H. B. 2884
(By Mr. Speaker, Mr. Kiss, and Delegates
Michael, Trump and Faircloth)
[Introduced February 24, 1999; referred to the
Committee on the Judiciary then Finance.]
A BILL to amend and reenact section two-o, article thirteen,
chapter eleven of the code of West Virginia, one thousand
nine hundred thirty-one, as amended, relating to providing
that electricity generated in this state by a partnership or
limited liability company, for the purposes of the amended
section, will be considered to be generated pro rata by its
partners or members.
Be it enacted by the Legislature of West Virginia:
That section two-o, article thirteen, chapter eleven of the
code of West Virginia, one thousand nine hundred thirty-one, as
amended, be amended and reenacted to read as follows:
ARTICLE 13. BUSINESS AND OCCUPATION TAX.
§11-13-2o. Business of generating or producing or selling electricity on and after the first day of June, one thousand nine hundred ninety-five; definitions; rate of tax; exemptions; effective date.
(a)
Definitions. -- As used in this section:
(1) "Average four-year generation" is computed by dividing
by four the sum of a generating unit's net generation, expressed
in kilowatt hours, for calendar years one thousand nine hundred
ninety-one, one thousand nine hundred ninety-two, one thousand
nine hundred ninety-three, and one thousand nine hundred ninety- four. For any generating unit which was newly installed and
placed into commercial operation after the first day of January,
one thousand nine hundred ninety-one and prior to the effective
date of this section, "average four-year generation" is computed
by dividing such unit's net generation for the period beginning
with the month in which the unit was placed into commercial
operation and ending with the month preceding the effective date
of this section by the number of months in such period and
multiplying the resulting amount by twelve with the result
being a representative twelve-month average of the unit's net
generation while in an operational status.
(2) "Capacity factor" means a fraction, the numerator of
which is average four-year generation and the denominator of
which is the maximum possible annual generation.
(3) "Generating unit" means a mechanical apparatus or
structure which through the operation of its component parts is
capable of generating or producing electricity and is regularly
used for this purpose.
(4) "Inactive reserve" means the removal of a generating
unit from commercial service for a period of not less than twelve consecutive months as a result of lack of need for generation
from the generating unit or as a result of the requirements of
state or federal law or the removal of a generating unit from
commercial service for any period as a result of any physical
exigency which is beyond the reasonable control of the taxpayer.
(5) "Maximum possible annual generation" means the product,
expressed in kilowatt hours, of official capability times eight
thousand seven hundred sixty hours.
(6) "Official capability" means the nameplate capacity
rating of a generating unit expressed in kilowatts.
(7) "Peaking unit" means a generating unit designed for the
limited purpose of meeting peak demands for electricity or
filling emergency electricity requirements.
(8) "Retired from service" means the removal of a generating
unit from commercial service for a period of at least twelve
consecutive months with the intent that the unit will not
thereafter be returned to active service.
(9) "Taxable generating capacity" means the product,
expressed in kilowatts, of the capacity factor times the official
capability of a generating unit, subject to the modifications set
forth in subdivisions (2) and (3), subsection (c) of this
section.
(10) "Net generation" for a period means the kilowatt hours
of net generation available for sale generated or produced by the
generating unit in this state during such period less the
following:
(A) Twenty-one twenty-sixths of the kilowatt hours of
electricity generated at the generating unit and sold during such
period to a plant location of a customer engaged in manufacturing
activity if the contract demand at such plant location exceeds
two hundred thousand kilowatts per hour in a year or where the
usage at such plant location exceeds two hundred thousand
kilowatts per hour in a year;
(B) Twenty-one twenty-sixths of the kilowatt hours of
electricity produced or generated at the generating unit during
such period by any person producing electric power and an
alternative form of energy at a facility located in this state
substantially from gob or other mine refuse;
(C) The total kilowatt hours of electricity generated at the
generating unit exempted from tax during such period by
subsection (b), section two-n of this article.
