Date Requested: January 21, 2015
Time Requested: 03:40 PM
Agency: Tax Department, State
CBD Number: Version: Bill Number: Resolution Number:
1026 Introduced HB2204
CBD Subject: Tax


FUND(S):

State Road Fund

Sources of Revenue:

Other Fund State Road 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 provide an exemption for eligible seniors from payment of tax on heating oil in a private dwelling.
    
    According to our interpretation, the proposed bill would exempt eligible seniors from the variable rate component of the tax, since existing statutes already provide refunds all purchases of heating oil for use in any private or public dwelling from the flat rate component of the tax. A per se exemption may work for sales of propane, but is unworkable for sales of kerosene and oil used for home heating purposes. Kerosene and other similar products are taxed at the rack of sale long before the determination of final use is established. Absent a complete overhaul of the entire motor fuel tax system that would remove the tax at the rack system in favor of a less efficient tax collection at the distributor level system, a limited private home heating fuel exemption could only be executed through a refund application process. If the bill is meant to exempt heating by propane, fuel oil, and kerosene by refund application, the loss to the State Road Fund would be roughly $315,000 per year.
    
    Additional administrative costs to the State Tax Department will be $75,000 in the next fiscal year for form and schedule modifications as well as reporting changes. Thereafter, the administrative costs will be $15,000.



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 75,000 15,000
Personal Services 0 75,000 15,000
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 -315,000


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


    According to our interpretation, the proposed bill would exempt eligible seniors from the variable rate component of the tax, since existing statutes already provide refunds all purchases of heating oil for use in any private or public dwelling from the flat rate component of the tax. A per se exemption may work for sales of propane, but is unworkable for sales of kerosene and oil used for home heating purposes. Kerosene and other similar products are taxed at the rack of sale long before the determination of final use is established. Absent a complete overhaul of the entire motor fuel tax system that would remove the tax at the rack system in favor of a less efficient tax collection at the distributor level system, a limited private home heating fuel exemption could only be executed through a refund application process. If the bill is meant to exempt heating by propane, fuel oil, and kerosene by refund application, the loss to the State Road Fund would be roughly $315,000 per year.
    
    Based upon information from the American Community Survey, there are around 3,000 households that might qualify for the refundable exemption proposed by this bill. The average refund would be roughly $61 for propane and $141 for fuel oil and kerosene. Those eligible seniors that would need paid assistance for filing appropriate documents to claim the proposed refund might pay over most of the benefit of the refund to the preparer.
    
    Additional administrative costs to the State Tax Department will be $75,000 in the next fiscal year for form and schedule modifications as well as reporting changes. Thereafter, the administrative costs will be $15,000.



Memorandum


    The stated purpose of this bill is to exempt eligible seniors from payment of tax on heating oil in a private dwelling.
    
    This bill would exempt eligible seniors from payment of the motor fuel excise tax on both the flat rate and variable rate components of the tax. “Eligible seniors” are defined as persons aged sixty-five years old or older whose federal adjusted gross income is 150% or less of the federal poverty guideline. The new subdivision (c)(19) exempts home heating oil purchased by eligible seniors from the flat rate component of the tax. However, subdivision (c)(9) of the existing statute already exempts all purchases of heating oil for use in any private or public dwelling from the tax. The new language in subsection (c) referring to the refund procedures is also unnecessary, as §11-14C-31 already contains language relating to these exemptions.
    



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