FISCAL NOTE
FUND(S):
West Virginia Sustainable Wealth Fund
Sources of Revenue:
Other Fund WV Sustainable Wealth
Legislation creates:
A New Fund
Fiscal Note Summary
Effect this measure will have on costs and revenues of state government.
The purpose of this bill is to create a special revenue fund, the West Virginia Sustainable Wealth Fund, consisting of an additional one percent severance tax on the extraction of coal and natural gas and oil.
As written, the bill establishes the West Virginia Sustainable Wealth Fund within the Treasurer’s Office. The fund will consist of an additional one percent severance tax on coal, oil, and natural gas. The tax is not to be reduced or offset by any other tax. The tax would become effective ninety days after passage of the bill. The funds would be deposited in the West Virginia Sustainable Wealth Fund, and then managed by the West Virginia Investment Management Board. Annual disbursements shall begin in FY2015 and shall be equal to one percent of the investment earnings. Disbursements will increase incrementally until the annual disbursement equals five percent of the average year-end market value of the fund over the preceding five fiscal years. The funds will be used for economic diversification projects, education, work force development, federal matching grants, and higher education.
According to our interpretation and assuming the proposed one percent Severance Tax would be in addition to the current tax rates on coal, natural gas, and oil, The West Virginia Sustainable Wealth Fund would receive roughly $111.3 million in FY2013. This could fluctuate depending on the variability of both the price and production quantities of these natural resources.
Additional administrative costs to the Tax Department would be significant. Passage of this bill would require computer programming changes as well as costs for testing and implementation. Furthermore, the Tax Department would incur printing and postage costs associated with notifying affected tax payers of the changes.
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 |
111,300,000 |
111,300,000 |
Explanation of above estimates (including long-range effect):
As written, the bill establishes the West Virginia Sustainable Wealth Fund within the Treasurer’s Office. The fund will consist of an additional one percent severance tax on coal, oil, and natural gas. The tax is not to be reduced or offset by any other tax. The tax would become effective ninety days after passage of the bill. The funds would be deposited in the West Virginia Sustainable Wealth Fund, and then managed by the West Virginia Investment Management Board. Annual disbursements shall begin in FY2015 and shall be equal to one percent of the investment earnings. Disbursements will increase incrementally until the annual disbursement equals five percent of the average year-end market value of the fund over the preceding five fiscal years. The funds will be used for economic diversification projects, education, work force development, federal matching grants, and higher education.
According to our interpretation and assuming the proposed one percent Severance Tax would be in addition to the current tax rates on coal, natural gas, and oil, The West Virginia Sustainable Wealth Fund would receive roughly $111.3 million in FY2013. This could fluctuate depending on the variability of both the price and production quantities of these natural resources.
Additional administrative costs to the Tax Department would be significant. Passage of this bill would require computer programming changes as well as costs for testing and implementation. Furthermore, the Tax Department would incur printing and postage costs associated with notifying affected tax payers of the changes.
Memorandum
The purpose of this bill is to create a special revenue fund, the West Virginia Sustainable Wealth Fund, consisting of an additional one percent severance tax on the extraction of coal and natural gas and oil.
As written, the bill includes the statement “The tax imposed by this section shall be in addition to the five percent of gross value imposed pursuant to sections three, three-a and six, article thirteen-A, chapter eleven...” Current W. Va. Code §11-13A-3, in addition to providing for a five percent tax on coal, also contains provisions for a two percent and a one percent tax on coal. The exclusion of a reference to the two percent and the one percent tax may result in a different interpretation of the bill than intended.
Person submitting Fiscal Note: Mark Muchow
Email Address: kerri.r.petry@wv.gov