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 allow manufacturers a credit against their business franchise and corporation net income tax liabilities for a percentage of the net profits attributable to a patent used in manufacturing processes and products in this State and to allow a developer of a patent used in manufacturing processes and products a credit against their business franchise and corporation net income tax liabilities for the consideration received as a result of developing the patent. When the manufacturer is a partnership, limited liability company or other pass through entity and credit remaining after application against business franchise tax liability would flow through to the owners of the pass-through entity.
As written, this bill would create two tax credits. The first tax credit would be equal to 20 percent of the royalties, license fees or other consideration received from the sale, lease, or licensing of a patent developed in West Virginia. The tax credit would equal 30 percent of royalties, license fees or other consideration when the recipient reinvests at least 80 percent of the amount of the credit claimed in depreciable property purchased for purposes of developing additional patents in West Virginia, or in improving upon a patent developed in the State, or in contributing to a stipend to retain a graduate or post-doctoral student integral to the development of the patents. The bill also provides for allocating consideration received from patents developed from multi-state activity based upon the ratio of development costs incurred in West Virginia to all development costs. The second credit that would be created by passage of this bill would be equal to 20 percent of the net profit attributable to directly using a patent developed in this State in a manufacturing process or product in the State. The credit percentage would increase to 30 percent if the person claiming the credit reinvests at least 80 percent of the tax credit amount in capital improvements to add product lines or to increase productivity. Both tax credits would be applicable to reduce Business Franchise Tax, Corporation Net Income Tax, and Personal Income Tax liabilities for tax years beginning on or after 2011. Unused credit may be carried forward for nine consecutive years, or until exhausted. No credit would be allowed beginning with the eleventh tax year after the patent was first directly used in a manufacturing product or process. The State Tax Department does not have information on the number of patents whose development would qualify for the proposed tax credit nor is information available on the net profit attributable to using a patent developed in the State. Therefore, we are unable to estimate the potential revenue impact of this bill.
Additional administrative costs cannot be determined.
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 |
0 |
Explanation of above estimates (including long-range effect):
As written, this bill would create two tax credits. The first tax credit would be equal to 20 percent of the royalties, license fees or other consideration received from the sale, lease, or licensing of a patent developed in West Virginia. The tax credit would equal 30 percent of royalties, license fees or other consideration when the recipient reinvests at least 80 percent of the amount of the credit claimed in depreciable property purchased for purposes of developing additional patents in West Virginia, or in improving upon a patent developed in the State, or in contributing to a stipend to retain a graduate or post-doctoral student integral to the development of the patents. The bill also provides for allocating consideration received from patents developed from multi-state activity based upon the ratio of development costs incurred in West Virginia to all development costs. The second credit that would be created by passage of this bill would be equal to 20 percent of the net profit attributable to directly using a patent developed in this State in a manufacturing process or product in the State. The credit percentage would increase to 30 percent if the person claiming the credit reinvests at least 80 percent of the tax credit amount in capital improvements to add product lines or to increase productivity. Both tax credits would be applicable to reduce Business Franchise Tax, Corporation Net Income Tax, and Personal Income Tax liabilities for tax years beginning on or after 2011. Unused credit may be carried forward for nine consecutive years, or until exhausted. No credit would be allowed beginning with the eleventh tax year after the patent was first directly used in a manufacturing product or process. The State Tax Department does not have information on the number of patents whose development would qualify for the proposed tax credit nor is information available on the net profit attributable to using a patent developed in the State. Therefore, we are unable to estimate the potential revenue impact of this bill.
Additional administrative costs cannot be determined.
Memorandum
Person submitting Fiscal Note: Mark Muchow
Email Address: kerri.r.petry@wv.gov