SB 2033 — Relating to personal income tax

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in effect from passage] Enr SB 2033 AN ACT to amend and reenact §11-21-4h of the Code of West Virginia, 1931, as amended;

and to amend said code by adding thereto a new section, designated §11-21-4i, all relating to personal income tax;

modifying the effective date of future personal income tax reductions;

providing for reduced graduated income tax rates;

reducing the rate of tax on certain composite returns;

reducing the rate of withholding tax on nonresident income;

reducing the rate of withholding tax on the nonresident sale of real estate;

reducing the rate of withholding on lottery winnings;

applying reduced rates beginning on and after January 1, 2025;

providing for contingent additional future reductions in the personal income tax rates when certain criteria have been met;

making technical corrections;

and providing effective dates.

Be it enacted by the Legislature of West Virginia:

ARTICLE 21.

PERSONAL INCOME TAX.

§11-21-4h.  Future personal income tax reductions.

(a) For the purposes of this section, the terms defined in this section have the meanings ascribed to them unless a different meaning is clearly required by the context in which the term is used:

(1) "Adjusted consumer price ratio" means the fiscal year consumer price index divided by the base year consumer price index.

(2) "Adjusted general revenue fund collections" means all net general revenue fund collections minus the net general revenue fund collections related to the imposition of the taxes imposed under the provisions of §11-13A-1, et seq.

of this code.

(3) "Base year revenues" means actual general revenue fund collections for 2019 fiscal year, which is $4,293,884,754 (4) "Base year consumer price index" means a 12-month average of the not seasonally adjusted Consumer Price Index for all urban consumers for the months between July 2018 and June 2019.

Enr SB 2033 (5) "Excess fiscal year general revenue fund collections" means the positive difference from subtracting the inflation adjusted base year revenues from the adjusted general revenue fund collections from the immediately preceding fiscal year.

(6) "Fiscal year consumer price index" means a 12-month average of the not seasonally adjusted Consumer Price Index for all urban consumers for the months between July and June of the immediately preceding fiscal year.

(7) "Inflation adjusted base year revenues" means the base year general revenue fund collections multiplied by the adjusted consumer price ratio.

(b) Future personal income tax rate reductions.

— Beginning on August 15, 2024 2025, and every August 15 thereafter, the Secretary of Revenue will determine whether the total fiscal year adjusted general revenue fund collections from the immediately preceding fiscal year are in excess of the inflation adjusted base year revenues.

If the total fiscal year adjusted general revenue fund collections from the immediately preceding fiscal year are in excess of the inflation adjusted base year revenues, then there will be a reduction in the personal income tax rates as determined under this section beginning in the next taxable year the second taxable year following the determination.

(c) Determination of rate.

— In order to determine the amount of a personal income tax reduction, the excess fiscal year general revenue fund collections will be divided by the amount of the immediately preceding fiscal year’s total personal income tax collections for all funds and will be rounded down to the nearest whole percentage.

The amount of the percentage of reduction will be applied equally across the tax rates applicable in the tax year immediately preceding the rate reduction:

Provided, That reduction in personal income tax rates may not result in an amount larger than a 10% reduction in the rates set forth in §11-21-4e of this code.

(d) Certification of reduction.

– The Secretary of Revenue and the State Auditor will certify to the Tax Commissioner that a rate change is required under this section as soon as possible after August 15 so that the Tax Commissioner may notify taxpayers of any change in personal income Enr SB 2033 tax rates.

The certification will provide base year revenues, the total fiscal year general revenue fund collections from the immediately preceding fiscal year, the base year consumer price index, the fiscal year consumer price index, the adjusted consumer price ratio, the amount of inflation adjusted base year revenues, the amount of excess fiscal year general revenue fund collections and the amount of the immediately preceding fiscal year’s total personal income tax collections for all funds.

(e) Applicability of this section.

— The provisions of this section shall be applicable in determining the rates of tax imposed by this article and shall apply for all taxable years beginning on and after January 1, 2025 2026, and shall be in lieu of the rates of tax specified in §11-21-4g §11-21-4i of this code.

(f) Annual Reports.

— The Tax Commissioner shall prepare an annual report to the Joint Committee on Government and Finance detailing any relevant modifications to the personal income tax.