The Register-Herald, Beckley, West Virginia

State News

August 2, 2013

W.Va. vehicle tax credit tamps down collections

CHARLESTON — A newly repealed state tax credit for alternative vehicles is taking a bite out of state tax collections.

The tax credit was part of a law to promote investments in natural gas developments. It allowed buyers of alternative fuel vehicles to write off 35 percent of the purchase price of the vehicle, up to $7,500 for passenger cars and $25,000 for commercial vehicles.

The tax credit was repealed in April, but not before a surge in sales of the vehicles.

Tax collections came in at $297.2 million — about $17.9 million below estimates — for July. Deputy Revenue Secretary Mark Muchow told The Charleston Gazette ( ) the primary reason was taxpayers claiming the tax credit against their July income tax payments.

Muchow said the impact of the tax credits will affect personal income tax revenues through next April. In June, the credits accounted for $29 million of lost tax revenue.

The tax credit law was passed in 2011. Lawmakers initially applied the credit only to natural gas-powered vehicles, but the legislation was amended at the last minute to extend the tax credit to all hybrid and alternative fuel cars and trucks.

During the 2013 session, legislators passed a law limiting the credit to natural gas vehicles only, but that many took advantage of the loophole before it expired in April.

Despite the decrease in tax collections, the state closed the fiscal year with a small $11.8 million surplus, Muchow said.

“That’s only because some agencies did not spend all the money appropriated to them,” he said.

Of that, $3.5 million will go into the state’s emergency fund, with the remainder set to be appropriated in the 2014-2015 state budget.

In July, the state saw better-than-expected consumer sales tax collections at $105.8 million — or $800,000 above estimates for the month. Severance taxes also came in $6.8 million over projections, at $45.8 million.

Some of that was due to timing, Muchow said, because payments normally due at the end of June came in early July instead.  But he said the state also saw increases in natural gas prices and production.

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