Senate Bill No. 493
(By Senators McCabe, Browning, Barnes, Green, Foster, D.
Facemire, Laird, Unger, Plymale, K. Facemyer,
Williams, Snyder,
Wells, Hall, Stollings, Jenkins, Chafin, White and Kessler)
____________
[Introduced February 5, 2010; referred to the Committee on
Economic Development; and then to the Committee on Finance.]
____________
A BILL to amend the Code of West Virginia, 1931, as amended, by
adding thereto a new article,
designated §11-6K-1, §11-6K-2,
§11-6K-3, §11-6K-4, §11-6K-5, §11-6K-6 and §11-6K-7; and
to
amend said code by adding thereto a new article, designated
§11-13AA-1, §11-13AA-2, §11-13AA-3, §11-13AA-4, §11-13AA-5,
§11-13AA-6, §11-13AA-7, §11-13AA-8, §11-13AA-9, §11-13AA-10,
§11-13AA-11, §11-13AA-12, §11-13AA-13, §11-13AA-14, §11-13AA-
15, §11-13AA-16, §11-13AA-17 and §11-13AA-18, all relating
generally to the West Virginia Economic Development Act of
2010, consisting of the Twenty-First Century Business
Technologies Property Valuation Act and, as to such act,
specifying method for valuation of certain property; providing
for initial determination by county assessors of whether
certain property is used in a twenty-first century business
technology; specifying procedure for protest and appeal of
determination by county assessor; requiring the West Virginia Development Office to report to the Joint Committee on
Government and Finance on the economic impact of such
valuation beginning in 2014;
consisting of the West Virginia
Twenty-First Century Tax Credit Act and, as to such act,
providing short title, setting forth purpose and legislative
findings; defining terms; allowing credit and exemption from
certain taxes; providing for computation of credit,
application of credit and period for which credit is allowed;
requiring application to claim credit; requiring that new jobs
be good-paying jobs with health benefits; requiring
identification of investment credit property and recomputation
of credit in event of premature disposition of investment
property; providing for forfeiture of unused tax credits and
redetermination of credit allowed; imposing recapture tax
under specified circumstances; allowing transfer of qualified
investment to successors; providing rules for interpretation
and construction of act; providing for tax credit review and
accountability; specifying effective date; and providing
severability clause.
Be it enacted by the Legislature of West Virginia:
That the Code of West Virginia, 1931, as amended, be amended
by adding thereto a new article,
designated §11-6K-1, §11-6K-2,
§11-6K-3, §11-6K-4, §11-6K-5, §11-6K-6 and §11-6K-7
; and that said
code be amended by adding thereto a new article, designated §11-
13AA-1, §11-13AA-2, §11-13AA-3, §11-13AA-4, §11-13AA-5, §11-13AA-6, §11-13AA-7, §11-13AA-8, §11-13AA-9, §11-13AA-10, §11-13AA-11, §11-
13AA-12, §11-13AA-13, §11-13AA-14, §11-13AA-15, §11-13AA-16, §11-
13AA-17 and §11-13AA-18, all to read as follows:
ARTICLE 6K. SPECIAL METHOD FOR VALUATION OF TWENTY-FIRST CENTURY
BUSINESS TECHNOLOGY PROPERTY.
§11-6K-1. Short title.
This article shall be known and cited as the "Twenty-first
Century Business Technologies Property Valuation Act".
§11-6K-2. Definitions.
For the purposes of this article:
(1) "Salvage value" means five percent of original cost; and
(2) "Twenty-first century business technologies" means
"twenty-first century business technologies" as defined in section
three, article thirteen-aa of this chapter when the owner of the
property qualifies or qualified for the tax credit allowed by that
article.
§11-6K-3. Valuation of certain twenty-first century business
technology property.
Notwithstanding any other provision of this code to the
contrary, the value of tangible personal property directly used in
a twenty-first century business technoloy for the purpose of ad
valorem property taxation under this chapter and under article X of
the Constitution of this state, shall be its salvage value.
