Senate Bill No. 424

(By Senators Manchin, Oliverio and Kimble)

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[Introduced February 17, 1995; referred to the Committee
on Finance.]
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A BILL to amend chapter eleven of the code of West Virginia, one thousand nine-hundred thirty-one, as amended, by adding thereto a new article, designated article thirteen-j, relating to the establishment of a neighborhood investment tax credit; short title; legislative findings and purpose; definitions; eligibility for tax credits; certification of program plans by the office of economic opportunity; payment of application filing fee to the office of economic opportunity; amount of same; providing for disapproval of applications not certified within sixty days after receipt; notification of certification of program plan or denial of same; taxpayers eligible for receipt of the tax credit; authorizing the formation of a neighborhood investment program advisory board; providing that all applications for certification of a program plan shall be public information; amount of credit allowed to eligible taxpayers; providing for application of the credit against the corporation net income tax, franchise tax, severance tax and the personal income tax not attributable to wages, salaries or other compensation reportable on federal form W2; prohibiting application of the credit against employer withholding taxes; providing for forfeiture of unused credit; procedure for claiming the credit against tax; annual filing requirements for claiming the credit against tax; tax credit reporting schedule to be filed with required documentation; proof of payment of eligible contributions and documentation of project certification; disallowance of the credit for failure to timely file the tax credit reporting schedule, proof of payment of eligible contributions or other required documentation; aggregate amount of tax credits to be allowed in any state fiscal year; receipt and recording of applications for certification of program plans; time of filing; providing that when the total amount of credits certified by the office of economic opportunity equals the maximum amount allowed in any state fiscal year, no further certifications shall be issued for that fiscal year; providing that applications for certification of program plans not approved during the fiscal year in which they are submitted are void; reapplication for certification in the next ensuing state fiscal year; recapture of the tax credit in certain circumstances; statute of limitations for the issuance of assessments of tax; tax commissioner to publish annually the names, addresses and total amount of credit claimed for every taxpayer asserting the credit on a tax return; inapplicability of certain statutory provisions regarding confidentiality of taxpayer information; authorizing joint audits and examinations by the tax commissioner and the office of economic opportunity; and authorizing information sharing between the tax commissioner and the office of economic opportunity.

Be it enacted by the Legislature of West Virginia:
That chapter eleven of the code of West Virginia, one thousand nine hundred thirty-one, as amended, be amended by adding thereto a new article, designated article thirteen-j, to read as follows:
ARTICLE 13J. Neighborhood Investment Tax Credit.
§11-13J-1. Short title.

This article shall be known and may be cited as the "Neighborhood Investment Tax Credit Act".
§11-13J-2. Legislative findings and purpose.

