ENGROSSED
Senate Bill No. 614
(By Senators Tomblin, Mr. President, and Sprouse,
By Request of the Executive)
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[Introduced March 21, 2005; referred to the Committee
on Finance.]
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A BILL to amend and reenact §11-24-3 of the Code of West Virginia,
1931, as amended; and to amend said code by adding thereto a
new section, designated §11-24-6a, all relating to updating
meaning of federal taxable income and certain other terms used
in West Virginia Corporation Net Income Tax Act; providing new
increasing modification to federal taxable income for amount
deducted under Section 199 of Internal Revenue Code; requiring
filing of certain schedules to support deduction and
increasing modification; providing Tax Commissioner with
additional remedies for noncompliance and for errors in
computing federal taxable income; and specifying effective
dates.
Be it enacted by the Legislature of West Virginia:
That §11-24-3 of the Code of West Virginia, 1931, as amended,
be amended and reenacted; and that said code be amended by adding thereto a new section, designated §11-24-6a, all to read as
follows:
ARTICLE 24. CORPORATION NET INCOME TAX.
§11-24-3. Meaning of terms; general rule.
(a) Any term used in this article has the same meaning as when
used in a comparable context in the laws of the United States
relating to federal income taxes, unless a different meaning is
clearly required by the context or by definition in this article.
Any reference in this article to the laws of the United States
means the provisions of the Internal Revenue Code of 1986, as
amended, and any other provisions of the laws of the United States
that relate to the determination of income for federal income tax
purposes. All amendments made to the laws of the United States
after the thirty-first day of
May December, two thousand three, but
prior to the first day of January, two thousand
four five, shall be
given effect in determining the taxes imposed by this article to
the same extent those changes are allowed for federal income tax
purposes, whether the changes are retroactive or prospective, but
no amendment to the laws of the United States made on or after the
first day of January, two thousand
four five, shall be given any
effect.
(b) The term "Internal Revenue Code of 1986" means the
Internal Revenue Code of the United States enacted by the federal
Tax Reform Act of 1986 and includes the provisions of law formerly
known as the Internal Revenue Code of 1954, as amended, and in effect when the federal Tax Reform Act of 1986 was enacted that
were not amended or repealed by the federal Tax Reform Act of 1986.
Except when inappropriate, any reference in any law, executive
order or other document:
(1) To the Internal Revenue Code of 1954 includes a reference
to the Internal Revenue Code of 1986; and
(2) To the Internal Revenue Code of 1986 includes a reference
to the provisions of law formerly known as the Internal Revenue
Code of 1954.
(c)
Effective date. -- The amendments to this section enacted
in the year two thousand
four five are retroactive to the extent
allowable under federal income tax law. With respect to taxable
years that began prior to the first day of
June, two thousand three
January, two thousand five, the law in effect for each of those
years shall be fully preserved as to that year, except as provided
in this section.
§11-24-6a. Additional modification increasing federal taxable
income; disallowance of deduction taken under IRC §
199.
(a)
General rule. -- In addition to amounts added to federal
taxable income pursuant to subsection (b), section six of this
article, unless already included therein, there shall be added to
federal taxable income the amount computed under Section 199 of the
Internal Revenue Code of 1986, as amended, and taken as a deduction
when determining federal taxable income for the taxable year for federal income tax purposes, unless subsection (b), (d) or (e) of
this section applies.
(b)
Member of affiliated group filing on separate entity basis
in this state. -- When the taxpayer is a member of an affiliated
group for federal income tax purposes for the taxable year and
computation of the deduction allowed under Section 199 of the
Internal Revenue Code for the taxable year is determined at the
affiliated group level but the taxpayer files on a separate entity
basis under this article, then in addition to amounts added to
federal taxable income pursuant to subsection (b), section six of
this article, unless already included therein, there shall be added
to the taxpayer's pro forma federal taxable income the amount
computed under Section 199 of the Internal Revenue Code of 1986, as
amended, and taken, in whole or in part, as a deduction when
determining the taxpayer's pro forma federal taxable income for the
taxable year. The taxpayer shall file with its annual return under
this article a schedule that shows: (1) The amount of the Section
199 deduction computed for the affiliated group for federal income
tax purposes for the taxable year; and (2) how that deduction is
allocated among the various members of the affiliated group for
purposes of determining each member's pro forma federal taxable
income for the taxable year.
(c)
Consolidated federal return consolidated state return. --
When the taxpayer elects to file a consolidated return under this
article for the taxable year, the general rule stated in subsection (a) of this section shall apply.
(d)
Combined state return. -- When a combined return is filed
under this article for the taxable year, the members of the group
filing the combined return shall in addition to amounts added to
federal taxable income pursuant to subsection (b), section six of
this article, unless already included therein, add to the combined
group's pro forma federal taxable income for the year, the amount
computed under Section 199 of the Internal Revenue Code of 1986, as
amended, by the appropriate person or persons and taken, in whole
or in part, as a deduction when determining pro forma federal
taxable income of the combined group for the taxable year. The
combined group shall file with its annual return under this article
a schedule that shows: (1) The amount of the Section 199 deduction
computed by the entity, or each entity that made the computation
for federal income tax purposes, and to what entity and to what
state it was allocated; (2) how that deduction is allocated for
state income tax purposes; (3) how the amount of the Section 199
deduction taken as a deduction when determining the pro forma
federal taxable income of the combined group was determined; and
(4) such other information as the Tax Commissioner may require.
(e)
Taxpayer with flow-through income. -- When the taxpayer's
federal taxable income includes a distributive share of income,
gain or loss of a partnership, limited liability company, electing
small business corporation, or other entity treated as a
partnership for federal income tax purposes, and when the taxpayer's distributive share for the taxable year includes a
deduction, or portion of a deduction computed under Section 199 of
the Internal Revenue Code, as amended, for the taxable year, then
in addition to amounts added to federal taxable income pursuant to
subsection (b), section six of this article, unless already
included therein, the taxpayer shall add the amount computed under
Section 199 of the Internal Revenue Code of 1986, as amended, that
flows through to the taxpayer for federal income tax purposes for
the taxable year. The taxpayer shall file with its annual return
filed under this article a copy of all schedules K-1 it received
showing allocation of a Section 199 deduction and such other
information as the Tax Commissioner may require.
(f)
Failure to attach required schedules. -- When the taxpayer
fails to include with the annual return due under this article the
schedule or schedules required by this section, the return shall be
treated as an incomplete return until the day the required schedule
or schedules are filed with the Tax Commissioner. An incomplete
return showing an overpayment of tax may not be treated as a claim
for refund until the day the defect is cured. The filing of an
incomplete return shall not start the running of the limitations
period that would limit the time during which the Tax Commissioner
may issue an assessment or take other action to enforce compliance
with this article for the taxable year for which the incomplete
return is filed.
(g)
Audit adjustment to federal taxable income. -- When auditing for compliance with this article, the Tax Commissioner may
change a taxpayer's computation of federal taxable income or pro
forma taxable income to comply with the laws of the United States
as in effect for the taxable year and incorporated by reference
into this article.
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