§11-6K-4. Initial determination by county assessor.
The assessor of the county in which a specific item of
tangible personal property is located shall determine, in writing,
whether a specific item of tangible personal property is directly
used in a twenty-first century business technology subject to
valuation in accordance with this article. Upon making a
determination that a taxpayer has tangible personal property
directly used in a twenty-first century business technology, the
county assessor shall notify the Tax Commissioner of that
determination and shall provide information to the Tax Commissioner
as he or she requires relating to that determination.
§11-6K-5. Protest and appeal.
(a) At any time after the property is returned for taxation,
but prior to January 1 of the assessment year, any taxpayer may
apply to the county assessor for information regarding the issue of
whether any particular item or items of property constitute
property directly used in a twenty-first century business
technology under this article which should be subject to valuation
in accordance with this article. If the taxpayer believes that
some portion of the taxpayer's property is subject to this article,
the taxpayer shall file objections in writing with the county
assessor. The county assessor shall decide the matter by either
sustaining the protest and making proper corrections, or by
stating, in writing if requested, the reasons for the county
assessor's refusal. The county assessor may, and if the taxpayer
requests, the county assessor shall, before February 1 of the assessment year, certify the question to the Tax Commissioner in a
statement sworn to by both parties, or if the parties are unable to
agree, in separate sworn statements. The sworn statement or
statements shall contain a full description of the property and any
other information which the Tax Commissioner may require.
(b) The Tax Commissioner shall, as soon as possible on receipt
of the question, but in no case later than February 28 of the
assessment year, instruct the county assessor as to how the
property shall be treated. The instructions issued and forwarded
by mail to the county assessor are binding upon the county
assessor, but either the county assessor or the taxpayer may apply
to the circuit court of the county for review of the question of
the applicability of this article to the property in the same
fashion as is provided for appeals from the county commission in
section twenty-five, article three of this chapter. The Tax
Commissioner shall prescribe forms on which the questions under
this section shall be certified and the Tax Commissioner has the
authority to pursue any inquiry and procure any information
necessary for disposition of the matter.
§11-6K-6. Effective date.
This article shall be effective on and after July 1, 2010.
§11-6K-7. Report on economic benefit.
The West Virginia Development Office shall provide to the
Joint Committee on Government and Finance by March 1, 2014, and on
March 1 of each of the two subsequent years, a report detailing the economic benefit of the valuation method specified in this article.
The report shall include the number of new jobs created due to the
provisions of this article and the ad valorem property tax impact.
ARTICLE 13AA. TWENTY-FIRST CENTURY TAX CREDIT.
§11-13AA-1. Short title.
This article may be cited as the "West Virginia Twenty-First
Century Tax Credit Act."
§11-13AA-2. Purpose and legislative findings.
(a)
Purpose. -- The purpose of this article is to encourage
economic opportunity, greater capital investment and development of
the use in this state of twenty-first century technologies by
enacting the twenty-first century tax credit.
(b)
Legislative findings. --
(1) All sectors of the West Virginia economy, job creation
potential, and the physical environment are driven by the flow of
energy and the nonstop emergence of new technologies.
(2) Energy technology plays an essential role in the efficient
consumption and wise utilization of energy resources, has dramatic
impacts on all state and national economies, and can help to
improve environmental conditions. These facts, along with the
technical and economic conditions around the world, have resulted
in the demand for improved energy technologies.
(3) Leading-edge energy technologies are being developed,
demonstrated, and manufactured in other states in order to meet
their energy needs, as well as to support economic development by responding to the rapidly expanding world-wide export market for
these technologies.
(4) Other emerging technologies are being developed,
demonstrated, and manufactured in other states in order to support
economic development by responding to the emergence of new
technologies and the rapidly expanding world-wide export market for
such technologies.
(5) West Virginia has been slow to recognize the potential
economic and technical benefits of these energy and other emerging
technologies.
