
0 |
0 |
| Assets |
0 |
1,500 |
0 |
| Other |
0 |
15,000 |
0 |
| 2. Estimated Total Revenues |
0 |
0 |
-37,700,000 |
Explanation of above estimates (including long-range effect):
According to our interpretation, passage of this bill would exempt all federally taxable Social Security benefits from personal income tax by removing income limitation language present in current law. Under current law, a decreasing modification for Social Security benefits is allowed when the federal adjusted gross income of a married couple filing a joint return does not exceed $100,000, or $50,000 in the case of a single individual or a married individual filing a single return.
There is no internal effective date for the amendments; therefore, per §11-10-5p, they would be effective as of January 1, 2025.
Based on our interpretation, based on updated statistical and Personal Income Tax rates currently in effect, the passage of this bill would reduce General Revenue Fund collections by a minimal amount in FY2025, by 37.7 million in FY2026, and by increasing amounts in subsequent fiscal years. The legislation removes income limitation language present in current law without including an effective date. Some taxpayers may seek to amend returns from prior periods to take advantage of decreasing modifications for social security income which began in TY2020.
Additional administrative costs incurred by the State Tax Department would be $61,500 in FY2025 and $45,000 in subsequent fiscal years.
Memorandum
The stated purpose of this bill is to exempt the full amount of social security benefits from personal income taxation.
The bill has title defects.
W.Va. Code §11-21-12(c)(8)(C) provides a decreasing modification of the federal adjusted gross income for purposes of calculating the West Virginia adjusted gross income for 100% of social security benefits received by the taxpayer, for tax years beginning on and after January 1, 2022. However, paragraph (D) of that subdivision limits the “deduction” (sic) to taxpayers with a federal adjusted gross income of less than $50,000 or $100,000 for joint filers.
This bill would strike that limitation, thereby eliminating the income cap for eligibility for the decreasing modification. The bill also strikes language in paragraphs (A), (B), and (C), stating that the provisions of those paragraphs are subject to the limitation in paragraph (D) (i.e., the $50,000/$100,000 income caps on eligibility).
There is a title defect. Current law does not “exempt” the first $50,000 (or $100,000 for joint filers) of social security benefits received from personal income taxation. Current law provides for a cap on federal adjusted gross income to be eligible for the decreasing modification, and no modification of any amount is allowed for persons with a federal adjusted gross income over $50,000 (or $100,000 for joint filers).
The proposed bill does not limit the decreasing modification to amounts included in the federal adjusted gross income of the taxpayer. Because the federal adjusted gross income includes only a portion of the social security benefits received by the taxpayer, this would allow taxpayers to claim a West Virginia modification in excess of the amount of taxable social security benefits included in their federal adjusted gross income.
The bill does not provide an effective date for the proposed change. Under current law, the 100 percent decreasing modification applies to tax years on or after January 1, 2022, which raises the possibility of persons newly eligible for the modification filing an amended return for their 2022 and 2023 taxes, claiming the modification retrospectively. This retroactive application of the modification is not mentioned in the bill’s title.
Person submitting Fiscal Note: Mark Muchow
Email Address: kerri.r.petry@wv.gov