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 specify that gambling and lottery winnings are taxable and that gambling and lottery losses are tax deductible. The bill also requires the taxpayer to keep detailed records showing losses. According to our interpretation, passage of this bill would reduce General Revenue Fund collections by roughly $26.6 million per year beginning in Fiscal Year 2012. The legislation creates a decreasing modification for gambling and lottery losses. Due to the lack of an internal effective date, this proposed modification would first become effective for tax years beginning on or after January 1, 2011. If all returns with decreasing modifications for gambling losses are accepted as filed, there would be no additional administrative costs to the State Tax Department.



Fiscal Note Detail


Effect of Proposal Fiscal Year
2010
Increase/Decrease
(use"-")
2011
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 -26,550,000


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


According to our interpretation, passage of this bill would reduce General Revenue Fund collections by roughly $26.6 million per year beginning in Fiscal Year 2012. The legislation creates a decreasing modification for gambling and lottery losses. Due to the lack of an internal effective date, this proposed modification would first become effective for tax years beginning on or after January 1, 2011. If all returns with decreasing modifications for gambling losses are accepted as filed, there would be no additional administrative costs to the State Tax Department.



Memorandum


The stated purpose of this bill is to specify that gambling and lottery winnings are taxable and that gambling and lottery losses are tax deductible. The bill also requires the taxpayer to keep detailed records showing losses. The federal deduction for gambling losses, only available when itemizing deductions, is limited to the extent of reported gambling winnings. This essentially limits gambling activity to a neutral or positive effect on federal adjusted gross income. The proposed legislation makes no reference to federal statute and does not impose a similar limitation. The title and language of the bill indicate the creation of a deduction for gambling and lottery losses. West Virginia Code §11-21-12 lists current allowable modifications to Federal adjusted gross income when determining West Virginia adjusted gross income. It is assumed that the intent of the legislation is to create a decreasing modification in the case of “gambling and lottery losses”, rather than create a new method of calculating West Virginia adjusted gross income. The phrases “gambling and lottery winnings”, “gambling and lottery losses”, “gains arising from gambling and lotteries”, and “costs and expenses incurred in connection with the gambling and lottery activity” are not defined and do not reference other Code sections.



    Person submitting Fiscal Note: Mark Muchow
    Email Address: kerri.r.petry@wv.gov