FISCAL NOTE
Date Requested: January 15, 2024
Time Requested: 04:06 PM |
| Agency: |
Tax & Revenue Department, WV State |
|---|
| CBD Number: |
Version: |
Bill Number: |
Resolution Number: |
| 1521 |
Introduced |
HB4705 |
|
|---|
| CBD Subject: |
Roads and Transportation |
|---|
|
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 return to the Division of Highways the sales tax collected from contractors for materials used in Highways construction and maintenance projects. If the contractors’ sales tax is going to the general revenue, DOH is paying sales tax to the state. No other agency of state government pays state sales tax.
According to our interpretation, this bill would reinstate an annual revenue transfer from the General Revenue Fund to the State Road Fund equal to a calculation of 40 percent of total gross funds expended by the Division of Highways during the fiscal period for acquisition of materials used by contractors for construction and maintenance of highway projects. The Division of Highways is to provide an itemized listing of projects and funds expended on those projects to the Tax Commissioner by June 15th of each fiscal year. The amendments would be effective beginning January 1, 2024 and apply to “former sales made on and after that date.” Even though the proposed provisions are located among various sales tax exemptions, the proposed change does not create an additional sales tax exemption.
Based on estimates received from the West Virginia Division of Highways, the proposed legislation would decrease General Revenue Fund collections by roughly $10.5 million in FY2024, $25.1 million in FY2025, and $22.1 million in FY2026. The legislation appears to indicate that the amendments would only apply to sales made on and after January 1, 2024. If it is determined that the amendment would apply to all sales made during FY2024, then the impact for FY2024 would double. It is anticipated that future transfers would vary considerably from year to year.
There would be no additional administrative costs.
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 |
-10,450,000 |
-25,100,000 |
-22,100,000 |
Explanation of above estimates (including long-range effect):
According to our interpretation, this bill would reinstate an annual revenue transfer from the General Revenue Fund to the State Road Fund equal to a calculation of 40 percent of total gross funds expended by the Division of Highways during the fiscal period for acquisition of materials used by contractors for construction and maintenance of highway projects. The Division of Highways is to provide an itemized listing of projects and funds expended on those projects to the Tax Commissioner by June 15th of each fiscal year. The amendments would be effective beginning January 1, 2024 and apply to “former sales made on and after that date.” Even though the proposed provisions are located among various sales tax exemptions, the proposed change does not create an additional sales tax exemption.
Based on estimates received from the West Virginia Division of Highways, the proposed legislation would decrease General Revenue Fund collections by roughly $10.5 million in FY2024, $25.1 million in FY2025, and $22.1 million in FY2026. The legislation appears to indicate that the amendments would only apply to sales made on and after January 1, 2024. If it is determined that the amendment would apply to all sales made during FY2024, then the impact for FY2024 would double. It is anticipated that future transfers would vary considerably from year to year.
There would be no additional administrative costs.
Memorandum
The stated purpose of this bill is to return to the Division of Highways the sales tax collected from contractors for materials used in Highways construction and maintenance projects. If the contractors’ sales tax is going to the general revenue, DOH is paying sales tax to the state. No other agency of state government pays state sales tax.
Even though the language of the bill is located and stated as a refundable exemption, the provisions of the bill fail to create a sales tax exemption. The provisions of the bill create a revenue appropriation similar to those found under W.Va. Code §11-15-30.
The refundable exemption was deleted by legislation in 2018. The proposed bill reinstates the refundable exemption but replaces the reference to “a highway project” with “a Division of Highways road, highway, or bridge project.”
The bill also amends W.Va. Code §11-15-9(c) so that the reinstatement of the refundable exemption is effective after January 1, 2024. This amendment essentially renders the reinstatement of the refundable exemption retroactive, and may be a problem because retroactivity is not mentioned in the bill’s title.
Person submitting Fiscal Note: Mark Muchow
Email Address: kerri.r.petry@wv.gov