West Virginia 2023 Regular Session

West Virginia Senate Bill SB496

Introduced
1/27/23  

Caption

Allowing tax pass through entities to pay state and local taxes at entity level

Impact

The introduction of this bill aims to modernize and streamline the taxation process for pass-through entities operating in West Virginia. By allowing these entities the option to pay taxes directly at the entity level, SB496 potentially simplifies tax obligations for individual owners who may have previously experienced complexities with fluctuating personal tax scenarios based on their share of partnership income. Additionally, a refundable income tax credit is introduced for owners, providing them an opportunity to recoup some tax paid by the entity, thereby incentivizing compliance and reducing overall tax burdens for active business participants.

Summary

Senate Bill 496 proposes amendments to the West Virginia tax code to introduce levies on income from pass-through entities. Specifically, it establishes a framework allowing pass-through entities to elect to pay state income tax at the entity level rather than imposing the tax on individual owners. This mechanism is designed to enhance tax compliance and efficiency by centralizing the tax obligation at the business level while allowing for a better structured tax collection process from these businesses, which include partnerships and limited liability companies.

Sentiment

The sentiment surrounding SB496 appears mixed. Supporters, particularly from the business community and certain legislators, argue that the bill fosters a more viable business climate by alleviating individual tax burdens and simplifying tax compliance procedures for pass-through entities. On the other hand, critics express concerns regarding the implications for state revenue, fearing that a shift in tax burdens might lead to complications or declines in tax revenue if businesses choose to opt out of the taxation election. Moreover, there are apprehensions about the reliability of the refundable credits, which may complicate tax credit claims in practice.

Contention

Notable points of contention in the legislative discussions around SB496 center on the balance between providing tax relief to businesses and ensuring adequate funding for state services that rely on tax revenue. Members of the opposition raise concerns that allowing pass-through entities to pay taxes at the entity level may reduce oversight and accountability in tax collection. Lawmakers must navigate the complexities of how this could affect fiscal health and the ability of the state to fund various public services, while also considering the benefits touted by supporters of the bill.

Companion Bills

WV HB2934

Similar To Levying a tax on a pass-through entity’s income apportioned to West Virginia

Previously Filed As

WV HB2608

Allow pass-through entities to elect to be taxed at the entity level

WV SB442

Providing option for pass-through entities to pay income tax at entity level

WV HB3245

Providing an election for pass-through entities to pay income tax at the entity level

WV HB1456

Income tax, state; pass-through entities.

WV HB401

Income tax, state; pass-through entities.

WV SB1476

Income tax, state; pass-through entities.

WV SB692

Income tax, state; pass-through entities, elective tax.

WV HB1121

Income tax, state; pass-through entities, elective tax.

WV SB0002

Taxation of pass through entities.

WV SB240

Income Tax – Out–of–State Taxes Paid by Pass–Through Entities – Addition Modification

Similar Bills

WV HB4749

Relating to West Virginia standard deduction of a resident individual

WV SB198

Creating Stay in State tax credit

VA SB169

Virginia Rap Back Service; criminal history record monitoring.

VA HB444

Virginia Rap Back Service; criminal history record monitoring.

WV HB5421

To create a K9 Search and Rescue Advisory Committee.

WV HB2547

Establishing the “Stay in State” tax credit

VA SB1191

Adults charged w/ criminal offense punishable by confinement in jail, etc.; collecting, etc., data.

VA HB1859

Applicant Fingerprint Database; participation in FBI Next Generation Identification Rap Back Serv.