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 an excise tax on transfers of utilities. As written, this bill would require any public utility which files with the Public Service Commission an application for approval of a transfer of all or a portion of a public utility to provide the State Tax Commissioner notice of such filing and any and all information requested concerning the federal, state, and local tax impact of the transfer. Following the information filing, the State Tax Commissioner is required to determine if the proposed transfer utilizes a Reverse Morris Trust and the amount of federal, state, and local taxes that would have been paid by the public utility if the proposed transfer did not utilize a Reverse Morris Trust. Prior to the close of the public utility transfer, the public utility owning the property to be transferred would be required to pay an excise tax equal to the amount of State and local taxes that would have been paid if the transfer transaction did not utilize a Reverse Morris Trust. The bill provides that the proposed Article is effective upon enactment and applies to all transfers that have not closed as of the date of enactment. According to our interpretation, the potential revenue from the proposed excise tax is undeterminable due to the uniqueness of any particular public utility transfer transaction. In some cases, there would be no such excise tax revenue depending upon the public utility’s commercial domicile. Incorporation of the proposed tax into the State Tax Department’s Integrated Tax System would result in substantial additional administrative costs in the year the tax was implemented. Additionally, due to the likely complexity of public utility transfer transactions, the State Tax Department may incur significant additional administrative expenses in the determination of the potential excise tax.



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):


Passage of this bill would require any public utility which files with the Public Service Commission an application for approval of a transfer of all or a portion of a public utility to provide the State Tax Commissioner notice of such filing and any and all information requested concerning the federal, state, and local tax impact of the transfer. Following the information filing, the State Tax Commissioner is required to determine if the proposed transfer utilizes a Reverse Morris Trust and the amount of federal, state, and local taxes that would have been paid by the public utility if the proposed transfer did not utilize a Reverse Morris Trust. Prior to the close of the public utility transfer, the public utility owning the property to be transferred would be required to pay an excise tax equal to the amount of State and local taxes that would have been paid if the transfer transaction did not utilize a Reverse Morris Trust. The bill provides that the proposed Article is effective upon enactment and applies to all transfers that have not closed as of the date of enactment. According to our interpretation, the potential revenue from the proposed excise tax is undeterminable due to the uniqueness of any particular public utility transfer transaction. In some cases, there would be no such excise tax revenue depending upon the public utility’s commercial domicile. Incorporation of the proposed tax into the State Tax Department’s Integrated Tax System would result in substantial additional administrative costs in the year the tax was implemented. Additionally, due to the likely complexity of public utility transfer transactions, the State Tax Department may incur significant additional administrative expenses in the determination of the potential excise tax.



Memorandum


The stated purpose of this bill is to provide an excise tax on transfers of utilities. As written, the proposed bill may have used wording other than intended. In proposed W. Va. Code §11-28-1, the bill uses the phrase “As used in this chapter,” while the appropriate phrase probably should be “As used in this article.” Also, in proposed W. Va. Code §11-28-1(3), The phrase “. . . pursuant to such plan of reorganization, stock or securities in the controlled corporation are distributed in transaction . . .” may be missing a word before “transaction.”



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