Date Requested: January 21, 2015
Time Requested: 10:55 AM
Agency: State Tax & Revenue Department
CBD Number: Version: Bill Number: Resolution Number:
1020 Introduced HB2110
CBD Subject: Tax


FUND(S):

General Revenue Fund, local government funds

Sources of Revenue:

General Fund,Other Fund local property tax

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 manufacturing investment tax credit generally for small arms manufacturing. It amends the definition of manufacturing for purposes of special method for appraising qualified capital additions to manufacturing facilities for property tax purposes and the definition of manufacturing for purposes of manufacturing investment tax credit.
    
    As written, this bill proposes changes to both the State Manufacturing Investment Tax Credit and to the valuation procedures for the local ad valorem property tax with regard to small arms manufacturing activity.
    
    The current Manufacturing Investment Tax Credit already applies to all manufacturing activity in West Virginia including any manufacturing of small arms. The proposed change simply places a new restriction on small arms manufacturing that otherwise only applies to natural gas extraction facilities. The new restriction would prohibit the tax credit from applying in cases of investment in excess of $500,000 unless the project hires "at least seventy-five percent of employees for said construction from the local labor market". There would be no measurable change in State revenues associated with this proposed change, but there might be additional administrative costs for the Tax Department related to the proposed investment tax credit restrictions.
    
    The proposed bill would also lower the minimum capital investment requirement for salvage valuation treatment under the Special Method for Appraising Qualified Capital Additions to Manufacturing Facilities from $50 million (or $10 million in the case of natural gas extraction facilities) to $1 million only for small arms manufacturing facilities located within two miles of a manufacturing facility owned or operated by the person making the capital addition that has a total original cost before the capital addition of at least $2 million. The potential cost in property tax revenue to local governments would be no more than minimal because this additional tax preference would narrowly apply only to small arms manufacturing, an activity with little or no existing presence in West Virginia. However, the proposed tax preference would provide small arms manufacturing facilities with a significant local property tax preference relative to nearly all other businesses in West Virginia and to businesses in other states given that the use of the salvage valuation formula would apply not only to investment in tangible personal property but also to any real property improvements.
    
    Additional administrative costs for the State Tax Department associated with passage of this will would be minimal.
    



Fiscal Note Detail


Effect of Proposal Fiscal Year
2015
Increase/Decrease
(use"-")
2016
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):


    As written, this bill proposes changes to both the State Manufacturing Investment Tax Credit and to the valuation procedures for the local ad valorem property tax with regard to small arms manufacturing activity.
    
    The current Manufacturing Investment Tax Credit already applies to all manufacturing activity in West Virginia including any manufacturing of small arms. The proposed change simply places a new restriction on small arms manufacturing that otherwise only applies to natural gas extraction facilities. The new restriction would prohibit the tax credit from applying in cases of investment in excess of $500,000 unless the project hires "at least seventy-five percent of employees for said construction from the local labor market". There would be no measurable change in State revenues associated with this proposed change, but there might be additional administrative costs for the Tax Department related to the proposed investment tax credit restrictions.
    
    The proposed bill would also lower the minimum capital investment requirement for salvage valuation treatment under the Special Method for Appraising Qualified Capital Additions to Manufacturing Facilities from $50 million (or $10 million in the case of natural gas extraction facilities) to $1 million only for small arms manufacturing facilities located within two miles of a manufacturing facility owned or operated by the person making the capital addition that has a total original cost before the capital addition of at least $2 million. The potential cost in property tax revenue to local governments would be no more than minimal because this additional tax preference would narrowly apply only to small arms manufacturing, an activity with little or no existing presence in West Virginia. However, the proposed tax preference would provide small arms manufacturing facilities with a significant local property tax preference relative to nearly all other businesses in West Virginia and to businesses in other states given that the use of the salvage valuation formula would apply not only to investment in tangible personal property but also to any real property improvements.
    
    Additional administrative costs for the State Tax Department associated with passage of this will would be minimal.
    



Memorandum


    



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