ENROLLED
COMMITTEE SUBSTITUTE
FOR
SENATE BILL NO. 207
(Senators Craigo, Blatnik, White, Sharpe, Dittmar
Jackson, Manchin, Chafin, Wooton, Boley, Ross, Deem, Kimble,
Scott, Bowman, Buckalew, Schoonover, Wiedebusch, Walker,
Tomblin, Mr. President, Wagner, Plymale and Minear,
original sponsors)
__________
[Passed March 11, 1995; in effect ninety days from passage.]
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AN ACT to amend and reenact section two, article thirteen-a,
chapter eleven of the code of West Virginia, one thousand
nine hundred thirty-one, as amended; and to further amend
said article by adding thereto a new section, designated
section five-a, all relating to dedicating ten percent of
the oil and gas severance tax revenues for the benefit of
counties and municipalities; providing definitions;
creating funds and setting certain budgeting requirements
for cities and counties; and phasing in the dedication of
the ten percent of said oil and gas tax revenues.
Be it enacted by the Legislature of West Virginia:
That section two, article thirteen-a, chapter eleven of
the code of West Virginia, one thousand nine hundred thirty-
one, as amended, be amended and reenacted; and that said
article be further amended by adding thereto a new section,
designated five-a, all to read as follows:
ARTICLE 13A. SEVERANCE TAXES.
§11-13A-2. Definitions.
(a) General rule. -- When used in this article, or in the
administration of this article, the terms defined in subsection
(b), (c) or (d) of this section shall have the meanings
ascribed to them by this section, unless a different meaning is
clearly required by the context in which the term is used, or
by specific definition.
(b) General terms defined. -- Definitions in this
subsection apply to all persons subject to the taxes imposed by
this article.
(1) "Business" includes all activities engaged in, or
caused to be engaged in, with the object of gain or economic
benefit, direct or indirect, and whether engaged in for profit,
or not for profit, or by a governmental entity: Provided, That
"business" does not include services rendered by an employee
within the scope of his or her contract of employment. Employee services, services by a partner on behalf of his or
her partnership and services by a member of any other business
entity on behalf of that entity are the business of the
employer, or partnership, or other business entity as the case
may be, and reportable as such for purposes of the taxes
imposed by this article.
(2) "Corporation" includes associations, joint-stock
companies and insurance companies. It also includes
governmental entities when and to the extent such governmental
entities engage in activities taxable under this article.
(3) "Delegate" in the phrase "or his 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 function mentioned or described in this article or
regulations promulgated thereunder.
(4) "Fiduciary" means and includes a guardian, trustee,
executor, administrator, receiver, conservator or any person
acting in any fiduciary capacity for any person.
(5) "Gross proceeds" means the value, whether in money or
other property, actually proceeding from the sale or lease of
tangible personal property, or from the rendering of services, without any deduction for the cost of property sold or leased
or expenses of any kind.
(6) "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 being defined.
(7) "Partner" includes a member of a syndicate, group,
pool, joint venture or other organization which is a
"partnership" as defined in this section.
(8) "Partnership" includes a syndicate, group, pool, joint
venture or other unincorporated organization through or by
means of which any privilege taxable under this article is
exercised, and which is not within the meaning of this article
a trust or estate or corporation. "Partnership" includes a
limited liability company which is treated as a partnership for
federal income tax purposes.
(9) "Person" or "company" are herein used interchangeably
and include any individual, firm, partnership, mining
partnership, joint venture, association, corporation, trust or
other entity, or any other group or combination acting as a
unit, and the plural as well as the singular number, unless the
intention to give a more limited meaning is declared by the
context.
(10) "Sale" includes any transfer of the ownership or title to property, whether for money or in exchange for other
property or services, or any combination thereof. "Sale"
includes a lease of property, whether the transaction be
characterized as a rental, lease, hire, bailment or license to
use. "Sale" also includes rendering services for a
consideration, whether direct or indirect.
(11) "Service" includes all activities engaged in by a
person for a consideration, which involve the rendering of a
service as distinguished from the sale of tangible personal
property: Provided, That "service" does not include: (A)
Services rendered by an employee to his or her employer under
a contract of employment; (B) contracting; or (C) severing or
processing natural resources.
(12) "Tax" means any tax imposed by this article and, for
purposes of administration and collection of such tax, it
includes any interest, additions to tax or penalties imposed
with respect thereto under article ten of this chapter.
(13) "Tax commissioner" or "commissioner" means the tax
commissioner of the state of West Virginia or his or her
delegate.
(14) "Taxable year" means the calendar year, or the fiscal
year ending during such calendar year, upon the basis of which a tax liability is computed under this article. In the case of
a return made under this article, or regulations of the tax
commissioner, for a fractional part of a year, the term
"taxable year" means the period for which such return is made.
