Statehouse Beat: Tax credit slowing down returns

Gazette photo by LAWRENCE PIERCE......."SPIRITWV1".......6x7.78.......Excursion boat Spirit of West Virginia makes its way up the river past the Capitol.......9/12/10.......

About 98 percent of the state income tax returns have been processed, but judging by complaints in the newspapers’ forum/vent lines, people who haven’t gotten their refunds yet are a very vocal 2 percent.

Going into the weekend, the state Tax Division had about 12,900 returns left to process, out of about 521,000 returns received, according to Deputy Tax Secretary Mark Muchow.

Last year, the Legislature emptied the $45 million Income Tax Reserve Fund to help balance the current state budget, but Muchow said that’s not causing any delays in paying tax refunds.

The fund was designed to help the state make timely tax refunds in years when the state is having cash-flow problems. While the state has had a tough financial year, a combination of mid-year budget cuts, a hiring freeze, and a $70 million supplemental appropriation by the Legislature in March have all assured that the state has had enough cash on hand to pay tax refunds timely.

What has slowed the process, for a second straight year, is the time it takes to verify claims for the state’s now infamous alternative-fuel vehicle tax credit, Muchow said.

(You may recall that in a 2011 bill intended to encourage economic development tied to the Marcellus Shale gas field, there was a provision to allow tax credits for natural gas-powered vehicles.

However, in the final hours of the final night of that session, the bill was amended to apply the credit — equal to 35 percent of the purchase price, up to $7,500 — to any alternative fuel or hybrid vehicles. By the time the credit was repealed in April 2013, it set off a boom in alt-fuel vehicle sales — and blew a $100 million hole in state tax collections.)

Because most taxpayers don’t owe $7,500 in state income taxes in any one year (you’d have to make about $120,000 to reach that level), the credit can carry over for multiple years, causing multiple headaches for the Tax Division, since several documents, including the bill of sale on the vehicle, have to be verified with each filing.

“That’s the thing that’s affected refunds for the last two years,” Muchow said, explaining that tax returns using alt-fuel credits against income taxes take considerably longer to process.

Of the remaining 12,900 returns, about 2,600 have alternative fuel credits claimed, he said.

From June 23 through June 25, the division processed 4,456 returns, so Muchow is estimating all returns should be processed and all refunds paid out by July 15.

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Muchow concurred with my suggestion it would be prudent for the Legislature to adopt a rule requiring that any proposed amendment to bills dealing with taxes or other state revenue have a Fiscal Note assessing its potential impact before it can be taken up for consideration.

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Costs for the Disneyfication of the State Museum in the Culture Center have now topped the $1 million mark.

A couple of weeks ago, I noted that the Division of Culture and History had awarded an $800,000 contract to Explus of Dulles, Virginia, to design a number of audio-visual enhancements for the museum’s show path, including an animatronic Civil War soldier and four animatronic animals.

Now, the division has awarded a $202,126 contract to Dan Hill Construction of Glen Ferris for the installation/general contracting for the displays. The animatronics function using compressed air, which, of course, requires installation of an air compressor and a network of piping to the various displays.

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Coming up this week, the Consolidated Public Retirement Board is expected to get the actuary’s report on the cost of complying with the April state Supreme Court decision expanding military service credits for state pension plans to cover service in all armed conflicts, not just those spelled out in legislation.

(As noted, back in 2006, actuary Harry Mandel estimated that would amount to about $42.5 million in additional retirement pay each year.)

During interims, Administration Secretary Ross Taylor told legislators that CPRB very well may have to increase the employer’s share of premiums to cover the additional benefits.

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Finally, one left-over tidbit from last week’s item on how the state planes are being underutilized, based on flight logs:

Last Dec. 27, the Marshall Alumni Association leased the King Air to fly from Charleston to Baltimore to Pittsburgh and back to Charleston. While that seemingly contradicts the Aviation Division’s own mission statement: “Access and usage of state aircraft is limited to state of West Virginia agencies and Legislature. State-owned aircraft will not be used for transportation when no state interest is served,” that’s not the most interesting thing about the flight.

More interesting is that one of the passengers on board was a former frequent flier of the King Air making a return appearance, Sen. Joe Manchin, D-West Virginia.

Reach Phil Kabler at or 304-348-1220.

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