(b)
Rate of tax. -- Upon every person engaging or continuing
within this state in the business of generating or producing
electricity for sale, profit or commercial use, either directly
or indirectly through the activity of others, in whole or in
part, or in the business of selling electricity to consumers, or
in both businesses, the tax imposed by section two of this
article shall be equal to:
(1) For taxpayers who generate or produce electricity for
sale, profit or commercial use, the product of twenty-two dollars
and seventy-eight cents multiplied by the taxable generating
capacity of each generating unit in this state owned or leased by the taxpayer, subject to the modifications set forth in
subsection (c) of this section:
Provided, That with respect to
each generating unit in this state which has installed a flue gas
desulfurization system, the tax imposed by section two of this
article shall, on and after the thirty-first day of January, one
thousand nine hundred ninety-six, be equal to the product of
twenty dollars and seventy cents multiplied by the taxable
generating capacity of the units, subject to the modifications
set forth in subsection (c) of this section:
Provided, however,
That with respect to kilowatt hours sold to or used by a plant
location engaged in manufacturing activity in which the contract
demand at such plant location exceeds two hundred thousand
kilowatts per hour per year or if the usage at such plant
location exceeds two hundred thousand kilowatts per hour in a
year, in no event shall the tax imposed by this article with
respect to the sale or use of such electricity exceed five
hundredths of one cent times the kilowatt hours sold to or used
by a plant engaged in such a manufacturing activity; and
(2) For taxpayers who sell electricity to consumers in this
state that is not generated or produced in this state by the
taxpayer, nineteen hundredths of one cent times the kilowatt
hours of electricity sold to consumers in this state that were
not generated or produced in this state by the taxpayer, except
that the rate shall be five hundredths of one cent times the
kilowatt hours of electricity not generated or produced in this
state by the taxpayer which is sold to a plant location in this state of a customer engaged in manufacturing activity if the
contract demand at such plant location exceeds two hundred
thousand kilowatts per hour per year or if the usage at such
plant location exceeds two hundred thousand kilowatts per hour in
a year. The measure of tax under this subdivision (2) shall be
equal to the total kilowatt hours of electricity sold to
consumers in the state during the taxable year, that were not
generated or produced in this state by the taxpayer, to be
determined by subtracting from the total kilowatt hours of
electricity sold to consumers in the state the net kilowatt hours
of electricity generated or produced in the state by the taxpayer
during the taxable year.
For the purposes of this subdivision,
net kilowatt hours of electricity generated or produced in this
state by the taxpayer includes the taxpayer's pro rata share of
electricity generated or produced in this state by a partnership
or limited liability company of which the taxpayer is a partner
or member. The provisions of this subdivision (2) shall not
apply to those kilowatt hours exempt under subsection (b),
section two-n of this article. Any person taxable under this
subdivision (2) shall be allowed a credit against the amount of
tax due under this subdivision (2) for any electric power
generation taxes or a tax similar to the tax imposed by
subdivision (1) of this subsection (b) paid by the taxpayer with
respect to such electric power to the state in which such power
was generated or produced. The amount of credit allowed shall
not exceed the tax liability arising under this subdivision (2) with respect to the sale of such power.
(c) The following provisions are applicable to taxpayers
subject to tax under subdivision (1), subsection (b) of this
section:
(1)
Retired units; inactive reserve. -- If a generating unit
is retired from service or placed in inactive reserve, a taxpayer
shall not be liable for tax computed with respect to the taxable
generating capacity of the unit for the period that the unit is
inactive or retired. The taxpayer shall provide written notice
to the joint committee on government and finance, as well as to
any other entity as may be otherwise provided by law, eighteen
months prior to retiring any generating unit from service in this
state.
(2)
New generating units. -- If a new generating unit, other
than a peaking unit, is placed in initial service on or after the
effective date of this section, the generating unit's taxable
generating capacity shall equal forty percent of the official
capability of the unit:
Provided, That the taxable generating
capacity of a municipally-owned wood-waste fired generating unit
and of a municipally-owned hydro-electric generating unit shall
equal zero percent of the official capability of the unit.