(15) "Taxpayer" means any person subject to any tax
imposed by this article.
(16) "This code" means the code of West Virginia, one
thousand nine hundred thirty-one, as amended.
(17) "This state" means the state of West Virginia.
(18) "Withholding agent" means any person required by law
to deduct and withhold any tax imposed by this article or under
regulations promulgated by the tax commissioner.
(c) Specific definitions for producers of natural
resources. --
(1) "Barrel of oil" means forty-two U.S. gallons of two
hundred thirty-one cubic inches of liquid at a standard
temperature of sixty degrees Fahrenheit.
(2) "Coal" means and includes any material composed
predominantly of hydrocarbons in a solid state.
(3) "Cubic foot of gas" means the volume of gas contained
in one cubic foot at a standard pressure base of fourteen point
seventy-three pounds per square inch (absolute) and a standard
temperature of sixty degrees Fahrenheit.
(4) "Economic interest" for the purpose of this article is
synonymous with the economic interest ownership required by
Section 611 of the Internal Revenue Code in effect on the
thirty-first day of December, one thousand nine hundred eighty-
five, entitling the taxpayer to a depletion deduction for
income tax purposes: Provided, That a person who only receives
an arm's length royalty shall not be considered as having an
economic interest.
(5) "Extraction of ores or minerals from the ground"
includes extraction by mine owners or operators of ores or
minerals from the waste or residue of prior mining only when
such extraction is sold.
(6) "Gross value" in the case of natural resources means
the market value of the natural resource product, in the
immediate vicinity, where severed, determined after application
of post production processing generally applied by the industry
to obtain commercially marketable or usable natural resource
products. For all natural resources, "gross value" is to be
reported as follows:
(A) For natural resources severed or processed (or both
severed and processed) and sold during a reporting period,
gross value is the gross proceeds received or receivable by the taxpayer.
(B) In a transaction involving related parties, gross
value shall not be less than the fair market value for natural
resources of similar grade and quality.
(C) In the absence of a sale, gross value shall be the
fair market value for natural resources of similar grade and
quality.
(D) If severed natural resources are purchased for the
purpose of processing and resale, the gross value is the amount
received or receivable during the reporting period reduced by
the amount paid or payable to the taxpayer actually severing
the natural resource. If natural resources are severed outside
the state of West Virginia and brought into the state of West
Virginia by the taxpayer for the purpose of processing and
sale, the gross value is the amount received or receivable
during the reporting period reduced by the fair market value of
natural resources of similar grade and quality and in the same
condition immediately preceding the processing of the natural
resources in this state.
(E) If severed natural resources are purchased for the
purpose of processing and consumption, the gross value is the
fair market value of processed natural resources of similar
grade and quality reduced by the amount paid or payable to the taxpayer actually severing the natural resource. If severed
natural resources are severed outside the state of West
Virginia and brought into the state of West Virginia by the
taxpayer for the purpose of processing and consumption, the
gross value is the fair market value of processed natural
resources of similar grade and quality reduced by the fair
market value of natural resources of similar grade and quality
and in the same condition immediately preceding the processing
of the natural resources.
(F) In all instances, the gross value shall be reduced by
the amount of any federal energy tax imposed upon the taxpayer
after the first day of June, one thousand nine hundred ninety-
three, but shall not be reduced by any state or federal taxes,
royalties, sales commissions or any other expense.
(G) For natural gas, gross value is the value of the
natural gas at the wellhead immediately preceding
transportation and transmission.
(H) For limestone or sandstone quarried or mined, gross
value is the value of such stone immediately upon severance
from the earth.
(7) "Mining" includes not merely the extraction of ores or
minerals from the ground but also those treatment processes
necessary or incidental thereto.
(8) "Natural resources" means all forms of minerals
including, but not limited to, rock, stone, limestone, coal,
shale, gravel, sand, clay, natural gas, oil and natural gas
liquids which are contained in or on the soils or waters of
this state, and includes standing timber.
(9) "Processed" or "processing" as applied to:
(A) Oil and natural gas shall not include any conversion
or refining process; and
(B) Limestone or sandstone quarried or mined shall not
include any treatment process or transportation after the
limestone or sandstone is severed from the earth.
(10) "Related parties" means two or more persons,
organizations or businesses owned or controlled directly or
indirectly by the same interests. Control exists if a contract
or lease, either written or oral, is entered into whereby one
party mines or processes natural resources owned or held by
another party and the owner or lessor participates in the
severing, processing or marketing of the natural resources or
receives any value other than an arm's length passive royalty
interest. In the case of related parties, the tax commissioner
may apportion or allocate the receipts between or among such
persons, organizations or businesses if he determines that such
apportionment or allocation is necessary to more clearly reflect gross value.