The Legislature of West Virginia hereby finds and declares that community-based organizations can be a powerful force in community development. In West Virginia, however, the effectiveness of such organizations has historically been weakened by meager resources. Private corporations and individuals in West Virginia possess the resources to aid community based organizations in their efforts to assist neighborhoods, but because of the lack of clear incentives, the private and not-for-profit sectors have often not taken advantage of opportunities to collaborate with community-based organizations to the fullest extent possible through investment and participation in local programs.
Therefore, the neighborhood investment tax credit act is hereby enacted with the intent that it provide incentives to contribute to qualifying charitable projects. It is the intent of the Legislature that this act encourage private sector businesses and individuals to contribute capital, material and services to community-based organizations which establish projects to assist neighborhoods through such services as counseling, emergency assistance, crime prevention, education, housing, job training and physical improvements, including environmental clean-up programs.
§11-13J-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 in 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) "Affiliate" or "affiliates" includes all concerns which are affiliates of each other when either directly or indirectly:
(A) One concern controls or has the power to control the other; or
(B) A third party or third parties control or have the power to control both. In determining whether concerns are independently owned and operated and whether or not affiliation exists, consideration shall be given to all appropriate factors, including common ownership, common management and contractual relationships.
(2) "Commissioner" or "tax commissioner" are used interchangeably herein and mean the tax commissioner of the state of West Virginia, or his or her designee.
(3) "Community services" means services provided at no charge, including, but not limited to, the following:
(A) Providing any type of health, personal finance, psychological or behavioral, housing, legal, marital or educational counseling and advice;
(B) Providing emergency assistance or medical care;
(C) Establishing, maintaining or operating recreational or housing facilities;
(D) Providing economic development assistance to individuals, groups or neighborhood organizations in an economically disadvantaged area;
(E) Providing communities, groups or neighborhood organizations assistance in environmental clean-up projects and establishing waste recycling projects that are not mandated by either federal or state statute.
(4) "Compensation" means wages, salaries, commissions and any other form of remuneration paid to employees for personal services.
(5) "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.
(6) "Crime prevention" means any activity which aids in the reduction of crime in an economically disadvantaged area.
(7) "Designee," when used in the phrase "tax commissioner or his or her designee," means any officer or employee of the tax division of the department of tax and revenue, duly authorized by the commissioner to perform the functions mentioned or described in this article.
(8) "Director" means the director of the West Virginia office of economic opportunity.
(9) "Economically disadvantaged area" means an area determined by the West Virginia office of economic opportunity to qualify for special consideration on the basis of current indices of social and economic conditions, which shall include, but not be limited to, the median per capita income of the area in relation to the median per capita income of the state.
(A) An economically disadvantaged area may qualify as such only pursuant to a designation issued by the office of economic opportunity. This designation shall expire after the passage of five calendar years, unless expressly limited to a shorter time by specific order of the office of economic opportunity, and no area may be designated as an economically disadvantaged area for more than ten years, either consecutively or in the aggregate.
(B) No fewer than two thirds of all areas designated as economically disadvantaged by the office of economic opportunity under this article at any one time shall be located in rural areas.
(10) "Education" means any type of scholastic instruction to, or scholarship by, an individual that enables that individual to prepare for better life opportunities. The term does not include courses in physical training, physical conditioning, physical education, sports training, sports camps and similar training or conditioning courses, except for physical therapy prescribed by a physician or other person licensed to prescribe courses of medical treatment under West Virginia law.
(11) An "eligible contribution":
(A) Consists of cash, tangible personal property valued at its fair market value, real property valued at its fair market value, or a contribution of in-kind professional services valued at fair market value.
(B) For purposes of this definition, the value of in-kind professional services will not qualify as an eligible contribution unless the services are:
(i) Reasonably priced and valued and are reasonably necessary services, other than those encompassed by the program plan, that are customarily and normally provided by the contributor in the normal course of business to customers, clients or patients;
(ii) Not reimbursable, in whole or in part, from sources other than the tax credit provided under this article; and
(iii) Are services which are not available elsewhere in the community.
(C) No contribution of cash, property or professional services or any combination thereof, having a value of less than five hundred dollars and contributed in any one tax year, may qualify as an eligible contribution.
(12) "Eligible taxpayer" means:
(A) Any person subject to the taxes imposed by article twenty-one, twenty-three or twenty-four of this chapter, who makes an eligible contribution to a community based organization pursuant to the terms of a program plan certified by the director of the West Virginia office of economic opportunity for the purpose of providing neighborhood assistance, community services, crime prevention, or of providing job training or education for individuals not employed by the prospective contributing taxpayer or an affiliate of the prospective contributing taxpayer or a person related to the prospective contributing taxpayer, in an economically disadvantaged area; and
(B) An affiliated group of taxpayers, if it elects to file a consolidated corporation net income tax return under article twenty-four of this chapter and one or more of the individual taxpayers affiliated with the group would qualify as an eligible taxpayer under paragraph (A) of this subdivision.
(13) "Includes" and "including," when used in a definition contained in this article, does not exclude things which otherwise come within the meaning of the term defined.
(14) "Job training" means instruction to an individual that is intended to enable the individual to acquire academic or vocational skills so as to become employable or be able to seek a higher grade of employment.
(15) "Neighborhood assistance" means:
(A) Furnishing financial assistance, labor, material or technical advice to aid in the physical or economic improvement of any part or all of an economically disadvantaged area; or
(B) Furnishing technical advice to promote higher employment in an economically disadvantaged area.
(16) "Community-based organization" means any organization which:
(A) Is performing community services in an economically disadvantaged area; and
(B) Is exempt from income taxation under Section 501(c)(3) of the Internal Revenue Code.
(17) "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, an estate, a corporation or a sole proprietorship. The term "partner" includes a member in such a syndicate, group, pool, joint venture or organization.
(18) "Person" includes any natural person, corporation, limited liability company or partnership.
(19) "Related person" or "person related to" a certain taxpayer includes:
(A) An individual, corporation, partnership, affiliate, association or trust, or any combination thereof, which is controlled by the taxpayer;
(B) An individual, corporation, partnership, affiliate, association or trust, or any combination thereof, that exercises control over the taxpayer;
(C) An individual, corporation, partnership, affiliate, association or trust, or any combination thereof, which is controlled by an individual, corporation, partnership, affiliate, association or trust, or any combination thereof, that exercises control over the taxpayer; and
(D) A member of the same group as one that exercises control over the taxpayer.
For purposes of this article, when used with respect to a corporation, "control" means ownership, direct or indirect, 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. When used with respect to a trust, "control" means ownership, direct or indirect, of fifty percent or more of the beneficial interest in the principal or income of the trust. The ownership of stock in a corporation, a capital or profits interest in a partnership or association or a beneficial interest in a trust shall be determined in accordance with the rules for determining constructive ownership of stock provided in Section 267(c), Internal Revenue Code, as amended, except for paragraph (3) of said section.
(20) "State fiscal year" means the twelve-month period which begins on the first day of July and ends on the thirtieth day of June in the following year.
(21) "Taxpayer" means any person subject to the tax imposed by article twenty-one, twenty-three or twenty-four of this chapter, or any combination thereof.
§11-13J-4. Eligibility for tax credits; certification of program
plans by the office of economic opportunity; notification thereof; neighborhood investment program advisory board; application for certification constitutes public information; filing fee to accompany application.
(a) A community-based organization which seeks to solicit eligible contributions under this article shall submit to the director an application for certification of a program plan, in a form as the director shall prescribe, which sets forth the program to be implemented, the identity of all of the persons and organizations that will participate in the program, the area selected, the amount of eligible contributions to be solicited by the community-based organization and the schedule for implementing the program.
(b) The director shall certify, or deny certification of, the program plan of a community-based organization within sixty days after receipt of a properly completed application for approval. Those applications not approved by the director within sixty days after receipt of a properly completed application shall be deemed disapproved by operation of law.
(c) The office of economic opportunity shall promptly notify an applicant whether an application for certification of a program plan has been approved or disapproved.
(d) Those taxpayers who make eligible contributions to a community-based organization or organizations under one or more certified program plans, and who otherwise comply with the requirements of this article so as to become eligible taxpayers, as defined in this article, are eligible to receive a tax credit as provided in section five of this article. No tax credit may be granted under this article to any taxpayer without the issuance of a certification under this section.
(e) The office of economic opportunity may establish a neighborhood investment program advisory board made up of not more than ten members to serve in an advisory capacity and provide advice and guidance to the office of economic opportunity on project plans, proposals and applications.
(f) All applications for certification of a program plan filed with the office of economic opportunity shall be public information, regardless of whether the plan is certified, and any application submitted to the office may be viewed and copied by members of the public and may be published by the office of economic opportunity at its discretion.
(g) All applications for certification filed under this article shall be accompanied by a filing fee in the amount of three percent of the amount of the total tax credit sought by the applicant.
§11-13J-5. Credit allowed; amount; taxes against which credit

