A BILL to repeal article thirteen-h, chapter eleven of the code of West Virginia, one thousand nine hundred thirty-one, as amended; to repeal section twenty-four, article twenty-three and section twenty-two, article twenty-four, all of said chapter; to repeal section five, article thirteen, chapter twenty-one of said code; to amend article one, chapter five-e of said code, by adding thereto a new section, designated section twenty-two; to amend chapter eight of said code by adding thereto a new article, designated article thirteen-b; to amend and reenact section five-s, article ten, chapter eleven of said code; to further amend said article by adding thereto a new section, designated section eleven-a; to amend article thirteen-c of said chapter by adding thereto a new section, designated section sixteen; to amend article thirteen-d of said chapter by adding thereto a new section, designated section ten; to amend and reenact section four, article thirteen-n of said chapter; to further amend said chapter by adding thereto three new articles, designated articles thirteen-q, thirteen-r and thirteen-s; to amend article fifteen of said chapter by adding thereto to three new sections, designated sections nine-b, nine-c and nine-f; to amend and reenact sections seven and twenty-four-a, article twenty-three of said chapter; and to amend and reenact section twenty-two-a, article twenty-four of said chapter, all relating generally to certain taxes for certain business activity; repealing the business and occupation tax credit for increased generation of electricity; repealing the business franchise tax credit and the corporation net income tax credit for coal coking facilities; repealing the tax credit for convenience store owners to meet certain requirements of the convenience food stores safety act; terminating new steel manufacturing operations tax credit; terminating the credit for producing value-added products from raw agricultural products; terminating the business investment and jobs investment tax credit; terminating the small business tax credit; terminating corporate headquarters relocation tax credit; preserving certain tax credits for eligible activity occurring prior to termination date; specifying transition rules; establishing economic opportunity tax credit specifying short titles; specifying legislative findings and purpose for new credits; defining terms; specifying activity that qualifies for credits, how amount of allowable credits are determined, how credits may be applied and against what tax liabilities credits may be applied; providing for forfeiture of unused tax credits, redetermination of credits and recapture of credits under certain circumstances; imposing recapture tax, interest and civil money penalty and specifying circumstance when they apply; allowing transfer of qualified investment to successors; requiring identification of investment credit property; requiring persons claiming credit to keep records and to provide information to tax commissioner; providing rules for interpretation, construction, severability and burden of proof; requiring filing of application for credit as condition precedent to claiming credit and imposing consequences for failure to make timely application; specifying business activity eligible for economic opportunity credit; requiring periodic review of tax credit and performance reports to governor and Legislature; providing internal effective dates and making technical corrections; specifying termination of credits provided in article thirteen-d, chapter eleven, specifying exception for electricity producers; preservation of entitlements; establishing tax credit for manufacturing investment; specifying short title, legislative findings and purpose; setting forth definitions; specifying amount of credit allowed for manufacturing investment; specifying procedures for determining qualified manufacturing investment; requiring certain forfeiture of unused tax credits; redetermination of credit allowed; specifying treatment for transfer of property purchased for manufacturing investment to successors, requiring identification of investment credit property; specifying treatment for failure to keep records of property purchased for manufacturing investment; requiring tax credit review and accountability; establishing tax credit for qualified research and development credit; specifying short title, legislative findings and purpose; definitions, specifying annual combined qualified research and development expenditure; qualified research and development expenses; amount of credit allowed; application of credit; requiring certain forfeiture of unused tax credits; redetermination of credit allowed; specifying treatment for transfer of qualified research and development investment to successors; requiring identification of research and development credit property; specifying treatment for failure to keep records of property purchased for research and development investment; requiring tax credit review and accountability; adding new exemption to consumers sales and service tax for purchases of tangible personal property and services for direct use in research and development, purchased after the thirtieth day of June, two thousand-two; defining certain terms; exempting from the business franchise tax persons and organizations to the extent they provide venture capital to West Virginia businesses; defining terms; specifying effective date of exemption; providing for the decertification of qualified capital companies that are not small business investment companies; specifying effective date therefor; providing an exemption from the consumers sales tax and the use tax for services providing technical evaluations for compliance with federal and state environmental standards provided by environmental and industrial consultants who have formal certification through the department of environmental protection or the bureau for public health; requiring disclosure of certain taxpayer information relating to economic opportunity tax credit, strategic research and development tax credit and manufacturing investment tax credit; authorizing municipalities to create special downtown redevelopment districts; describing redevelopment expenditures; providing for treatment of redevelopment expenditures by licensed race tracks; providing for notice and hearing; providing for approval by council for community and economic development; establishing a downtown redevelopment fund; providing for the Legislature's authorization of establishment of a district; describing ordinance to create district; establishing a board to oversee operations; authorizing special district excise tax; modifications to district boundaries; procedures for abolition and dissolution of district; authorizing issuance of municipal revenue obligations; providing for administration of special district excise tax by tax commissioner; exempting certain sales and services in district from consumers sales and service tax; and making technical corrections.

Be it enacted by the Legislature of West Virginia:
That article thirteen-h, chapter eleven of the code of West Virginia, one thousand nine hundred thirty-one, as amended, be repealed; that section twenty-four, article twenty-three and section twenty-two, article twenty-four, all of said chapter be repealed; that section five, article thirteen, chapter twenty-one of said code be repealed; that article one, chapter five-e of said code, be amended by adding thereto a new section, designated section twenty-two; that chapter eight of said code be amended by adding there to a new article, designated article thirteen-b; that section five-s, article ten, chapter eleven of said code be amended and reenacted; that said article ten be further amended by adding thereto a new section, designated section eleven-a; that article thirteen-c of said chapter be amended by adding thereto a new section, designated section sixteen; that article thirteen-d of said chapter be amended by adding thereto a new section, designated section ten; that section four, article thirteen-n of said chapter be amended and reenacted; that said chapter be further amended by adding thereto three new articles, designated articles thirteen-q, thirteen-r and thirteen-s; that article fifteen of said chapter be amended by adding thereto three new sections, designated sections nine-b, nine-c and nine-f; that sections seven and twenty-four-a, article twenty-three of said chapter be amended and reenacted; and that section twenty-two-a, article twenty-four of said chapter be amended and reenacted, all to read as follows:

§5E-1-22. Decertification of qualified capital companies other Than small business investment companies.

Notwithstanding any provision in this article to the contrary, the authority may not hereafter allocate credit to any applicant other than a small business investment company. Every qualified capital company that is not a small business investment company may no longer be considered a qualified capital company and shall, without any further action, be decertified effective as of the first day of July, two thousand two. Each company that has been decertified in accordance with the provisions of this section is no longer subject to the provisions of this article. Nothing herein may be construed to limit an investor in a qualified capital company from applying credits previously allocated by the authority including unused credits carried forward pursuant to section eight of this article.

CHAPTER 8. MUNICIPAL CORPORATIONS.
ARTICLE 13B. DOWNTOWN REDEVELOPMENT DISTRICTS.
§8-13B-1. Short title.
This article is known and may be cited as the "Downtown Redevelopment District Act."
§8-13B-2. Legislative findings and declaration of purpose.
The Legislature finds that many downtown business districts within the municipalities of this state are economically depressed. This adversely affects the economic and general well-being of the citizens of those municipalities. Establishment of downtown redevelopment districts within municipalities of the state, in accordance with the purpose and powers set forth in this article, will serve a public purpose, and promote the health, safety, prosperity, security and general welfare of all citizens in the state. It will also promote the vitality of retail business areas within municipalities, while serving as an effective means for restoring and promoting retail and other business activity within the downtown redevelopment districts created herein. This will be of special benefit to the tax base of the downtown municipalities within which any downtown redevelopment district is created under this article and will stimulate economic growth and job creation.
§8-13B-3. Definitions.

For purposes of this article, the term:

(1) "Council" means the council for community and economic development established in section two, article two, chapter five-b of this code;
(2) "District" means a downtown redevelopment district created pursuant to this article
(3) "District board" means a district board created pursuant to section ten of this article;
(4) "Downtown property" means any taxable or exempt real property which is classified for ad valorem real property tax purposes as Class IV;
(5) "Gross annual district tax revenue amount" means the total amount of consumers sales and service tax actually remitted to the tax commissioner by vendors maintaining places of business within the district with respect to sales made and services rendered by such vendors from a location within the district for the twelve full calendar months immediately preceding the filing of an application pursuant to section seven of this article;
(6) "Municipality" means a municipal corporation recognized as such in chapter eight of this code; and
(7) "Redevelopment expenditures" means payments for governmental functions, programs, activities, facility construction, improvements and other goods and services which a district board is authorized to perform or provide under section five of this article.
§8-13B-4. Authorization.
The governing body of any municipality may, in accordance with the procedures and subject to the limitations set forth in this article, create one or more downtown redevelopment districts within the municipality. The municipality may, in accordance with the procedures and subject to the limitations set forth in this article, provide for the administration and financing of redevelopment expenditures within the districts and for the administration and financing of a continuing program of redevelopment expenditures within the districts.
§8-13B-5. Redevelopment expenditures.
Any municipality that has established a downtown redevelopment district under this article may make, or authorize to be made by a district board and other public or private parties, such redevelopment expenditures as will restore or promote the economic vitality of the district and the general welfare of the municipality, including, but not limited to, expenditures for the following purposes:
(a)Beautification of the district, by means such as landscaping and construction and erection of fountains, shelters, benches, sculptures, signs, lighting, decorations and similar amenities;
(b) Provision of special or additional public services, such as sanitation, security for persons and property and the construction and maintenance of public facilities, including sidewalks and other public areas;
(c) Making payments for principal, interest, issuance costs, any of the costs described in section eighteen of this article and appropriate reserves for bonds and other instruments and arrangements issued or entered into by the municipality for financing the expenditures of the district described in this section and to otherwise implement the purposes of this article;
(d) Providing financial support for public transportation and vehicle parking facilities open to the general public, whether or not physically situate within the district's boundaries;
(e) Acquiring, demolishing, razing, constructing, repairing, reconstructing, refurbishing, renovating, rehabilitating, expanding, altering, otherwise developing, operating and maintaining real property generally, parking facilities, commercial structures and other capital improvements to real property, fixtures and tangible personal property, whether or not physically situate within the district's boundaries;
(f) Developing plans for the architectural design of the district and portions thereof, and developing plans and programs for the future development of the district;
(g) Developing, promoting and supporting community events and activities open to the general public;
(h) Providing the administrative costs for a district management program;
(i) Providing for the usual and customary maintenance and upkeep of all improvements and amenities in the district as may be commercially reasonable and necessary to sustain its economic viability on a permanent basis;
(j) Providing any other services which the municipality or district board is authorized to perform and which the municipality does not also perform to the same extent on a municipality-wide basis;
(k) Making grants to the owners or tenants of downtown property for the purposes described in this section;
(l) Acquiring an interest in any entity or entities that own any portion of the real property situate in the district and contributing capital to any such entity or entities; and
(m) To do any and all things necessary, desirable or appropriate to carry out and accomplish the purposes of this article: Provided, That notwithstanding anything in this code to the contrary, any redevelopment expenditure made by a licensed race track, as defined in section three, article twenty-two-a, chapter twenty-nine of this code, within thirty days after such redevelopment expenditure shall have been requested in writing by the district board, shall entitle such licensed race track to receive the same recoupment from its capital reinvestment fund account as any other capital improvement expenditure described in subsection (b), section ten-c, article twenty-two-a, chapter twenty-nine of this code.
§8-13B-6. Notice; hearing.
The governing body of a municipality desiring to create a downtown redevelopment district shall conduct a public hearing. A notice of the public hearing shall be published as a Class I-0 legal advertisement in compliance with article three, chapter fifty-nine of this code at least twenty days prior to the scheduled hearing. In addition to the time and place of the hearing, the notice must also state:
(a) The purpose of the hearing;
(b) The name of the proposed district;
(c) The general purpose of the proposed district;
(d) The property proposed to be included in the district; and
(e) The proposed method of financing any costs involved, including the base and rate of special district excise tax that may be imposed upon any businesses operating and properties situated within the proposed district.
At the time and place set forth in the notice, the governing body shall afford the opportunity to be heard to any owner of real property situated in the proposed district and any residents of the municipality.
If the governing body of the municipality, following the public hearing, determines it advisable and in the public interest to establish a downtown redevelopment district, it shall apply to the council for approval of a downtown redevelopment district project pursuant to the procedures provided in section seven of this article.

§8-13B-7. Application to council for community and economic development for approval of a downtown redevelopment district project.

(a) The council shall receive and act on applications filed with it by municipalities pursuant to section six of this article. Each such application must contain a copy of the notice described in section six of this article; a general description of the capital improvements, additional or extended services and other proposed redevelopment expenditures to be made in the district; a description of the proposed method of financing such redevelopment expenditures, together with a description of such reserves to be established for financing on-going redevelopment expenditures necessary to permanently maintain the optimum economic viability of the district following its inception: Provided, That the amounts of such reserves shall not exceed the amounts that would be required by ordinary commercial capital market considerations; a description of the sources and anticipated amounts of all such financing, including, but not limited to, proceeds from the issuance of any bonds, or other instruments, revenues from the special district excise tax and enhanced revenues from municipal business and occupation taxes, property taxes and fees; a description of the financial contribution of the municipality to the funding of redevelopment expenditures, which contribution may include, but not be necessarily limited to, incremental business and occupation taxes generated from district; a description of the financial contribution to the funding of redevelopment expenditures by the county commission of the county in which the district is situate; identification of any entities which the municipality expects to relocate their business locations from the district to another place in the state in connection with the establishment of district: Provided, That for purposes of this article, any such entities shall be designated "relocated entities"; a good faith estimate of the aggregate amount of consumers sales and service tax that was actually remitted to the tax commissioner by all relocated entities with respect to their sales made and services rendered from their business locations in the district for the twelve full calendar months next preceding the date of the application: Provided, That for purposes of this article, such aggregate amount shall be designated as "the relocated tax revenue amount"; a good faith estimate of the gross annual district tax revenue amount; and the proposed application of any surplus from all funding sources to further the objectives of this article: Provided, That the amount of all redevelopment expenditures proposed to be made in the first twenty-four months following the creation of the district shall be not less than fifty million dollars. The council may establish other criteria for approving such applications: Provided, That the council shall act to approve or not approve any such application within thirty days following the receipt of the application.
(b)If the council approves a municipality's downtown redevelopment district project application, it shall issue to the municipality a written certificate evidencing such approval: Provided, That such certificate shall expressly state a base tax revenue amount which, for purposes of this article shall be the difference between the gross annual district tax revenue amount and the relocated tax revenue amount all of which the council shall have determined with respect to such district's application based on such investigation as it may deem reasonable and necessary, including but not limited to any relevant information the council shall request from the tax commissioner and the tax commissioner shall provide to the council: Provided, however, That, in determining the base tax revenue amount, in lieu of confirmation from the tax commissioner of the gross annual district tax revenue amount, the council shall use the estimate of the gross annual district tax revenue amount provided by the municipality pursuant to subsection (a) of this section.
(c) The council may promulgate rules to implement the downtown redevelopment district project application approval process and to describe the criteria and procedures it has established in connection therewith. These rules are not subject to the provisions of chapter twenty-nine-a of this code, but shall be filed with the secretary of state.

§8-13B-8. Establishment of the downtown redevelopment district fund; Legislature's authorization of establishment of district.

(a) There is hereby created a special revenue account in the state treasury, designated the "downtown redevelopment district fund," which shall be an interest-bearing account and shall be invested in the manner described in section nine-c, article six, chapter twelve of the code, with the interest income a proper credit of the Fund. A separate and segregated sub-account within the account shall be established for each municipality's downtown redevelopment district, which has been approved by the council and authorized by the Legislature pursuant to subsection (b) of this section. Funds paid into the account for the credit of any such sub-account may also be derived from the following sources:
(1) All interest or return on the investment accruing to the sub-account;
(2) Any gifts, grants, bequests, transfers, appropriations or donations which may be received from any governmental entity or unit or any person, firm, foundation, or corporation; and
(3) Any appropriations by the Legislature which may be made for this purpose.
(b) The Legislature may authorize the establishment of a downtown redevelopment district if the district has been approved by the council pursuant to section seven of this article. Once the establishment of the district has been authorized by the Legislature, the auditor shall thereafter, upon receipt of a monthly requisition from the district board, issue his warrant on the state treasurer for the funds requested from the district's sub-account as provided in section eleven-a, article ten, chapter eleven of this code, to be applied for the purposes described in section five of this article, and the state treasurer shall pay the warrant out of the sub-account.

§8-13B-9. Ordinance to create district as approved by council and authorized by the Legislature.