(3)
Peaking units. -- If a peaking unit is placed in initial
service on or after the effective date of this section, the
generating unit's taxable generating capacity shall equal five
percent of the official capability of the unit:
Provided, That
the taxable generating capacity of a municipally owned hydro-electric generating plant shall equal zero percent of the
official capability of the unit.
(4)
Transfers of interests in generating units. -- If a
taxpayer acquires an interest in a generating unit, the taxpayer
shall include the computation of taxable generating capacity of
said unit in the determination of the taxpayer's tax liability as
of the date of the acquisition. Conversely, if a taxpayer
transfers an interest in a generating unit, the taxpayer shall
not for periods thereafter be liable for tax computed with
respect to the taxable generating capacity of such transferred
unit.
(5)
Proration, allocation. -- The tax commissioner shall
promulgate rules in conformity with the provisions of article
three, chapter twenty-nine-a of this code to provide for the
administration of this section and to equitably prorate taxes for
a taxable year in which a generating unit is first placed in
service, retired or placed in inactive reserve, or in which a
taxpayer acquires or transfers an interest in a generating unit,
to equitably allocate and reallocate adjustments to net
generation, and to equitably allocate taxes among multiple
taxpayers with interests in a single generating unit, it being
the intent of the Legislature to prohibit multiple taxation of
the same taxable generating capacity.
So as to provide for an orderly transition with respect to
the rate making effect of this section, those electric light and
power companies which, as of the effective date of this section, are permitted by the West Virginia public service commission to
utilize deferred accounting for purposes of recovery from
ratepayers of any portion of business and occupation tax expense
under this article shall be permitted, until such time that
action pursuant to a rate application or order of the commission
provides for appropriate alternative rate making treatment for
such expense, to recover the tax expense imposed by this section
by means of deferred accounting to the extent that the tax
expense imposed by this section exceeds the level of business and
occupation tax under this article currently allowed in rates.
(6)
Electricity generated by manufacturer or affiliate for
use in manufacturing activity. -- When electricity used in a
manufacturing activity is generated in this state by the person
who owns the manufacturing facility in which the electricity is
used and the electricity generating unit or units producing the
electricity so used are owned by such manufacturer, or by a
member of the manufacturer's controlled group, as defined in
section 267 of the Internal Revenue Code of 1986, as amended, the
generation of the electricity shall not be taxable under this
article:
Provided, That any electricity generated or produced at
the generating unit or units which is sold or used for purposes
other than in the manufacturing activity shall be taxed under
this section and the amount of tax payable shall be adjusted to
be equal to an amount which is proportional to the electricity
sold for purposes other than the manufacturing activity. The
department of tax and revenue shall promulgate rules in accordance with article three, chapter twenty-nine-a of the code:
Provided, however, That the rules shall be promulgated as
emergency rules.
(d) Beginning the first day of June, one thousand nine
hundred ninety-five, electric light and power companies that
actually paid tax based on the provisions of subdivision (3),
subsection (a), section two-d of this article or section two-m of
this article for every taxable month in one thousand nine hundred
ninety-four shall determine their liability for payment of tax
under this article in accordance with subdivisions (1) and (2) of
this subsection. All other electric light and power companies
shall determine their liability for payment of tax under this
article exclusively under this section beginning the first day of
June, one thousand nine hundred ninety-five and thereafter.
(1) If for taxable months beginning on or after the first
day of June, one thousand nine hundred ninety-five, liability for
tax under this section is equal to or greater than the sum of the
power company's liability for payment of tax under subdivision
(3), subsection (a), section two-d of this article and this
section, then the company shall pay the tax due under this
section and not the tax due under subdivision (3), subsection
(a), section two-d of this article and section two-m of this
article. If tax liability under this section is less, then the
tax shall be paid under subdivision (3), subsection (a), section
two-d of this article and section two-m and the tax due under
this section shall not be paid.
(2) Notwithstanding subdivision (1) of this subsection, for
taxable years beginning on or after the first day of January, one
thousand nine hundred ninety-eight, all electric light and power
companies shall determine their liability for payment of tax
under this article exclusively under this section.
Strike-throughs indicate language that would be stricken
from the present law, and underscoring indicates new language
that would be added.