FISCAL NOTE

Date Requested: February 13, 2017
Time Requested: 02:04 PM
Agency: Tax & Revenue Department, WV State
CBD Number: Version: Bill Number: Resolution Number:
1590 Introduced HB2417
CBD Subject:


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 deduction from adjusted federal gross income for persons whose income is $100,000 or less the entirety of any income received under the federal Social Security System. According to the provisions of this bill, for taxable years beginning after December 31, 2016, people with an adjustable gross income of $100,000 or less will receive a State Personal Income Tax deduction on any income received under the federal Social Security System. According to our interpretation, passage of the bill would reduce General Revenue Fund collections by roughly $63.0 million in FY2018 due to the exclusion of taxable social security benefits from the State Personal Income Tax for those with adjustable gross incomes of $100,000 or less. The value of the proposed tax exclusion will escalate over time as members of the baby-boom generation begin receiving Social Security benefits. Additional administrative costs incurred by the State Tax Department would be $14,000 in FY2018 and $5,000 per year in fiscal years thereafter.



Fiscal Note Detail


Effect of Proposal Fiscal Year
2017
Increase/Decrease
(use"-")
2018
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 -63,000,000 0


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


According to the provisions of this bill, for taxable years beginning after December 31, 2016, people with an adjustable gross income of $100,000 or less will receive a State Personal Income Tax deduction on any income received under the federal Social Security System. According to our interpretation, passage of the bill would reduce General Revenue Fund collections by roughly $63.0 million in FY2018 due to the exclusion of taxable social security benefits from the State Personal Income Tax for those with adjustable gross incomes of $100,000 or less. The value of the proposed tax exclusion will escalate over time as members of the baby-boom generation begin receiving Social Security benefits. Additional administrative costs incurred by the State Tax Department would be $14,000 in FY2018 and $5,000 per year in fiscal years thereafter.



Memorandum


The stated purpose of this bill is to provide a deduction from adjusted federal gross income for persons whose income is $100,000 or less the entirety of any income received under the federal Social Security System. The proposed bill states that “all income received under the federal Social Security System” may be subtracted from an eligible taxpayer’s federal adjusted gross income. Subsection (c) states that the modifications listed under that subsection are to be subtracted from adjusted gross income to the extent included therein. Many of the modifications listed under subsection (c) also specifically states that the modification may only subtract income already included in the federal adjusted gross income. The modification in this bill does not do so. Therefore, this bill may allow a taxpayer to deduct more than what was included in the federal adjusted gross income. The proposed bill incorrectly uses the term “adjustable” federal gross income. The bill should refer to “adjusted” federal gross income. The bill has an effective date of taxable years beginning after December 31, 2016. However, the bill title does not mention the internal effective date. Further, the bill title states that is “exempting” from Personal Income Tax the social security benefits for people with an adjusted gross income of $100,000 or less. Under West Virginia Code, this is a modification, not an exemption. If this is an exemption, the language would conflict with W.Va. Constitution, Article X, §1, which only provides the ability to exempt from income taxation “incomes below a minimum to be fixed from time to time” and does not authorize exemptions based upon the category of income.



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