(a) If a downtown redevelopment district project has been approved by the council, and the establishment of such a district has been authorized by the Legislature, all in accordance with this article, the governing body of the municipality may create the district by ordinance as provided for in article eleven of this chapter: Provided, That the governing body may not amend, alter or change in any manner the boundaries of the downtown redevelopment district as approved by the council. In addition to all other requirements, the ordinance shall contain the following:
(1) The name of the district and a description of its boundaries;
(2) A summary of any proposed services to be provided and capital improvements to be made within the district and a reasonable estimate of any attendant costs;
(3) The base and rate of any special district excise tax that may be imposed upon the businesses for the privilege of operating within the district, which tax shall be passed on to and paid by the consumer, and the manner in which the taxes will be imposed, administered and collected, all of which shall be in conformity with the requirements of this article; and
(4) The district board members' terms, their method of appointment and a general description of the district board's powers and duties: Provided, That such powers may include the authority to (A) make and adopt all necessary bylaws and rules for its organization and operations not inconsistent with any applicable laws; (B) to elect its own officers, to appoint committees and to employ and fix compensation for personnel necessary for its operations; (C) to enter into contracts with any person, agency, government entity, agency or instrumentality, firm, partnership, limited partnership, limited liability company or corporation, including both public and private corporations, and for-profit and not-for-profit organizations, and generally to do any and all things necessary or convenient for the purpose of promoting, developing and advancing the purposes described in section two of this article; (D) to amend or supplement any contracts or leases or to enter into new, additional or further contracts or leases upon such terms and conditions, for such consideration and for such term of duration, with or without option of renewal, as may be agreed upon by the district board and such person, agency, government entity, agency or instrumentality, firm, partnership, limited partnership, limited liability company or corporation; (E) unless otherwise provided for in, and subject to the provisions of, such contracts, or leases, to operate, repair, manage, and maintain such buildings and structures and provide adequate insurance of all types, and in connection with the primary use thereof and incidental thereto to provide such services, such as retail stores, and restaurants, and to effectuate such incidental purposes, grant leases, permits, concessions or other authorizations to any person or persons, upon such terms and conditions, for such consideration and for such term of duration as may be agreed upon by the district board and such person, agency, governmental department, firm or corporation; (F) to delegate any authority given to it by law to any of its officers, committees, agents or employees; (G) to apply for, receive and use grants-in- aid, donations and contributions from any source or sources, and to accept and use bequests, devises, gifts and donations from any person, firm or corporation; (H) to acquire real property by gift, purchase, or construction, or in any other lawful manner, and hold title thereto in its own name and to sell, lease or otherwise dispose of all or part of such real property which it may own, either by contract or at public auction, upon the approval by the district board; (I) to purchase or otherwise acquire, own, hold, sell, lease and dispose of all or part of any personal property which it may own, either by contract or at public auction; (J) pursuant to a determination by the district board that there exists a continuing need for redevelopment expenditures, and that moneys or funds of the district are necessary therefor, to borrow money and execute and deliver the district's negotiable notes and other evidences of indebtedness therefor, on such terms as the district shall determine, and give such security therefor as shall be requisite, including, without limitation, a pledge of the district's rights in its sub-account of the downtown district redevelopment fund; (K) to acquire (either directly or on behalf of the municipality) an interest in any entity or entities that own any real property situate in the district, to contribute capital to such entity or entities and to exercise the rights of an owner with respect thereto; and (L) to expend its funds in the execution of the powers and authority herein given, which expenditures, by the means authorized herein, are hereby determined and declared as a matter of legislative finding to be for a public purpose and use, in the public interest, and for the general welfare of the people of West Virginia, to alleviate and prevent economic deterioration and to relieve the existing critical condition of unemployment existing within the state.
(b) The ordinance shall also state the general intention of the municipality to redevelop and increase services and to make capital improvements within the district.
§8-13B-10. District board; duties.
(a) The governing body of any municipality that has been authorized by the Legislature to establish a downtown redevelopment district, in accordance with this article, shall provide by ordinance for the appointment of a district board to oversee the operations of the district: Provided, That the governing body may, by ordinance in lieu of appointing a separate district board, designate itself to act as the district board. If a separate district board is to be appointed, it shall be made up of at least seven members, two of which shall be owners, or representatives of owners, of downtown property situated in the district, and the other five shall be residents of the county within which the municipality is located.
(b) The district board, in addition to the duties prescribed by the ordinance creating the improvement district, shall submit an annual report to the governing body and the council containing:
(1) An itemized statement of its receipts and disbursements for the preceding fiscal year;
(2) A description of its activities for the preceding fiscal year;
(3) A recommended program of services to be performed and capital improvements to be made within the district for the coming fiscal year; and
(4) A proposed budget to accomplish its objectives.
(c) Nothing in this article prohibits any member of the district board from also serving on the board of directors of a nonprofit corporation with which the municipality may contract to provide specified services within the district.
(d) Each member of the district board may receive reasonable compensation for services on the board, determined by the governing body of the municipality.
§8-13B-11. Special district excise tax authorized.
(a) The governing body of a municipality, authorized by the Legislature to establish a downtown redevelopment district, may, by ordinance, impose a special district excise tax on the privilege of selling tangible personal property and rendering selected services in the district in accordance with this section.
(b) The base of a special district excise tax imposed pursuant to this section shall be identical to the base of the consumers sales and service tax imposed pursuant to article fifteen, chapter eleven of this code on sales made and services rendered within the boundaries of the district: Provided, That, except for the exemption provided in section nine-f of article fifteen, chapter eleven of this code, all exemptions and exceptions from the consumers sales and service tax shall also apply to the special district excise tax.
(c) The rate of a special district excise tax imposed pursuant to this section shall be provided in an ordinance adopted by the governing body of the municipality and shall be six cents on the dollar of sales and services subject to the tax.
(d) The ordinance of a municipality imposing a special district excise tax shall provide procedures for the administration, assessment, collection and enforcement of the tax in conformity with similar provisions and requirements set forth in articles ten and fifteen, chapter eleven of this code, and to those procedures in article ten, chapter eleven of this code, and shall conform with such provisions as they relate to waiver of penalties and additions to tax: Provided, That the governing body of the municipality shall, in any such ordinance, also provide that the state tax commissioner shall administer, assess, collect and enforce a special district excise tax on behalf of and as the agent for the municipality as provided in section eleven-a, article ten, chapter eleven of this code.
(e) The ordinance of a municipality imposing a special district excise tax shall provide that the tax commissioner shall deposit the net amount of tax collected in the special downtown redevelopment district fund to the credit of the municipality's sub-account therein, and may only be used to pay for development expenditures provided under this article: Provided, That the state treasurer shall withhold from the municipality's sub-account in the downtown redevelopment district fund, and shall deposit in the general revenue fund of this State, on or before the fifteenth day of each calendar month next following the effective date of a special district excise tax, a sum equal to one-twelfth of the base tax revenue amount last certified by the council pursuant to section seven of this article.
(f) Any taxes imposed pursuant to the authority of this section shall be effective on the first day of the calendar month that begins on or after the date of adoption of an ordinance imposing such tax, or at such later date expressly designated in the ordinance that begins on the first day of a calendar month.
§8-13B-12. Modification of included area; notice; hearing.
(a) The ordinance creating a downtown redevelopment district may be amended to include additional downtown property only after such amendment has been approved by the council in the same manner as an application to approve the establishment of the district is acted upon under section seven of this article.
Additional property may not be included in the district unless it is situated within the boundaries of the municipality.
(b) The governing body of any municipality desiring to so amend its ordinance shall designate a time and place for a public hearing upon the proposal to include additional property. The notice shall meet the requirements set forth in section six of this article.
(c) At the time and place set forth in the notice, the governing body shall afford the opportunity to be heard to any owners of downtown property either currently included in or proposed to be added to the existing district and to any other residents of the municipality.
(d) Following such hearing, the governing body may, by resolution, apply to the council to approve inclusion of such additional property in the district.
(e) If the council shall approve inclusion of such additional property in the district, the governing body of the municipality may then amend its ordinance accordingly.
(f) All businesses and additional property included in a district shall thereafter be subject to all special district excise taxes whether currently existing or thereafter levied.

§8-13B-13. Abolishment and dissolution of district; notice; hearing.

(a) Except upon the express written consent of the council and of all the holders or obligees of any indebtedness or other instruments the proceeds of which were applied to any redevelopment expenditures or any indebtedness the payment of which is secured by revenues payable into the fund provided under section eight of this article or by any public property, a district may only be abolished by the governing body of the municipality when there is no outstanding indebtedness the proceeds of which were applied to any redevelopment expenditures or the payment of which is secured by revenues payable into the fund provided under section eight of this article, or by any public property, and following a public hearing upon the proposed abolishment. Notice of such hearing must be provided by first class mail to all owners of downtown property within the district and shall be published as a Class I-0 legal advertisement in compliance with article three, chapter fifty-nine of this code at least twenty days prior to the public hearing. Upon the abolishment of any downtown redevelopment district, any funds or other assets, contractual rights or obligations, claims against holders of indebtedness or other financial benefits, liabilities or obligations, existing after full payment has been made on all existing contracts, bonds, notes or other obligations of the district, shall be transferred to and assumed by the municipality. Any funds or other assets so transferred shall be used for the benefit of the area included in the district being abolished.
(b) Following abolishment of a district pursuant to this section, its reinstatement shall require compliance with all requirements and procedures set forth in this article for the initial development, approval, establishment and creation of a district. Upon the dissolution of any downtown redevelopment district, any funds or other assets, contractual rights or obligations, claims against holders of indebtedness, or other financial benefits, liabilities or obligations of the district, existing after full payment has been made on all obligations of the district, shall be transferred and assumed by the municipality. Any funds or other assets so transferred shall be used for the benefit of the area included in the district being dissolved.

§8-13B-14. Bonds issued to finance downtown redevelopment district projects.

The governing body of a municipality may issue bonds or notes for the purpose of financing redevelopment expenditures, as described in section five of this article, with respect to one or more downtown redevelopment district projects within the municipality. All bonds issued by a municipality under the authority of this article shall be limited obligations of the municipality. No municipality may issue notes, bonds or other instruments for funding district projects or improvements that exceed a repayment schedule of forty years.

The principal and interest on such bonds shall be payable out of the funds on deposit in the sub-account established for the downtown redevelopment district pursuant to section eight of this article, including without limitation any funds derived from the special district excise tax imposed by section eleven of this article, or other revenues derived from the downtown redevelopment project to the extent pledged for such purpose by the governing body of the municipality in the resolution authorizing the bonds. To the extent that the average daily amount on deposit in the sub-account established for a district pursuant to section eight of this article exceeds, for more than six consecutive calendar months, the sum of (1) one hundred thousand dollars, plus (2) the amount required to be kept on deposit pursuant to the documents authorizing, securing or otherwise relating to the bonds or notes issued under this section, then such excess shall be used by the district either to redeem the bonds or notes previously issued or shall be remitted to the general fund of this state. The bonds and any interest coupons issued under the authority of this article shall never constitute an indebtedness of the municipality issuing the same within the meaning of any constitutional provision or statutory limitation and shall never constitute or give rise to a pecuniary liability of the municipality issuing the same. Neither shall such bond nor interest thereon be a charge against the general credit or taxing powers of the municipality and such fact shall be plainly stated on the face of each such bond. Such bonds may be executed, issued and delivered at any time and from time to time; may be in such form and denomination; may be of such tenor, must be negotiable but may be registered as to the principal thereof or as to the principal and interest thereof; may be payable in such amounts and at such time or times; may be payable at such place or places; may bear interest at such rate or rates payable at such place or places and evidenced in such manner; and may contain such provisions therein not inconsistent herewith, all as shall be provided in the proceedings of the governing body of the municipality whereunder the bonds shall be authorized to be issued. Said bonds may be sold by the governing body of the municipality at public or private sale at, above or below par, as the governing body of the municipality shall authorize.
The bonds issued pursuant to this article shall be signed by the mayor or other chief officer thereof and attested by the clerk, recorder or other official custodian of the records of said municipality and under the seal of the municipality. Any coupons attached thereto shall bear the facsimile signature of the mayor or other chief officer of the municipality. In case any of the officials whose signatures appear on the bonds or coupons shall cease to be such officers before the delivery of such bonds, such signatures shall, nevertheless, be valid and sufficient for all purposes to the same extent as if they had remained in office until such delivery.
If the proceeds of such bonds, by error of calculation or otherwise, shall be less than the cost of the downtown redevelopment district project, or if additional real or personal property is to be added to the downtown redevelopment district project or if it is determined that financing is needed for additional redevelopment expenditures, additional bonds may in like manner be issued to provide the amount of the deficiency, or to defray the cost of acquiring or financing such additional real or personal property or such redevelopment expenditures, and unless otherwise provided for in the trust agreement, mortgage or deed of trust, shall be deemed to be of the same issue, and shall be entitled to payment from the same fund, without preference or priority, and shall be of equal priority as to any security.
§8-13B-15. Security for bonds.
Unless the governing body of the municipality shall otherwise determine in the resolution authorizing the issuance of the revenue bonds under the authority of this article, there is hereby created a statutory lien upon the sub-account created pursuant to section eight of this article and all special district excise tax revenues collected for the benefit of the district pursuant to section eleven-a, article ten, chapter eleven of this code, for the purpose of securing the principal of said bonds and the interest thereon. The principal of and interest on any bonds issued under the authority of this article shall be secured by a pledge of the special district excise tax revenues derived from the downtown redevelopment district project by the governing body of the municipality issuing such bonds to the extent provided in the resolution adopted by the governing body of the municipality authorizing the issuance of the bonds. In the discretion and at the option of the municipality, such revenue bonds may also be secured by a trust indenture by and between the municipality and a corporate trustee, which may be a trust company or bank having trust powers, within or without the State of West Virginia. The governing body may authorize the issuance of such revenue bonds by resolution. The resolution authorizing the revenue bonds and fixing the details thereof may provide that such trust indenture may contain such provisions for the protection and enforcing the rights and remedies of the bondholders as may be reasonable and proper, not in violation of law, including covenants setting forth the duties of the municipality in relation to the construction, acquisition or financing of a downtown redevelopment district project, or part thereof, or an addition thereto, and the improvement, repair, maintenance and insurance thereof, and for the custody, safeguarding and application of all moneys, and may provide that the downtown redevelopment district project shall be constructed and paid for under the supervision and approval of the consulting engineers or architects employed and designated by the governing body or, if directed by the governing body in the resolution, by the district board, and satisfactory to the purchasers of the bonds, their successors, assigns or nominees, who may require the security given by any contractor or any depository of the proceeds of the bonds or the revenues received from the downtown redevelopment district project be satisfactory to such purchasers, their successors, assigns or nominees. Such indenture may set forth the rights and remedies of the bondholders, the municipality or such trustee, and said indenture may provide for accelerating the maturity of the revenue bonds, at the option of the bondholders or the governmental body issuing the same, upon default in the payment of the amounts due under the bonds. The governing body may also provide by resolution and in such trust indenture for the payment of the proceeds of the sale of the bonds and the revenues from the downtown redevelopment district project to such depository as it may determine, for the custody and investment thereof and for the method of distribution thereof, with such safeguards and restrictions as it may determine to be necessary or advisable for the protection thereof and upon the filing of a certified copy of such resolution or of the indenture for record in the office of the clerk of the county commission of the county in which a downtown redevelopment district project is located, the same shall have the same effect, as to notice, as the recordation of a deed of trust or other recordable instrument. In the event that more than one such certified resolution or indenture is so recorded, the security interest granted by the first such recorded resolution or indenture shall have priority in the same manner as an earlier filed deed of trust except to the extent such earlier recorded resolution or indenture provides otherwise.
In addition to or in lieu of the indenture provided for hereinabove the principal of and interest on said bonds may, but need not, be secured by a mortgage or deed of trust covering all or any part of the downtown redevelopment district project from which the revenues so pledged may be derived, and the same may be secured by an assignment or pledge of the income received from the downtown redevelopment district project. The proceedings under which such bonds are authorized to be issued, when secured by a mortgage or deed of trust, may contain the same terms, conditions and provisions provided for herein when an indenture is entered into between the governing body and a trustee and any such mortgage or deed of trust may contain any agreements and provisions customarily contained in instruments securing bonds, including, without limiting the generality of the foregoing, provisions respecting the fixing and collection of revenues from the downtown redevelopment district project covered by such proceedings or mortgage, the terms to be incorporated in any lease, sale or financing agreement with respect to such downtown redevelopment district project, the improvement, repair, maintenance and insurance of such downtown redevelopment district project, the creation and maintenance of special funds from the revenues received from the downtown redevelopment district project and the rights and remedies available in event of default to the bondholders, the governing body, or to the trustee under an agreement, indenture, mortgage or deed of trust, all as the governing body shall deem advisable and as shall not be in conflict with the provisions of this article or any existing law: Provided, That in making any such agreements or provisions a municipality shall not have the power to incur original indebtedness by indenture, ordinance, resolution, mortgage or deed of trust, except with respect to the downtown redevelopment district project and the application of the revenues therefrom, and shall not have the power to incur a pecuniary liability or a charge upon its general credit or against its taxing powers unless approved by the voters in accordance with article one, chapter thirteen of this code, or as otherwise permitted by the Constitution of this State. The proceedings authorizing any bonds hereunder and any indenture, mortgage or deed of trust securing such bonds may provide that, in the event of default in payment of the principal of or the interest on such bonds or in the performance of any agreement contained in such proceedings, indenture, mortgage or deed of trust, such payment and performance may be enforced by the appointment of a receiver in equity with power to charge and collect rents or other amounts and to apply the revenues from the downtown redevelopment district project in accordance with such proceedings or the provisions of such agreement, indenture, mortgage or deed of trust. Any such agreement, indenture, mortgage or deed of trust may provide also that, in the event of default in such payment or the violation of any agreement contained in the mortgage or deed of trust, the agreement, indenture, mortgage or deed of trust may be foreclosed either by sale at public outcry or by proceedings in equity and may provide that the holder or holders of any of the bonds secured thereby may become the purchaser at any foreclosure sale, if the highest bidder therefor. No breach of any such agreement, indenture, mortgage or deed of trust shall impose any pecuniary liability upon a municipality or any charge upon its general credit or against its taxing powers.
§8-13B-16. Redemption of bonds.
The revenue bonds issued pursuant to this article may contain a provision therein to the effect that they, or any of them, may be called for redemption at any time prior to maturity by the municipality, and at such redemption prices, or premiums, which terms shall be stated in the bond.
§8-13B-17. Refunding bonds.
Any bonds issued hereunder and at any time outstanding may at any time and from time to time be refunded by a municipality by the issuance of its refunding bonds in such amount as the governing body may deem necessary to refund the principal of the bonds so to be refunded, together with any unpaid interest thereon; to make any improvements or alterations in the downtown redevelopment district project; and any premiums and commissions necessary to be paid in connection therewith. Any such refunding may be effected whether the bonds to be refunded shall have then matured or shall thereafter mature, either by sale of the refunding bonds and the application of the proceeds thereof for the redemption of the bonds to be refunded thereby, or by exchange of the refunding bonds for the bonds to be refunded thereby: Provided, That the holders of any bonds so to be refunded shall not be compelled without their consent to surrender their bonds for payment or exchange prior to the date on which they are payable or, if they are called for redemption, prior to the date on which they are by their terms subject to redemption. Any refunding bonds issued under the authority of this article shall be subject to the provisions contained in section fourteen of this article and shall be secured in accordance with the provisions of section fifteen of this article.
§8-13B-18. Use of proceeds from sale of bonds.
The proceeds from the sale of any bonds issued under authority of this article shall be applied only for the purpose for which the bonds were issued: Provided, That any accrued interest received in any such sale shall be applied to the payment of the interest on the bonds sold: Provided, however, That if for any reason any portion of such proceeds may not be needed for the purpose for which the bonds were issued, then such unneeded portion of said proceeds may be applied to the purchase of bonds for cancellation or payment of the principal of or the interest on said bonds, or held in reserve for the payment thereof. The costs that may be paid with the proceeds of the bonds include all redevelopment costs described in section five of this article and may also include but not be limited to the following: The cost of acquiring any real estate deemed necessary, the actual cost of the construction of any part of a downtown redevelopment district project which may be constructed, including architects', engineers', financial or other consultants' and legal fees, the purchase price or rental of any part of a downtown redevelopment district project that may be acquired by purchase or lease, all expense incurred in connection with the authorization, sale and issuance of the bonds to finance such acquisition, and the interest on such bonds for a reasonable time prior to construction, during construction, and for not exceeding twelve months after completion of construction and any other costs and expenses reasonably necessary in the establishment and acquisition of such downtown redevelopment district project and the financing thereof.
§8-13B-19. Bonds made legal investments.
Bonds issued under the provisions of this article shall be legal investments for banks, building and loan associations, and insurance companies organized under the laws of this State and for a business development corporation organized pursuant to chapter thirty-one, article fourteen of this code.
§8-13B-20. Exemption from taxation.
The revenue bonds issued pursuant to this article and the income therefrom shall be exempt from taxation except inheritance, estate and transfer taxes; and the real and personal property which a municipality or district board may acquire pursuant to the provisions of this article, shall be exempt from taxation by the State, or any county, municipality, or other levying body, as public property, so long as the same is owned by such municipality or district board.

