FISCAL NOTE
Date Requested: January 17, 2024
Time Requested: 04:32 PM |
| Agency: |
Tax & Revenue Department, WV State |
|---|
| CBD Number: |
Version: |
Bill Number: |
Resolution Number: |
| 2972 |
Introduced |
SB478 |
|
|---|
| 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 establish the Energy Intensive Industrial or Manufacturing Consumer Tax Credit.
The provisions of this bill would provide a tax credit to an electric power company that enters into a special contract with a qualified energy intensive industrial consumer for a reduced special rate or terms and conditions not otherwise available for the general industrial consumer. The provisions of the bill define a qualified industrial consumer as an industrial facility located in West Virginia after January 1, 2024, if such enterprise’s cost of electricity constitutes at least 15 percent of the cost of production, the enterprise creates at least 25 new jobs, the enterprise invested at least $5 million in fixed assets or other capital expenditures at the service location as set forth in the special contract and the enterprise has a billing demand of at least 5,000 kilowatts. Enterprises that existed on January 1, 2024, may qualify with an additional increase in annual billing demand of at least 5,000 kilowatts compared to 2023. The tax credit would equal 0.19 cents per kilowatt-hour of electricity sold to a qualified enterprise.
According to the West Virginia Public Service Commission, there are currently nine facilities that serve under special contracts with demands above 5,000 kilowatts. Had this bill included the nine existing contracts, the revenue impact would have been a loss of $3.8 million. However, the provisions of this bill only relate to qualified contracts as defined after January 1, 2024. Because of this requirement, we cannot determine the number of contracts qualifying after the effective date. As a result, we cannot reasonably estimate the loss of revenue associated with this bill.
The current Business and Occupation tax on the electric power industry is largely a fixed tax on taxable generating capacity with the capacity tax accounting for roughly 93 percent of all tax collected. The yield of the fixed tax does not increase with additional sales of electricity. The proposed tax credit would generally apply against the fixed capacity tax for the electric power company.
Additional administrative costs incurred by the Tax Division would be $15,000 in FY 2025.
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 |
15,000 |
0 |
| Personal Services |
0 |
0 |
0 |
| Current Expenses |
0 |
0 |
0 |
| Repairs and Alterations |
0 |
0 |
0 |
| Assets |
0 |
0 |
0 |
| Other |
0 |
15,000 |
0 |
| 2. Estimated Total Revenues |
0 |
0 |
0 |
Explanation of above estimates (including long-range effect):
The provisions of this bill would provide a tax credit to an electric power company that enters into a special contract with a qualified energy intensive industrial consumer for a reduced special rate or terms and conditions not otherwise available for the general industrial consumer. The provisions of the bill define a qualified industrial consumer as an industrial facility located in West Virginia after January 1, 2024, if such enterprise’s cost of electricity constitutes at least 15 percent of the cost of production, the enterprise creates at least 25 new jobs, the enterprise invested at least $5 million in fixed assets or other capital expenditures at the service location as set forth in the special contract and the enterprise has a billing demand of at least 5,000 kilowatts. Enterprises that existed on January 1, 2024, may qualify with an additional increase in annual billing demand of at least 5,000 kilowatts compared to 2023. The tax credit would equal 0.19 cents per kilowatt-hour of electricity sold to a qualified enterprise.
According to the West Virginia Public Service Commission, there are currently nine facilities that serve under special contracts with demands above 5,000 kilowatts. Had this bill included the nine existing contracts, the revenue impact would have been a loss of $3.8 million. However, the provisions of this bill only relate to qualified contracts as defined after January 1, 2024. Because of this requirement, we cannot determine the number of contracts qualifying after the effective date. As a result, we cannot reasonably estimate the loss of revenue associated with this bill.
The current Business and Occupation tax on the electric power industry is largely a fixed tax on taxable generating capacity with the capacity tax accounting for roughly 93 percent of all tax collected. The yield of the fixed tax does not increase with additional sales of electricity. The proposed tax credit would generally apply against the fixed capacity tax for the electric power company.
Additional administrative costs incurred by the Tax Division would be $15,000 in FY 2025.
Memorandum
The stated purpose of this bill is to establish the Energy Intensive Industrial or Manufacturing Consumer Tax Credit.
There is a title defect. The title references a credit against state “business and operating” taxes. There is no such tax, presumably “business and occupation” is what is meant.
This bill is similar to SB 729 from the 2023 session, and it does not appear all the dates were updated, potentially giving this bill a retroactive application, or at the very least causing confusion.
The facility, plant, or enterprise’s cost of electricity consumed in the industrial or manufacturing process constitutes or is anticipated to constitute at least 15 percent of the cost of production under normal operating conditions (the term “normal operating conditions” is not defined).
If the facility, plant, or enterprise existed on January 1, 2024, it must have an increase in its annual billing demand of at least 5,000 kilowatts compared to 2023, or if the facility, plant, or enterprise did not exist on January 1, 2024, it must have a projected billing demand of at least 5,000 kilowatts and upon construction of the facility, plan, or enterprise have a billing demand of at least 5,000 kilowatts. (What if the demand is due to another factor? What about new ownership of an established facility, or successorship)?
The Tax Commissioner is required to propose Legislative rules and may create forms and require submission of documentation. It is not clear what role the PSC will play in administering this credit.
Person submitting Fiscal Note: Mark Muchow
Email Address: kerri.r.petry@wv.gov