At the beginning of this year, there was a pretty consistent message from legislators that any bill containing a tax credit was most likely D.O.A.: dead on arrival.
And we know why. It was a historically bad budget year. It was the year when there were no tax credits to be had. You want a tax credit? You better think of a new idea.
Which is why we were so surprised late last week to see HB 2110 suddenly come to life and pass on the final day of session.
The bill, effectively a manufacturing expansion bill, provides small arms manufacturers (otherwise known as ammo makers) with a tax credit of up to 50 percent for investing in expanding their businesses in West Virginia. The State Tax Department found that the impact of the bill would be negligible because there is almost no small arms manufacturing in the state.
But maybe, because of this bill, there will be.
So, we managed to find room in the budget to provide tax credits to small arms manufacturers this year. That got us wondering what else got some space in that crowded budget room – and what good ideas got left behind.
We’re no tax experts here at The Hub. (Check out the West Virginia Center on Budget and Policy if you want to do a deep dive into the tax issues in this state.) But we did take the time to read through each of the fiscal notes provided by the Tax Department for the 2016 legislative session and were able to pull out most, if not all, of the bills that included tax credits.
So Who Did Get Tax Credits?
At least 20 bills were introduced this year that would have provided tax credits from the state to individuals and/or businesses.
We’ve highlighted a few of those, below, and there were also proposals to provide tax credits to teachers to cover their out-of-pocket expenses for school supplies (SB 292), to companies to expand broadband into remote rural areas (SB 16), to homeowners to install solar energy system (SB 93), and to working families who qualified for Earned Income Tax Credits (HB 4645).
None of these passed. But three tax credit bills did pass.
1. SB 293 extends the Neighborhood Investment Program until 2021, allowing individuals who donate to nonprofits to qualify for tax credits.
2. HB 2110, as discussed above, provides tax credits to small arms manufacturers to expand their businesses in West Virginia.
3. And HB 4145 gives a tax credit of $50 to concealed weapon gun owners who go through the safety training.
At least 10 bills that would have provided tax credits to small businesses, young professionals and businesses seeking to develop post-mine land failed. Two bills providing tax credits to support the gun industry passed.
If we’re looking for an answer to what are the priorities set by the West Virginia Legislature this year, there’s an answer to be found in looking at what got tax credits – and what didn’t.
Tax Credits for Young Professionals
We’re constantly discussing how to “attract and retain young talent” in West Virginia. A number of lawmakers saw an opportunity to do that this year through legislation.
We’ve talked before about HB 4585, the “Stay in the State Act”, which would have provided a tax credit to graduates of a West Virginia college/university who stay in the state after graduating. Graduates could use their credits to pay back student loans.
HB 4421 took another angle to the same challenge, providing tax credits to employers who are assisting their employees in paying back their student loans. [Note to employers: Want to attract young talent to the state and to your company? Create a benefits package that includes assistance in paying back their student loans – you’ll get a lot of qualified applicants, we guarantee.]
Both bills got stuck in their first committee reference, House Education. Neither bill was helped by the fact that the State Tax Department didn’t have enough data to adequately estimate the impact of the proposals on revenue.
We’re betting Delegate Shawn Fluharty (lead sponsor of 4585) and Delegate Stephen Skinner (4421’s lead sponsor) would be open to help from groups that could provide them with the research and data to back up these proposals. If we want bright ideas like these to pass, we’ve got to put in the work to make a foundation of support for them.
And let’s not forget SB 489, which would have provided tax credits to newly minted physicians who practice in West Virginia for at least six years after receiving their medical license.
That sounds like a Senator Takubo + Senator Stollings bill – and it is. These two medical professionals have a sense of what could attract young doctors to stay in the state, and they provided the Tax Department with the clearly articulated data to estimate that the individual $10,000 tax credits would cost the state an average of $1 million. This bill got stuck in Senate Finance. Could it be resurrected next year?
Small Business Support & Expansion
A number of bills would have helped individual business sector expansion through tax credits.
The bills proposed tax credits to small business owners to offset the hiring of employees. The Tax Department found that it lacked key information to identify how many small businesses would qualify and, thus, what the revenue impact of the tax credit would be.
Could this be a bill that small business advocates work on to reintroduce in a stronger, better version for passage next year?
We love micro-breweries over here at The Hub, so you know HB 4682, the Agriculture and Tourism Incentive Act, caught our eye. This bill would have provided tax credits to micro-breweries, wineries, farm wineries and micro-distilleries to help cover capital expenditure costs.
Unlike the voter ID bill, which was characterized as a solution looking for a problem, HB 4682 is a solution to a clearly existing problem.
The cost of capital expenditures for these small local businesses is a huge hurdle to their success. Check out the current Kickstarter campaign to support the growth of West Virginia’s first local hard cider brewery to see for yourself. The owners are asking for public support to help cover the cost of building a tasting room to serve their product to the public. Sounds like a capital expense to us.
And then there were the bills that would have provided tax credits to support local farmers (SB 399) and to businesses developing post-mine sites (SB 337 and HB 4596), both of which we have covered in previous issues of the Legislative Hubbub.
We were really heartened to find some good ideas that got thrown on the table this year. Unfortunately, most of them weren’t picked up and passed. Many of these ideas could be tried again next year, and would greatly benefit from some data and analysis to help the State identify the potential impact of the proposals.