ARTICLE 10. PROCEDURE AND ADMINISTRATION.
§11-10-5s. Disclosure of certain taxpayer information.
(a) Purpose. - The Legislature hereby recognizes the importance of confidentiality of taxpayer information as a protection of taxpayers' privacy rights and to enhance voluntary compliance with the tax law. The Legislature also recognizes the citizens' right to accountable and efficient state government. To accomplish these ends, the Legislature hereby creates certain exceptions to the general principle of confidentiality of taxpayer information.
(b) Exceptions to confidentiality.
(1) Notwithstanding any provision in this code to the contrary, the tax commissioner shall publish in the state register the name and address of every taxpayer, and the amount, by category, of any credit asserted on a tax return under articles thirteen-c, thirteen-d, thirteen-e, thirteen-f, thirteen-g, and thirteen-h thirteen-q, thirteen-r and thirteen-s of this chapter and article one, chapter five-e of this code. for any tax year beginning on or after the first day of July, one thousand nine hundred ninety-one. The categories by dollar amount of credit received shall be as follows:
(A) More than $1.00, but not more than $50,000;
(B) More than $50,000, but not more than $100,000;
(C) More than $100,000, but not more than $250,000;
(D) More than $250,000, but not more than $500,000;
(E) More than $500,000, but not more than $1,000,000; and
(F) More than $1,000,000.
(2) Notwithstanding any provision in this code to the contrary, the tax commissioner shall publish in the state register the following information regarding any compromise of a pending civil tax case that occurs on or after the effective date of this section in which the tax commissioner is required to seek the written recommendation of the attorney general and the attorney general has not recommended acceptance of such the compromise or when the tax commissioner compromises any civil tax case for an amount that is more than two hundred fifty thousand dollars less than the assessment of tax owed made by the tax commissioner:
(A) The names and addresses of taxpayers that are parties to such the compromise;
(B) A summary of such the compromise;
(C) Any written advice or recommendation rendered by the attorney general regarding such the compromise; and
(D) Any written advice or recommendation rendered by the tax commissioner's staff.
Under no circumstances may the tax return of the taxpayer nor any other information which would otherwise be confidential under any other provisions of law be disclosed pursuant to the provisions of this subsection.
(3) Notwithstanding any provision in this code to the contrary, the tax commissioner may disclose any relevant return information to the prosecuting attorney for the county in which venue lies for a criminal tax offense when there is reasonable cause, based upon and substantiated by such information, to believe that a criminal tax law has been or is being violated.
(4) Notwithstanding any provision in this code to the contrary, the tax commissioner may enter into written exchange of information agreements with the commissioners of labor, employment security and workers' compensation to disclose and receive return information: Provided, That the tax commissioner may promulgate rules pursuant to chapter twenty-nine-a of this code regarding further agencies with which written exchange of information agreements may be sought: Provided, however, That the tax commissioner may not promulgate emergency rules regarding further agencies with which written exchange of information agreements may be sought. Such The agreements shall be published in the state register and shall only be for the purpose of facilitating premium collection, tax collection and facilitating licensure requirements directly enforced, administered or collected by the respective agencies. The provisions of this subsection shall not be construed to preclude or limit disclosure of tax information authorized by other provisions of this code. Any confidential return information so disclosed shall remain confidential in the hands of such the other division to the extent provided by section five-d of this article and by other applicable federal or state laws.
(5) Notwithstanding any provision of this code to the contrary, the tax commissioner may enter into a written agreement with the state treasurer to disclose to the state treasurer the following business registration information:
(1) The names, addresses and federal employer identification numbers of businesses which have registered to do business in West Virginia; and
(2) the type of business activity and organization of those businesses. Disclosure of such this information shall begin as soon as practicable after the effective date of this subsection and may be used only for the purpose of recovery and disposition of unclaimed property in accordance with the provisions of article eight, chapter thirty-six of this code. The provisions of this subsection shall not be construed to preclude or limit disclosure of tax information authorized by other provisions of this code. Any confidential return information disclosed hereunder or thereunder shall otherwise remain confidential to the extent provided by section five-d of this article and by other applicable federal or state laws.
(c) Tax expenditure reports. - Beginning on the fifteenth day of January, one thousand nine hundred ninety-two and every fifteenth day of January thereafter, the governor shall submit to the president of the Senate and the speaker of the House of Delegates a tax expenditure report. Such This report shall expressly identify all tax expenditures. Within three-year cycles, such the reports shall be considered together to analyze all tax expenditures by describing the annual revenue loss and benefits of the tax expenditure based upon information available to the tax commissioner. For purposes of this section, the term "tax expenditure" shall mean a provision in the tax laws administered under this article, including, but not limited to, exclusions, deductions, tax preferences, credits and deferrals designed to encourage certain kinds of activities or to aid taxpayers in special circumstances: Provided, That the tax commissioner shall promulgate rules setting forth the procedure by which he or she will compile such the reports and setting forth a priority for the order in which the reports will be compiled according to type of tax expenditure.
(d) Federal and state return information confidential. - Notwithstanding any other provisions of this section or of this code, no return information made available to the tax commissioner by the Internal Revenue Service or department or agency of any other state may be disclosed to another person in any manner inconsistent with the provisions of Section 6103 of the Internal Revenue Code of 1986, as amended, or of such the other states' confidentiality laws.

ARTICLE 10. PROCEDURE AND ADMINISTRATION

§11-10-11a. Administration of special district excise tax; commission authorized.

(a) Any municipality which, pursuant to section eleven, article thirteen-b, chapter eight of this code, imposes a special district excise tax, shall, by express provision in the ordinance imposing that tax, authorize the state tax commissioner to administer, assess, collect and enforce that tax on behalf of and as its agent. The municipality shall make such authorization by the adoption of a provision in its special district excise tax ordinance stating its purpose and referring to this section, and providing that such ordinance shall be effective on the first day of a month at least sixty days after its adoption. A certified copy of such ordinance shall be forwarded to the tax commissioner so that it will be received within five days after its adoption.
(b) Any special district excise tax administered under this section shall be administered and collected by the tax commissioner in the same manner and subject to the same interest, additions to tax and penalties as provided for the tax imposed in article fifteen of this chapter.
(c) All special district excise tax moneys collected by the tax commissioner under this section shall be paid into the state treasury to the credit of each municipality's sub-account in the downtown redevelopment district fund created pursuant to section eight, article thirteen-b, chapter eight of this code. Such special district excise tax moneys shall be credited to the sub- account of each particular municipality levying a special district excise tax being administered under this section. The credit shall be made to the sub-account of the municipality in which the taxable sales were made and services rendered as shown by the records of the tax commissioner and certified by him or her monthly to the state treasurer, namely, the location of each place of business of every vendor collecting and paying the tax to the tax commissioner without regard to the place of possible use by the purchaser.
(d) As soon as practicable after the special district excise tax moneys have been paid into the state treasury in any month for the preceding reporting period, the district board may issue a requisition to the auditor requesting issuance of a state warrant for the proper amount in favor of each municipality entitled to the monthly remittance of its special district excise tax moneys. Upon receipt of the requisition, the auditor shall issue his warrant on the state treasurer for the funds requested, and the state treasurer shall pay the warrant out of the sub-account. If errors are made in any such payment, or adjustments are otherwise necessary, whether attributable to refunds to taxpayers, or to some other fact, the errors shall be corrected and adjustments made in the payments for the next six months as follows: one-sixth of the total adjustment shall be included in the payments for the next six months. In addition, the payment shall include a refund of amounts erroneously not paid to the municipality and not previously remitted during the three years preceding the discovery of the error. A correction and adjustment in payments described in this subsection due to the misallocation of funds by the vendor shall be made within three years of the date of the payment error.
(e) Notwithstanding any other provision of this code to the contrary, the tax commissioner shall deduct, and retain for the benefit of his office for expenditure pursuant to appropriation of the Legislature, from each payment into the state treasury as provided in subsection (c) of this section, one percent thereof as a commission to compensate his or her office for the discharge of the duties described in this section.

ARTICLE 13C. BUSINESS INVESTMENT AND JOBS EXPANSION TAX CREDIT.
§11-13C-16. Termination of credit; effective date.
(a) Notwithstanding any other provision of this article to the contrary, no entitlement to any tax credit under this article may result from, and no credit is available to any taxpayer for, investment placed in service or use after the thirty-first day of December, two thousand two.
(b) Notwithstanding the provisions of subsection (a) of this section, the provisions of sections one through fifteen of this article continue to apply to taxpayers that have gained entitlement to the credit pursuant to the placement of qualified investment into service or use prior to the first day of January, two thousand three.
(c) Transition rules. -- The general rule stated in subsection (a) of this section does not apply:
(1) To qualified investment property placed in service or use prior to the first day of January, two thousand three.
(2) To property purchased or leased for business expansion that is placed in service or use on or after the first day of January, two thousand three, if at least one of the following clauses applies to the property:
(A) The new or expanded business facility was constructed, reconstructed or erected, pursuant to a written construction contract executed prior to the first day of January, two thousand three, as limited to the provisions of the contract as of that date then binding on the taxpayer, but only to the extent the new or expanded business facility is placed in service or use prior to the first day of January, two thousand four.
(B) The new or expanded business facility that is part of a project described in subdivision (1), subsection (a), section four-b of this article, was constructed, reconstructed or erected, pursuant to a written construction contract executed prior to the first day of January, two thousand three, as limited to the provisions of the contract as of that date then binding on the taxpayer: Provided, That only that portion of the contract price attributable to that percentage of the construction contract completed prior to the first day of January, two thousand four, (determined under principles set forth in section 460(b) of the Internal Revenue Code of 1986, as in effect before the first day of January, two thousand three), which is placed in service or use prior to the first day of January, two thousand four, may be treated as property purchased for business expansion under section six of this article.
(C) The new or expanded business facility was purchased or leased pursuant to a written contract executed prior to the first day of January, two thousand three, as limited to the provisions then binding on the taxpayer as of that date, but only to the extent the new or expanded business facility is placed in service or use prior to the first day of January, two thousand four.
(D) The machinery or equipment or other tangible personal property purchased or leased for business expansion at a new or expanded business facility was purchased or leased by the taxpayer pursuant to a written contract to purchase or lease identifiable tangible personal property executed before the first day of January, two thousand three, as limited to the provisions of the written contract then binding on the taxpayer, but only to the extent the tangible personal property purchased or leased under the contract is placed in service or use before the first day of January, two thousand four.

(c) Notice of election required. - Any person intending to claim credit under one or more of the transition rules provided in subsection (b) of this section shall file written notice of his or her intention with the tax commissioner on or before the thirty- first day of December, two thousand two. In the case of a multiparticipant project, this notice may be filed by the managing project participant on behalf of all participants in the project. Notice is to be in a form prescribed by the tax commissioner and all information required by the form is to be provided.
(d) Failure to file notice. -- If any person fails to timely file the notice required by subsection (c) of this section, that person is precluded from claiming credit under article thirteen-c for investment property placed in service or use after the thirty- first day of December, two thousand two, and may claim credit under article thirteen-q of this chapter to the extent credit is allowable under that article.

ARTICLE 13D. TAX CREDITS FOR INDUSTRIAL EXPANSION AND
REVITALIZATION, RESEARCH AND DEVELOPMENT
PROJECTS, CERTAIN HOUSING DEVELOPMENT PROJECTS,

MANAGEMENT INFORMATION SERVICES FACILITIES,

INDUSTRIAL FACILITIES PRODUCING COAL-BASED
LIQUIDS USED TO PRODUCE SYNTHETIC FUELS, AND
AEROSPACE INDUSTRIAL FACILITY INVESTMENTS.

§11-13D-10. Termination of credit, exception for electricity producers, preservation of entitlements.

(a) Except for persons taxable under section two-o, article thirteen of this chapter as described in subsection (b) of this section and persons described in subsection (c) of this section, no credit is available to any taxpayer under this article after the thirty-first day of December, two thousand two.
(b) Persons taxable under section two-o, article thirteen of this chapter that make eligible investment that qualifies for credit in accordance with the provisions of subdivision (e), section three of this article in property used in the business activity taxable under section two-o, article thirteen of this chapter, are entitled to the credit determined under subdivision (e), section three of this article, in accordance with the requirements and limitations of this article, without regard to whether such investment is made or credit claimed after the thirty- first day of December, two thousand two.
(c) Taxpayers who gained entitlement to any tax credit pursuant to the terms of this article prior to the first day of January, two thousand three, retain that entitlement, and may apply the credit in due course pursuant to the requirements and limitations of this article until the original ten-year entitlement has been exhausted or otherwise terminated.
ARTICLE 13N. TAX CREDIT FOR NEW STEEL MANUFACTURING OPERATIONS AFTER JULY 1, 1998.
§11-13N-4. Amount of credit allowed; expiration of the credit.
(a) Credit allowable. -- The amount of annual credit allowable under this article to an eligible taxpayer shall be is two hundred fifty dollars for each new job at a new value-added steel product manufacturing facility located in this state, or at a new value-added steel product line of an existing manufacturing facility located in this state, that is filled by a full-time employee of the eligible taxpayer during the taxable year, subject to the following:
(1) When the new value-added steel product manufacturing facility, or the new steel product line of an existing value-added steel product manufacturing facility, is in operation for less than twelve months of the taxable year in which it is placed in service, the credit allowed by subsection (a) of this section shall be prorated by the ratio that the number of months in the taxpayer's taxable year during which the new value-added steel products facility, or the new products line of an existing value-added steel product manufacturing facility, was in service bears to twelve.
(2) When the eligible taxpayer stops manufacturing value-added steel products at the new value-added steel product manufacturing facility, or at the new steel product line of an existing value-added steel product manufacturing facility, during the taxable year, the credit allowed by subsection (a) of this section shall be prorated by the ratio that the number of months in the taxpayer's taxable year during which the new value-added steel products facility, or the new products line of an existing value-added steel product manufacturing facility, was in operation manufacturing value-added steel product bears to twelve.
(3) When determining the number of full-time employees who fill new jobs at the new value-added steel product manufacturing facility located in this state, or who fill new jobs at a new value-added steel product line of an existing manufacturing facility located in this state, the eligible taxpayer shall may not include any position occupied by any employee of the eligible taxpayer, or of a related person, which existed in this state as of the first day of the second calendar month preceding the calendar month in which the new value-added steel product manufacturing facility, or a new value-added steel product line at an existing value-added steel products manufacturing facility first becomes operational, whether such the positions are filled by permanent, seasonal, temporary or part-time employees.
(4) The amount of credit allowable each taxable year shall be is calculated annually based upon the number of new jobs filled by full-time employees during the taxable year: Provided, That the credit provided for in this article may only be taken one time for each new job created, and once claimed in a tax year for a new job the credit may not be claimed in a subsequent year for that position.
(b) Expiration of credit. -- This credit shall expire expires on the first day of July, two thousand five two. When the first day of July in the year two thousand five two falls during the taxable year of the eligible taxpayer, the amount of credit allowable for that taxable year shall be limited to that portion of the amount of credit that would have been allowable had the credit not expired multiplied by the ratio of the number of months during taxpayers taxable year ending before the first day of July, two thousand five two, bears to twelve.
ARTICLE 13Q. ECONOMIC OPPORTUNITY TAX CREDIT.
§11-13Q-1. Short title.
This article may be cited as the "West Virginia Economic Opportunity Tax Credit Act."
§11-13Q-2. Legislative finding and purpose.
The Legislature finds that the encouragement of economic opportunity in this state is in the public interest and promotes the general welfare of the people of this state. In order to encourage greater capital investment in businesses in this state and thereby increase economic opportunity in this state, there is hereby enacted the economic opportunity tax credit.
§11-13Q-3. Definitions.
(a) General. -- When used in this article, or in the administration of this article, terms defined in subsection (b) have the meanings ascribed to them by this section, unless a different meaning is clearly required by either the context in which the term is used, or by specific definition, in this article.
(b) Terms defined.
(1) Business. -- The term "business" means any activity which is engaged in by any person in this state which is taxable under article thirteen, twenty-one, twenty-three or twenty-four of this chapter (or any combination of those articles of this chapter).
(2) Business expansion. -- The term "business expansion" means capital investment in a new or expanded business facility in this state.
(3) Business facility. -- The term "business facility" means any factory, mill, plant, refinery, warehouse, building or complex of buildings located within this state, including the land on which it is located, and all machinery, equipment and other real and personal property located at or within the facility, used in connection with the operation of the facility, in a business that is taxable in this state, and all site preparation and start-up costs of the taxpayer for the business facility which it capitalizes for federal income tax purposes.
(4) Commissioner or tax commissioner. -- The terms "commissioner" and "tax commissioner" are used interchangeably herein and mean the tax commissioner of the state of West Virginia, or his or her designee.
(5) Compensation. -- The term "compensation" means wages, salaries, commissions and any other form of remuneration paid to employees for personal services.
(6) Controlled group. -- The term "controlled group" means one or more chains of corporations connected through stock ownership with a common parent corporation if stock possessing at least fifty percent of the voting power of all classes of stock of each of the corporations is owned directly or indirectly by one or more of the corporations; and the common parent owns directly stock possessing at least fifty percent of the voting power of all classes of stock of at least one of the other corporations.
(7) Corporation. -- The term "corporation" means any corporation, joint-stock company or association, and any business conducted by a trustee or trustees wherein interest or ownership is evidenced by a certificate of interest or ownership or similar written instrument.
(8) Designee. -- The term "designee" in the phrase "or his designee," when used in reference to the commissioner, means any officer or employee of the state tax department duly authorized by the commissioner directly, or indirectly by one or more redelegations of authority, to perform the functions mentioned or described in this article.
(9) Eligible taxpayer. -- The term "eligible taxpayer" means any person who makes qualified investment in a new or expanded business facility located in this state and creates at least the required number of new jobs and who is subject to any of the taxes imposed by articles thirteen, twenty-one, twenty-three and twenty-four of this chapter (or any combination of those articles). "Eligible taxpayer" shall also include an affiliated group of taxpayers if the group elects to file a consolidated corporation net income tax return under article twenty-four of this chapter.
(10) Expanded facility. -- The term "expanded facility" means any business facility (other than a new or replacement business facility) resulting from the acquisition, construction, reconstruction, installation or erection of improvements or additions to existing property if the improvements or additions are purchased on or after the first day of January, two thousand three, but only to the extent of the taxpayer's qualified investment in the improvements or additions.
(11) Includes and including. -- The terms "includes" and "including," when used in a definition contained in this article, shall not be deemed to exclude other things otherwise within the meaning of the term defined.
(12) Leased property. -- The term "leased property" does not include property which the taxpayer is required to show on its books and records as an asset under generally accepted principles of financial accounting. If the taxpayer is prohibited from expensing the lease payments for federal income tax purposes, the property shall be treated as purchased property under this section.
(13) New business facility. -- The term "new business facility" means a business facility which satisfies all the requirements of paragraphs (A), (B), (C) and (D) of this subdivision.
(A) The facility is employed by the taxpayer in the conduct of a business the net income of which is or would be taxable under article twenty-one or twenty-four of this chapter. The facility shall not be considered a new business facility in the hands of the taxpayer if the taxpayer's only activity with respect to the facility is to lease it to another person or persons.
(B) The facility is purchased by, or leased to, the taxpayer on or after the first day of January, two thousand three.
(C) The facility was not purchased or leased by the taxpayer from a related person. The commissioner may waive this requirement if the facility was acquired from a related party for its fair market value and the acquisition was not tax motivated.
(D) The facility was not in service or use during the ninety days immediately prior to transfer of the title to the facility, or prior to the commencement of the term of the lease of the facility: Provided, That this ninety-day period may be waived by the commissioner if the commissioner determines that persons employed at the facility may be treated as "new employees" as that term is defined in this subsection.
(14) New employee. -
(A) The term "new employee" means a person residing and domiciled in this state, hired by the taxpayer to fill a position or a job in this state which previously did not exist in taxpayer's business enterprise in this state prior to the date on which the taxpayer's qualified investment is placed in service or use in this state. In no case may the number of new employees directly attributable to the investment for purposes of this credit exceed the total net increase in the taxpayer's employment in this state: Provided, That the commissioner may require that the net increase in the taxpayer's employment in this state be determined and certified for the taxpayer's controlled group: Provided, however, That persons filling jobs saved as a direct result of taxpayer's qualified investment in property purchased or leased for business expansion may be treated as new employees filling new jobs if the taxpayer certifies the material facts to the commissioner and the commissioner expressly finds that:
(i) But for the new employer purchasing the assets of a business in bankruptcy under chapter seven or eleven of the United States bankruptcy code and the new employer making qualified investment in property purchased or leased for business expansion, the assets would have been sold by the United States bankruptcy court in a liquidation sale and the jobs so saved would have been lost; or
(ii) But for taxpayer's qualified investment in property purchased or leased for business expansion in this state, taxpayer would have closed its business facility in this state and the employees of the taxpayer located at the facility would have lost their jobs: Provided, That the commissioner may not make this certification unless the commissioner finds that the taxpayer is insolvent as defined in 11 U.S.C. §101(32) or that the taxpayer's business facility was destroyed, in whole or in significant part, by fire, flood or other act of God.
(B) A person shall be deemed to be a "new employee" only if the person's duties in connection with the operation of the business facility are on:
(i) A regular, full-time and permanent basis.
(I) "Full-time employment" means employment for at least one hundred forty hours per month at a wage not less than the prevailing state or federal minimum wage, depending on which minimum wage provision is applicable to the business;
(II) "Permanent employment" does not include employment that is temporary or seasonal and therefore the wages, salaries and other compensation paid to the temporary or seasonal employees will not be considered for purposes of sections five and seven of this article; or
(ii) A regular, part-time and permanent basis: Provided, That the person is customarily performing the duties at least twenty hours per week for at least six months during the taxable year.
(15) New job. -- The term "new job" means a job which did not exist in the business of the taxpayer in this state prior to the taxpayer's qualified investment being made, and which is filled by a new employee.
(16) New property. -- The term "new property" means:
(A) Property, the construction, reconstruction or erection of which is completed on or after the first day of January, two thousand three, and placed in service or use after that date; and
(B) Property leased or acquired by the taxpayer that is placed in service or use in this state on or after the first day of January, two thousand three, if the original use of the property commences with the taxpayer and commences after that date.
(17) Original use. -- The term "original use" means the first use to which the property is put, whether or not the use corresponds to the use of the property by the taxpayer.
(18) Partnership and partner. -- The term "partnership" includes a syndicate, group, pool, joint venture or other unincorporated organization through or by means of which any business, financial operation or venture is carried on, and which is not a trust or estate, a corporation or a sole proprietorship. The term "partner" includes a member in such a syndicate, group, pool, joint venture or organization.
(19) Person. -- The term "person" includes any natural person, corporation or partnership.
(20) Property purchased or leased for business expansion.
(A) Included property. -- Except as provided in paragraph (B), the term "property purchased or leased for business expansion" means real property and improvements thereto, and tangible personal property, but only if the real or personal property was constructed, purchased, or leased and placed in service or use by the taxpayer, for use as a component part of a new or expanded business facility as defined in this section, which is located within West Virginia. This term includes only:
(1) Real property and improvements thereto having a useful life of four or more years, placed in service or use on or after the first day of January, two thousand three, by the taxpayer.
(2) Real property and improvements thereto, acquired by written lease having a primary term of ten or more years and placed in service or use by the taxpayer on or after the first day of January, two thousand three.
(3) Tangible personal property placed in service or use by the taxpayer on or after the first day of January, two thousand three, with respect to which depreciation, or amortization in lieu of depreciation, is allowable in determining the personal or corporation net income tax liability of the business taxpayer under article twenty-one or twenty-four of this chapter, and which has a useful life, at the time the property is placed in service or use in this state, of four or more years.
(4) Tangible personal property acquired by written lease having a primary term of four years or longer, that commenced and was executed by the parties thereto on or after the first day of January, two thousand three, if used as a component part of a new or expanded business facility, shall be included within this definition.
(5) Tangible personal property owned or leased, and used by the taxpayer at a business location outside this state which is moved into this state on or after the first day of January, two thousand three, for use as a component part of a new or expanded business facility located in this state: Provided, That if the property is owned, it must be depreciable or amortizable personal property for income tax purposes, and have a useful life of four or more years remaining at the time it is placed in service or use in this state, and if the property is leased, the primary term of the lease remaining at the time the leased property is placed in service or use in this state, must be four or more years:
(B) Excluded property. - The term "property purchased or leased for business expansion" does not include:
(i) Property owned or leased by the taxpayer and for which the taxpayer was previously allowed tax credit under article thirteen-c, thirteen-d or thirteen-e of this chapter, or the tax credits allowed by this article.
(ii) Property owned or leased by the taxpayer and for which the seller, lessor, or other transferor, was previously allowed tax credit under article thirteen-c, thirteen-d or thirteen-e of this chapter, or the tax credits allowed by this article.
(iii) Repair costs, including materials used in the repair, unless for federal income tax purposes the cost of the repair must be capitalized and not expensed.
(iv) Airplanes.
(v) Property which is primarily used outside this state, with use being determined based upon the amount of time the property is actually used both within and without this state.
(vi) Property which is acquired incident to the purchase of the stock or assets of the seller, unless for good cause shown, the commissioner consents to waiving this requirement.
(vii) Natural resources in place.
(viii) Purchased or leased property, the cost or consideration for which cannot be quantified with any reasonable degree of accuracy at the time the property is placed in service or use: Provided, That when the contract of purchase or lease specifies a minimum purchase price or minimum annual rent the amount thereof shall be used to determine the qualified investment in the property under section eight of this article if the property otherwise qualifies as property purchased or leased for business expansion.
(21) Purchase. -- The term "purchase" means any acquisition of property, but only if:
(A) The property is not acquired from a person whose relationship to the person acquiring it would result in the disallowance of deductions under section 267 or 707 (b) of the United States Internal Revenue Code of 1986, as amended, and in effect on the first day of January, two thousand three.
(B) The property is not acquired by one component member of a controlled group from another component member of the same controlled group. The commissioner can waive this requirement if the property was acquired from a related party for its then fair market value; and
(C) The basis of the property for federal income tax purposes, in the hands of the person acquiring it, is not determined:
(i) In whole or in part by reference to the federal adjusted basis of the property in the hands of the person from whom it was acquired; or
(ii) Under Section 1014 (e) of the United States Internal Revenue Code of 1986, as amended, and in effect on the first day of January, two thousand two.
(22) Qualified activity. -- The term "qualified activity" means any business or other activity subject to any of the taxes imposed by article thirteen, twenty-one, twenty-three or twenty-four of this chapter (or any combination of those articles of this chapter), but does not include the activity of severance or production of natural resources.
(23) Related person. -- The term "related person" means:
(A) A corporation, partnership, association or trust controlled by the taxpayer;
(B) An individual, corporation, partnership, association or trust that is in control of the taxpayer;
(C) A corporation, partnership, association or trust controlled by an individual, corporation, partnership, association or trust that is in control of the taxpayer; or
(D) A member of the same controlled group as the taxpayer.
For purposes of this section, "control," with respect to a corporation, means ownership, directly or indirectly, of stock possessing fifty percent or more of the total combined voting power of all classes of the stock of the corporation entitled to vote. "Control," with respect to a trust, means ownership, directly or indirectly, of fifty percent or more of the beneficial interest in the principal or income of the trust. The ownership of stock in a corporation, of a capital or profits interest in a partnership or association or of a beneficial interest in a trust shall be determined in accordance with the rules for constructive ownership of stock provided in section 267 (c) of the United States Internal Revenue Code of 1986, as amended, other than paragraph (3) of that section.
(24) Replacement facility. -- The term "replacement facility" means any property (other than an expanded facility) that replaces or supersedes any other property located within this state that:
(A) The taxpayer or a related person used in or in connection with any activity for more than two years during the period of five consecutive years ending on the date the replacement or superseding property is placed in service by the taxpayer; or
(B) Is not used by the taxpayer or a related person in or in connection with any qualified activity for a continuous period of one year or more commencing with the date the replacement or superseding property is placed in service by the taxpayer.
(25) Research and development. -- The term "research and development" means systematic scientific, engineering or technological study and investigation in a field of knowledge in the physical, computer or software sciences, often involving the formulation of hypotheses and experimentation, for the purpose of revealing new facts, theories or principles, or increasing scientific knowledge, which may reveal the basis for new or enhanced products, equipment of manufacturing processes.
(A) Research and development includes, but is not limited to, design, refinement and testing of prototypes of new or improved products, or design, refinement and testing of manufacturing processes before commercial sales relating thereto have begun. For purposes of this section, commercial sales includes, but is not limited to, sales of prototypes or sales for market testing.
(B) Research and development does not include:
(i) Market research;
(ii) Sales research;
(iii) Efficiency surveys;
(iv) Consumer surveys;
(v) Product market testing;
(vi) Product testing by product consumers or through consumer surveys for evaluation of consumer product performance or consumer product usability;
(vii) The ordinary testing or inspection of materials or products for quality control (quality control testing);
(viii) Management studies;
(ix) Advertising;
(x) Promotions;
(xi) The acquisition of another's patent, model, production or process or investigation or evaluation of the value or investment potential related thereto;
(xii) Research in connection with literary, historical, or similar activities;
(xiii) Research in the social sciences, economics, humanities or psychology and other nontechnical activities; and
(xiv) The providing of sales services or any other service, whether technical service or nontechnical service.
(26) Taxpayer. -- The term "taxpayer" means any person subject to any of the taxes imposed by article thirteen, twenty-one, twenty-three or twenty-four of this chapter (or any combination of those articles of this chapter).
(27) This code. -- The term "this code" means the code of West Virginia, one thousand nine hundred thirty-one, as amended.
(28) This state. -- The term "this state" means the state of West Virginia.
(29) Used property. -- The term "used property" means property acquired after the thirty-first day of December, two thousand two, that is not "new property."
§11-13Q-4. Amount of credit allowed.
(a) Credit allowed. -- Eligible taxpayers are allowed a credit against the portion of taxes imposed by this state that are attributable to and the consequence of the taxpayer's qualified investment in a new or expanded business in this state, which results in the creation of new jobs. The amount of this credit shall be determined and applied as hereinafter provided in this article.
(b) Amount of credit. -- The amount of credit allowable is determined by multiplying the amount of the taxpayer's "qualified investment" (determined under section five or eight, or both) in "property purchased or leased for business expansion" (as defined in section three) by the taxpayer's new jobs percentage (determined under section nine). The product of this calculation establishes the maximum amount of credit allowable under this article due to the qualified investment.
(c) Application of credit over ten years. -- The amount of credit allowable must be taken over a ten-year period, at the rate of one tenth of the amount thereof per taxable year, beginning with the taxable year in which the taxpayer places the qualified investment in service or use in this state, unless the taxpayer elected to delay the beginning of the ten-year period until the next succeeding taxable year. This election shall be made in the annual income tax return filed under this chapter for the taxable year in which qualified investment is first placed into service or use by the taxpayer. Once made, the election cannot be revoked. The annual credit allowance shall be taken in the manner prescribed in section seven of this article.
(d) Placed in service or use. -- For purposes of the credit allowed by this section, property is considered placed in service or use in the earlier of the following taxable years:
(1) The taxable year in which, under the taxpayer's depreciation practice, the period for depreciation with respect to the property begins; or
(2) The taxable year in which the property is placed in a condition or state of readiness and availability for a specifically assigned function.

