COMMITTEE SUBSTITUTE FOR

H. B. 2120

(By Delegate Kiss (By Request))



(Originating in the Committee on Finance)

[February 14, 1995]


A BILL to amend and reenact section six, article twenty-three, chapter eleven of the code of West Virginia, one thousand nine hundred thirty-one, as amended, relating to taxation; business franchise tax; and exempting passive family partnerships from the first two hundred dollars of business franchise tax liability by establishing a credit therefor.

Be it enacted by the Legislature of West Virginia:
That section six, article twenty-three, chapter eleven of the code of West Virginia, one thousand nine hundred thirty-one, as amended, be amended and reenacted to read as follows:
ARTICLE 23. BUSINESS FRANCHISE TAX.
§11-23-6. Imposition of tax; change in rate of tax.
(a) General. -- An annual business franchise tax is hereby imposed on the privilege of doing business in this state and in respect of the benefits and protections conferred. Such tax shall be collected from every domestic corporation, every corporation having its commercial domicile in this state, every foreign or domestic corporation owning or leasing real or tangible personal property located in this state or doing business in this state and from every partnership owning or leasing real or tangible personal property located in this state or doing business in this state, effective on and after the first day of July, one thousand nine hundred eighty-seven: Provided, That for taxable years ending after the thirty-first day of December, one thousand nine hundred ninety-four, there shall be a tax credit for the first two hundred dollars of tax liability imposed under this article on any family partnership engaged solely in the passive activities of holding or investing in tangible or intangible personal property and engaged in no other business activities whatsoever. For purposes of this subsection, a family partnership is any partnership, as defined in section three of this article, and including a limited liability partnership or limited liability company, in which more than eighty percent of the capital or profits interests is held, at all times during the taxable year of the family partnership, directly or indirectly by an individual or individuals who are related as set forth in section 267(b) or 707(b) of the Internal Revenue Code of 1986, as amended, and none of the partnership or membership interests are held, at any time during the taxable year of the family partnership, by any corporation that is not an electing small business corporation, as defined in section 1362 of the Internal Revenue Code, during such taxable year.
(b) Amount of tax and rate; effective date.
(1) On and after the first day of July, one thousand nine hundred eighty-seven, the amount of tax shall be the greater of fifty dollars or fifty-five one hundredths of one percent of the value of the tax base, as determined under this article: Provided, That when the taxpayer's first taxable year under this article is a short taxable year, the taxpayer's liability shall be prorated based upon the ratio which the number of months in which such short taxable year bears to twelve: Provided, however, That this subdivision (1) shall not apply to taxable years beginning on or after the first day of January, one thousand nine hundred eighty-nine.
(2) Taxable years after December 31, 1988. -- For taxable years beginning on or after the first day of January, one thousand nine hundred eighty-nine, the amount of tax due under this article shall be the greater of fifty dollars or seventy-five one hundredths of one percent of the value of the tax base as determined under this article: Provided, That when the taxpayer's taxable year for federal income tax purposes is a short taxable year, the tax determined by application of the tax rate to the taxpayer's tax base shall be prorated based upon the ratio which the number of months in such short taxable year bears to twelve: Provided, however, That when the taxpayer's first taxable year under this article is less than twelve months, the taxpayer's liability shall be prorated based upon the ratio which the number of months taxpayer was doing business in this state bears to twelve but in no event shall the tax due be less than fifty dollars.