(6) The Legislature finds that it is in public interest of the
citizens of West Virginia to:
(A) Establish a foothold in the West Virginia economy for
manufacturers of advanced energy and other emerging technologies
that are magnets for capital investment and which spin off jobs
that are characteristically knowledge-based; and
(B) Encourage the application of nanotechnology and other
supporting technology to:
(i) Biotechnology and agriculture;
(ii) Manufacturing and materials;
(iii) Medicine and health;
(iv) Photonics;
(v) Nanoelectronics and computer technology;
(vi) Environment and energy;
(vii) Aeronautics and space; and
(viii) National security.
§11-13AA-3. Definitions.
(a)
General. -- When used in this article, or in the
administration of this article, terms defined in subsection (b)
have the meanings ascribed to them by 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) "Alternative and renewable energy sources" means and
includes the following existing and new sources for the production
of electricity:
(A) Solar photovoltaic or other solar electric energy.
(B) Solar thermal energy.
(C) Wind power.
(D) Large-scale hydro power, which means the production of
electric power by harnessing the hydroelectric potential of moving
water impoundments, including pumped storage that does not meet the
requirements of low-impact hydro power under paragraph (E) of this
subdivision.
(E) Low-impact hydro power, which consists of any technology
that produces electric power and that harnesses the hydroelectric
potential of moving water impoundments, provided the incremental
hydroelectric development:
(i) Does not adversely change existing impacts to aquatic
systems;
(ii) Meets the certification standards established by the Low
Impact Hydro Power Institute and American Rivers, Inc., or their
successors;
(iii) Provides an adequate water flow for protection of
aquatic life and for safe and effective fish passage;
(iv) Protects against erosion; and
(v) Protects cultural and historic resources.
(F) Geothermal energy, which means electricity produced by
extracting hot water or steam from geothermal reserves in the
earth's crust and supplied to steam turbines that drive generators
to produce electricity.
(G) Biomass energy, which means the generation of electricity
utilizing the following:
(i) Organic material from a plant that is grown for the
purpose of being used to produce electricity or is protected by the
Federal Conservation Reserve Program (CRP) and provided further
that crop production on CRP lands does not prevent achievement of
the water quality protection, soil erosion prevention or wildlife
enhancement purposes for which the land was primarily set aside; or
(ii) Any solid nonhazardous, cellulosic waste material that is
segregated from other waste materials, such as waste pallets,
crates and landscape or right-of-way tree trimmings or agricultural
sources, including orchard tree crops, vineyards, grain, legumes,
sugar and other crop by-products or residues.
(H) Biologically derived methane gas, which includes, but is not limited to, landfill methane gas and methane from the anaerobic
digestion of organic materials from yard waste, such as grass
clippings and leaves, food waste, animal waste and sewage sludge.
(I) Fuel cells, which means any electrochemical device that
converts chemical energy in a hydrogen-rich fuel directly into
electricity, heat and water without combustion.
(J)
Recycled energy, which means useful thermal, mechanical or
electrical energy produced from: (i) Exhaust heat from any
commercial or industrial process; (ii) waste gas, waste fuel or
other forms of energy that would otherwise be flared, incinerated,
disposed of or vented; and (iii) electricity or equivalent
mechanical energy extracted from a pressure drop in any gas,
excluding any pressure drop to a condenser that subsequently vents
the resulting heat
.
(K) Coalbed methane, which means methane gas produced or
emitting from a coal seam, or rock or other strata in communication
with a coal seam, a mined out area or a gob well.
(L) Demand-side management consisting of the management of
customer consumption of electricity or the demand for electricity
through the implementation of:
(i) Energy efficiency technologies, management practices or
other strategies in residential, industrial, commercial,
institutional or government customers that reduce electricity
consumption by those customers;
(ii) Load management or demand response technologies, management practices or other strategies in residential,
commercial, industrial, institutional and government customers that
shift electric load from periods of higher demand to periods of
lower demand; or
(iii) Industrial by-product technologies consisting of the use
of a by-product from an industrial process, including the reuse of
energy from exhaust gases or other manufacturing by-products that
are used in the direct production of electricity at the facility of
a customer;
(M)
Electrical, mechanical, or thermal energy produced from a
method that uses one or more of the following fuels or energy
sources: hydrogen, biomass, solar energy, geothermal energy, wind
energy, waste heat, or hydroelectric power
.