§11-13Q-5. Credit allowed for locating corporate headquarters in this state.

(a) Credit allowed. -- A corporation that presently has its corporate headquarters located outside this state that relocates its corporate headquarters in this state and employs, on a full-time basis, at its new corporate headquarters location, at least fifteen people, who are domiciled in this state, is allowed credit under this article, the amount of which is determined as provided in subsection (b) of this section. The restrictions set forth in subsection (a), section nineteen of this article do not apply to the credit for corporate headquarters relocations allowed under this section.
(b) Determination of credit. -- The amount of credit allowed by subsection (a) is determined, at the election of the taxpayer:
(1) By multiplying taxpayer's adjusted qualified investment by its new jobs percentage (as determined under section nine of this article); or
(2) By multiplying taxpayer's adjusted qualified investment by ten percent.
(c) Corporate headquarters relocations after December 31, 2002. -- For purposes of corporate headquarters relocations occurring on or after the first day of January, two thousand three, and notwithstanding any other provision of this article to the contrary:
(1) New jobs created in this state by relocation of a corporate headquarters may include jobs created in this state within twelve months before or after the month in which the qualified investment in the corporate headquarters relocation is placed into service or use in this state by:
(A) Relocation or transfer of employees of the corporation or employees of a related corporation or related person from an out-of-state location to the relocated corporate headquarters in this state, who: (i) Are or become employees of the corporation within twelve months before or after the month in which the qualified investment in the corporate headquarters is placed into service or use in this state; and (ii) whose regular place of work is in the corporate headquarters, or
(B) New employees of the corporation whose regular place of work is in the corporate headquarters.
(2) Multiple year projects certified under section six of this article may be allowed for corporate headquarters relocations under this section.
(d) Application of credit. -- The credit allowed by this section is applied in the manner prescribed in section seven of this article: Provided, That the amount of corporation net income taxes against which the credit allowed by this section may be applied is the sum of the corporation net income tax due on adjusted federal taxable income allocated to this state under section seven, article twenty-four of this chapter, plus that portion of the corporation net income tax due on adjusted federal taxable income apportioned to this state under section seven, article twenty-four of this chapter, that is further apportioned to the qualified investment using the payroll factor provided in subdivision (1), subsection (h), section seven of this article or an alternative means of apportionment as prescribed by the commissioner under said section seven. For all other purposes, the credit allowed by this section is treated as credit allowed by section four of this article.
(e) Definitions. -- For purposes of this section:
(1) Adjusted qualified investment. -- The term "adjusted qualified investment" means the taxpayer's qualified investment in the corporate headquarters as determined under section eight of this article and rules of the commissioner, plus the cost of the reasonable and necessary expenses it incurred to relocate its corporate headquarters at a location in this state from its prior location outside this state.
(2) Corporate headquarters. -- The term "corporate headquarters" means the place at which the corporation has its commercial domicile and from which the business of the corporation is primarily conducted.
(3) Reasonable and necessary expenses incurred to relocate corporate headquarters. -- The phrase "reasonable and necessary expenses incurred to relocate corporate headquarters" means only those expenses incurred and paid by the corporation, to unrelated third parties, to move its corporate headquarters and its corporate headquarters employees to this state that are, upon application by the corporation, determined by the commissioner to have been both reasonable and necessary to effectuate the move.
(4) The corporation. -- For purposes of this section, the term "the corporation" means the corporation for which the corporate headquarters is relocated.
§11-13Q-6. Credit allowable for certified projects.
(a) In general. -- A multiple year project certified by the commissioner is eligible for the credit allowable by this article. A project eligible for certification under this section is one where the qualified investment under this article creates at least the required minimum number of new jobs but the qualified investment is placed in service or use over a period of up to three successive tax years: Provided, That the qualified investment is made pursuant to a written business facility development plan of the taxpayer providing for an integrated project for investment at one or more new or expanded business facilities, a copy of which must be attached to the taxpayer's application for project certification and approved by the commissioner, and the qualified investment placed in service or use during the first tax year would not have been made without the expectation of making the qualified investment placed in service or use during the next two succeeding tax years;
(b) Application for certification. -- The application for certification of a project under this section shall be filed with and approved by the commissioner prior to any credit being claimed or allowed for the project's qualified investment and new jobs created as a direct result of the qualified investment. This application shall be approved in writing and contain the information as the commissioner may require to determine whether the project should be certified as eligible for credit under this article.
(c) Taking of credit. -- The participant or participants claiming the credit for qualified investments in a certified project shall annually file with their income tax returns filed under this chapter:
(A) Certification that the participant's qualified investment property continues to be used in the project and if disposed of during the tax year, was not disposed of prior to expiration of its useful life;
(B) Certification that the new jobs created by the project's qualified investment continue to exist and are filled by persons who are residents of this state; and
(C) Any other information the commissioner requires to determine continuing eligibility to claim the annual credit allowance for the project's qualified investment.
§11-13Q-7. Application of annual credit allowance.
(a) In general. -- The aggregate annual credit allowance for the current taxable year is an amount equal to the sum of the following:
(1) The one-tenth part allowed under section four of this article for qualified investment placed into service or use during a prior taxable year; plus
(2) The one-tenth part allowed under section four of this article for qualified investment placed into service or use during the current taxable year; plus
(3) The one-tenth part allowed under section five of this article for locating corporate headquarters in this state; or the amount allowed under section ten of this article of the taxable year.
(b) Application of current year annual credit allowance. -- The amount determined under subsection (a) of this section is allowed as a credit against eighty percent of that portion of the taxpayer's state tax liability which is attributable to and the direct result of the taxpayer's qualified investment, and applied as provided in subsections (c) through (f), both inclusive, of this section, and in that order: Provided, That if the median salary of the new jobs is higher than the statewide average nonfarm payroll wage, as determined annually by the West Virginia bureau of employment programs, the amount determined under subsection (a) of this section is allowed as a credit against one hundred percent of that portion of the taxpayers state tax liability which is attributable to and the direct result of the taxpayer's qualified investment, and shall be applied, as provided in subsections (c) through (f), both inclusive, of this section, and in that order.
(c) Business and occupation taxes. -- That portion of the allowable credit attributable to qualified investment in a business or other activity subject to the taxes imposed by article thirteen of this chapter under section two-o of said article thirteen must first be applied to reduce the taxes imposed or payable under section two-o, article thirteen of this chapter, for the taxable year (determined before application of allowable credits against tax and the annual exemption). In no case may the credit allowed under this article be applied to reduce any tax imposed or payable under section two-f, or under any other section of article thirteen of this chapter except section two-o.
(1) If the taxes due under section two-o, article thirteen of this chapter are not solely attributable to and the direct result of the taxpayer's qualified investment in a business or other activity taxable under said section two-o, the amount of those taxes that are so attributable shall be determined by multiplying the amount of taxes due under said section two-o, for the taxable year (determined before application of any allowable credits against tax and the annual exemption), by a fraction, the numerator of which is all wages, salaries and other compensation paid during the taxable year to all employees of the taxpayer employed in this state, whose positions are directly attributable to the qualified investment in a business or other activity taxable under said section two-o. The denominator of the fraction shall be the wages, salaries and other compensation paid during the taxable year to all employees of the taxpayer employed in this state, whose positions are directly attributable to the business or other activity of the taxpayer that is taxable under the said article thirteen.
(2) The annual exemption allowed by section three, article thirteen of this chapter, plus any credits allowable under articles thirteen-d, thirteen-e, thirteen-r and thirteen-s of this chapter, shall be applied against and reduce only the portion of article thirteen taxes not apportioned to the qualified investment under this article: Provided, That any excess exemption or credits may be applied against the amount of article thirteen taxes apportioned to the qualified investment under this article, that is not offset by the amount of annual credit against the taxes allowed under this article for the taxable year, unless their application is otherwise prohibited by this chapter.
(d) Business franchise tax. --
(1) After application of subsection (c) of this section, any unused allowable credit is next applied to reduce the taxes imposed by said article twenty-three for the taxable year (determined after application of the credits against tax provided in section seventeen of said article, but before application of any other allowable credits against tax).
(2) If the taxes due under article twenty-three of this chapter are not solely attributable to and the direct result of the taxpayer's qualified investment in a business or other activity taxable under said article for the taxable year, the amount of the taxes which are so attributable are determined by multiplying the amount of taxes due (determined after application of the credits against tax as provided in section seventeen of article twenty- three, but before application of any other allowable credits), by a fraction, the numerator of which is all wages, salaries and other compensation paid during the taxable year to all employees of the taxpayer employed in this state, whose positions are directly attributable to the qualified investment in a business or other activity taxable under said article. The denominator of the fraction is wages, salaries and other compensation paid during the taxable year to all employees of the taxpayer employed in this state, whose positions are directly attributable to the business or other activity of the taxpayer that is taxable under said article.
(3) Any credits allowable under articles thirteen-d, thirteen-e, thirteen-r and thirteen-s of this chapter are applied against and reduce only the portion of article twenty-three taxes not apportioned to the qualified investment under this article: Provided, That any excess exemption or credits may be applied against the amount of article twenty-three taxes apportioned to the qualified investment under this article that is not offset by the amount of annual credit against those taxes allowed under this article for the taxable year, unless their application is otherwise prohibited by this chapter.
(e) Corporation net income taxes. --
(1) After application of subsections (c) and (d) of this section, any unused credit is next applied to reduce the taxes imposed by article twenty-four of this chapter for the taxable year (determined before application of allowable credits against tax).
(2) If the taxes due under article twenty-four of this chapter (determined before application of allowable credits against tax) are not solely attributable to and the direct result of the taxpayer's qualified investment, the amount of the taxes that is so attributable are determined by multiplying the amount of taxes due under article twenty-four for the taxable year (determined before application of allowable credits against tax), by a fraction, the numerator of which is all wages, salaries and other compensation paid during the taxable year to all employees of the taxpayer employed in this state whose positions are directly attributable to the qualified investment. The denominator of the fraction is the wages, salaries and other compensation paid during the taxable year to all employees of the taxpayer employed in this state.
(3) Any credits allowable under article twenty-four of this chapter are applied against and reduce only the amount of article twenty-four taxes not apportioned to the qualified investment under this article: Provided, That any excess credits may be applied against the amount of article twenty-four taxes apportioned to the qualified investment under this article that is not offset by the amount of annual credit against such taxes allowed under this article for the taxable year, unless their application is otherwise prohibited by this chapter.
(f) Personal income taxes. --
(1) If the person making the qualified investment is an electing small business corporation (as defined in section 1361 of the United States Internal Revenue Code of 1986, as amended), a partnership, a limited liability company that is treated as a partnership for federal income tax purposes or a sole proprietorship, then any unused credit (after application of subsections (c), (d) and (e) of this section) is allowed as a credit against the taxes imposed by article twenty-one of this chapter on the income from business or other activity subject to tax under article thirteen or twenty-three of this chapter or on income of a sole proprietor attributable to the business.
(2) Electing small business corporations, limited liability companies, partnerships and other unincorporated organizations shall allocate the credit allowed by this article among its members in the same manner as profits and losses are allocated for the taxable year.
(3) If the amount of taxes due under article twenty-one of this chapter (determined before application of allowable credits against tax) that is attributable to business, is not solely attributable to and the direct result of the qualified investment of the electing small business corporation, limited liability company, partnership, other unincorporated organization or sole proprietorship, the amount of the taxes that are so attributable are determined by multiplying the amount of taxes due under said article (determined before application of allowable credits against tax), that is attributable to business by a fraction, the numerator of which is all wages, salaries and other compensation paid during the taxable year to all employees of the electing small business corporation, limited liability company, partnership, other unincorporated organization or sole proprietorship employed in this state, whose positions are directly attributable to the qualified investment. The denominator of the fraction is the wages, salaries and other compensation paid during the taxable year to all employees of the taxpayer.
(4) No credit is allowed under this section against any employer withholding taxes imposed by article twenty-one of this chapter.
(g) If the wages, salaries and other compensation fraction formula provisions of subsections (c) through (f) of this section, inclusive, do not fairly represent the taxes solely attributable to and the direct result of qualified investment of the taxpayer the commissioner may require, in respect to all or any part of the taxpayer's businesses or activities, if reasonable:
(1) Separate accounting or identification; or
(2) Adjustment to the wages, salaries and other compensation fraction formula to reflect all components of the tax liability; or
(3) The inclusion of one or more additional factors that will fairly represent the taxes solely attributable to and the direct result of the qualified investment of the taxpayer and all other project participants in the businesses or other activities subject to tax; or
(4) The employment of any other method to effectuate an equitable attribution of the taxes.
In order to effectuate the purposes of this subsection, the commissioner may propose for promulgation rules, including emergency rules, in accordance with article three, chapter twenty-nine-a of this code.
(h) Unused credit. -- If any credit remains after application of subsection (b) of this section, the amount thereof is carried forward to each ensuing tax year until used or until the expiration of the third taxable year subsequent to the end of the initial ten year credit application period. If any unused credit remains after the thirteenth year, the amount thereof is forfeited. No carryback to a prior taxable year is allowed for the amount of any unused portion of any annual credit allowance.
§11-13Q-8. Qualified investment.
(a) General. -- The qualified investment in property purchased or leased for business expansion is the applicable percentage of the cost of each property purchased or leased for the purpose of business expansion which is placed in service or use in this state by the taxpayer during the taxable year.
(b) Applicable percentage. -- For the purpose of subsection (a), the applicable percentage of any property is determined under the following table:
If useful life is: The applicable percentage is:
Less than 4 years....................................0%
4 years or more but less than 6 years ..........33 1/3%
6 years or more but less than 8 years ..........66 2/3%
8 years or more ...................................100%
The useful life of any property, for purposes of this section, shall be determined as of the date the property is first placed in service or use in this state by the taxpayer, determined in accordance with such rules and requirements the tax commissioner may prescribe.
(c) Cost. -- For purposes of subsection (a), the cost of each property purchased for business expansion is determined under the following rules:
(1) Trade-ins. -- Cost does not include the value of property given in trade or exchange for the property purchased for business expansion.
(2) Damaged, destroyed or stolen property. -- If property is damaged or destroyed by fire, flood, storm or other casualty, or is stolen, then the cost of replacement property does not include any insurance proceeds received in compensation for the loss.
(3) Rental property. -
(A) The cost of real property acquired by written lease for a primary term of ten years or longer is one hundred percent of the rent reserved for the primary term of the lease, not to exceed twenty years.
(B) The cost of tangible personal property acquired by written lease for a primary term of:
(i) Four years, or longer, is one third of the rent reserved for the primary term of the lease;
(ii) Six years, or longer, is two thirds of the rent reserved for the primary term of the lease; or
(iii) Eight years, or longer, is one hundred percent of the rent reserved for the primary term of the lease, not to exceed twenty years: Provided, That in no event may rent reserved include rent for any year subsequent to expiration of the book life of the equipment, determined using the straight-line method of depreciation.
(4) Self-constructed property. -- In the case of self-constructed property, the cost thereof is the amount properly charged to the capital account for depreciation in accordance with federal income tax law.
(5) Transferred property. -- The cost of property used by the taxpayer out-of-state and then brought into this state, is determined based on the remaining useful life of the property at the time it is placed in service or use in this state, and the cost is the original cost of the property to the taxpayer less straight line depreciation allowable for the tax years or portions thereof taxpayer used the property outside this state. In the case of leased tangible personal property, cost is based on the period remaining in the primary term of the lease after the property is brought into this state for use in a new or expanded business facility of the taxpayer, and is the rent reserved for the remaining period of the primary term of the lease, not to exceed twenty years, or the remaining useful life of the property (determined as aforesaid), whichever is less.
§11-13Q-9. New jobs percentage.
(a) In general. -- The new jobs percentage is based on the number of new jobs created in this state directly attributable to the qualified investment of the taxpayer.
(b) When a job is attributable. -- An employee's position is directly attributable to the qualified investment if:
(1) The employee's service is performed or his base of operations is at the new or expanded business facility;
(2) The position did not exist prior to the construction, renovation, expansion or acquisition of the business facility and the making of the qualified investment; and
(3) But for the qualified investment, the position would not have existed.
(c) Applicable percentage. --
For the purpose of subsection (a) of this section, the applicable new jobs percentage is determined under the following table:

If number of

The applicablenew jobs
percentage is:is at least:
20% 20
25%280
30%520
(d) Certification of new jobs. -- With the annual return for the applicable taxes filed for the taxable year in which the qualified investment is first placed in service or use in this state, the taxpayer shall estimate and certify the number of new jobs reasonably projected to be created by it in this state within the period prescribed in subsection (f), that are, or will be, directly attributable to the qualified investment of the taxpayer. For purposes of this section, "applicable taxes" means the taxes imposed by articles thirteen, twenty-one, twenty-three and twenty-four of this chapter against which this credit is applied.
(e) Equivalency of permanent employees. -- The hours of part-time employees shall be aggregated to determine the number of equivalent full-time employees for the purpose of this section.
(f) Redetermination of new jobs percentage. -- With the annual return for the applicable taxes imposed, filed for the third taxable year in which the qualified investment is in service or use, the taxpayer shall certify the actual number of new jobs created by it in this state, that are directly attributable to the qualified investment of the taxpayer.
(1) If the actual number of jobs created would result in a higher new jobs percentage, the credit allowed under this article shall be redetermined and amended returns filed for the first and second taxable years that the qualified investment was in service or use in this state.
(2) If the actual number of jobs created would result in a lower new jobs percentage, the credit previously allowed under this article shall be redetermined and amended returns filed for the first and second taxable years. In applying the amount of redetermined credit allowable for the two preceding taxable years, the redetermined credit shall first be applied to the extent it was originally applied in the prior two years to personal income taxes, then to corporation net income taxes, then to business franchise taxes, and lastly to business and occupation taxes. Any additional taxes due under this chapter shall be remitted with the amended returns filed with the commissioner, along with interest, as provided in section seventeen, article ten of this chapter, and a ten percent penalty determined on the amount of taxes due with the amended return, which may be waived by the commissioner if the taxpayer shows that the overclaimed amount of the new jobs percentage was due to reasonable cause and not due to willful neglect.
§11-13Q-10. Credit for small business.
(a) Small business defined. -- For purposes of this section, the term "small business" means a business which has annual gross receipts of not more than seven million dollars (including the gross receipts of any affiliates in its controlled group): Provided, That beginning the first day of January, two thousand four, and on the first day of January of each year thereafter, the commissioner shall prescribe an amount that shall apply in lieu of the seven million dollar amount during that calendar year. This amount is prescribed by increasing the seven million dollar amount by the cost-of-living adjustment for that calendar year. The requirements for annual gross receipts, once met by a given taxpayer in that taxable year when qualified investment is first placed in service or use, may not again be applied to that same taxpayer in subsequent years to defeat the small business credit to which the taxpayer gained entitlement in that year.
(1) Cost-of-living adjustment. -- For purposes of subsection (a), the cost-of-living adjustment for any calendar year is the percentage (if any) by which the consumer price index for the preceding calendar year exceeds the consumer price index for the calendar year two thousand two.
(2) Consumer price index for any calendar year. -- For purposes of subdivision (1) above, the consumer price index for any calendar year is the average of the federal consumer price index as of the close of the twelve-month period ending on the thirty-first day of August of that calendar year.
(3) Consumer price index. -- For purposes of subdivision (2) above, the term "Federal Consumer Price Index" means the most recent consumer price index for all urban consumers published by the United States department of labor.
(4) Rounding. -- If any increase under subdivision (1) above is not a multiple of fifty dollars, the increase shall be rounded to the next lowest multiple of fifty dollars.
(b) Amount of credit allowed.
(1) Credit allowed. -- An eligible small business taxpayer is allowed a credit against the portion of taxes imposed by this state that are attributable to and the direct consequence of the eligible small business taxpayer's qualified investment in a new or expanded business in this state which results in the creation of at least ten new jobs within twelve months after placing qualified investment into service. The amount of this credit is determined as provided in this section.
(2) Amount of credit. -- The annual amount of credit allowable under this section is determined by dividing the amount of the eligible small business taxpayer's "qualified investment" (determined under section eight of this article) in "property purchased for business expansion" (as defined in section three of this article) by ten. The amount of qualified investment so apportioned to each year of the ten-year credit period is the annual measure against which taxpayer's annual new jobs percentage (determined under subsection (d) of this section,) is applied. The product of this calculation establishes the maximum amount of credit allowable each year for ten consecutive years under this section due to the qualified investment.
(3) Application of credit. -- The annual credit allowance must be taken beginning with the taxable year in which the taxpayer places the qualified investment into service or use in this state, unless the taxpayer elects to delay the beginning of the ten-year credit period until the next succeeding taxable year. This election is made in the annual income tax return filed under this chapter by the taxpayer for the taxable year in which the qualified investment is first placed in service or use. Once made, this election cannot be revoked. The annual credit allowance shall be taken and applied in the manner prescribed in section seven of this article.
(c) New jobs. -- The term "new jobs" has the meaning ascribed to it in section three of this article.
(1) The term "new employee" has the meaning ascribed to it in section three of this article: Provided, That this term does not include employees filling new jobs who:
(A) Are related individuals, as defined in subsection (i), section 51 of the Internal Revenue Code of 1986, or a person who owns ten percent or more of the business with such ownership interest to be determined under rules set forth in subsection (b), section 267 of said Internal Revenue Code; or
(B) Worked for the taxpayer during the six-month period ending on the date the taxpayer's qualified investment is placed in service or use and is rehired by the taxpayer during the six-month period beginning on the date taxpayer's qualified investment is placed in service or use.
(2) When a job is attributable. -- An employee's position is directly attributable to the qualified investment if:
(A) The employee's service is performed or his or her base of operations is at the new or expanded business facility;
(B) The position did not exist prior to the construction, renovation, expansion or acquisition of the business facility and the making of the qualified investment; and
(C) But for the qualified investment, the position would not have existed.
(d) New jobs percentage. -- The annual new jobs percentage is based on the number of new jobs created in this state by the taxpayer directly attributable to taxpayer's qualified investment.
(1) If at least ten new jobs are created and filled during the taxable year in which the qualified investment is placed in service or use, the applicable new jobs percentage is ten percent.
(2) During each of the remaining nine years of the ten-year credit period, the annual new jobs percentage is based on the average number of new jobs filled during that taxable year: Provided, That for purposes of estimating the new jobs percentage that will be applicable for each subsequent credit year, the taxpayer shall use the new jobs percentage allowable for the taxable year immediately prior thereto, and in the annual income tax return filed under this chapter for the then current tax year, taxpayer shall redetermine his or her allowable new jobs percentage for that year based on the average number of new employees employed in new jobs during that year (determined on a monthly basis) created as the direct result of taxpayer's qualified investment.
(e) Certification of new jobs. -- With the annual income tax return filed under this chapter for each taxable year during the ten-year credit period, the taxpayer shall certify:
(1) The new jobs percentage for that taxable year;
(2) The amount of the credit allowance for that year;
(3) If the business is a partnership, limited liability company or electing small business corporation, the amount of credit allocated to the partners, members or shareholders, as the case may be;
(4) That qualified investment property continue to be used in the business, or if any of it was disposed of during the year the date of disposition and that the property was not disposed of prior to expiration of its useful life, as determined under section eight of this article;
(5) That the new jobs created by the qualified investment continue to exist and are filled by persons who meet the definition of new employee (as defined in this section).
(f) Small business project. -- A small business may apply to the commissioner under section six of this article for certification as a project if that project will create at least ten new jobs.
(g) Rules. -- The commissioner may prescribe such rules as he or she may deem necessary in order to determine the amount of credit allowed under this section to a taxpayer; to verify taxpayer's continued entitlement to claim the credit; and to verify proper application of the credit allowed.
(h) The commissioner may require a taxpayer intending to claim credit under this section to file with the commissioner a notice of intent to claim this credit, before the taxpayer begins reducing his or her monthly or quarterly installment payments of estimated tax for the credit provided in this section.

§11-13Q-11. Forfeiture of unused tax credits; redetermination of credit allowed.

(a) Disposition of property or cessation of use. -- If during any taxable year, property with respect to which a tax credit has been allowed under this article:
(1) Is disposed of prior to the end of its useful life, as determined under section eight of this article; or
(2) Ceases to be used in an eligible business of the taxpayer in this state prior to the end of its useful life, as determined under said section eight, then the unused portion of the credit allowed for the property is forfeited for the taxable year and all ensuing years. Additionally, except when the property is damaged or destroyed by fire, flood, storm or other casualty, or is stolen, the taxpayer shall redetermine the amount of credit allowed in all earlier years by reducing the applicable percentage of cost of the property allowed under said section eight, to correspond with the percentage of cost allowable for the period of time that the property was actually used in this state in the new or expanded business of the taxpayer. Taxpayer shall then file a reconciliation statement for the year in which the forfeiture occurs and pay any additional taxes owed due to reduction of the amount of credit allowable for the earlier years, plus interest and any applicable penalties. The reconciliation statement shall be filed with the annual return for the primary tax for which the taxpayer is liable under articles thirteen and twenty-three of this chapter.
(b) Cessation of operation of business facility. -- If during any taxable year the taxpayer ceases operation of a business facility in this state for which credit was allowed under this article, before expiration of the useful life of property with respect to which tax credit has been allowed under this article, then the unused portion of the allowed credit is forfeited for the taxable year and for all ensuing years. Additionally, except when the cessation is due to fire, flood, storm or other casualty, the taxpayer shall redetermine the amount of credit allowed in earlier years by reducing the applicable percentage of cost of the property allowed under section eight of this article, to correspond with the percentage of cost allowable for the period of time that the property was actually used in this state in a business of the taxpayer that is taxable under article thirteen, twenty-three or twenty-four, or in the case of a sole proprietorship, article twenty-one of this chapter. Taxpayer shall then file a reconciliation statement with the annual return for the primary tax for which the taxpayer is liable under articles thirteen, twenty-one or twenty-three of this chapter, for the year in which the forfeiture occurs, and pay any additional taxes owed due to the reduction of the amount of credit allowable for the earlier years, plus interest and any applicable penalties.
(c) Reduction in number of employees. -- If during any taxable year subsequent to the taxable year in which the new jobs percentage is redetermined as provided in section nine of this article, the average number of employees of the taxpayer, for the then current taxable year, employed in positions created because of and directly attributable to the qualified investment falls below the minimum number of new jobs created upon which the taxpayer's annual credit allowance is based, the taxpayer shall calculate what his or her annual credit allowance would have been had his or her new jobs percentage been determined based upon the average number of employees, for the then current taxable year, employed in positions created because of and directly attributable to the qualified investment. The difference between the result of this calculation and the taxpayer's annual credit allowance for the qualified investment as determined under section four of this article, is forfeited for the then current taxable year, and for each succeeding taxable year unless for a succeeding taxable year the taxpayer's average employment in positions directly attributable to the qualified investment once again meets the level required to enable the taxpayer to utilize its full annual credit allowance for that taxable year.
§11-13Q-12. Recapture of credit; recapture tax imposed.
(a) When recapture tax applies. --
(1) Any person who places qualified investment property in service or use and who fails to use the qualified investment property for at least the period of its useful life (determined as of the time the property was placed in service or use), or the period of time over which tax credits allowed under this article with respect to the property are applied under this article, whichever period is less, and who reduces the number of its employees filling new jobs in its business in this state, which were created and are directly attributable to the qualified investment property, after the third taxable year in which the qualified investment property was placed in service or use, or fails to continue to employ individuals in all the new jobs created as a direct result of the qualified investment property and used to qualify for the credit allowed by this article, prior to the end of the tenth taxable year after the qualified investment property was placed in service or use, the person shall pay the recapture tax imposed by subsection (b) of this section.
(2) This section does not apply when section thirteen of this article applies. However, the successor, or the successors, and the person, or persons, who previously claimed credit under this article with respect to the qualified investment property and the new jobs attributable thereto, are jointly and severally liable for payment of any recapture tax subsequently imposed under this section with respect to the qualified investment property and new jobs.
(b) Recapture tax imposed. --
The recapture tax imposed by this subsection is the amount determined as follows:
(1) Full recapture. -- If taxpayer prematurely removes qualified investment property placed in service (when considered as a class) from economic service in the taxpayer's qualified investment business activity in this state, and the number of employees filling the new jobs created by the person falls below the number of new jobs required to be created in order to qualify for the amount of credit being claimed, taxpayer shall recapture the amount of credit claimed under section seven of this article for the taxable year, and all preceding taxable years, on qualified investment property which has been prematurely removed from service. The amount of tax due under this subdivision of subsection (b) of this section shall be an amount equal to the amount of credit that is recaptured under this subdivision (1).
(2) Partial recapture. -- If taxpayer prematurely removes qualified investment property from economic service in the taxpayer's qualified investment business activity in this state, and the number of employees filling the new jobs created by the person remains twenty or more, but falls below the number necessary to sustain continued application of credit determined by use of the new job percentage upon which the taxpayer's one-tenth annual credit allowance was determined under section four or section ten of this article, taxpayer shall recapture an amount of credit equal to the difference between: (A) The amount of credit claimed under section seven of this article for the taxable year, and all preceding taxable years; and (B) the amount of credit that would have been claimed in those years if the amount of credit allowable under section four or ten of this article had been determined based on the qualified investment property which remains in service using the average number of new jobs filled by employees in the taxable year for which recapture occurs. The amount of tax due under this subdivision of subsection (b) of this section is an amount equal to the amount of credit that is recaptured under this subdivision (2).
(3) Additional recapture. -- If after a partial recapture under subdivision (2) of this subsection, the taxpayer further reduces the number of employees filling new jobs, the taxpayer shall recapture an additional amount determined as provided under subdivision (1) of this subsection. The amount of tax due under this subdivision of subsection (b) of this section is an amount equal to the amount of credit that is recaptured under this subdivision (3).
(c) Recapture of credit allowed for projects. -- The commissioner may file in the West Virginia register an emergency legislative rule explaining how the provisions of this section are applied in the case of projects certified under section six of this article.
(d) Payment of recapture tax. -- The amount of tax recaptured under this section is due and payable on the day the person's annual return is due for the taxable year in which this section applies, under article twenty-one or twenty-four of this chapter. When the employer is a partnership, limited liability company or S corporation for federal income tax purposes, the recapture tax shall be paid by those persons who are partners in the partnership, members in the company, or shareholders in the S corporation, in the taxable year in which recapture occurs under this section.
(e) Rules. -- The commissioner may promulgate such rules as may be useful or necessary to carry out the purpose of this section and to implement the intent of the Legislature. Rules shall be promulgated in accordance with the provisions of article three, chapter twenty-nine-a of this code.
§11-13Q-13. Transfer of qualified investment to successors.
(a) Mere change in form of business. -- Property may not be treated as disposed of under section eleven of this article, by reason of a mere change in the form of conducting the business as long as the property is retained in the successor business in this state, and the transferor business retains a controlling interest in the successor business. In this event, the successor business is allowed to claim the amount of credit still available with respect to the business facility or facilities transferred, and the transferor business may not be required to redetermine the amount of credit allowed in earlier years.
(b) Transfer or sale to successor. -- Property is not treated as disposed of under section eleven of this article by reason of any transfer or sale to a successor business which continues to operate the business facility in this state. Upon transfer or sale, the successor shall acquire the amount of credit that remains available under this article for each subsequent taxable year and the transferor business is not required to redetermine the amount of credit allowed in earlier years.
§11-13Q-14. Identification of investment credit property.
Every taxpayer who claims credit under this article shall maintain sufficient records to establish the following facts for each item of qualified property:
(1) Its identity;
(2) Its actual or reasonably determined cost;
(3) Its straight-line depreciation life;
(4) The month and taxable year in which it was placed in service;
(5) The amount of credit taken; and
(6) The date it was disposed of or otherwise ceased to be qualified property.

