FISCAL NOTE
Date Requested: January 31, 2024
Time Requested: 01:30 PM |
| Agency: |
Tax & Revenue Department, WV State |
|---|
| CBD Number: |
Version: |
Bill Number: |
Resolution Number: |
| 3456 |
Introduced |
HB5374 |
|
|---|
| 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 Strong Family Tax Credit to eligible charitable organizations that are exempt from federal income taxation under §501(c)(3) of the Internal Revenue Code and that are located in West Virginia providing services approved by the Department of Health and Human Resources.
The provisions of this bill would create a new undefined tax credit with undefined rules for taxpayers with an annual cap of $10,000. The language of the bill implies that the Taxpayer may qualify for a tax credit based on a donation to an eligible non-profit organization with approval by the Department of Human Services. However, there is no defined relationship between a donation and the amount of tax credit associated with such donation. The language of the bill appears to provide an aggregate tax credit cap of $10,000 for all donations made by all taxpayers to all eligible organizations approved by the Department of Human Services. If the total credit cap is $10,000 per year, then total cost would be $10,000 per year. However, if the $10,000 cap is intended to apply to every Taxpayer who donates to one or more of the organizations approved by the Department of Human Services, then the annual cost could be substantial. Tax credits would apply to the Business Franchise Tax (a tax no longer imposed in this State), and then either Personal Income Tax or Corporation Net Income Tax liability. The bill states that the credit would be capped at $10,000 annually and is nonrefundable with no carry forward or carry back provisions to other years.
The bill outlines the types of eligible charitable organizations that would qualify the taxpayer for the credit. While it does not specify eligible charitable organizations, the bill states which type of organization would be eligible. For example, organizations that help prevent child abuse, neglect, abandonment, or exploitation would qualify.
According to our interpretation, we cannot reasonably estimate the number of taxpayers who would donate to such a broad and open number of potentially eligible organizations. Therefore, we cannot estimate the revenue impact of this bill though the loss may be substantial.
Administrative costs incurred by the Tax Division would by $15,000 in FY2025 and $0 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 |
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 create a new undefined tax credit with undefined rules for taxpayers with an annual cap of $10,000. The language of the bill implies that the Taxpayer may qualify for a tax credit based on a donation to an eligible non-profit organization with approval by the Department of Human Services. However, there is no defined relationship between a donation and the amount of tax credit associated with such donation. The language of the bill appears to provide an aggregate tax credit cap of $10,000 for all donations made by all taxpayers to all eligible organizations approved by the Department of Human Services. If the total credit cap is $10,000 per year, then total cost would be $10,000 per year. However, if the $10,000 cap is intended to apply to every Taxpayer who donates to one or more of the organizations approved by the Department of Human Services, then the annual cost could be substantial. Tax credits would apply to the Business Franchise Tax (a tax no longer imposed in this State), and then either Personal Income Tax or Corporation Net Income Tax liability. The bill states that the credit would be capped at $10,000 annually and is nonrefundable with no carry forward or carry back provisions to other years.
The bill outlines the types of eligible charitable organizations that would qualify the taxpayer for the credit. While it does not specify eligible charitable organizations, the bill states which type of organization would be eligible. For example, organizations that help prevent child abuse, neglect, abandonment, or exploitation would qualify.
According to our interpretation, we cannot reasonably estimate the number of taxpayers who would donate to such a broad and open number of potentially eligible organizations. Therefore, we cannot estimate the revenue impact of this bill though the loss may be substantial.
Administrative costs incurred by the Tax Division would by $15,000 in FY2025 and $0 in subsequent fiscal years.
Memorandum
The stated purpose of this bill is to create a Strong Family Tax Credit to eligible charitable organizations that are exempt from federal income taxation under §501(c)(3) of the Internal Revenue Code and that are located in West Virginia providing services approved by the Department of Health and Human Resources.
The tax credit is to be first applied against the business franchise tax, a tax that, although not eliminated, was reduced to $0 in 2015.
The bill title states in part that the bill is intended to create a “Strong Family Tax Credit to eligible charitable organizations that are exempt from federal income taxation.” This seems to create a tax credit for tax exempt organizations. The language is confusing.
Subsection (a) of W. Va. Code §11-13NN-1 states in part, “The Legislature finds and declares that taxpayers making contributions to organizations that are designated by the Department of Human Services …” At this juncture one expects the sentence to conclude, “are eligible for a [Strong Family] tax credit.” Rather, the sentence concludes with a definition, “‘Eligible charitable organization’ means a charitable organization eligible to receive funding under this section,” rendering the entire subsection confusing.
Presumably, this bill is about a tax credit for taxpayers making contributions to “eligible charitable organizations,” not a “funding source” for those organizations.
Person submitting Fiscal Note: Mark Muchow
Email Address: kerri.r.petry@wv.gov