FISCAL NOTE



FUND(S):

General Revenue Fund, local governments

Sources of Revenue:

General Fund,Other Fund local property tax

Legislation creates:

A New Program



Fiscal Note Summary


Effect this measure will have on costs and revenues of state government.


The stated purpose of this bill is to authorize the deferment of property tax increases for property owned, use and occupied by senior citizens. The passage of this bill would result in the temporary loss of significantly less than $0.9 million in local property tax revenues per year due to the temporary deferral of property tax increases over 10% or $300. Local governments would eventually recoup any lost funds upon the sale of the home or change in the homeowner. The decision to defer payment of the tax increase would be optional on the part of the homeowner. West Virginia would join 25 other states and the District of Columbia in allowing certain qualified senior citizens to defer at least a portion of their annual property tax bill. The tax deferment option would provide additional flexibility to senior citizens when paying local property taxes. Senior citizens may also take advantage of the local Homestead Exemption, and the refundable Homestead Exemption Tax Credit for families with federal adjusted gross income at or below 150% of the poverty guidelines. Beginning in 2008, any taxpayer whose owner-occupied residential property tax bill exceeds 4% of their gross household income may claim a refundable State income tax credit for the difference up to a maximum of $1,000. According to a study by the Tax Foundation, West Virginia ranked third lowest among the 50 states in the share of median income for home owners devoted to the payment of residential property taxes in 2006. Given all of the tax benefits associated with home ownership in West Virginia, we would anticipate only a small fraction of the 1,573 eligible homeowners would opt to participate in the proposed tax deferment program. If every eligible homeowner opts to defer their tax increase payment into the future, then the maximum annual temporary cost to local governments is no more than $0.9 million. Additional administrative costs cannot be determined. The State Tax Department would have a one-time cost of $25,000 for programming. In addition, the Tax Department and the county sheriffs would incur additional costs because the deferment and acquired interest would have to be tracked annually on a parcel by parcel basis.



Fiscal Note Detail


Effect of Proposal Fiscal Year
2008
Increase/Decrease
(use"-")
2009
Increase/Decrease
(use"-")
Fiscal Year
(Upon Full
Implementation)
1. Estmated Total Cost 0 0 0
Personal Services 0 0 0
Current Expenses 0 0 0
Repairs and Alterations 0 0 0
Assets 0 0 0
Other 0 0 0
2. Estimated Total Revenues 0 0 -900,000


Explanation of above estimates (including long-range effect):


The passage of this bill would result in the temporary loss of significantly less than $0.9 million in local property tax revenues per year due to the temporary deferral of property tax increases over 10% or $300. Local governments would eventually recoup any lost funds upon the sale of the home or change in the homeowner. The decision to defer payment of the tax increase would be optional on the part of the homeowner. West Virginia would join 25 other states and the District of Columbia in allowing certain qualified senior citizens to defer at least a portion of their annual property tax bill. The tax deferment option would provide additional flexibility to senior citizens when paying local property taxes. Senior citizens may also take advantage of the local Homestead Exemption, and the refundable Homestead Exemption Tax Credit for families with federal adjusted gross income at or below 150% of the poverty guidelines. Beginning in 2008, any taxpayer whose owner-occupied residential property tax bill exceeds 4% of their gross household income may claim a refundable State income tax credit for the difference up to a maximum of $1,000. According to a study by the Tax Foundation, West Virginia ranked third lowest among the 50 states in the share of median income for home owners devoted to the payment of residential property taxes in 2006. Given all of the tax benefits associated with home ownership in West Virginia, we would anticipate only a small fraction of the 1,573 eligible homeowners would opt to participate in the proposed tax deferment program. If every eligible homeowner opts to defer their tax increase payment into the future, then the maximum annual temporary cost to local governments is no more than $0.9 million. Additional administrative costs cannot be determined. The State Tax Department would have a one-time cost of $25,000 for programming. In addition, the Tax Department and the county sheriffs would incur additional costs because the deferment and acquired interest would have to be tracked annually on a parcel by parcel basis.



Memorandum


The stated purpose of this bill is to authorize the deferment of property tax increases for property owned, use and occupied by senior citizens. The bill contains no provision for the enforcement of liens. The proposed ยง11-61-8 specifically removes the liens from the collection procedures of Chapter 11a. Furthermore, the bill does not provide any alternative collection procedures. Thus, the liens against the property for unpaid deferred taxes under this bill would be unenforceable.



    Person submitting Fiscal Note: Mark Muchow
    Email Address: kpetry@tax.state.wv.us