§11-13Q-15. Failure to keep records of investment credit property.

A taxpayer who does not keep the records required for identification of investment credit property is subject to the following rules:
(1) A taxpayer is treated as having disposed of, during the taxable year, any investment credit property which the taxpayer cannot establish was still on hand, in this state, at the end of that year.
(2) If a taxpayer cannot establish when investment credit property reported for purposes of claiming this credit returned during the taxable year was placed in service, the taxpayer is treated as having placed it in service in the most recent prior year in which similar property was placed in service, unless the taxpayer can establish that the property placed in service in the most recent year is still on hand. In that event, the taxpayer will be treated as having placed the returned property in service in the next most recent year.
§11-13Q-16. Interpretation and construction.
(a) No inference, implication or presumption of legislative construction or intent may be drawn or made by reason of the location or grouping of any particular section, provision or portion of this article; and no legal effect may be given to any descriptive matter or heading relating to any section, subsection or paragraph of this article.
(b) The provisions of this article shall be reasonably construed in order to effectuate the legislative intent recited in section two of this article.
§11-13Q-17. Severability.
(a) If any provision of this article or the application thereof is for any reason adjudged by any court of competent jurisdiction to be invalid, the judgment may not affect, impair or invalidate the remainder of the article, but shall be confined in its operation to the provision thereof directly involved in the controversy in which the judgment shall have been rendered, and the applicability of the provision to other persons or circumstances may not be affected thereby.
(b) If any provision of this article or the application thereof is made invalid or inapplicable by reason of the repeal or any other invalidation of any statute therein addressed or referred to, such invalidation or inapplicability may not affect, impair or invalidate the remainder of the article, but shall be confined in its operation to the provision thereof directly involved with, pertaining to, addressing or referring to the statute, and the application of the provision with regard to other statutes or in other instances not affected by any such repealed or invalid statute may not be abrogated or diminished in any way.

§11-13Q-18. Burden of proof; application required; failure to make timely application.

(a) The burden of proof is on the taxpayer to establish by clear and convincing evidence that the taxpayer is entitled to the benefits allowed by this article.
(b) Application for credit required.
(1) Application required. -- Notwithstanding any provision of this article to the contrary, no credit is allowed or applied under this article for any qualified investment property placed in service or use until the person asserting a claim for the allowance of credit under this article makes written application to the commissioner for allowance of credit as provided in this subsection. An application for credit shall be filed no later than the last day of the due date for filing the tax returns required under article twenty-one or twenty-four of this chapter for the taxable year in which the property to which the credit relates is placed in service or use and all information required by the form shall be provided.
(2) Failure to make timely application. -- The failure to timely apply for the credit results in the forfeiture of fifty percent of the annual credit allowance otherwise allowable under this article. This penalty applies annually until the application is filed.
§11-13Q-19. Business eligible for credit entitlements.
(a) Notwithstanding any other provision of this article to the contrary, except for as provided in section five of this article, no entitlement to the economic opportunity tax credit may result from, and no credit is available to any taxpayer for, investment placed in service or use except for taxpayers engaged in the following industries or business activities:
(1) Manufacturing, including, but not limited to, chemical processing and chemical manufacturing, manufacture of wood products and forestry products, manufacture of aluminum, manufacture of paper, paper processing, recyclable paper processing, food processing, commercial hydroponic growing of food crops, manufacture of aircraft or aircraft parts, manufacture of automobiles or automobile parts, and all other manufacturing activities, but not timbering or timber severance or timber hauling, or mineral severance, hauling, processing or preparation, or coal severance, hauling, processing or preparation or synthetic fuel manufacturing taxable under section two-f, article thirteen of this chapter;
(2) Information processing, including, but not limited to, telemarketing, information processing, systems engineering, back office operations and software development;
(3) The activity of warehousing, including, but not limited to, commercial warehousing and the operation of regional distribution centers by manufacturers, wholesalers or retailers;
(4) The activity of goods distribution (exclusive of retail trade);
(5) Destination-oriented recreation and tourism;
(6) Research and development, as defined in section three of this article.
(b) Notwithstanding the fact that a company, entity or taxpayer is engaged in an industry or business activity enumerated in subsection (a) of this section, the company, entity or taxpayer must qualify for the economic opportunity tax credit by fulfilling the qualified investment, jobs creation and other credit entitlement requirements of this article in order to obtain entitlement to any credit under this article. Failure to fulfill the statutory requirements of this article results in a partial or complete loss of the tax credit.
§11-13Q-20. Tax credit review and accountability.
(a) Beginning on the first day of February, two thousand six and every third year thereafter, the commissioner shall submit to the governor, the president of the Senate and the speaker of the House of Delegates a tax credit review and accountability report evaluating the cost effectiveness of the economic opportunity credit during the most recent three-year period for which information is available. The criteria to be evaluated shall include, but not be limited to, for each year of the three-year period:
(1) The numbers of taxpayers claiming the credit;
(2) The net number of new jobs created by all taxpayers claiming the credit;
(3) The cost of the credit;
(4) The cost of the credit per new job created;
(5) Comparison of employment trends for an industry and for taxpayers within the industry that claim the credit.
(b) Taxpayers claiming the credit shall provide any information the tax commissioner may require to prepare the report: Provided, That the information provided is subject to the confidentiality and disclosure provisions of sections five-d and five-s, article ten of this chapter of the code.
§11-13Q-21. Effective date; election; notice of claim or election under transition rules.
(a) The credit allowed by this article is allowed for qualified investment placed in service or use on or after the first day of January, two thousand three, subject to the rules contained in this section.

(b) Election. -- Notwithstanding the general rule stated in subsection (a), the taxpayer may elect to apply the credit allowed under article thirteen-c of this chapter in lieu of the credit allowed by this article

to property purchased or leased for business expansion that is placed in service or use on or after the first day of January, two thousand three, if at least one of the following subdivisions applies to the property:
(1) The new or expanded business facility was constructed, reconstructed or erected, pursuant to a written construction contract executed prior to the first day of January, two thousand three, as limited to the provisions of the contract as of that date then binding on the taxpayer, but only to the extent the new or expanded business facility is placed in service or use prior to the first day of January, two thousand four.

(2) The new or expanded business facility that is part of a project described in subsection (a), section six of this article, was constructed, reconstructed or erected, pursuant to a written construction contract executed prior to the first day of January, two thousand three, as limited to the provisions of such contract as of such date then binding on the taxpayer.

(3) The new or expanded business facility was purchased or leased pursuant to a written contract executed prior to the first day of January, two thousand three, as limited to the provisions then binding on the taxpayer as of that date, but only to the extent the new or expanded business facility is placed in service or use prior to the first day of January, two thousand four.
(4) The machinery or equipment or other tangible personal property purchased or leased for business expansion at a new or expanded business facility was purchased or leased by the taxpayer pursuant to a written contract to purchase or lease identifiable tangible personal property executed before the first day of January, two thousand three, as limited to the provisions of the written contract then binding on the taxpayer, but only to the extent the tangible personal property purchased or leased under the contract is placed in service or use before the first day of January, two thousand four.

(c) Notice of election required. - Any person intending to make the election allowed in subsection (b) of this section shall file written notice of such intention with the tax commissioner on or before the thirty-first day of December, two thousand two. In the case of a multiparticipant project, this notice may be filed by the managing project participant on behalf of all participants in such project. Such notice shall be in a form prescribed by the tax commissioner and all information required by such form shall be provided.
(d) Failure to file notice. -- If any person fails to timely file the notice required by subsection (c) of this section, that person is precluded from claiming credit under article thirteen-c of this chapter for property placed in service or use after the thirty-first day of December, two thousand two, and may claim credit under this article to the extent such credit is allowable under this article.

ARTICLE 13R. STRATEGIC RESEARCH AND DEVELOPMENT TAX CREDIT.
§11-13R-1. Short title.
This article may be cited as the "West Virginia Strategic Research and Development Tax Credit Act."
§11-13R-2. Legislative finding and purpose.
The Legislature finds that the encouragement of research and development in this state is in the public interest and promotes economic growth and development and the general welfare of the people of this state. In order to encourage research and development in this state and thereby increase employment and economic development, there is hereby provided a strategic research and development tax credit.
§11-13R-3. Definitions.
(a) General. -- When used in this article, or in the administration of this article, terms defined in subsection (b) of this section have the meanings ascribed to them by this section, unless a different meaning is clearly required by either the context in which the term is used, or by specific definition, in this article.
(b) Terms defined.
(1) "Base amount" means
(A) The average annual combined qualified research and development expenditure for the three taxable years immediately preceding the taxable year for which a credit is claimed under this article;
(B) For a taxpayer that has filed a tax return under article twenty-three of this chapter for fewer than three but at least one prior taxable year, determined on the basis of all filings by the taxpayer's controlled group, the base amount is the average annual combined qualified research and development expenditure for the number of immediately preceding taxable years, other than short taxable years, during which the taxpayer has filed a tax return under article twenty-three of this chapter; or
(C) For a taxpayer that has not filed a tax return under article twenty-three of this chapter for at least one taxable year, determined on the basis of all filings by the taxpayer's controlled group, the base amount is zero.
(2) "Commissioner" and "tax commissioner" are used interchangeably herein and mean the tax commissioner of the state of West Virginia, or his or her delegate.
(3) "Controlled group" means a controlled group as defined by section 1563 of the Internal Revenue Code of 1986, as amended.
(4) "Corporation" means any corporation, limited liability company, joint-stock company or association, and any business conducted by a trustee or trustees wherein interest or ownership is evidenced by a certificate of interest or ownership or similar written instrument.
(5) "Delegate" in the phrase "or his or her delegate," when used in reference to the tax commissioner, means any officer or employee of the state tax division of the department of tax and revenue duly authorized by the tax commissioner directly, or indirectly by one or more redelegations of authority, to perform the functions mentioned or described in this article.
(6) "Eligible taxpayer" means any person that is subject to the tax imposed by article twenty-three or article twenty-four of this chapter that is engaged in qualified research and development that has paid or incurred investment in qualified research and development credit property or that has paid or incurred qualified research and development expenses as defined in section four of this article. In the case of a sole proprietorship subject to neither the tax imposed by article twenty-three nor the tax imposed by article twenty-four, the term "eligible taxpayer" means any sole proprietor who is subject to the tax imposed by article twenty-one of this chapter and who is engaged in qualified research and development that has paid or incurred investment in qualified research and development credit property or that has paid or incurred qualified research and development expenses as defined in section four of this article.
(7) "Partnership" includes a syndicate, group, pool, joint venture or other unincorporated organization through or by means of which any business, financial operation or venture is carried on, and which is not a trust or estate, a corporation or a sole proprietorship. The term "partner" includes a member in such a syndicate, group, pool, joint venture or organization.
(8) "Person" includes any natural person, corporation, limited liability company or partnership.
(9) "Qualified research and development credit property" means depreciable property purchased for the conduct of qualified research and development.
(10) "Research and development" means systematic scientific, engineering or technological study and investigation in a field of knowledge in the physical, computer or software sciences, often involving the formulation of hypotheses and experimentation, for the purpose of revealing new facts, theories or principles, or increasing scientific knowledge, which may reveal the basis for new or enhanced products, equipment or manufacturing processes.
(A) Research and development includes, but is not limited to, design, refinement and testing of prototypes of new or improved products, or design, refinement and testing of manufacturing processes before commercial sales relating thereto have begun. For purposes of this section, commercial sales includes, but is not limited to, sales of prototypes or sales for market testing.
(B) Research and development does not include:
(i) Market research;
(ii) Sales research;
(iii) Efficiency surveys;
(iv) Consumer surveys;
(v) Product market testing;
(vi) Product testing by product consumers or through consumer surveys for evaluation of consumer product performance or consumer product usability;
(vii) The ordinary testing or inspection of materials or products for quality control (quality control testing);
(viii) Management studies;
(ix) Advertising;
(x) Promotions;
(xi) The acquisition of another's patent, model, production or process or investigation or evaluation of the value or investment potential related thereto;
(xii) Research in connection with literary, historical or similar activities;
(xiii) Research in the social sciences, economics, humanities or psychology and other non-technical activities; and
(xiv) The providing of sales services or any other service, whether technical service or non-technical service.
(11) "Related person" means:
(A) A corporation, limited liability company, partnership, association or trust controlled by the taxpayer;
(B) An individual, corporation, limited liability company, partnership, association or trust that is in control of the taxpayer;
(C) A corporation, limited liability company, partnership, association or trust controlled by an individual, corporation, partnership, association or trust that is in control of the taxpayer; or
(D) A member of the same controlled group as the taxpayer.
For purposes of this article, "control," with respect to a corporation, means ownership, directly or indirectly, of stock possessing fifty percent or more of the total combined voting power of all classes of the stock of such corporation entitled to vote. "Control," with respect to a trust, means ownership, directly or indirectly, of fifty percent or more of the beneficial interest in the principal or income of such trust. The ownership of stock in a corporation, of a capital or profits interest in a partnership or association or of a beneficial interest in a trust shall be determined in accordance with the rules for constructive ownership of stock provided in section 267(c) of the United States Internal Revenue Code of 1986, as amended, other than paragraph (3) of such section.
(12) "Taxpayer" means any person subject to the tax imposed by article twenty-three or twenty-four of this chapter or both. In the case of a sole proprietorship subject to neither the tax imposed by article twenty-three nor the tax imposed by article twenty-four, the term "taxpayer" means any sole proprietor who is subject to the tax imposed by article twenty-one of this chapter.
(13) "This code" means the code of West Virginia, one thousand nine hundred thirty-one, as amended.
(14) "This state" means the state of West Virginia.

§11-13R-4. Annual combined qualified research and development expenditure, qualified research and development expenses.

