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 provide a different procedure for determining the credit for utility taxpayers with net operating loss carryovers relating to the corporation net income tax. As written, this bill proposes a change in the calculation of the non refundable tax credit for utility taxpayers with net operating loss carryovers as of December 31, 2006. Taxpayers subject to the Business and Occupation Tax on electric power generation may use the credit against their Corporation Net Income Tax liability. For those taxpayers (generally regulated public utilities) that book their net operating loss as an asset equal to the West Virginia Corporation Net Income Tax rate times the net operating loss, the credit essentially restores the future tax benefit of the net operating loss at the level that existed before the reduction in the Corporation Net Income Tax rate. The original tax credit provision only provided for the reduction in the Corporation Net Income Tax rate from 9 percent to 8.75 percent. According to our interpretation, passage of this bill will provide flexibility to guarantee full preservation of the public utility’s net operating loss asset. The changes proposed in this bill would result in technical changes to an already codified policy. Additional administrative costs to the State Tax Department associated with this bill would be minimal.



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 proposes a change in the calculation of the non refundable tax credit for utility taxpayers with net operating loss carryovers as of December 31, 2006. Taxpayers subject to the Business and Occupation Tax on electric power generation may use the credit against their Corporation Net Income Tax liability. For those taxpayers (generally regulated public utilities) that book their net operating loss as an asset equal to the West Virginia Corporation Net Income Tax rate times the net operating loss, the credit essentially restores the future tax benefit of the net operating loss at the level that existed before the reduction in the Corporation Net Income Tax rate. The original tax credit provision only provided for the reduction in the Corporation Net Income Tax rate from 9 percent to 8.75 percent. According to our interpretation, passage of this bill will provide flexibility to guarantee full preservation of the public utility’s net operating loss asset. The changes proposed in this bill would result in technical changes to an already codified policy. Additional administrative costs to the State Tax Department associated with this bill would be minimal.



Memorandum






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