Senate Bill No. 666
[Originating in the Committee on Finance;
reported March 3, 2000.]
A BILL to amend and reenact sections two and three, article
thirteen-a, chapter eleven of the code of West Virginia, one
thousand nine hundred thirty-one, as amended, all relating to
the imposition of severance tax on home and community-based
services; and clarifying definition.
Be it enacted by the Legislature of West Virginia:
That sections two and three, article thirteen-a, chapter
eleven of the code of West Virginia, one thousand nine hundred
thirty-one, as amended, be amended and reenacted, all to read as
ARTICLE 13A. SEVERANCE TAXES.
(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
(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
(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
(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
(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
(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
(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
(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.(2) "Home and community based services" are those service
defined in Title XIX of the Social Security Act that enable individuals to remain in their residence and include homemaker,
personal care and case management services. Homemaker and personal
care services are those tasks which assist individuals with
activities of daily living, including, but not limited to, meal
preparation, cleaning, bathing and dressing. Case Management
refers, but is not limited to, to those tasks such as referral,
linkage, developing plans of care that assist individuals to access
§11-13A-3. Imposition of tax or privilege of severing coal,
limestone or sandstone, or furnishing certain health care services,
effective dates therefor; reduction of severance rate for coal
mined by underground methods based on seam thickness.
(a) Imposition of tax. -- Upon every person exercising the
privilege of engaging or continuing within this state in the
business of severing, extracting, reducing to possession and
producing for sale, profit or commercial use coal, limestone or
sandstone, or in the business of furnishing certain health care
services, there is hereby levied and shall be collected from every
person exercising such privilege an annual privilege tax.
(b) Rate and measure of tax. -- The tax imposed in subsection
(a) of this section shall be five percent of the gross value of the
natural resource produced or the health care service provided, as shown by the gross income derived from the sale or furnishing
thereof by the producer or the provider of the health care service,
except as otherwise provided in this article. In the case of coal,
this five percent rate of tax includes the thirty-five one
hundredths of one percent additional severance tax on coal imposed
by the state for the benefit of counties and municipalities as
provided in section six of this article.
(c) "Certain health care services" defined. -- For purposes
of this section, the term "certain health care services" means, and
is limited to, behavioral health services and home and community
and community care services.
(d) Tax in addition to other taxes. -- The tax imposed by this
section shall apply to all persons severing or processing (or both
severing and processing) in this state natural resources enumerated
in subsection (a) of this section and to all persons providing
certain health care services in this state as enumerated in
subsection (c) of this section and shall be in addition to all
other taxes imposed by law.
(e) Effective date. -- This section, as amended in the year
one thousand nine hundred ninety-three, shall apply to gross
proceeds derived after the thirty-first day of May of such year. The language of this section, as in effect on the first day of
January of such year, shall apply to gross proceeds derived prior
to the first day of June of such year and, with respect to such
gross proceeds, shall be fully and completely preserved.
(f) Reduction of severance tax rate. -- For tax years
beginning after the effective date of this subsection, any person
exercising the privilege of engaging within this state in the
business of severing coal for the purposes provided in subsection
(a) of this section shall be allowed a reduced rate of tax on coal
mined by underground methods in accordance with the following:
(i) For coal mined by underground methods from seams with an
average thickness of thirty-seven inches to forty-five inches, the
tax imposed in subsection (a) of this section shall be two percent
of the gross value of the coal produced. For coal mined by
underground methods from seams with an average thickness of less
than thirty-seven inches, the tax imposed in subsection (a) of this
section shall be one percent of the gross value of the coal
produced. Gross value is determined from the sale of the mined
coal by the producer. This rate of tax includes the thirty-five
one hundredths of one percent additional severance tax imposed by
the state for the benefit of counties and municipalities as
provided in section six of this article.
(ii) This reduced rate of tax applies to any new underground
mine producing coal after the effective date of this subsection,
from seams of less than forty-five inches in average thickness or
any existing mine that has not produced coal from seams forty-five
inches or less in thickness in the one hundred eighty days
immediately preceding the effective date of this subsection.
(iii) The seam thickness shall be based on the weighted
average isopach mapping of actual coal thickness by mine as
certified by a professional engineer.