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 create a tax credit program for individuals paying qualified educational expenses and for those individuals or corporations making donations to organizations granting scholarships for qualified educational expenses. The bill defines terms and sets forth requirements. As written, this bill would provide a tax credit to individuals who pay all or part of the tuition, fees, and other educational expenses of an eligible student. Parents would also be able to claim a tax credit for certain home schooling expenses. The bill also provides that an individual may assign their tax credit to their student’s qualifying school. An additional provision would provide a tax credit to individuals and corporations making contributions to scholarship granting organizations. The tax credit would be refundable for parents of a student when the parent’s income does not exceed an amount equal to the income standard used to qualify for a reduced price lunch. For other parents and corporations, the credit would be limited to 50% of tax liability. In addition to the credit related the direct expenses of a student, the proposed bill would effectively create a mechanism for the State to fund donations for educational purposes and may result in an increase in scholarship donations. Other charitable organizations, such as religion, the arts, environment, etc., may see a drop in donations because scholarship donations would become more tax-preferred. In addition, many taxpayers would be able to qualify for the tax credit by making contributions to programs outside the State. Although we are unable to accurately estimate the revenue impact of this proposal, we believe the revenue reduction attributable to passage of this bill would be significant. Due to the specified credit mechanism and notification responsibilities in the proposed bill, additional administrative costs to the State Tax Department or Department or Revenue would be substantial.



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 0


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


As written, this bill would provide a tax credit to individuals who pay all or part of the tuition, fees, and other educational expenses of an eligible student. Parents would also be able to claim a tax credit for certain home schooling expenses. The bill also provides that an individual may assign their tax credit to their student’s qualifying school. An additional provision would provide a tax credit to individuals and corporations making contributions to scholarship granting organizations. The tax credit would be refundable for parents of a student when the parent’s income does not exceed an amount equal to the income standard used to qualify for a reduced price lunch. For other parents and corporations, the credit would be limited to 50% of tax liability. In addition to the credit related the direct expenses of a student, the proposed bill would effectively create a mechanism for the State to fund donations for educational purposes and may result in an increase in scholarship donations. Other charitable organizations, such as religion, the arts, environment, etc., may see a drop in donations because scholarship donations would become more tax-preferred. In addition, many taxpayers would be able to qualify for the tax credit by making contributions to programs outside the State. Although we are unable to accurately estimate the revenue impact of this proposal, we believe the revenue reduction attributable to passage of this bill would be significant. Due to the specified credit mechanism and notification responsibilities in the proposed bill, additional administrative costs to the State Tax Department or Department or Revenue would be substantial.



Memorandum


The stated purpose of this bill is to create a tax credit program for individuals paying qualified educational expenses and for those individuals or corporations making donations to organizations granting scholarships for qualified educational expenses. The bill defines terms and sets forth requirements. As written this bill contains a provision that would provide a tax credit to individuals and corporations making contributions to scholarship granting organizations. Since the definition of scholarship granting organizations may be broadly interpreted, the potential utilization of the credit may be much greater than intended. Additionally, the bill provides that the tax credit would be refundable for parents of a student when the parent’s income does not exceed an amount equal to the income standard used to qualify for a reduced price lunch. However, the bill does specify what part of the credit is to be refunded (e.g., the entire credit or the credit in excess of tax liability).



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