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 make a technical correction clarifying which entities are to be included in a water’s edge group for purposes of the corporation net income tax.
Under current law, Taxpayers filing on a water’s edge unitary combined reporting basis are to include any member that earns more than 20 percent of its income, directly or indirectly, from intangible property or service-related activities that are deductible against the business income of other members of the water’s edge group. This bill proposes that a corporation organized outside of the United States that is included in a water’s edge combined group and has an item of income that is exempt from United States federal income tax pursuant to the mandate of a comprehensive income tax treaty qualified under the Internal Revenue Code, is to be considered included in a combined group only with regard to any items of income that are not exempt taking into account items or expense and apportionment facts associated with such items of nonexempt income.
According to our interpretation this bill is merely a clarification of current law and as such, passage of this bill will not result in any substantive change in collections of the Corporation Net Income Tax. The starting point for determining West Virginia taxable income is federal taxable income. Given that income that is excluded from federal taxable income under a Federal income tax treaty would not be included in West Virginia income in the first place, there would be no substantive change in taxable income for purposes of the West Virginia Corporation Net Income tax and thus no substantive change in revenue.
Additional administrative costs to the State Tax Department associated with this bill will be minimal.
Fiscal Note Detail
| Effect of Proposal |
Fiscal Year |
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 |
0 |
Explanation of above estimates (including long-range effect):
According to our interpretation this bill is merely a clarification of current law and as such, passage of this bill will not result in any substantive change in collections of the Corporation Net Income Tax. The starting point for determining West Virginia taxable income is federal taxable income. Given that income that is excluded from federal taxable income under a Federal income tax treaty would not be included in West Virginia income in the first place, there would be no substantive change in taxable income for purposes of the West Virginia Corporation Net Income tax and thus no substantive change in revenue.
Additional administrative costs to the State Tax Department associated with this bill will be minimal.
Memorandum
Person submitting Fiscal Note: Mark Muchow
Email Address: kerri.r.petry@wv.gov