FISCAL NOTE
Date Requested: January 12, 2024
Time Requested: 05:14 PM |
| Agency: |
Tax & Revenue Department, WV State |
|---|
| CBD Number: |
Version: |
Bill Number: |
Resolution Number: |
| 2240 |
Introduced |
HB4662 |
|
|---|
| CBD Subject: |
Taxation |
|---|
|
FUND(S):
General Revenue Fund
Sources of Revenue:
General Fund
Legislation creates:
Increases Revenue From Existing Sources, 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 require lessees of West Virginia real estate who make natural resources royalty payments for in-state property to any nonresident lessor, to withhold West Virginia personal income tax on natural resources royalty payments. The bill provides exceptions, penalties, defines terms and grants rule-making authority.
The bill provides that every lessee of West Virginia real estate who makes a natural resources royalty payment to a lessor who does not reside in West Virginia must withhold West Virginia personal income tax on the natural resources royalty payments to that lessor and remit the withheld amount to the Tax Commissioner. The withholding of the tax is optional with respect to payments to a lessor who receives less than $1,000 annually in natural resource royalty payments from the lessee and is at the discretion of the lessee. Royalty income from West Virginia properties is subject to West Virginia Personal Income Tax regardless of individual residency. The provisions of this bill may improve compliance. The provisions of the bill would be effective for all taxable years beginning after December 31, 2024.
Based on our interpretation, the passage of the proposed legislation could increase General Revenue Fund collections by between $3 million and $10 million per year when fully implemented depending on energy prices.
Additional administrative costs incurred by the Tax Division would be $5,000 in FY2025.
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 |
5,000 |
0 |
| Personal Services |
0 |
0 |
0 |
| Current Expenses |
0 |
0 |
0 |
| Repairs and Alterations |
0 |
0 |
0 |
| Assets |
0 |
0 |
0 |
| Other |
0 |
5,000 |
0 |
| 2. Estimated Total Revenues |
0 |
0 |
3,000,000 |
Explanation of above estimates (including long-range effect):
The bill provides that every lessee of West Virginia real estate who makes a natural resources royalty payment to a lessor who does not reside in West Virginia must withhold West Virginia personal income tax on the natural resources royalty payments to that lessor and remit the withheld amount to the Tax Commissioner. The withholding of the tax is optional with respect to payments to a lessor who receives less than $1,000 annually in natural resource royalty payments from the lessee and is at the discretion of the lessee. Royalty income from West Virginia properties is subject to West Virginia Personal Income Tax regardless of individual residency. The provisions of this bill may improve compliance. The provisions of the bill would be effective for all taxable years beginning after December 31, 2024.
Based on our interpretation, the passage of the proposed legislation could increase General Revenue Fund collections by between $3 million and $10 million per year when fully implemented depending on energy prices.
Additional administrative costs incurred by the Tax Division would be $5,000 in FY2025.
Memorandum
Person submitting Fiscal Note: Mark Muchow
Email Address: kerri.r.petry@wv.gov