Date Requested: February 05, 2015
Time Requested: 12:52 PM
Agency: Tax Department, State
CBD Number: Version: Bill Number: Resolution Number:
2721 Introduced HB2630
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 provide low and moderate income workers with a refundable state tax credit based on the federal earned income tax credit. Current law provides for a non-refundable tax credit based on federal poverty guidelines.
    
    As written, this bill would replace the Low-Income Family Tax Credit with a new tax credit named as the West Virginia Earned Income Tax Credit. The new tax credit would be in an amount equal to 50 percent of the earned income credit allowed under Section 32 of the federal Internal Revenue Code, and applicable to a qualifying Taxpayer’s Personal Income Tax liability, as reduced by all other available tax credits. Any West Virginia Earned Income Tax Credit in excess of the Taxpayer’s adjusted Personal Income Tax liability would be refunded to the Taxpayer. The bill also requires the State Tax Commissioner to make efforts every year to alert taxpayers who may be eligible to receive the tax credit. The proposed bill is effective tax years after December 31, 2014.
    
    Based upon available information, it is estimated that Taxpayers would receive roughly $174.5 million per year from the West Virginia Earned Income Tax Credit. However, since the West Virginia Earned Income Tax Credit would replace roughly $18.1 million of Low-Income Family Tax Credit, the net reduction in revenue attributable to passage of this bill would be roughly $156.4 million beginning in FY2016.
    Additional administrative costs incurred by the State Tax Department would be $111,500 for FY2016 and $75,000 per year thereafter. Additional administrative costs would include notification of potential taxpayers and review of returns to verify taxpayer eligibility.
    



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 0 111,500 75,000
Personal Services 0 75,000 75,000
Current Expenses 0 0 0
Repairs and Alterations 0 0 0
Assets 0 31,500 0
Other 0 5,000 0
2. Estimated Total Revenues 0 -156,400,000 -156,400,000


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


    As written, this bill would replace the Low-Income Family Tax Credit with a new tax credit named as the West Virginia Earned Income Tax Credit. The new tax credit would be in an amount equal to 50 percent of the earned income credit allowed under Section 32 of the federal Internal Revenue Code, and applicable to a qualifying Taxpayer’s Personal Income Tax liability, as reduced by all other available tax credits. Any West Virginia Earned Income Tax Credit in excess of the Taxpayer’s adjusted Personal Income Tax liability would be refunded to the Taxpayer. The bill also requires the State Tax Commissioner to make efforts every year to alert taxpayers who may be eligible to receive the tax credit. The proposed bill is effective tax years after December 31, 2014.
    
    Based upon available information, it is estimated that Taxpayers would receive roughly $174.5 million per year from the West Virginia Earned Income Tax Credit. However, since the West Virginia Earned Income Tax Credit would replace roughly $18.1 million of Low-Income Family Tax Credit, the net reduction in revenue attributable to passage of this bill would be roughly $156.4 million beginning in FY2016.
    
    Additional administrative costs incurred by the State Tax Department would be $111,500 for FY2016 and $75,000 per year thereafter. Additional administrative costs would include notification of potential taxpayers and review of returns to verify taxpayer eligibility.
    



Memorandum


    



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