FISCAL NOTE
Date Requested: February 09, 2024
Time Requested: 03:10 PM |
| Agency: |
Tax & Revenue Department, WV State |
|---|
| CBD Number: |
Version: |
Bill Number: |
Resolution Number: |
| 2974 |
Introduced |
HB5547 |
|
|---|
| 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 provide tax credits to incentivize investments and improvements in blighted properties in West Virginia.
This bill would allow for a tax credit equal to 15 percent of blighted property rehabilitation and improvement expenditures. The credit would apply to Corporation Net Income and Personal Income Taxes and is available for both residential and nonresidential buildings located in this state. Any unused portion of the credit not taken in the taxable year would be qualified for carryback and carryforward treatment. This carryforward would be available for the next five tax years following the first tax year for which the credit entitlement is authorized. This credit would be available for any taxable year beginning on January 1, 2025.
According to a study by West Virginia University, there were over 17,000 structures in the state that were considered to be heavily blighted and in need of demolition as of 2018. Of those, approximately 13,300 were residential structures and 3,800 were commercial. More recent data from the Census Bureau’s American Community Survey suggests that there were 136,262 vacant buildings in West Virginia in 2021. Of those, 55,600 were in good condition and 80,662 were likely to be in a state of disrepair. While there was no cost data for property rehabilitation readily available, WVU was able to estimate the cost range of the demolition of a single-family home of $10,000 - 15,000, assuming there are no contaminants that would need to be removed. Because of the high cost involved with property rehabilitation, the 15 percent tax credit, and the number of potentially blighted properties in the state, the revenue impact of this bill cannot be readily quantified, but the loss would be significant.
Administrative costs incurred by the State Tax Division would be $30,000 in FY 2025, $46,500 in FY 2026, and $45,000 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 |
30,000 |
45,000 |
| Personal Services |
0 |
0 |
45,000 |
| Current Expenses |
0 |
0 |
0 |
| Repairs and Alterations |
0 |
0 |
0 |
| Assets |
0 |
0 |
0 |
| Other |
0 |
30,000 |
0 |
| 2. Estimated Total Revenues |
0 |
0 |
0 |
Explanation of above estimates (including long-range effect):
This bill would allow for a tax credit equal to 15 percent of blighted property rehabilitation and improvement expenditures. The credit would apply to Corporation Net Income and Personal Income Taxes and is available for both residential and nonresidential buildings located in this state. Any unused portion of the credit not taken in the taxable year would be qualified for carryback and carryforward treatment. This carryforward would be available for the next five tax years following the first tax year for which the credit entitlement is authorized. This credit would be available for any taxable year beginning on January 1, 2025.
According to a study by West Virginia University, there were over 17,000 structures in the state that were considered to be heavily blighted and in need of demolition as of 2018. Of those, approximately 13,300 were residential structures and 3,800 were commercial. More recent data from the Census Bureau’s American Community Survey suggests that there were 136,262 vacant buildings in West Virginia in 2021. Of those, 55,600 were in good condition and 80,662 were likely to be in a state of disrepair. While there was no cost data for property rehabilitation readily available, WVU was able to estimate the cost range of the demolition of a single-family home of $10,000 - 15,000, assuming there are no contaminants that would need to be removed. Because of the high cost involved with property rehabilitation, the 15 percent tax credit, and the number of potentially blighted properties in the state, the revenue impact of this bill cannot be readily quantified, but the loss would be significant.
Administrative costs incurred by the State Tax Division would be $30,000 in FY 2025, $46,500 in FY 2026, and $45,000 in subsequent fiscal years.
Memorandum
The stated purpose of this bill is to provide tax credits to incentivize investments and improvements in blighted properties in West Virginia.
First, §11-13NN-3 references itself. Second, the section states that the credit is allowed against “the tax imposed by this article.” There is no tax imposed by this article. Third, it is unclear to whom the disclosure of information is to be made and under what circumstances. Fourth, it does not address carryback treatment that would require the credit to be claimed on an amended return for a tax year prior to the effective date.
In addition, this credit is for properties sold pursuant to §11A-3-1, et seq., which was rewritten during the 2022 session.
Person submitting Fiscal Note: Mark Muchow
Email Address: kerri.r.petry@wv.gov