FISCAL NOTE
Date Requested: January 15, 2024
Time Requested: 04:48 PM |
| Agency: |
Tax & Revenue Department, WV State |
|---|
| CBD Number: |
Version: |
Bill Number: |
Resolution Number: |
| 1035 |
Introduced |
HB4722 |
|
|---|
| 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 create a credit against the severance tax to encourage private companies to make infrastructure improvements to highways, roads, and bridges in the state. The bill limits the total amount of road and highway infrastructure improvement credits, which can be verified by the Secretary of Transportation. The bill seeks to encourage greater capital investment in coal production and processing facilities. The bill will increase economic opportunity to the state. The bill authorizes the claiming of the credits. Finally, the bill provides for an effective date.
The provisions of this bill would create two separate investment tax credit applications for the coal industry effective January 1, 2024. The bill creates a broad tax credit against coal severance taxes equal to 50 percent of qualified expenses necessary to operate a coal mine and related properties. The bill also creates a narrow 50 percent tax credit for qualified expenses of a surface mine associated with the development of a certified road or highway infrastructure improvement project up to a total limit of $50,000 based on a maximum certification of no more than $100,000 in eligible expenses. The resulting tax credits may be used to offset up to 20 percent of the Taxpayer’s coal severance tax liability with excess tax credits carried over for up to nine additional years. The broad tax credit equal to 50 percent of the qualified operating expenses of a mine should by itself be sufficient to fully offset 20 percent of coal severance tax liability without need for additional benefits from the narrower tax credit for highway improvement projects. The narrow tax credit for highway improvement projects would require pre-certification from the Secretary of Transportation with a limit of no more than $100,000 in total expenditures eligible for the tax credit. Beginning in FY2025, passage of this bill would result in an annual General Revenue Fund loss of roughly $53.0 million to $65 million per year based on current coal prices and current collection trends. Given the January 2024 effective date of these proposed tax credits, a revenue loss ranging from $22.0 million to $27.0 million could be anticipated for the balance of FY2024 based on an expectation of claims against monthly tax payments.
Additional administrative costs incurred by the State Tax Department would be $15,000 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 |
15,000 |
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 |
15,000 |
0 |
0 |
| 2. Estimated Total Revenues |
0 |
0 |
0 |
Explanation of above estimates (including long-range effect):
The provisions of this bill would create two separate investment tax credit applications for the coal industry effective January 1, 2024. The bill creates a broad tax credit against coal severance taxes equal to 50 percent of qualified expenses necessary to operate a coal mine and related properties. The bill also creates a narrow 50 percent tax credit for qualified expenses of a surface mine associated with the development of a certified road or highway infrastructure improvement project up to a total limit of $50,000 based on a maximum certification of no more than $100,000 in eligible expenses. The resulting tax credits may be used to offset up to 20 percent of the Taxpayer’s coal severance tax liability with excess tax credits carried over for up to nine additional years. The broad tax credit equal to 50 percent of the qualified operating expenses of a mine should by itself
be sufficient to fully offset 20 percent of coal severance tax liability without need for additional benefits from the narrower tax credit for highway improvement projects. The narrow tax credit for highway improvement projects would require pre-certification from the Secretary of Transportation with a limit of no more than $100,000 in total expenditures eligible for the tax credit. Beginning in FY2025, passage of this bill would result in an annual General Revenue Fund loss of roughly $53.0 million to $65 million per year based on current coal prices and current collection trends. Given the January 2024 effective date of these proposed tax credits, a revenue loss ranging from $22.0 million to $27.0 million could be anticipated for the balance of FY2024 based on an expectation of claims against monthly tax payments.
Additional administrative costs incurred by the State Tax Department would be $15,000 in FY2024 and $5,000 per year in subsequent fiscal years.
Memorandum
The stated purpose of this bill is to create a credit against the severance tax to encourage private companies to make infrastructure improvements to highways, roads, and bridges in the state. The bill limits the total amount of road and highway infrastructure improvement credits, which can be verified by the Secretary of Transportation. The bill seeks to encourage greater capital investment in coal production and processing facilities. The bill will increase economic opportunity to the state. The bill authorizes the claiming of the credits. Finally, the bill provides for an effective date.
The bill does not define a “coal production and processing facility”. Use of the phrase “in furtherance of” could be interpreted to make the list of covered expenditures very broad.
There is no comparable application process or dollar limitation for credits claimed for qualified expenditures toward a coal production and processing facility.
The Secretary of Transportation is authorized to certify a maximum of $100,000 for road or highway infrastructure improvements as being eligible for the proposed tax credit. It is unclear whether this $100,000 limit applies for each year the credit is available or for the entirety of the life of the proposed credit. Further, it is uncertain whether this proposed credit applies to any single project or all projects statewide. It is unclear whether the Transportation Secretary is to award credits on a first-come, first-served basis or pick and choose the projects he or she considers to be the best.
Person submitting Fiscal Note: Mark Muchow
Email Address: kerri.r.petry@wv.gov