(a) General. -- The annual combined qualified research and development expenditure is the sum of the applicable percentage of the cost of depreciable property purchased for the conduct of a qualified research and development activity, which is placed in service or use in this state during the taxable year, plus the amount of qualified research and development expenses (as defined in this section) deducted by the eligible taxpayer, for federal income tax purposes for the taxable year.
(b) Applicable percentage of the cost of depreciable property. -- For the purpose of subsection (a), the applicable percentage of the cost of depreciable property is determined under the following table:
If useful life is: The applicable percentage is:
Less than 4 years ...........................33 1/3
4 years or more but less than 6 years .......66 2/3
6 years or more .............................100
The useful life of any property for purposes of this section is determined by those methods as the tax commissioner may require as of the date the property is first placed in service or use in this state by the taxpayer.
(c) Placed in service or use. -- For purposes of the credit allowed by this article, property is considered placed in service or use in the earlier of the following taxable years:
(1) The taxable year in which, under the taxpayer's depreciation practice, the period for depreciation with respect to the property begins; or
(2) The taxable year in which the property is placed in a condition or state of readiness and availability for a specifically assigned function.
(d) Cost of property. -- For purposes of subsection (a) of this section, the cost of each property purchased for the conduct of a qualified research and development activity is determined under the following rules:
(1) Trade-ins. -- Cost does not include the value of property given in trade or exchange for the property purchased for conduct of the research and development activity.
(2) Damaged, destroyed or stolen property. -- If property is damaged or destroyed by fire, flood, storm or other casualty, or is stolen, then the cost of replacement property does not include any insurance proceeds received in compensation for the loss.
(3) Rental property. -- The cost of property acquired by lease for a term of ten years or longer shall be one hundred percent of the rent reserved for the primary term of the lease, not to exceed twenty years.
(4) Property purchased for multiple use. -- The cost of property purchased for multiple business use, including direct use in the conduct of a qualified research and development activity, together with some other business or activity not eligible under this section, shall be apportioned between such activities. The amount apportioned to the conduct of the qualified research and development activity shall be considered to be eligible investment subject to the conditions and limitations of this section.
(5) Self-constructed property. -- In the case of self-constructed property, the cost thereof is the amount properly charged to the capital account for depreciation in accordance with federal income tax law.
(e) Qualified research and development expenses. -- For purposes of this section:
(1) "Qualified research and development expenses" means the sum of in-house and contract research and development expenses for qualified research and development allocated to this state, which are paid or incurred by the eligible taxpayer during the taxable year. In no event does "qualified research and development expenses" include:
(A) Any expense that must be capitalized and depreciated for federal income tax purposes, or any expenditure paid or incurred for the purpose of ascertaining the existence, location, extent or quality of any deposit of coal, limestone or other natural resource, including oil and natural gas, or
(B) Any wage or salary expense for wages or salary reported on form W-2 for federal income tax purposes on which the personal income tax is imposed under article twenty-one of this chapter, and against which tax the credit allowed under this article is applied.
(2) "In-house research and development expenses" means:
(A) Wages paid or incurred to an employee for qualified services performed in this state by such employee;
(B) Amounts paid or incurred for supplies used in the conduct of qualified research and development in this state; and
(C) Amounts paid or incurred to another person for the right to use personal property in the conduct of qualified research and development in this state.
(3) "Qualified services" means services consisting of:
(A) Engaging in qualified research and development; or
(B) Engaging in the direct supervision or direct support of qualified research and development;
(C) If substantially all of the services performed by an individual for the taxpayer during the taxable year consist of services meeting the requirements of paragraph (A) or (B) of this subdivision, the term "qualified services" means all services performed by such individual for the taxable year;
(4) "Supplies" means any tangible property other than:
(A) Land or improvements to land; and
(B) Property of a character subject to depreciation for federal income tax purposes.
(5) "Wages" has the meaning given to such term by section 3401(a) of the Internal Revenue Code of 1986, as amended. In the case of self-employed individuals and owner-employees (within the meaning of section 401(c)(1) of said Internal Revenue Code), the term "wages" includes the earned income (as defined in section 401(c)(2) of said Internal Revenue Code) of such employee. The term "wages" shall not include any amount taken into account in determining the federal targeted jobs credit under section 51(a) of said Internal Revenue Code.
(6) "Contract research and development expenses" means:
(A) In general, sixty-five percent of any amount paid or incurred by the taxpayer to any person (other than an employee of the taxpayer) for qualified research and development;
(B) If any contract research and development expenses paid or incurred during any taxable year are attributable to qualified research and development to be conducted after the close of the taxable year, such amount shall be treated as paid or incurred during the taxable year during which the qualified research and development is conducted.
(7) "Qualified research and development" means research and development that occurs in West Virginia.
(8) Excluded property. -- Any property owned or leased by the taxpayer, the cost of which was the basis of a credit against tax taken under any other article of this chapter, does not qualify as property purchased for the conduct of a qualified research and development activity for purposes of this article.
(9) Excluded expense. -- Any expense paid or incurred by the taxpayer, which was the basis of a credit against tax taken under any other article of this chapter, does not qualify as a qualified research and development expense for purposes of this article.
(f) Research and development by colleges, universities and certain research and development organizations. -- In general, sixty-five percent of the amount paid or incurred by a taxpayer to a research institution as defined in this section for research and development to be performed by such research institution shall be treated as contract research and development expenses. The preceding sentence applies only if the amount is paid or incurred pursuant to a written research and development agreement between the taxpayer and the research institution.
For purposes of this section, the term "research institution" means any nonprofit educational organization which is an institution of higher education (as defined in section 3304(f) of the Internal Revenue Code of 1986, as amended), a West Virginia institution of higher education subject to the jurisdiction of a board described in article two-a, chapter eighteen-b of this code, or any other nonprofit organization exempt from federal income taxes which is organized and operated primarily to conduct scientific research and is not a private foundation for federal income tax purposes.
(g) Standards for determining qualified research and development expenses. -- In prescribing standards for determining which research and development expenses are considered to be qualified research and development expenses for purposes of this section, the tax commissioner may consider: (1) The place where the services are performed; (2) the residence or business location of the person or persons performing the services; (3) the place where research and development supplies are consumed; and (4) other factors that the tax commissioner believes relevant in determining whether or not the research and development expenses were made for qualified research and development, and depreciable property was purchased and used for qualified research and development, during the taxable year
(h) Depreciable property. -- Purchases of depreciable property for the conduct of qualified research qualify as part of the annual combined qualified research and development expenditure for purposes of this article only if:
(1) The property is not acquired from a person whose relationship to the person acquiring it would result in the disallowance of deductions under section 267 or 707(b) of the United States Internal Revenue Code of 1986, as amended.
(2) The property is not acquired from a related person or by one component member of a controlled group from another component member of the same controlled group. The tax commissioner may waive this requirement if the property was acquired from a related party for its then fair market value; and
(3) The basis of the property for federal income tax purposes, in the hands of the person acquiring it, is not determined:
(A) In whole or in part by reference to the federal adjusted basis of such property in the hands of the person from whom it was acquired; or
(B) Under section 1014(e) of the United States Internal Revenue Code of 1986, as amended.
§11-13R-5. Amount of credit allowed.
The allowable credit is the greater of:
(1) Three percent of the annual combined qualified research and development expenditure, or
(2) Ten percent of the excess of the annual combined qualified research and development expenditure over the base amount.
§11-13R-6. Application of credit.
(a) Credit allowed. -- Beginning in the year that the annual combined qualified research and development expenditure is paid or incurred, eligible taxpayers and owners of eligible taxpayers described in subsections (d) and (f) of this section are allowed a credit against the taxes imposed by articles twenty-three, twenty- four and twenty-one of this chapter, in that order, as specified in this section.
(b) Business franchise tax. -- The credit is first applied to reduce the taxes imposed by article twenty-three of this chapter for the taxable year (determined after application of the credits against tax provided in section seventeen of said article, but before application of any other allowable credits against tax).
(c) Corporation net income taxes. -- After application of subsection (b) of this section, any unused credit is next applied to reduce the taxes imposed by article twenty-four of this chapter for the taxable year (determined before application of allowable credits against tax).
(d) If the eligible taxpayer is a limited liability company, small business corporation, or a partnership, then any unused credit (after application of subsections (b) and (c) of this section) is allowed as a credit against the taxes imposed by article twenty-four of this chapter on owners of the eligible taxpayer on the conduit income directly derived from the eligible taxpayer by its owners. Only those portions of the tax imposed by article twenty-four of this chapter that are imposed on income directly derived by the owner from the eligible taxpayer are subject to offset by this credit:
(1) Small business corporations, limited liability companies, partnerships and other unincorporated organizations shall allocate the credit allowed by this article among their members in the same manner as profits and losses are allocated for the taxable year;
(2) No credit is allowed under this article against any withholding tax imposed by, or payable under, article twenty-one of this chapter.
(e) Personal income tax taxes. -- After application of subsections (b), (c) and (d) of this section, any unused credit is next applied to reduce the taxes imposed by article twenty-one of this chapter for the taxable year (determined before application of allowable credits against tax) of the eligible taxpayer.
(f) If the eligible taxpayer is a limited liability company, small business corporation, or a partnership, then any unused credit (after application of subsections (b), (c), (d) and (e) of this section) is allowed as a credit against the taxes imposed by article twenty-one of this chapter on owners of the eligible taxpayer on the conduit income directly derived from the eligible taxpayer by its owners. Only those portions of the tax imposed by article twenty-one of this chapter that are imposed on income directly derived by the owner from the eligible taxpayer are subject to offset by this credit:
(1) Small business corporations, limited liability companies, partnerships and other unincorporated organizations shall allocate the credit allowed by this article among their members in the same manner as profits and losses are allocated for the taxable year;
(2) No credit is allowed under this article against any withholding tax imposed by, or payable under, article twenty-one of this chapter.
(g) The total amount of tax credit that may be used in any taxable year by any eligible taxpayer in combination with the owners of the eligible taxpayer under subsections (d) and (f) of this section may not exceed two million dollars.
(h) Unused credit carry forward. -- If the credit allowed under this article in any taxable year exceeds the sum of the taxes enumerated in subsections (b), (c), (d), (e) and (f) of this section for that taxable year, the eligible taxpayer and owners of eligible taxpayers described in subsections (d) and (f) of this section may apply the excess as a credit against those said taxes, in the order and manner stated in this section, for succeeding taxable years until the earlier of the following:
(1) The full amount of the excess credit is used; or
(2) The expiration of the tenth taxable year after the taxable year in which the annual combined qualified research and development expenditure was paid or incurred. Credit remaining thereafter is forfeited.
(i) Application for certification. -- No credit is allowed or may be applied under this article until the person seeking to claim the credit has filed a written application for certification of the proposed research and development program or project with the tax commissioner, and has received certification of the research and development program or project from the tax commissioner pursuant to that written application. The certification of the program or project must be received by the eligible taxpayer from the tax commissioner prior to any credit being claimed or allowed for any annual combined qualified research and development expenditure for any research activity or project:
(1) In the case of owners of eligible taxpayers described in subsections (d) or (f) of this section, the application for certification filed under this section by the limited liability company, small business corporation or partnership owned by such person is considered to be filed on behalf of the owner, and no separate filing of the application is required of such owner;
(2) Form of application. -- The application for certification must be filed in such form as the tax commissioner may prescribe, and shall contain such information as the tax commissioner may require, to determine whether the project should be certified as eligible for credit under this article;
(3) Time period covered by certification. -- The application may request certification of the research and development program for one taxable year or multiple taxable years, as applicable, based on the nature and character of the program or project plan for the particular research and development project or activity;
(4) Requirements for application. -- The application shall specifically set forth a written research and development program plan generally describing the nature of the research and development to be undertaken, the projected time period over which the research and development shall be carried out, the period of time for which the applicant seeks certification of the program or project, and such other information as the tax commissioner may require;
(5) Certification. -- The tax commissioner may issue certification of a research and development program or project if it appears to the tax commissioner that the applicant intends to engage in a bona fide research and development activity, as described in this article, and will otherwise comply with the requirements of this article and all rules and requirements applicable thereto;
(6) Time period covered by certification. -- The tax commissioner may issue certification for the period of time for which the eligible taxpayer seeks certification, or a different period of time, within the discretion of the tax commissioner. In his or her discretion, the tax commissioner may require that a separate application be filed for each tax year in which qualified research and development activity is to be undertaken or in which qualified research and development property is to be placed in service or use;
(7) Failure to file. -- The failure to timely file the application for certification of a research and development program or project under this section results in forfeiture of one hundred percent of the annual credit otherwise allowable under this article. This penalty applies annually until such application is filed;
(8) Research and development undertaken without certification. -- If a person has filed an application for certification of a research and development program or project, and has failed to receive certification of the plan or program from the tax commissioner, no credit is allowed under this article for the research and development activity or investment relating thereto;
(9) Failure to comply with terms of certification. -- If a person has filed an application for certification of a research and development program or project, and has received certification of the plan or program from the tax commissioner, but fails to conform to the terms of the certification, no credit is allowed under this article for the research and development activity or for investment in the research and development activity by the eligible taxpayer. This restriction may be waived by the tax commissioner upon a finding that the research and development undertaken was within the requirements of this article, and that there was no intent to defraud the state or willful neglect in the applicant's failure to conform to the terms of the certification;
(10) Failure to comply with certification time restrictions. -- If a person has filed an application for certification of a research and development program or project, and has received certification of the plan or program from the tax commissioner, but fails to conform to the time periods specified therein for the certified research and development program or project, or fails to renew the certification so as to cover ongoing or subsequent research and development activity, the research and development activity is out of compliance with the terms of the certification, and no credit is allowed under this article for, or relating to, such research and development activity by any person or taxpayer. This restriction may be waived by the tax commissioner upon a finding that the research and development thus undertaken was within the requirements of this article, and that there was no intent to defraud the state or willful neglect in the applicant's failure to conform to the terms of the certification.

§11-13R-7. Forfeiture of unused tax credits; redetermination of credit allowed.

(a) Disposition of property or cessation of use. -- If during any taxable year, property with respect to which a tax credit has been allowed under this article:
(1) Is disposed of prior to the end of its useful life, as determined under section four of this article; or
(2) Ceases to be used in a qualified research and development activity of the taxpayer in this state prior to the end of its useful life, as determined under said section four, then the unused portion of the credit allowed for such property is forfeited for the taxable year and all ensuing years. Except when the property is damaged or destroyed by fire, flood, storm or other casualty, or is stolen, the taxpayer shall redetermine the amount of credit allowed in all earlier years by reducing the applicable percentage of cost of such property allowed under said section four, to correspond with the percentage of cost allowable for the period of time that the property was actually used in the qualified research and development activity of the taxpayer. The taxpayer shall then file a reconciliation statement with its annual return filed under article twenty-three of this chapter, for the year in which the forfeiture occurs and pay any additional taxes owed due to reduction of the amount of credit allowable for such earlier years, plus interest and any applicable penalties.

§11-13R-8. Transfer of qualified research and development investment to successors.

(a) Mere change in form of business. -- Property may not be treated as disposed of under section seven of this article, by reason of a mere change in the form of conducting the business as long as the property is retained in a business in this state for use in qualified research and development, and the taxpayer retains a controlling interest in the successor business. In this event, the successor business is allowed to claim the amount of credit still available with respect to the property transferred, and the taxpayer (transferor) may not be required to redetermine the amount of credit allowed in earlier years.
(b) Transfer or sale to successor. -- Property may not be treated as disposed of under section seven of this article by reason of any transfer or sale to a successor business which continues to use the property in qualified research and development. Upon transfer or sale, the successor shall acquire the amount of credit that remains available under this article for each subsequent taxable year, and the taxpayer (transferor) may not be required to redetermine the amount of credit allowed in earlier years.
§11-13R-9. Identification of investment credit property.
Every taxpayer who claims credit under this article shall maintain sufficient records to establish the following facts for each item of qualified research and development property:
(1) Its identity;
(2) Its actual or reasonably determined cost;
(3) Its straight-line depreciation life;
(4) The month and taxable year in which it was placed in service;
(5) The amount of credit taken; and
(6) The date it was disposed of or otherwise ceased to be qualified research and development property.

§11-13R-10. Failure to keep records of qualified research and development credit property.

A taxpayer who does not keep the records required for identification of qualified research and development credit property, is subject to the following rules:
(1) A taxpayer is treated as having disposed of, during the taxable year, any qualified research and development credit property which the taxpayer cannot establish was still on hand and used in qualified research and development activity at the end of that year.
(2) If a taxpayer cannot establish when qualified research and development credit property reported for purposes of claiming this credit returned during the taxable year was placed in service, the taxpayer is treated as having placed it in service in the most recent prior year in which similar property was placed in service, unless the taxpayer can establish that the property placed in service in the most recent year is still on hand and used in qualified research and development activity at the end of that year. In that event, the taxpayer will be treated as having placed the returned property in service in the next most recent year.
§11-13R-11. Tax credit review and accountability.
(a) Beginning on the first day of February, two thousand six and on the first day of February every third year thereafter, the commissioner shall submit to the governor, the president of the Senate and the speaker of the House of Delegates a tax credit review and accountability report evaluating the cost effectiveness of the credit allowed under this article during the most recent three-year period for which information is available. The criteria to be evaluated includes, but is not limited to, for each year of the three-year period:
(1) The numbers of taxpayers claiming the credit;
(2) The net number of new jobs created by all taxpayers claiming the credit;
(3) The cost of the credit;
(4) The cost of the credit per new job created;
(5) Comparison of employment trends for an industry and for taxpayers within the industry that claim the credit.
(b) Taxpayers claiming the credit shall provide such information as the tax commissioner may require to prepare the report: Provided, That such information shall be subject to the confidentiality and disclosure provisions of sections five-d and five-s, article ten of this chapter of this code.
§11-13R-12. Effective date.
The provisions of this article become effective on the first day of January, two thousand three, and apply only to qualified investment made on or after that date.
ARTICLE 13S. MANUFACTURING INVESTMENT TAX CREDIT.
§11-13S-1. Short title.
This article may be cited as the "West Virginia Manufacturing Investment Tax Credit Act."
§11-13S-2. Legislative findings and purpose.
The Legislature finds that the encouragement of the location of new industry in this state, and the expansion, growth and revitalization of existing industrial facilities in this state is in the public interest and promotes the general welfare of the people of this state.
§11-13S-3. Definitions.
(a) Any term used in this article has the meaning ascribed by this section, unless a different meaning is clearly required by the context of its use or by definition in this article.
(b) For purpose of this article, the term:
(1) "Eligible taxpayer" means an industrial taxpayer who purchases new property for the purpose of industrial expansion, or for the purpose of industrial revitalization of an existing industrial facility in this state.
(2) "Industrial expansion" means capital investment in a new or expanded industrial facility in this state.
(3) "Industrial facility" means any factory, mill, plant, refinery, warehouse, building or complex of buildings located within this state, including the land on which it is located, and all machinery, equipment and other real and tangible personal property located at or within such facility primarily used in connection with the operation of such manufacturing business.
(4) "Industrial revitalization" or "revitalization" means capital investment in an industrial facility located in this state to replace or modernize buildings, equipment, machinery and other tangible personal property used in connection with the operation of such facility in an industrial business of the taxpayer, including the acquisition of any real property necessary to the industrial revitalization.
(5) "Industrial taxpayer" means any taxpayer who is primarily engaged in a manufacturing business.
(6) "Manufacturing" means any business activity classified as having a sector identifier, consisting of the first two digits of the six-digit North American Industry Classification System code number, of thirty-one, thirty-two or thirty-three.
(7) "Property purchased for manufacturing investment" means real property, and improvements thereto, and tangible personal property, but only if such property was constructed, or purchased, on or after the first day of January, two thousand three, for use as a component part of a new, expanded or revitalized industrial facility. This term includes only that tangible personal property with respect to which depreciation, or amortization in lieu of depreciation, is allowable in determining the federal income tax liability of the industrial taxpayer, that has a useful life, at the time such property is placed in service or use in this state, of four years or more. Property acquired by written lease, for a primary term of ten years or longer, if used as a component part of a new or expanded industrial facility, shall be included within this definition.
(A) "Property purchased for manufacturing investment" does not include:
(i) Repair costs including materials used in the repair, unless for federal income tax purposes, the cost of the repair must be capitalized and not expensed;
(ii) Motor vehicles licensed by the department of motor vehicles;
(iii) Airplanes;
(iv) Off-premises transportation equipment;
(v) Property which is primarily used outside this state; and
(vi) Property which is acquired incident to the purchase of the stock or assets of an industrial taxpayer, which property was or had been used by the seller in his or her industrial business in this state, or in which investment was previously the basis of a credit against tax taken under any other article of this chapter.
(B) Purchases or acquisitions of land or depreciable property shall qualify as purchases of property purchased for manufacturing investment for purposes of this article only if:
(i) The property is not acquired from a person whose relationship to the person acquiring it would result in the disallowance of deductions under section 267 or 707(b) of the United States Internal Revenue Code of 1986, as amended;
(ii) The property is not acquired from a related person or by one component member of a controlled group from another component member of the same controlled group. The tax commissioner may waive this requirement if the property was acquired from a related party for its then fair market value; and
(iii) The basis of the property for federal income tax purposes, in the hands of the person acquiring it, is not determined, in whole or in part, by reference to the federal adjusted basis of such property in the hands of the person from whom it was acquired; or under Section 1014(e) of the United States Internal Revenue Code of 1986, as amended.
(9) "Qualified manufacturing investment" means that amount determined under section five of this article as qualified manufacturing investment.
(10) "Taxpayer" means any person subject to any of the taxes imposed by article thirteen-a, twenty-three or twenty-four of this chapter (or any combination of those articles of this chapter).
§11-13S-4. Amount of credit allowed for manufacturing investment.
(a) Credit allowed. -- There is allowed to eligible taxpayers and to persons described in subdivision (5), subsection (b) of this section, a credit against the taxes imposed by articles thirteen-a, twenty-three and twenty-four of this chapter. The amount of credit shall be determined as hereinafter provided in this section.
(b) Amount of credit allowable. -- The amount of allowable credit under this article is equal to five percent of the qualified manufacturing investment (as determined in section five of this article), and shall reduce the severance tax, imposed under article thirteen-a of this chapter, the business franchise tax imposed under article twenty-three of this chapter and the corporation net income tax imposed under article twenty-four of this chapter, in that order, subject to the following conditions and limitations:
(1) The amount of credit allowable is applied over a ten-year period, at the rate of one-tenth thereof per taxable year, beginning with the taxable year in which the property purchased for manufacturing investment is first placed in service or use in this state;
(2) Severance tax. -- The credit is applied to reduce the severance tax, imposed under article thirteen-a of this chapter (determined before application of the credit allowed by section three, article twelve-b of this chapter and before any other allowable credits against tax and before application of the annual exemption allowed by section ten of said article thirteen-a). The amount of annual credit allowed may not reduce the severance tax, imposed under article thirteen-a of this chapter, below fifty percent of the amount which would be imposed for such taxable year in the absence of this credit against tax, determined as aforesaid. When in any taxable year the taxpayer is entitled to claim credit under this article and article thirteen-d of this chapter, the total amount of all such credits allowable for the taxable year may not reduce the amount of the severance tax, imposed under article thirteen-a of this chapter, below fifty percent of the amount which would be imposed for such taxable year (determined before application of the credit allowed by section three, article twelve- b of this chapter and before any other allowable credits against tax and before application of the annual exemption allowed by section ten of the said article thirteen-a);
(3) Business franchise tax. -- After application of subdivision (2) of this subsection (b), any unused credit is next applied to reduce the business franchise tax, imposed under article twenty-three of this chapter (determined after application of the credits against tax provided in section seventeen of said article, but before application of any other allowable credits against tax). The amount of annual credit allowed will not reduce the business franchise tax imposed under article twenty-three of this chapter, below fifty percent of the amount which would be imposed for such taxable year in the absence of this credit against tax, determined as aforesaid. When in any taxable year the taxpayer is entitled to claim credit under this article and article thirteen-d of this chapter, the total amount of all such credits allowable for the taxable year will not reduce the amount the business franchise tax, imposed under article twenty-three of this chapter, below fifty percent of the amount which would be imposed for such taxable year (determined after application of the credits against tax provided in section seventeen of said article, but before application of any other allowable credits against tax);
(4) Corporation net income tax. -- After application of subdivision (3) of this subsection (b), any unused credit is next applied to reduce the corporation net income tax, imposed under article twenty-four of this chapter (determined before application of any other allowable credits against tax). The amount of annual credit allowed will not reduce corporation net income tax imposed under article twenty-four of this chapter, below fifty percent of the amount which would be imposed for such taxable year in the absence of this credit against tax, determined as aforesaid. When in any taxable year the taxpayer is entitled to claim credit under this article and article thirteen-d of this chapter, the total amount of all such credits allowable for the taxable year may not reduce the amount the corporation net income tax, imposed under article twenty-four of this chapter, below fifty percent of the amount which would be imposed for such taxable year (determined before application of any other allowable credits against tax).
(5) Pass-through entities. --
(A) If the eligible taxpayer is a limited liability company, small business corporation, or a partnership, then any unused credit (after application of subdivisions (2), (3) and (4) of this subsection (b)) is allowed as a credit against the taxes imposed by article twenty-four of this chapter on owners of the eligible taxpayer on the conduit income directly derived from the eligible taxpayer by its owners. Only those portions of the tax imposed by article twenty-four of this chapter that are imposed on income directly derived by the owner from the eligible taxpayer are subject to offset by this credit.
(B) The amount of annual credit allowed will not reduce corporation net income tax imposed under article twenty-four of this chapter, below fifty percent of the amount which would be imposed on the conduit income directly derived from the eligible taxpayer by each owner for such taxable year in the absence of this credit against tax against the taxes (determined before application of any other allowable credits against tax).
(C) When in any taxable year the taxpayer is entitled to claim credit under this article and article thirteen-d of this chapter, the total amount of all such credits allowable for the taxable year will not reduce the corporation net income tax imposed on the conduit income directly derived from the eligible taxpayer by each owner, below fifty percent of the amount that would be imposed for such taxable year on such conduit income (determined before application of any other allowable credits against tax).
(6) Small business corporations, limited liability companies, partnerships and other unincorporated organizations shall allocate any unused credit (after application of subdivisions (2), (3) and (4) of this subsection (b)) among their members in the same manner as profits and losses are allocated for the taxable year.
(7) No credit is allowed under this article against any tax imposed by article twenty-one of this chapter.
(c) No carryover to a subsequent taxable year or carryback to a prior taxable year is allowed for the amount of any unused portion of any annual credit allowance. Such unused credit is forfeited.
(d) Application for credit required. -- (1) Application required. - No credit is allowed or applied under this article for any manufacturing investment until the eligible taxpayer makes written application to the tax commissioner for allowance of credit as provided in this section. An application for credit shall be filed, in such form as the tax commissioner shall prescribe, prior to the first date when qualified investment property is first placed in service or use. All information required by such form is provided. A separate application shall be filed for each tax year in which property purchased for manufacturing investment is placed in service or use.
(2) Failure to file. -- The failure to timely apply the application for credit under this section results in forfeiture of fifty percent of the annual credit allowance otherwise allowable under this article. This penalty applies annually until such application is filed.
§11-13S-5. Qualified manufacturing investment.
(a) General. -- The qualified manufacturing investment is the applicable percentage of the cost of property purchased for manufacturing investment, which is placed in service or use in this state, by the eligible taxpayer during the taxable year.
(b) Applicable percentage. -- For the purposes of subsection (a) above, the applicable percentage for any property is determined under the following table:
If useful life is:The applicable percentage is:
4 years or more but less than 6 years ...........33 1/3
6 years or more but less than 8 years ...........66 2/3
8 years or more .................................100
The useful life of any property for purposes of this section is determined pursuant to such methods as the tax commissioner may require as of the date such property is first placed in service or use in this state by the taxpayer, determined as the tax commissioner may require.
(c) Placed in service or use. -- For purposes of the credit allowed by this article, property is considered placed in service or use in the earlier of the following taxable years:
(1) The taxable year in which, under the taxpayer's depreciation practice, the period for depreciation with respect to such property begins; or
(2) The taxable year in which the property is placed in a condition or state of readiness and availability for a specifically assigned function.
(d) Cost. -- For purposes of this section, the cost of property purchased for manufacturing investment, are determined under the following rules:
(1) Trade-ins. -- Cost will not include the value of property given in trade or exchange for property purchased for manufacturing investment;
(2) Damaged, destroyed or stolen property. -- If property is damaged or destroyed by fire, flood, storm or other casualty, or is stolen, then the cost of replacement property will not include any insurance proceeds received in compensation for the loss;
(3) Rental property. -- The cost of property acquired by lease for a term of ten years or longer is one hundred percent of the rent reserved for the primary term of the lease, not to exceed twenty years;
(4) Property purchased for multiple use. -- The cost of property purchased for multiple business use including use as a component part of a new or expanded or revitalized industrial facility, together with some other business or activity not eligible for credit under this article, shall be apportioned between such businesses and occupations. The amount apportioned to the new or expanded or revitalized industrial facility is considered as a qualified investment, subject to the conditions and limitations of this section;
(5) Self-constructed property. -- In the case of self-constructed property, the cost thereof shall be the amount properly charged to the capital account for purposes of depreciation.