(11) "Severing" or "severed" means the physical removal of
the natural resources from the earth or waters of this state by
any means: Provided, That "severing" or "severed" shall not
include the removal of natural gas from underground storage
facilities into which the natural gas has been mechanically
injected following its initial removal from earth: Provided,
however, That "severing" or "severed" oil and natural gas shall
not include any separation process of oil or natural gas
commonly employed to obtain marketable natural resource
products.
(12) "Stock" includes shares in an association, joint-
stock company or corporation.
(13) "Taxpayer" means and includes any individual,
partnership, joint venture, association, corporation, receiver,
trustee, guardian, executor, administrator, fiduciary or
representative of any kind engaged in the business of severing
or processing (or both severing and processing) natural
resources in this state for sale or use. In instances where
contracts (either oral or written) are entered into whereby
persons, organizations or businesses are engaged in the
business of severing or processing (or both severing and processing) a natural resource but do not obtain title to or do
not have an economic interest therein, the party who owns the
natural resource immediately after its severance or has an
economic interest therein is the taxpayer.
(d) Specific definitions for persons providing health care
items or services. --
(1) "Behavioral health services" means health care related
services provided by a behavioral health center as defined in
section one, article two-a, chapter twenty-seven of this code
or section one, article nine of said chapter.
(2) "Community care services" means home and community
care services furnished by a provider pursuant to an individual
plan of care, which also includes senior citizens groups that
provide such services, but does not include services of home
health agencies.
§11-13A-5a. Dedication of ten percent of oil and gas severance
tax for benefit of counties and municipalities;
distribution of major portion of such dedicated tax to oil
and gas producing counties; distribution of minor portion
of such dedicated tax to all counties and municipalities;
reports; rules; creation of special funds in the office of
state treasurer; methods and formulae for distribution of
such dedicated tax; expenditure of funds by counties and
municipalities for public purposes; and requiring special county and municipal budgets and reports thereon.
(a) Effective the first day of July, one thousand nine
hundred ninety-six, five percent of the tax attributable to the
severance of oil and gas imposed by section three-a of this
article is hereby dedicated for the use and benefit of counties
and municipalities within this state and shall be distributed
to such counties and municipalities as hereinafter provided.
Effective the first day of July, one thousand nine hundred
ninety-seven, and thereafter, ten percent of the tax
attributable to the severance of oil and gas imposed by section
three-a of this article is hereby dedicated for the use and
benefit of counties and municipalities within this state and
shall be distributed to such counties and municipalities as
hereinafter provided. Effective the first day of July, one
thousand nine hundred ninety-eight, and thereafter, ten percent
of the tax attributable to the severance of oil and gas imposed
by section three-a of this article is hereby dedicated for the
use and benefit of counties and municipalities within this
state and shall be distributed to such counties and
municipalities as hereinafter provided.
(b) Seventy-five percent of this dedicated tax shall,
after appropriation thereof by the Legislature, be distributed
by the state treasurer in the manner hereinafter specified, to the various counties of this state in which the oil and gas
upon which this additional tax is imposed was located at the
time it was removed from the ground. Those counties are
hereinafter in this section referred to as the "oil and gas
producing counties". The remaining twenty-five percent of the
net proceeds of this additional tax on coal shall be
distributed, after appropriation, among all the counties and
municipalities of this state in the manner hereinafter
specified.
(c) The tax commissioner is hereby granted plenary power
and authority to promulgate reasonable rules requiring the
furnishing by oil and gas producers of such additional
information as may be necessary to compute the allocation
required under the provisions of subsection (f) of this
section. The tax commissioner is also hereby granted plenary
power and authority to promulgate such other reasonable rules
as may be necessary to implement the provisions of this
section.
(d) In order to provide a procedure for the distribution
of seventy-five percent of such dedicated tax on oil and gas to
such oil and gas producing counties, there is hereby created in
the state treasurer's office the special fund known as the "oil
and gas county revenue fund"; and in order to provide a procedure for the distribution of the remaining twenty-five
percent of such dedicated tax on oil and gas to all counties
and municipalities of the state, without regard to oil and gas
having been produced therein, there is also hereby created in
the state treasurer's office the special fund known as the "all
counties and municipalities revenue fund".
Seventy-five percent of such dedicated tax on oil and gas
shall be deposited in the "oil and gas county revenue fund" and
twenty-five percent of such dedicated tax on oil and gas shall
be deposited in the "all counties and municipalities revenue
fund", from time to time, as such proceeds are received by the
tax commissioner. The moneys in such funds shall, after
appropriation thereof by the Legislature, be distributed to the
respective counties and municipalities entitled thereto in the
manner set forth in subsection (e) of this section.