(2) "Alternative or renewable energy system" means a facility
or energy system that uses a form of alternative or renewable
energy source to generate electricity and delivers the electricity
it generates to the distribution system of an electric distribution
company or to the transmission system operated by a regional
transmission organization;
(3) "Alternative fuels" include electricity, biodiesel,
natural gas, propane, and any other fuel that may be deemed
appropriate in the future by the Director of the Division of Energy
of the Department of Commerce;
(4) "Alternative fuel vehicles" include on-road and off-road
transportation vehicles and light-duty, medium-duty, and heavy-duty vehicles that are powered by an alternative fuel or a combination
of alternative fuels;
(5)"Biomass" means a power source that is comprised of, but
not limited to, combustible residues or gases from forest products
manufacturing, waste, byproducts, or products from agricultural and
orchard crops, waste or coproducts from livestock and poultry
operations, waste or byproducts from food processing, urban wood
waste, municipal solid waste, municipal liquid waste treatment
operations, and landfill gas;
(6) "Bioscience" means the use of compositions, methods and
organisms in cellular and molecular research, development and
manufacturing processes for such diverse areas as pharmaceuticals,
medical therapeutics, medical diagnostics, medical devices, medical
instruments, biochemistry, microbiology, veterinary medicine, plant
biology, agriculture and industrial, environmental, and homeland
security applications of bioscience, and future developments in the
biosciences. Bioscience includes biotechnology and life sciences;
(7) "Bioscience company" means a corporation, limited
liability company, S corporation, partnership, registered limited
liability partnership, foundation, association, nonprofit entity,
business trust, person, group, or other entity that is engaged in
the business of bioscience in this state and has business
operations in this state, including, without limitation, research,
development, or production directed towards developing or providing
bioscience products or processes for specific commercial or public purposes and are identified by the following NAICS codes: 325411,
325412, 325413, 325414, 325193, 325199, 325311, 32532, 334516,
339111, 339112, 339113, 334510, 334517, 339115, 621511, 621512,
541710, 541380, 541940, 622110. "Bioscience company" does not
include a sole proprietorship;
(8) "Biotechnology" means those fields focusing on
technological developments in such areas as molecular biology,
genetic engineering, genomics, proteomics, physiomics,
nanotechnology, biodefense, biocomputing and bioinformatics;
(9) "Business" means any activity which is engaged in by any
person in this state which is taxable under article thirteen,
twenty-one, twenty-three or twenty-four of this chapter (or any
combination of those articles of this chapter);
(10) "Commissioner" and "Tax Commissioner" are used
interchangeably herein and mean the Tax Commissioner of the State
of West Virginia, or his or her designee;
(11) "Compensation" means wages, salaries, commissions, the
cost of health benefits and any other form of remuneration paid to
employees for personal services;
(12) "Controlled group" means one or more chains of
corporations connected through stock ownership with a common parent
corporation if stock possessing at least fifty percent of the
voting power of all classes of stock of each of the corporations is
owned directly or indirectly by one or more of the corporations;
and the common parent owns directly stock possessing at least fifty percent of the voting power of all classes of stock of at least one
of the other corporations;
(13) "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;
(14) "Customer-generator" means a nonutility owner or operator
of a net metered distributed generation system with a nameplate
capacity of not greater than fifty kilowatts if installed at a
residential service or not larger than fifty thousand kilowatts at
other customer service locations, except for customers whose
systems are above three megawatts and up to five megawatts who make
their systems available to operate in parallel with the electric
utility during grid emergencies as defined by the regional
transmission organization or where a microgrid is in place for the
primary or secondary purpose of maintaining critical
infrastructure, such as homeland security assignments, emergency
services facilities, hospitals, traffic signals, wastewater
treatment plants or telecommunications facilities, provided that
technical rules for operating generators interconnected with
facilities of an electric distribution company, electric
cooperative or municipal electric system have been promulgated by