may be applied; carry-forward provision.


(a) Eligible taxpayers shall be allowed a credit against taxes imposed by this state, the application of which and the amount of which shall be determined as provided in this article.
(b) The amount of credit that may be allowed is fifty percent of the amount of the taxpayer's "eligible contribution." (c) The credit allowed by this section may be claimed against the following taxes: Corporation net income tax, franchise tax, severance tax and personal income tax. Taxpayers who may claim this credit include electing small business corporations, as defined in Section 1361 of the Internal Revenue Code, limited liability companies that are treated as partnerships for purposes of the federal income tax, partnerships and sole proprietorships.
(d) The unused portion of the total amount of credit allowed may be carried forward for a maximum period of four additional years, beginning with the tax year after that in which the taxpayer irrevocably transfers its eligible contribution to the program plan transferee. Notwithstanding any other provision of this code to the contrary, the tax credit which a taxpayer receives under this article may not exceed one hundred thousand dollars in any tax year. A tax credit shall be allowed under this article only for the tax year in which the eligible contribution is irretrievably transferred to the program plan transferee and the next four consecutive tax years.
§11-13J-6. Application of credit allowance against tax;

exceptions; forfeiture of unused credits.


(a) The aggregate amount determined under subsection (a) of this section shall be allowed as a credit for the tax year beginning on and after the first day of July, one thousand nine hundred ninety-five except that:
(1) No credit may be allowed under this section against any employer withholding taxes imposed by article twenty-one of this chapter.
(2) No credit may be allowed under this section against any tax due under article twenty-one of this chapter on any wage, salary or other compensation paid to any employee of any electing small business corporation, limited liability company, partnership, other unincorporated organization or sole proprietorship or against any amount of tax due on any wage, salary or other compensation reported on federal form W2.
(b) If any unused credit remains after a period of five years from the initial certification and contribution, the amount thereof shall be forfeited. No carryover to a subsequent tax year or carryback to a prior tax year may be allowed for the amount of any unused portion of any credit allowed under this article after the expiration of the five-year period.
§11-13J-7. Assertion of the tax credit against tax; schedule to

be prescribed by commissioner; required documentation; filing procedure; disallowance of credit by commissioner.
(a) Any eligible taxpayer which desires to claim a tax credit as provided in this article must file with the West Virginia tax commissioner, in a form that the tax commissioner shall prescribe, an annual tax credit reporting schedule which states the amount of the eligible contribution that the taxpayer has made. This tax credit reporting schedule must be accompanied by a certificate issued by the director of the office of economic opportunity which evidences approval of the community-based program plan by the director of the office of economic opportunity, pursuant to which the contribution was made.
(b) In the tax credit reporting schedule required under this section, the taxpayer shall provide all information required by the tax commissioner.
(c) The tax credit reporting schedule shall be filed with the annual return for the taxes imposed by article twenty-four of this chapter, for the tax year in which the eligible contribution is first irrevocably transferred to a transferee pursuant to a certified program plan: Provided, That if the eligible taxpayer is not required to file a tax return under article twenty-four of this chapter, then the tax credit reporting schedule shall be filed with the annual return for the taxes imposed by article twenty-three of this chapter for such year: Provided, however, That if the eligible taxpayer is not required to file a tax return under article twenty-four or article twenty-three of this chapter, the tax credit reporting schedule shall be filed with the annual return for the taxes imposed by article twenty-one of this chapter for such year.
(d) The tax credit reporting schedule shall be accompanied by such proof of payment as the tax commissioner may prescribe, showing that the amount to be contributed under the certified program plan has been paid to the transferee designated in the certified plan solely for the certified program.
(e) The tax commissioner may disallow any credit claimed under this article for which a properly completed tax credit reporting schedule, a properly completed and valid statement or proof of payment of the eligible contribution or other required documentation, statement or proof is not timely filed.
§11-13J-8. Limitation on total amount of tax credits allowed

