Date Requested: February 24, 2015
Time Requested: 02:24 PM
Agency: Tax Department, State
CBD Number: Version: Bill Number: Resolution Number:
3249 Introduced HB3000
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 create a hotel and restaurant renovation tax credit.
    
    This bill would create a credit against the sales tax liability of a qualified taxpayer for a hotel or restaurant renovation project. A hotel renovation project would mean an expenditure of at least two million dollars for renovations, with an expenditure of at least $10,000 per room; in other words, the credit would only be available for a hotel with at least 200 rooms. The hotel renovation project would have to be completed within three years after certification of the project by the Tax Commissioner.
    
    The restaurant renovation credit would be available for an expenditure of at least $100,000, with a minimum expenditure of $10,000 to one or more areas used primarily for food preparation. The restaurant renovation project would have to be completed within one year after certification of the project by the Tax Commissioner.
    
    The amount of the credit would be equal to 20% of the project’s actual costs. The annual amount of the credit may not exceed 25 % of the taxpayer’s baseline tax amount, which would be based on the taxpayer’s average sales tax remittances for the three years preceding commencement of the project. The credit may be claimed until the full 20% has been used, up to a maximum of ten years.
    
    According to our interpretation, assuming every hotel and restaurant business in the state participated, the credit would start out small overall. However, because the credit may be claimed for up to ten years, and because sales and use tax revenue in this sector usually rises every year in West Virginia, the credit amount could rise each year for individual taxpayers. Even if the credit starts small, at the end of the ten year period the credit would eventually cost several million. Furthermore, these industries are highly competitive. A possible unintended consequence of the proposed state subsidy would be the consolidation of industry activity at the expense of smaller businesses or any business not participating in the subsidy program.
    
    Administrative costs to the Tax Department would be $60,000 in the current fiscal year, and $10,000 in each subsequent fiscal year.



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 60,000 10,000 10,000
Personal Services 0 10,000 10,000
Current Expenses 0 0 0
Repairs and Alterations 0 0 0
Assets 0 0 0
Other 60,000 0 0
2. Estimated Total Revenues 0 0 0


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


    This bill would create a credit against the sales tax liability of a qualified taxpayer for a hotel or restaurant renovation project. A hotel renovation project would mean an expenditure of at least two million dollars for renovations, with an expenditure of at least $10,000 per room; in other words, the credit would only be available for a hotel with at least 200 rooms. The hotel renovation project would have to be completed within three years after certification of the project by the Tax Commissioner.
    
    The restaurant renovation credit would be available for an expenditure of at least $100,000, with a minimum expenditure of $10,000 to one or more areas used primarily for food preparation. The restaurant renovation project would have to be completed within one year after certification of the project by the Tax Commissioner.
    
    The amount of the credit would be equal to 20% of the project’s actual costs. The annual amount of the credit may not exceed 25 % of the taxpayer’s baseline tax amount, which would be based on the taxpayer’s average sales tax remittances for the three years preceding commencement of the project. The credit may be claimed until the full 20% has been used, up to a maximum of ten years.
    
    According to our interpretation, assuming every hotel and restaurant business in the state participated, the credit would start out small overall. However, because the credit may be claimed for up to ten years, and because sales and use tax revenue in this sector usually rises every year in West Virginia, the credit amount could rise each year for individual taxpayers. Even if the credit starts small, at the end of the ten year period the credit would eventually cost several million. Furthermore, these industries are highly competitive. A possible unintended consequence of the proposed state subsidy would be the consolidation of industry activity at the expense of smaller businesses or any business not participating in the subsidy program.
    
    Administrative costs to the Tax Department would be $60,000 in the current fiscal year, and $10,000 in each subsequent fiscal year.
    



Memorandum


    



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