the Institute of Electrical and Electronic Engineers and the West
Virginia Public Service Commission;
(15) "Designee" in the phrase "or his or her designee," when used in reference to the Tax Commissioner, means any officer or
employee of the Tax Division of the Department of Revenue duly
authorized by the commissioner directly, or indirectly by one or
more redelegations of authority, to perform the functions mentioned
or described in this article;
(16) "Eligible taxpayer" means any emerging technology
industry that makes qualified investment in a new business facility
or expanded business facility located in this state that employs
emerging technologies to manufacture tangible or intangible
personal property, or provide a service, for sale to another
business for use or consumption by that business or for resale to
consumers and creates at least the required number of new jobs and
who is subject to any of the taxes imposed by articles thirteen,
twenty-one, twenty-three and twenty-four of this chapter (or any
combination of those articles);
(17) "Emerging technology industries" include, but are not
limited to, industries employing new or state-of-the-art technology
in biotechnology, marine science technology, pharmaceuticals,
defense and homeland security-related technologies, advanced
materials, electronics, nanotechnology, environmental, medical
device, information technology, twenty-first century business
technologies, plastics polymers, telecommunications industries
involved in research and development of state-of-the-art medication
delivery devises or other technology field or industry which the
West Virginia Economic Development Authority has classified or classifies as an emerging technology. "Emerging technology
industries includes, but is not limited to:
(A) Semiconductors,
(B) information,
(C) computer and software technology,
(D) energy,
(E) manufactured energy systems,
(F) micro-electromechanical systems,
(G) nanotechnology,
(H) biotechnology,
(I) medicine,
(J) life sciences,
(K) chemical processing,
(L) aerospace,
(M) defense, and
(N) other industries that the West Virginia Economic
Development Authority has classified or classifies as an emerging
technology industry.
(18) "Expanded facility" means any business facility (other
than a new or replacement business facility) resulting from the
acquisition, construction, reconstruction, installation or erection
of improvements or additions to existing property if the
improvements or additions are purchased on or after July 1, 2010,
but only to the extent of the taxpayer's qualified investment in
the improvements or additions;
(19) "Fuel cells" means those products designed, manufactured,
and produced to convert hydrocarbon fuel to heat and electricity by
electrochemical means;
(20) "Health insurance benefits" means benefits provided to
employees that provide a subsidy of at least twenty-five percent of
a health insurance premium for a health insurance policy that
provides a "health benefit plan" meeting the requirements contained
in the West Virginia Code of State Rules, Title 114, Series 39,
Section 5 under the heading "Minimum Standards for Benefits" and
complies with the applicable requirements contained in article
sixteen, chapter thirty-three of this code, article twenty-four of
said chapter and article twenty of said chapter; Provided, that if
an employer in lieu of providing such a subsidy transfers moneys to
an employee's health savings account, an amount that is equal to
the cost of providing such subsidy, the employer shall be deemed to
have provided health insurance benefits for such employee;
(21) "Includes" and "including," when used in a definition
contained in this article, shall not be considered to exclude other
things otherwise within the meaning of the term defined;
(22) "Leased property" does not include property which the
taxpayer is required to show on its books and records as an asset
under generally accepted principles of financial accounting. If the
taxpayer is prohibited from expensing the lease payments for
federal income tax purposes, the property shall be treated as
purchased property under this section;
(23) "Life science" means the area of medical sciences,
pharmaceutical sciences, biological sciences, zoology, botany,
horticulture, ecology, toxicology, organic chemistry, physical
chemistry, physiology and future advances associated with life
sciences;
(24) "Microturbines" means one megawatt or smaller, high-speed
generator power plant that includes the turbine, compressor, and
generator, all of which are on a single shaft, as well as the power
electronics to deliver power to the grid;
(25) "Nanotechnology" means the materials and systems whose
structures and components exhibit novel and significantly improved
physical, chemical, and biological properties, phenomena, and
