Sources of Revenue:

General Fund,Other Fund local government revenue

Legislation creates:

Neither Program nor Fund

Fiscal Note Summary

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

The stated purpose of this bill is to provide a methodology for the valuation of all special manufacturing inventory property for property tax purposes. As written, this bill defines “special manufacturing inventory property” as “tangible property in the form of inventory or raw materials, goods in process and finished goods employed exclusively in or resulting exclusively from manufacturing.” The bill establishes the value of special manufacturing inventory property for the purpose of the ad valorem property taxation as salvage value, where salvage value is the lower of fair market salvage value or 5 percent of the original cost of the property. The determination as to whether a specific item of property qualifies as special manufacturing inventory property is initially made by the Assessor in the county in which the property is located. The bill also contains provisions for taxpayer’s protest and appeal of an Assessor’s ruling that property does not qualify for the special manufacturing inventory property designation. The special manufacturing inventory property provision applies for assessment years beginning on or after July 1, 2009. According to our interpretation, passage of this bill would result in a reduction of local government revenue of roughly $21.0 million per year. Additionally, State General Revenue Fund collections would be reduced by a minimal amount. County Assessors and the State Tax Department will incur an unknown increase in administrative costs attributable to passage of this bill.

Fiscal Note Detail

Effect of Proposal	Fiscal Year
Effect of Proposal	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	-21,000,000

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

Passage of this bill would provide a methodology for the valuation of all special manufacturing inventory property for property tax purposes. As written, this bill defines “special manufacturing inventory property” as “tangible property in the form of inventory or raw materials, goods in process and finished goods employed exclusively in or resulting exclusively from manufacturing.” The bill establishes the value of special manufacturing inventory property for the purpose of the ad valorem property taxation as salvage value, where salvage value is the lower of fair market salvage value or 5 percent of the original cost of the property. The determination as to whether a specific item of property qualifies as special manufacturing inventory property is initially made by the Assessor in the county in which the property is located. The bill also contains provisions for taxpayer’s protest and appeal of an Assessor’s ruling that property does not qualify for the special manufacturing inventory property designation. The special manufacturing inventory property provision applies for assessment years beginning on or after July 1, 2009. According to our interpretation, passage of this bill would result in a reduction of local government revenue of roughly $21.0 million per year. Additionally, State General Revenue Fund collections would be reduced by a minimal amount. County Assessors and the State Tax Department will incur an unknown increase in administrative costs attributable to passage of this bill.

Memorandum

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