Date Requested: February 03, 2015
Time Requested: 02:29 PM
Agency: State Tax & Revenue Department
CBD Number: Version: Bill Number: Resolution Number:
2127 Introduced HB2570
CBD Subject: Tax


FUND(S):

General Revenue Fund

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 allow a deduction for all capital expenditures from the corporate net income tax.
    
    According to our interpretation, the provisions of this bill would provide an additional deduction from tax liability (ie., a tax credit) for capital expenditures to businesses subject to the West Virginia Corporation Net Income Tax beginning in FY2017. Due to the lack of an effective date, the proposed tax credit would first apply in taxable years beginning on or after ninety days from passage. Passage of this bill would result in a reduction of General Revenue Fund collections averaging roughly $200 million per year. West Virginia already allows capital expenditure deductions including federal deductions under Section 179 of the Internal Revenue Code as well as federal depreciation allowances, including bonus depreciation. This proposal would result in both a deduction and a tax credit for certain capital expenditures.
    
    Additional administrative costs incurred by the State Tax Department would be $35,000 in FY2016 and $10,000 a year thereafter.
    



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 35,000 10,000
Personal Services 0 10,000 0
Current Expenses 0 0 0
Repairs and Alterations 0 0 0
Assets 0 0 0
Other 0 25,000 0
2. Estimated Total Revenues 0 -200,000,000 -200,000,000


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


    According to our interpretation, the provisions of this bill would provide an additional deduction from tax liability (ie., a tax credit) for capital expenditures to businesses subject to the West Virginia Corporation Net Income Tax beginning in FY2017. Due to the lack of an effective date, the proposed tax credit would first apply in taxable years beginning on or after ninety days from passage. Passage of this bill would result in a reduction of General Revenue Fund collections averaging roughly $200 million per year. West Virginia already allows capital expenditure deductions including federal deductions under Section 179 of the Internal Revenue Code as well as federal depreciation allowances, including bonus depreciation. This proposal would result in both a deduction and a tax credit for certain capital expenditures.
    
    Additional administrative costs incurred by the State Tax Department would be $35,000 in FY2016 and $10,000 a year thereafter.
    



Memorandum


    The stated purpose of this bill is to allow a deduction for all capital expenditures from the corporate net income tax.
    
    In proposed W.Va Code §11-13C-17, the proposed bill provides a credit against “the primary tax imposed by this code...” In proposed W.Va. Code §11-24-9d, the proposed bill provides the same credit against the Corporation Net Income Tax. It is not clear if the same credit may be taken against
    Corporation Net Income Tax and another tax, “the primary tax.”
    
    The credit is equal to the amount of capital expenditures, which is not defined in the bill.
    
    
    



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