FISCAL NOTE
Date Requested: January 10, 2024
Time Requested: 09:45 PM |
| Agency: |
Tax & Revenue Department, WV State |
|---|
| CBD Number: |
Version: |
Bill Number: |
Resolution Number: |
| 2487 |
Introduced |
HB4486 |
|
|---|
| 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 provide a tax credit to for-profit and nonprofit corporations to encourage the establishment of child-care facilities for the benefit of their employees. The credit for for-profit corporations would be taken against the corporate net income tax. The credit for nonprofit corporations would apply to payroll withholdings and would allow the nonprofit to recoup costs associated with employer-provided childcare by keeping a certain percentage of employee personal income tax withholdings that would otherwise be remitted to the State Tax Department.
West Virginia currently has two credits offsetting both Personal Income Tax and Corporation Net Income Tax equivalent to 50 percent of the cost of operation to the employer who provides or sponsors child-care less any amounts paid by employees during a taxable year and a 50 percent capital investment tax credit for qualified investment placed in service on or after July 1, 2022. This bill allows the employer to be eligible for the credit if they have a contract for at least one year with a DHHR licensed provider within reasonable distance of the employer’s facility.
Under current law, qualified 501(c)(3) and 501(c)(6) non-profit corporations may transfer their tax credits to a third party. The provisions of this bill would also allow these entities to take these credits against the employee’s payroll withholding tax that were withheld by the employer. The Withholding Tax is a tax withheld from employees’ pay and not a tax paid by the employer.
Passage of this bill will have minimal impact on the General Revenue Fund.
Additional administrative costs incurred by the State Tax Department would be $10,000 in FY2024 and $5,000 per year 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 |
10,000 |
5,000 |
5,000 |
| Personal Services |
0 |
5,000 |
5,000 |
| Current Expenses |
0 |
0 |
0 |
| Repairs and Alterations |
0 |
0 |
0 |
| Assets |
0 |
0 |
0 |
| Other |
10,000 |
0 |
0 |
| 2. Estimated Total Revenues |
0 |
0 |
0 |
Explanation of above estimates (including long-range effect):
West Virginia currently has two credits offsetting both Personal Income Tax and Corporation Net Income Tax equivalent to 50 percent of the cost of operation to the employer who provides or sponsors child-care less any amounts paid by employees during a taxable year and a 50 percent capital investment tax credit for qualified investment placed in service on or after July 1, 2022. This bill allows the employer to be eligible for the credit if they have a contract for at least one year with a DHHR licensed provider within reasonable distance of the employer’s facility.
Under current law, qualified 501(c)(3) and 501(c)(6) non-profit corporations may transfer their tax credits to a third party. The provisions of this bill would also allow these entities to take these
credits against the employee’s payroll withholding tax that were withheld by the employer. The Withholding Tax is a tax withheld from employees’ pay and not a tax paid by the employer.
Passage of this bill will have minimal impact on the General Revenue Fund.
Additional administrative costs incurred by the State Tax Department would be $10,000 in FY2024 and $5,000 per year in subsequent fiscal years.
Memorandum
The stated purpose of this bill is to provide a tax credit to for-profit and nonprofit corporations to encourage the establishment of child-care facilities for the benefit of their employees. The credit for for-profit corporations would be taken against the corporate net income tax. The credit for nonprofit corporations would apply to payroll withholdings and would allow the nonprofit to recoup costs associated with employer-provided childcare by keeping a certain percentage of employee personal income tax withholdings that would otherwise be remitted to the State Tax Department.
The proposed tax credit against an employer’s withholding tax would be problematic as the employee will still owe State Personal Income Tax. Further, W.Va. Code §11-21-74 requires the filing of a withholding tax return and payment of withholding tax. Withheld wages are never the employer’s money. This money is only held in trust by the employer for remittance to the State Tax Department on behalf of the employee in satisfaction of the employee’s Personal Income Tax liability.
This bill adds the requirement that off-site premises that are contracted through a licensed provider have a term of at least one year, and the childcare facility is permitted to fill uncontracted spaces by making them available to the general public. The meaning of “in order to protect the provider and spaces allowed by DHHR rules…” is vague. Further, the term “reasonable distance” is not defined in this bill.
The proposed tax credit qualification change does not appear to apply to the Personal Income Tax but does allow for a transferable credit available to non-profit corporations.
Person submitting Fiscal Note: Mark Muchow
Email Address: kerri.r.petry@wv.gov