Committee substitute for SB 610 approved; Dept. of Revenue estimates $70–$100M revenue impact

The Workforce Committee adopted a committee substitute for Senate Bill 610, a proposal to exempt overtime pay from West Virginia’s personal income tax, and agreed to report the substitute to the full Senate with a referral to the Finance Committee.

Counsel told the committee the substitute creates a new code section, listed as 11‑21‑12o, and defines overtime compensation by cross‑reference to the applicable code section. Martin Mucco of the Department of Revenue briefed members on the fiscal note, describing a state revenue loss estimate in the range of $70 million to $100 million and implementation and reporting challenges if the state diverges from federal definitions.

Mucco compared the proposal to a recent temporary Alabama exemption, saying Alabama enacted a temporary overtime exemption from Jan. 2024 to June 30, 2025 and later tightened eligibility to workers covered under the Fair Labor Standards Act after early cost estimates proved low. “There’s a lot of reporting requirements, of course, because it’s a deviation from federal code,” Mucco said, and he said employers may have to file additional information quarterly. He told the committee the Bureau of Labor Statistics figure that about 4.2% of wages are overtime and that the Department applied that share to about $46 billion in wages to produce its estimate.

Senators asked whether the fiscal note accounted for any offset from increased consumer spending and sales tax revenue; Mucco said the department did not perform a dynamic analysis of induced sales‑tax changes and noted that prior income‑tax cuts were roughly in line with revenue forecasts. Committee members also raised behavioral questions: exempting overtime from income tax could prompt employers or employees to change arrangements (for example, some employers offer comp time rather than paid overtime). Mucco acknowledged a range of possible behavioral responses and said they could increase or decrease the revenue impact.

The committee adopted the committee substitute by voice vote and the vice chair moved that it be reported to the full Senate with a recommendation that it do pass, under the original double committee reference first be referred to the Finance Committee; the motion carried.