FISCAL NOTE



FUND(S):

General Revenue Fund

Sources of Revenue:

General Fund

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 give a temporary tax credit to small business employers to assist in the purchase of health insurance for their employees. As written, this bill appears to provide a credit based upon the cost of private health insurance to small businesses (i.e., a business with less than 25 employees) who maintain their corporate headquarters in West Virginia. In the first year, the credit would be calculated at up to 50 percent of the cost of the businesses’ private health insurance paid by the business, while in the second year the credit would be calculated at up to 25 percent of the cost of the businesses’ private health insurance paid by the business, with no credit available in the third year. The credit would be limited to a maximum of $25,000 per taxpayer. The bill provides that the Governor’s Office of Health System Improvement is to allocate the tax credit in the order applications are received. The credit may be used to offset Business Franchise Tax, Corporation Net Income Tax and Personal Income Tax. Any credit in excess of tax liability for the aforementioned taxes may be carried forward for up to four years. Due to a stated limit of $6 million on the total amount of credit available for allocation, the annual reduction in the General Revenue Fund would be $6 million. Additional administrative costs for the State Tax Department associated with this bill would be minimal. However, the Governor’s Office of Health System Improvement will incur additional administrative costs due to the bill.



Fiscal Note Detail


Effect of Proposal Fiscal Year
2009
Increase/Decrease
(use"-")
2010
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 -6,000,000


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


As written, this bill appears to provide a credit based upon the cost of private health insurance to small businesses (i.e., a business with less than 25 employees) who maintain their corporate headquarters in West Virginia. In the first year, the credit would be calculated at up to 50 percent of the cost of the businesses’ private health insurance paid by the business, while in the second year the credit would be calculated at up to 25 percent of the cost of the businesses’ private health insurance paid by the business, with no credit available in the third year. The credit would be limited to a maximum of $25,000 per taxpayer. The bill provides that the Governor’s Office of Health System Improvement is to allocate the tax credit in the order applications are received. The credit may be used to offset Business Franchise Tax, Corporation Net Income Tax and Personal Income Tax. Any credit in excess of tax liability for the aforementioned taxes may be carried forward for up to four years. Due to a stated limit of $6 million on the total amount of credit available for allocation, the annual reduction in the General Revenue Fund would be $6 million. Additional administrative costs for the State Tax Department associated with this bill would be minimal. However, the Governor’s Office of Health System Improvement will incur additional administrative costs for reviewing, approving and certifying credit amounts.



Memorandum


The stated purpose of this bill is to give a temporary tax credit to small business employers to assist in the purchase of health insurance for their employees. As written, the bill uses several key terms (e.g., eligible small group employer, eligible employer, and eligible taxpayer) interchangeably, but does not provide a clear definition of the terms.



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