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 extend the West Virginia Tourism Development Act program permanently, remove the requirement for engagement of a consulting firm to review proposed projects, increase the limitation on the total amount of tourism development expansion project tax credits for all approved companies each calendar year, and provide for increased tax credit amounts for project located on state and federal recreational property. As written, the bill would extend the West Virginia Tourism Development Act by repealing the section of the West Virginia Code that precluded the Development Office from accepting applications for the Program after December 31, 2013. The tax credit Program is available for both qualified new tourism projects and qualified expansions of existing tourism facilities. There is no limit on tax credits for new projects, but there is a tax credit limit on expansion projects. The bill proposes to increase the total amount of Tourism Development Expansion Project Tax Credits that can be approved each year from $1.5 million to $2.5 million. Under this Program, a qualified vendor is allowed to keep some portion of the sales tax paid by customers (i.e., the increment above a base sales tax collection amount) to recoup up to 25 percent to 35 percent of investment costs pro-rated over a ten-year to thirteen year period. The higher 35 percent tax credit would apply to Tourism Development Projects located on a recreational property owned or leased by the State or federal government. The State Tax Department does not possess information on the number of tourism development projects that may qualify under the revised provisions. The current tax expenditure amount in FY2015 for the prior program is estimated to be $1.5 million related to five projects approved by the Development Office under the prior Program and in CY2013, the total sales tax credit was valued at slightly less than $0.9 million. Due to the economic impact of the Great Recession, no project applications were approved during the last four years. There are some key provisions in this tax credit program designed to help limit expenditure costs. A minimum $1 million investment is required for participation in this Program. All projects must be preapproved by the West Virginia Development Office Director. The project must attract at least 25 percent of its visitors from other states outside of West Virginia and must be open to the public at least 100 days each year. In theory, these projects might not happen absent the State subsidy equal to some portion of the increased sales tax attributable to the qualified capital investment. The Development Office may not always possess the information necessary to prove the accuracy of the theory. Additional administrative costs, attributable to passage of this bill, would be incurred by the Development Office and the State Tax Department. The Development Office would incur additional costs based upon the number of applications received and the State Tax Department would incur additional costs based upon the number of approved applications. If there are only a few applications and approved projects, the costs would be minimal. However, any significant number of applications and approved projects would result in more significant costs.

Fiscal Note Detail

Effect of Proposal	Fiscal Year
Effect of Proposal	2014 Increase/Decrease (use"-")	2015 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):

This bill proposes to extend the West Virginia Tourism Development Act program permanently, to remove the requirement for engagement of a consulting firm to review proposed projects, to increase the limitation on the total amount of tourism development expansion project tax credits for all approved companies each calendar year, and to provide for increased tax credit amounts for project located on state and federal recreational property. As written, the bill would extend the West Virginia Tourism Development Act by repealing the section of the West Virginia Code that precluded the Development Office from accepting applications for the Program after December 31, 2013. The tax credit Program is available for both qualified new tourism projects and qualified expansions of existing tourism facilities. There is no limit on tax credits for new projects, but there is a tax credit limit on expansion projects. The bill proposes to increase the total amount of Tourism Development Expansion Project Tax Credits that can be approved each year from $1.5 million to $2.5 million. Under this Program, a qualified vendor is allowed to keep some portion of the sales tax paid by customers (i.e., the increment above a base sales tax collection amount) to recoup up to 25 percent to 35 percent of investment costs pro-rated over a ten-year to thirteen year period. The higher 35 percent tax credit would apply to Tourism Development Projects located on a recreational property owned or leased by the State or federal government. The State Tax Department does not possess information on the number of tourism development projects that may qualify under the revised provisions. The current tax expenditure amount in FY2015 for the prior program is estimated to be $1.5 million related to five projects approved by the Development Office under the prior Program and in CY2013, the total sales tax credit was valued at slightly less than $0.9 million. Due to the economic impact of the Great Recession, no project applications were approved during the last four years. There are some key provisions in this tax credit program designed to help limit expenditure costs. A minimum $1 million investment is required for participation in this Program. All projects must be preapproved by the West Virginia Development Office Director. The project must attract at least 25 percent of its visitors from other states outside of West Virginia and must be open to the public at least 100 days each year. In theory, these projects might not happen absent the State subsidy equal to some portion of the increased sales tax attributable to the qualified capital investment. The Development Office may not always possess the information necessary to prove the accuracy of the theory. Additional administrative costs, attributable to passage of this bill, would be incurred by the Development Office and the State Tax Department. The Development Office would incur additional costs based upon the number of applications received and the State Tax Department would incur additional costs based upon the number of approved applications. If there are only a few applications and approved projects, the costs would be minimal. However, any significant number of applications and approved projects would result in more significant costs.

Memorandum

Person submitting Fiscal Note: Mark B. Muchow
Email Address: Roger.D.Cox@wv.gov