§11-13S-6. Forfeiture of unused tax credits; redetermination of credit allowed.

(a) Disposition of property or cessation of use. -- If during any taxable year, property with respect to which a tax credit has been allowed under this article:
(1) Is disposed of prior to the end of its useful life, as determined under section five of this article; or
(2) Ceases to be used in an industrial facility of the taxpayer in this state prior to the end of its useful life, as determined under said section five, then the unused portion of the credit allowed for such property is forfeited for the taxable year and all ensuing years. Except when the property is damaged or destroyed by fire, flood, storm or other casualty, or is stolen, the taxpayer shall redetermine the amount of credit allowed in all earlier years by reducing the applicable percentage of cost of such property allowed under said section five, to correspond with the percentage of cost allowable for the period of time that the property was actually used in manufacturing activity as part of an industrial facility of the taxpayer. The taxpayer must then file a reconciliation statement with its annual return filed under article twenty-three of this chapter, for the year in which the forfeiture occurs and pay any additional taxes owed due to reduction of the amount of credit allowable for such earlier years, plus interest and any applicable penalties.

§11-13S-7. Transfer of property purchased for manufacturing investment to successors.

(a) Mere change in form of business. -- Property may not be treated as disposed of under section six of this article, by reason of a mere change in the form of conducting the business as long as the property is retained in a business in this state for use in the activity of manufacturing in an industrial facility in West Virginia, and the taxpayer retains a controlling interest in the successor business. In this event, the successor business is allowed to claim the amount of credit still available with respect to the property or industrial facility transferred, and the taxpayer (transferor) may not be required to redetermine the amount of credit allowed in earlier years.
(b) Transfer or sale to successor. -- Property will not be treated as disposed of under section six of this article by reason of any transfer or sale to a successor business which continues to use the property in manufacturing in an industrial facility in West Virginia. Upon transfer or sale, the successor shall acquire the amount of credit that remains available under this article for each subsequent taxable year, and the taxpayer (transferor) shall not be required to redetermine the amount of credit allowed in earlier years.
§11-13S-8. Identification of investment credit property.
Every taxpayer who claims credit under this article shall maintain sufficient records to establish the following facts for each item of property purchased for manufacturing investment:
(1) Its identity;
(2) Its actual or reasonably determined cost;
(3) Its straight-line depreciation life;
(4) The month and taxable year in which it was placed in service;
(5) The amount of credit taken; and
(6) The date it was disposed of or otherwise ceased to be qualified research and development property.

§11-13S-9. Failure to keep records of property purchased for manufacturing investment.

A taxpayer who does not keep the records required for property purchased for manufacturing investment, is subject to the following rules:
(1) A taxpayer is treated as having disposed of, during the taxable year, any property purchased for manufacturing investment which the taxpayer cannot establish was still on hand and used in manufacturing activity in this state at the end of that year;
(2) If a taxpayer cannot establish when property purchased for manufacturing investment reported for purposes of claiming this credit returned during the taxable year was placed in service, the taxpayer is treated as having placed it in service in the most recent prior year in which similar property was placed in service, unless the taxpayer can establish that the property placed in service in the most recent year is still on hand and used in manufacturing activity at the end of that year. In that event, the taxpayer will be treated as having placed the returned property in service in the next most recent year.
§11-13S-10. Tax credit review and accountability.
(a) Beginning on the first day of February, two thousand six, and on the first day of February every third year thereafter, the commissioner shall submit to the governor, the president of the Senate and the speaker of the House of Delegates a tax credit review and accountability report evaluating the cost effectiveness of the credit allowed under this article during the most recent three-year period for which information is available. The criteria to be evaluated includes, but is not limited to, for each year of the three-year period:
(1) The numbers of taxpayers claiming the credit;
(2) The net number of new jobs created by all taxpayers claiming the credit;
(3) The cost of the credit;
(4) The cost of the credit per new job created;
(5) Comparison of employment trends for an industry and for taxpayers within the industry that claim the credit.
(b) Taxpayers claiming the credit shall provide such information as the tax commissioner may require to prepare the report: Provided, That such information is subject to the confidentiality and disclosure provisions of sections five-d and five-s, article ten of this chapter of the code.

ARTICLE 15. CONSUMERS SALES AND SERVICE TAX.

§11-15-9b. Exemption for purchases of tangible personal property and services for direct use in research and development.

(a) Sales of tangible personal property and services after the thirtieth day of June, two thousand two, directly used or consumed in the activity of research and development are exempt from tax imposed by this article. Any person having a right or claim to the exemption set forth in this section shall first pay to the vendor the tax imposed by this article and then apply to the tax commissioner for a refund or credit or give to the vendor the person's West Virginia direct pay permit number in accordance with the provisions of section nine-d of this article.
(b) For purposes of this article:
(1) "Directly used or consumed in the activity of research and development" means used or consumed in those activities or operations which constitute an integral and essential part of research and development, as contrasted with and distinguished from those activities or operations which are simply incidental, convenient or remote to the research and development.
(A) Uses of property or consumption of services which constitute direct use or consumption in the activity of research and development includes only:
(i) In the case of tangible personal property, physical incorporation of property into tangible personal property that is the subject of, or directly used in, research and development;
(ii) Causing a direct physical, chemical or other change upon property that is the subject of, or directly used in, research and development;
(iii) Transporting or storing property that is the subject of, or directly used in, research and development;
(iv) Measuring or verifying a change in property that is the subject of, or directly used in, research and development;
(v) Physically controlling or directing the physical movement or operation of property that is the subject of, or directly used in, research and development;
(vi) Directly and physically recording the flow of property that is the subject of, or directly used in, research and development;
(vii) Producing energy for property that is the subject of, or directly used in, research and development;
(viii) Controlling or otherwise regulating atmospheric or other environmental conditions required for research and development;
(ix) Serving as an operating supply for property that is the subject of, or directly used in, research and development;
(x) Maintenance or repair of property, including maintenance equipment, that is directly used in research and development;
(xi) Storage, removal or transportation of economic or other waste resulting from the activity of research and development;
(xii) Pollution control or environmental quality or environmental protection activity directly relating to the activity of research and development, and personnel, plant, property or community safety or security activity directly relating to the activity of research and development; or
(xiii) Otherwise being used as an integral and essential part of research and development.
(B) Uses of property or services which do not constitute direct use or consumption in the activity of research and development include, but are not limited to:
(i) Heating and illumination of office buildings;
(ii) Janitorial or general cleaning activities;
(iii) Personal comfort of personnel;
(iv) Planning or scheduling of work or inventory control;
(v) Marketing, general management, supervision, finance, training, accounting and administration; or
(vi) An activity or function incidental or convenient to research and development, rather than an integral and essential part of these activities.
(2) "Research and development" means systematic scientific, engineering or technological study and investigation in a field of knowledge in the physical, computer or software sciences, often involving the formulation of hypotheses and experimentation, for the purpose of revealing new facts, theories or principles, or increasing scientific knowledge, which may reveal the basis for new or enhanced products, equipment or manufacturing processes. Research and development includes, but is not limited to, design, refinement and testing of prototypes of new or improved products, or design, refinement and testing of manufacturing processes before commercial sales relating thereto have begun. For purposes of this section commercial sales includes, but is not limited, to sales of prototypes or sales for market testing.
(A) Research and development does not include:
(i) Market research;

(ii) Sales research;
(iii) Efficiency surveys;
(iv) Consumer surveys;
(v) Product market testing;
(vi) Product testing by product consumers or through consumer surveys for evaluation of consumer product performance or consumer product usability;
(vii) The ordinary testing or inspection of materials or products for quality control (quality control testing);
(viii) Management studies;
(ix) Advertising;
(x) Promotions;
(xi) The acquisition of another's patent, model, production or process or investigation or evaluation of the value or investment potential related thereto;
(xii) Research in connection with literary, historical or similar projects;
(xiii) Research in the social sciences, economics, humanities or psychology and other nontechnical activities; and
(xiv) The providing of sales services or any other service, whether technical service or nontechnical service.
(c) No provision of this section may be interpreted to alter, abrogate or impede application of the exemption for sales of primary opinion research services set forth in section nine of this article.
§11-15-9c. Exemption for

.
The service of providing technical evaluations for compliance with federal and state environmental standards provided by environmental and industrial consultants who have formal certification through the West Virginia department of environmental protection or the West Virginia bureau for public health or both. For purposes of this exemption, the service of providing technical evaluations for compliance with federal and state environmental standards includes those costs of tangible personal property directly used in providing the services that are separately billed to the purchaser of the services, and on which the tax imposed by this article has previously been paid by the service provider.

§11-15-9f. Exemption for sales and services subject to special district excise tax.
Notwithstanding any provision of this article to the contrary, any sale or service upon which a special district excise tax is paid, pursuant to the provisions of section eleven, article thirteen-b, chapter eight of this code, shall be exempt from the tax imposed by this article.

ARTICLE 23. BUSINESS FRANCHISE TAX.
§11-23-7. Persons and other organizations exempt from tax.
The following organizations and persons shall be are exempt from the tax imposed by this article to the extent provided in this section:
(a) Natural persons doing business in this state that are not doing business in the form of a partnership (as defined in section three of this article) or in the form of a corporation (as defined in section three of this article). Such Natural persons include persons doing business as sole proprietors, sole practitioners and other self-employed persons.
(b) Corporations and organizations which by reason of their purposes or activities are exempt from federal income tax: Provided, That this exemption does not apply to that portion of their capital (as defined in section three of this article) which is used, directly or indirectly, in the generation of unrelated business income (as defined in the Internal Revenue Code) of any such corporation or organization if the unrelated business income is subject to federal income tax.
(c) Insurance companies which pay this state a tax upon premiums.
(d) Production credit associations organized under the provisions of the federal "Farm Credit Act of 1933": Provided, That this exemption does not apply to corporations or associations organized under the provisions of article four, chapter nineteen of this code.
(e) Any trust established pursuant to section one hundred eighty-six, chapter seven, title twenty-nine of the code of the laws of the United States (enacted as section three hundred two (c) of the labor management relations act, one thousand nine hundred forty-seven), as amended prior to the first day of January, one thousand nine hundred eighty-five.
(f) Any credit union organized under the provisions of chapter thirty-one, or any other chapter of this code: Provided, That this exemption does not apply to corporations or cooperative associations organized under the provisions of article four, chapter nineteen of this code.
(g) Any corporation organized under this code which is a political subdivision of the state of West Virginia, or is an instrumentality of a political subdivision of this state, and was created pursuant to this code.
(h) Any corporation or partnership engaged in the activity of agriculture and farming, as defined in paragraph subdivision (8), subsection (b), section three of this article: Provided, That if a corporation or partnership is not exclusively engaged in such activity, its tax base under this article shall be apportioned, in accordance with regulations promulgated by the tax commissioner, among its several activities and only that portion attributable to the activity of agriculture and farming shall be exempt from tax under this article.
(i) Any corporation or partnership licensed under article twenty-three, chapter nineteen of this code, to conduct horse or dog racing meetings or a pari-mutuel system of wagering: Provided, That if the corporation or partnership is not exclusively engaged in this activity, its tax base under this article shall be apportioned, in accordance with regulations promulgated by the tax commissioner, among its several activities and only that portion attributable to the activity of conducting a horse or dog racing meeting or a pari-mutuel system of wagering shall be exempt from tax under this article.
(j) For those tax years beginning after the thirtieth day of June, one thousand nine hundred ninety-eight, any corporation or partnership operating as a hunting club: Provided, That the corporation or partnership distributes no income or dividends to its owners or stockholders. For the purposes of this subsection, a hunting club is a group of persons owning land which is used principally for hunting purposes by the members of the club and guests, and where any charges made for hunting are principally for the purpose of defraying the costs of operating and maintaining the club and club properties or establishing a reasonable reserve to meet the operating and maintenance costs of the club. The tax commissioner shall by legislative rule promulgated in accordance with article three of chapter twenty-nine of this code further prescribe the definition of a hunting club and the manner and method in which this credit may be claimed.
(k) For tax years beginning after the thirty-first day of December, two thousand two, any person or other organization engaged in the activity of providing venture capital to West Virginia businesses: Provided, That if the person or organization is not exclusively engaged in that activity, only that portion of its tax base under this article that is attributable to the providing of venture capital to West Virginia businesses shall be exempt from tax under this article, and its tax liability under this article shall be determined by multiplying its pre-credit tax liability by a fraction equal to one minus a fraction, the numerator of which is its gross receipts attributable to its venture capital activities in this state and the denominator of which is its total gross receipts from all of its business activities in this state. For purposes of this exemption, a "person or organization engaged in the activity of providing venture capital to West Virginia business" means a certified West Virginia capital company as defined in section four, article one, chapter five-e of this code.

§11-23-24a. Tax credit for value-added products from raw agricultural products; regulations; termination of credit.

(a) Effective for taxable years beginning the first day of July, one thousand nine hundred ninety-seven, notwithstanding any provisions of this code to the contrary, any person, newly and solely engaged in the production of value-added products from raw agricultural products shall be are allowed a credit, in the amount of one thousand dollars for each taxable year against the tax imposed by this article, for a period of five years from the date the person becomes subject to this article. The credit shall be is allowed only against the tax imposed on that capital which is attributable to the value-added production activity in this state.
(b) For purposes of this section, "value-added product" means the following products derived from processing a raw agricultural product, whether for human consumption or for other use. The following enterprises qualify as processing raw agricultural products into value-added products: (1) The conversion of lumber into furniture, toys, collectibles and home furnishings; (2) the conversion of fruit into wine; (3) the conversion of honey into wine; (4) the conversion of wool into fabric; (5) the conversion of raw hides into semifinished or finished leather products; (6) the conversion of milk into cheese; (7) the conversion of fruits or vegetables into a dried, canned or frozen product; (8) the conversion of feeder cattle into commonly acceptable marketable retail portions; (9) the conversion of aquatic animals into a dried, canned, cooked or frozen product; and (10) the conversion of poultry into a dried, canned, cooked or frozen product.
(c) The tax commissioner may propose rules for promulgation in accordance with article three, chapter twenty-nine-a as may be necessary to effectuate the purposes of this section.
(d) No credit is available to any taxpayer under this section after the first day of July, two thousand two: Provided, That taxpayers which have gained entitlement to the credit pursuant to the terms of this section prior to the first day of July, two thousand two, shall retain that entitlement and apply the credit in due course pursuant to the requirements and limitations of this section until the original five-year credit entitlement has been exhausted or otherwise terminated.
ARTICLE 24. CORPORATION NET INCOME TAX.

§11-24-22a. Tax credit for value-added products from raw agricultural products; regulations; termination of credit.

(a) Effective for taxable years beginning the first day of July, one thousand nine hundred ninety-seven, notwithstanding any provisions of this code to the contrary, any new corporation engaged solely in the production of value-added products from raw agricultural products shall be are allowed a credit, in the amount of one thousand dollars for each taxable year against the tax imposed by this article, for a period of five years from the date the person becomes subject to this article. The credit shall be is allowed only against the tax on taxable income which is attributable to the production of value-added products.
(b) Effective for taxable years beginning the first day of July, one thousand nine hundred ninety-seven, any new corporation engaged solely in the production of value-added products in West Virginia shall be is allowed a tax credit, according to the schedule herein, for every one hour spent by a new permanent, full-time employee training to learn a skill specific to the production of value-added products as defined in article twenty-one, chapter thirty-one of this code. The tax credit shall be is allowed for a maximum of sixty hours, per company, per year.
(c) For purposes of this section, tax credits for hours spent by a new permanent, full-time employee in training shall be is allowed as follows:
(1) Corporations which employ up to five new employees shall be is allowed a tax credit of two dollars for every one hour spent by a new employee in training as specified herein;
(2) Corporations which employ between six and twenty-five new employees shall be are allowed a tax credit of one dollar and fifty cents for every one hour spent by a new employee in training as specified herein;
(3) Corporations which employ between twenty-six and seventy-five new employees shall be are allowed a tax credit of one dollar and twenty-five cents for every one hour spent by a new employee in training as specified herein;
(4) Corporations which employ between seventy-six and one hundred and twenty-five new employees shall be are allowed a tax credit of one dollar for every one hour spent by a new employee in training as specified herein; and
(5) Corporations which employ more than one hundred twenty-five new employees shall be are allowed a tax credit of seventy-five cents for every one hour spent by a new employee in training as specified herein.
(d) For purposes of this section, "value-added product" means the following products derived from processing a raw agricultural product, whether for human consumption or for other use. The following enterprises qualify as processing raw agricultural products into value-added products: (1) The conversion of lumber into furniture, toys, collectibles and home furnishings; (2) the conversion of fruit into wine; (3) the conversion of honey into wine; (4) the conversion of wool into fabric; (5) the conversion of raw hides into semifinished or finished leather products; (6) the conversion of milk into cheese; (7) the conversion of fruits or vegetables into a dried, canned or frozen product; (8) the conversion of feeder cattle into commonly acceptable marketable retail portions; (9) the conversion of aquatic animals into a dried, canned, cooked or frozen product; and (10) the conversion of poultry into a dried, canned, cooked or frozen product.
(e) The tax commissioner may propose rules for promulgation in accordance with the provisions of article three, chapter twenty-nine-a of this code as may be necessary to effectuate the purposes of this article.
(f) No credit is available to any taxpayer under this section subsequent to the first day of July, two thousand two: Provided, That taxpayers which have gained entitlement to the credit pursuant to the terms of this section prior to the first day of July, two thousand two, shall retain that entitlement and apply the credit in due course pursuant to the requirements and limitations of this section until the original five-year credit entitlement has been exhausted or otherwise terminated.