(e) The moneys in the "oil and gas county revenue fund"
and the moneys in the "all counties and municipalities revenue
fund" shall be allocated among and distributed annually to the
counties and municipalities entitled thereto by the state
treasurer in the manner hereinafter specified. On or before
each distribution date, the state treasurer shall determine the
total amount of moneys in each fund which will be available for
distribution to the respective counties and municipalities entitled thereto on that distribution date. The amount to
which an oil and gas producing county is entitled from the "oil
and gas county revenue fund" shall be determined in accordance
with subsection (f) of this section, and the amount to which
every county and municipality shall be entitled from the "all
counties and municipalities revenue fund" shall be determined
in accordance with subsection (g) of this section. After
determining as set forth in subsections (f) and (g) of this
section the amount each county and municipality is entitled to
receive from the respective fund or funds, a warrant of the
state auditor for the sum due to such county or municipality
shall issue and a check drawn thereon making payment of such
sum shall thereafter be distributed to such county or
municipality.
(f) The amount to which an oil and gas producing county is
entitled from the "oil and gas county revenue fund" shall be
determined by:
(1) In the case of moneys derived from tax on the
severance of gas:
(A) Dividing the total amount of moneys in such fund
derived from tax on the severance of gas then available for
distribution by the total volume of cubic feet of gas extracted
in this state during the preceding year; and
(B) Multiplying the quotient thus obtained by the number
of cubic feet of gas taken from the ground in such county
during the preceding year; and
(2) In the case of moneys derived from tax on the
severance of oil:
(A) Dividing the total amount of moneys in such fund
derived from tax on the severance of oil then available for
distribution by the total number of barrels of oil extracted in
this state during the preceding year; and
(B) Multiplying the quotient thus obtained by the number
of barrels of oil taken from the ground in such county during
the preceding year.
(g) The amount to which each county and municipality is
entitled from the "all counties and municipalities revenue
fund" shall be determined in accordance with the provisions of
this subsection. For purposes of this subsection "population"
means the population as determined by the most recent decennial
census taken under the authority of the United States:
(1) The treasurer shall first apportion the total amount
of moneys available in the "all counties and municipalities
revenue fund" by multiplying the total amount in such fund by
the percentage which the population of each county bears to the
total population of the state. The amount thus apportioned for each county is the county's "base share".
(2) Each county's "base share" shall then be subdivided
into two portions. One portion is determined by multiplying
the "base share" by that percentage which the total population
of all unincorporated areas within the county bears to the
total population of the county, and the other portion is
determined by multiplying the "base share" by that percentage
which the total population of all municipalities within the
county bears to the total population of the county. The former
portion shall be paid to the county and the latter portion
shall be the "municipalities' portion" of the county's "base
share". The percentage of such latter portion to which each
municipality in the county is entitled shall be determined by
multiplying the total of such latter portion by the percentage
which the population of each municipality within the county
bears to the total population of all municipalities within the
county.
(h) Moneys distributed to any county or municipality under
the provisions of this section, from either or both special
funds, shall be deposited in the county or municipal general
fund and may be expended by the county commission or governing
body of the municipality for such purposes as the county
commission or governing body shall determine to be in the best interest of its respective county or municipality: Provided,
That in counties with population in excess of two hundred
thousand at least seventy-five percent of such funds received
from the oil and gas county revenue fund shall be apportioned
to, and expended within the oil and gas producing area or areas
of the county, said coal-producing areas of each county to be
determined generally by the state tax commissioner: Provided,
however, That the moneys distributed to any county or
municipality under the provisions of this section shall not be
budgeted for personal services in an amount to exceed one
fourth of the total amount of such moneys.
(i) On or before the twenty-eighth day of March, one
thousand nine hundred ninety-seven, and each twenty-eighth day
of March thereafter, each county commission or governing body
of a municipality receiving any such moneys shall submit to the
tax commissioner on forms provided by the tax commissioner a
special budget, detailing how such moneys are to be spent
during the subsequent fiscal year. Such budget shall be
followed in expending such moneys unless a subsequent budget is
approved by the state tax commissioner. All unexpended
balances remaining in the county or municipality general fund
at the close of a fiscal year shall remain in the general fund and may be expended by the county or municipality without
restriction.
(j) On or before the fifteenth day of December, one
thousand nine hundred ninety-six, and each fifteenth day of
December thereafter, the tax commissioner shall deliver to the
clerk of the Senate and the clerk of the House of Delegates a
consolidated report of such budgets, created by subsection (i)
of this section, for all county commissions and municipalities
as of the fifteenth day of July of the current year.
(k) The state tax commissioner shall retain for the
benefit of the state from the dedicated tax attributable to the
severance of oil and gas the amount of thirty-five thousand
dollars annually as a fee for the administration of such
additional tax by the tax commissioner.