Date Requested: January 23, 2015
Time Requested: 12:31 PM
Agency: State Tax & Revenue Department
CBD Number: Version: Bill Number: Resolution Number:
1069 Introduced HB2268
CBD Subject: Natural Resources


FUND(S):

Workers Compensation Debt Reduction Fund

Sources of Revenue:

Special 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 remove the severance tax on timber.
    
    As written, this bill would discontinue both the regular Severance Tax on timber for the benefit of the state Division of Forestry and the additional Workers’ Compensation timber severance tax on the effective date of this legislation (roughly 90 days from passage). According to our interpretation, passage of this bill would result in a reduction in the Workers’ Compensation Debt Reduction Fund of approximately $3.0 million per year beginning in FY2016. Since the W.Va. Code §11-13A-3b tax on timber is currently suspended due to a conditional moratorium (i.e., a moratorium active as long as the temporary Workers’ Compensation Severance Tax is levied), it is our interpretation that passage of this bill would make the moratorium permanent. Since no W.Va. Code §11-13A-3b timber tax was expected in FY2016 due to the current moratorium, passage of this bill will have no impact on revenue from the W.Va. Code §11-13A-3b timber tax in FY2016. If the Workers’ Compensation Debt is fully paid for by the end of calendar year 2016, then the provisions of this bill would thereafter eliminate the regular and additional Timber Severance Tax.
    
    
    Severance tax revenue collections on timber have increased by 30 percent between FY2013 and FY2014. In FY2014, approximately $3.0 million of Timber Severance tax revenue was allocated to the Workers’ Compensation Debt Reduction Fund.
    
    According to W.Va. Code §11-13V-4, an independent certified actuary has to determine that the unfunded liability of the Workers’ Compensation Debt Reduction Fund has been paid or provided for in its entirety. The Governor also has to certify that the payment of the debt service has been provided. According to the Office of the Insurance Commissioner, the Workers’ Compensation Debt should be paid off by the end of calendar year 2016. This bill could delay that payoff date, thereby extending other temporary revenue dedications and temporary taxes on employers and others for a longer period of time.
    
    Additional administrative costs to the State Tax Department would be $29,000 in FY2016. There would be no additional administrative costs in subsequent years.
    



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 29,000 0
Personal Services 0 0 0
Current Expenses 0 2,000 0
Repairs and Alterations 0 0 0
Assets 0 0 0
Other 0 27,000 0
2. Estimated Total Revenues 0 -3,000,000 -1,500,000


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


    As written, this bill would discontinue both the regular Severance Tax on timber for the benefit of the state Division of Forestry and the additional Workers’ Compensation timber severance tax on the effective date of this legislation (roughly 90 days from passage). According to our interpretation, passage of this bill would result in a reduction in the Workers’ Compensation Debt Reduction Fund of approximately $3.0 million per year beginning in FY2016. Since the W.Va. Code §11-13A-3b tax on timber is currently suspended due to a conditional moratorium (i.e., a moratorium active as long as the temporary Workers’ Compensation Severance Tax is levied), it is our interpretation that passage of this bill would make the moratorium permanent. Since no W.Va. Code §11-13A-3b timber tax was expected in FY2016 due to the current moratorium, passage of this bill will have no impact on revenue from the W.Va. Code §11-13A-3b timber tax in FY2016. If the Workers’ Compensation Debt is fully paid for by the end of calendar year 2016, then the provisions of this bill would thereafter eliminate the regular and additional Timber Severance Tax.
    
    Severance tax revenue collections on timber have increased by 30 percent between FY2013 and FY2014. In FY2014, approximately $3.0 million of Timber Severance tax revenue was allocated to the Workers’ Compensation Debt Reduction Fund.
    
    According to W.Va. Code §11-13V-4, an independent certified actuary has to determine that the unfunded liability of the Workers’ Compensation Debt Reduction Fund has been paid or provided for in its entirety. The Governor also has to certify that the payment of the debt service has been provided. According to the Office of the Insurance Commissioner, the Workers’ Compensation Debt should be paid off by the end of calendar year 2016. This bill could delay that payoff date, thereby extending other temporary revenue dedications and temporary taxes on employers and others for a longer period of time.
    
    Additional administrative costs to the State Tax Department would be $29,000 in FY2016. There would be no additional administrative costs in subsequent years.
    
    



Memorandum


    



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