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 permit deductions from federal adjusted gross income, for personal income tax purposes, for contributions to religious, educational or charitable organizations. According to our interpretation, passage of this bill would reduce General Revenue Fund collections by roughly $35.3 million per year beginning in Fiscal Year 2014. This bill would create a decreasing modification to federal adjusted gross income for charitable contributions. However, the bill does not specify whether or not a taxpayer must itemize for federal income tax purposes in order to take this modification. 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, 2013. If all returns with modifications for charitable contributions are accepted as filed, there would be no additional administrative costs to the State Tax Department. However, if the Tax Department would be required to verify the validity of charitable contributions made by taxpayers who do not itemize deductions for federal income tax purposes, additional costs could be significant.

Fiscal Note Detail

Effect of Proposal	Fiscal Year
Effect of Proposal	2012 Increase/Decrease (use"-")	2013 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	-35,300,000

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

According to our interpretation, passage of this bill would reduce General Revenue Fund collections by roughly $35.3 million per year beginning in Fiscal Year 2014. This bill would create a decreasing modification to federal adjusted gross income for charitable contributions. However, the bill does not specify whether or not a taxpayer must itemize for federal income tax purposes in order to take this modification. Less than 19% of West Virginia taxpayers claim itemized deductions, including a charitable contribution deduction, on their federal tax return. 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, 2013. If all returns with modifications for charitable contributions 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 permit deductions from federal adjusted gross income, for personal income tax purposes, for contributions to religious, educational or charitable organization. This bill proposes to add a subdivision to subsection W.Va. Code §11-21-12(c) to allow a decreasing modification for an amount equal to a contribution made within the tax year to a West Virginia entity operated solely for religious, educational or charitable purposes. However, the bill does not provide a definition of such entities or require that the entities be registered with the Secretary of State. Due to the lack of these definitions, this reducing modification may be subject to abuse. Also, the bill does not specify whether or not a taxpayer must itemize for federal income tax purposes in order to take this modification. The proposed bill lacks an internal effective date.

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