during fiscal year; applications void by operation of law; reapplication in following fiscal year.
(a) The total amount of tax credits allowed by the commissioner under this article may not exceed two million dollars in any state fiscal year.
(b) The office of economic opportunity shall record the time of filing of each application for certification of a program plan required under section four of this article and shall certify and approve the applications, if they otherwise qualify for certification under this article, in the applicable state fiscal year.
(c) When the total amount of tax credits certified under this article equals the maximum amount of tax credits allowed in any state fiscal year, no further certifications shall be issued in that fiscal year, as specified in subsection (a) of this section.
(d) All applications which are not certified during the same state fiscal year in which they are filed are void by operation of law, effective on the last day of the state fiscal year in which they are filed, and all applicants who elect to seek certification of a program plan so voided shall refile on or after the first day of the state fiscal year next ensuing without regard to any prior year's application or previous denial of certification.
§11-13J-9. Credit recapture; when additional taxes due;

interest; penalty; waiver by commissioner; statute of limitations.
If it appears upon an audit or otherwise that a taxpayer has not made the contribution as represented in its application for certification of a program plan or in its claim for credit against tax, or should it appear that any otherwise eligible contribution made by a taxpayer was made for the direct or indirect benefit of the taxpayer making the contribution or for the direct or indirect benefit of any person related to the taxpayer, the credit provided for by this article shall be recaptured, and amended returns shall be filed for any tax year for which the credit was claimed. Any additional taxes due under this chapter shall be remitted with the amended return or returns, along with interest, as provided in section seventeen, article ten of this chapter, and a ten percent penalty, which may be waived by the tax commissioner if the taxpayer shows that the claim for credit was reasonable under the circumstances then existing and not due to willful neglect or intentional misrepresentation. Notwithstanding the provisions of article ten of this chapter, the statute of limitations for the issuance of an assessment of tax by the tax commissioner shall be five years from the date of the filing of any tax return on which this credit was claimed or five years from the date of payment of any tax liability calculated pursuant to the assertion of this credit, whichever is later.
§11-13J-10. Tax commissioner to publish certain information
relating to tax credit.


The tax commissioner shall annually publish in the state register the name and address of every taxpayer who has claimed the credit provided for in this article, along with the amount of the credit claimed by that taxpayer, and the confidentiality provisions of section four-a, article one, section five-d, article ten of this chapter, or of any other similar provision of this code shall not apply to this information.
§11-13J-11. Joint audits and examinations authorized;

information sharing.


(a) In addition to or in lieu of discretionary audits conducted by the tax commissioner, the tax commissioner may in his or her discretion perform joint audits or examinations, in concert with the office of economic opportunity, of the books and records and other information, as appropriate: (i) Of any taxpayer which has filed an application for certification of a program plan with the office of economic opportunity under section four of this article; (ii) of any taxpayer which has claimed a credit provided for in this article on its tax return; or (iii) of any person believed to have information relevant to the validity of any claim for or the granting of such a credit.
(b) For purposes of any joint audit, or any other proceeding relating to a tax credit taken, asserted or sought under this article, the tax commissioner may share any information as he or she may deem appropriate with the office of economic opportunity, notwithstanding the provisions of section four-a, article one, section five-d, article ten of this chapter, or any other provision of this code to the contrary.


NOTE: The purpose of this bill is to establish a Neighborhood Investment Tax Credit Act which will allow a tax credit for those taxpayers who make contributions of cash, certain property or certain in-kind professional services to community based organizations which provide community assistance and which are designated as charitable organizations under Section 501(c)(3) of the Internal Revenue Code. The tax credit would be fifty percent of the amount of the eligible contribution and would apply against the business franchise tax, corporate severance tax, corporation net income tax, and nonwage, nonsalary personal income tax and could be taken in the year in which approved and taken, up to one hundred thousand dollars, with a carry-forward provision for any remaining credit to be taken for the next four ensuing tax years. The total amount of all such credits which the tax commissioner could certify in any given fiscal year would be two million dollars. The bill allows for recapture of tax credits taken in certain circumstances; provides for certain information relating to the credit to be public information; and provides for joint audits and information sharing.

This article is new; therefore, strike-throughs and underscoring have been omitted.