FISCAL NOTE

Date Requested: February 22, 2016
Time Requested: 03:38 PM
Agency: Tax Department, State
CBD Number: Version: Bill Number: Resolution Number:
2641 Amendment HB4640
CBD Subject: Education (K12)


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 a tax credit in the amount of fifty percent of the cost of educating as student in a public school for educating a student in a private or home school. The bill provides for rule-making authority. Based on our interpretation, the proposed bill would result in annual revenue losses of up to $121.8 million based on enrollment during the 2014-15 school year. These losses are expected to begin affecting revenues in FY2018 if the credit is first allowed for TY2017 Personal Income Tax returns. It is important to note that public school expenses are generally trending upward and public school enrollment has shown a slight decline in recent years. These changes are likely to affect future credit amounts. Additional administrative costs incurred by the State Tax Department are expected to be $14,000 in FY2018 and $5,000 for each year thereafter.



Fiscal Note Detail


Effect of Proposal Fiscal Year
2016
Increase/Decrease
(use"-")
2017
Increase/Decrease
(use"-")
Fiscal Year
(Upon Full
Implementation)
1. Estmated Total Cost 0 0 5,000
Personal Services 0 0 5,000
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 -121,800,000


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


Based on our interpretation, the proposed bill would result in annual revenue losses of up to $121.8 million based on enrollment during the 2014-15 school year. These losses are expected to begin affecting revenues in FY2018 if the credit is first allowed for TY2017 Personal Income Tax returns. It is important to note that public school expenses are generally trending upward and public school enrollment has shown a slight decline in recent years. These changes are likely to affect future credit amounts. Additional administrative costs incurred by the State Tax Department are expected to be $14,000 in FY2018 and $5,000 for each year thereafter.



Memorandum


The stated purpose of this bill is to provide a tax credit in the amount of fifty percent of the cost of educating as student in a public school for educating a student in a private or home school. The bill provides for rule-making authority. The proposed bill provides a Personal Income Tax (PIT) credit upon the completion of a school year. However, school years are statutorily defined to match fiscal years (i.e., July 1 to June 30) and most resident taxable years follow calendar years. A rule is needed to define how the credit is applicable given these concerns. The bill does not specify if only one credit is taken in a year or one credit is taken per child. Further, although the amount of credit is stated to be fifty percent of the “cost of educating a student in a public school,” the term “cost” is undefined. Public education costs include more than those used to educate a student directly, including funds to meet unfunded teachers’ retirement liabilities and benefits for staff.



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