processes due to their nanoscale size;
(26) "New business" means any business whose ownership and
activities are not closely related to a preexisting business. A
mere change in the stock ownership of a corporation, or the equity
ownership of a partnership or other entity treated as a partnership
for federal income tax purposes, will not affect its status as an
exiting business. Additionally, a new business that acquires
substantially all of the assets of a corporation or other business
entity or of a sole proprietorship shall not be treated as a new
business for purposes of this article. In determining whether or
not a new business is closely related to a preexisting business,
all facts and circumstances shall be considered by the Tax
Commissioner. The existence of the following factors help establish that a new business is closely related to an existing business:
(A) The new business's products or services are very similar
to the products or services provided by the preexisting business;
(B) The new business markets products and services to the same
class of customers as that of the preexisting business;
(C) The new business is conducted in the same general location
as the preexisting business;
(D) The new business requires the use the same or similar
operating assets as those used in the preexisting business;
(E) The new business's economic success builds on, or depends
on, the success of the preexisting business;
(F) The activity of the new business is of a type that would
normally be treated as a unit with the preexisting business in the
accounting records of the preexisting business;
(G) If the new business and the preexisting business are
regulated or licensed, they are regulated or licensed by the same
or similar governmental authority; and
(H) Twenty percent or more of the equity of the new business
is collectively owned by individuals and/or businesses that
collectively owned more than fifty percent of the equity of the
preexisting business.
These eight listed factors are not the only ones that may be
considered by the Tax Commissioner. Others may also be taken into
account, in the discretion of the Tax Commissioner. Additionally,
it is not necessary for all of the eight listed factors to point to a new business as "closely related" to an existing business in
order for the new business to not to be treated as a new business
for purposes of this article.
(27) "New business facility" means a business facility which
satisfies all the requirements of paragraphs (A), (B),(C) and (D)
of this subdivision.
(A) The facility is employed by the taxpayer in the conduct of
a business the net income of which is or will be taxable under
article twenty-one or twenty-four of this chapter. The facility is
not considered a new business facility in the hands of the taxpayer
if the taxpayer's only activity with respect to the facility is to
lease it to another person or persons.
(B) The facility is purchased by, or leased to, the taxpayer
on or after July 1, 2010.
(C) The facility was not purchased or leased by the taxpayer
from a related person: Provided, That the Tax Commissioner may
waive this requirement if the facility was acquired from a related
party for its fair market value and the acquisition was not tax
motivated.
(D) The facility was not in service or use during the ninety
days immediately prior to transfer of the title to the facility, or
prior to the commencement of the term of the lease of the facility:
Provided, That this ninety-day period may be waived by the Tax
Commissioner if the commissioner determines that persons employed
at the facility may be treated as "new employees" as that term is defined in this subsection;
(28) "New employee" means:
(A) The term "new employee" means a person residing and
domiciled in this state, hired by the taxpayer to fill a position
or a job in this state which previously did not exist in the
taxpayer's business enterprise in this state prior to the date on
which the taxpayer's qualified investment is placed in service or
use in this state. In no case may the number of new employees
directly attributable to the investment for purposes of this credit
exceed the total net increase in the taxpayer's employment in this
state: Provided, That the Tax Commissioner may require that the
net increase in the taxpayer's employment in this state be
determined and certified for the taxpayer's controlled group.
(B) A person is considered to be a "new employee" only if the
person's duties in connection with the operation of the business
facility are on:
(i) A regular, full-time and permanent basis:
(I) "Full-time employment" means employment for at least one
hundred forty hours per month at a wage not less than the
prevailing state or federal minimum wage, depending on which
minimum wage provision is applicable to the business;
(II) "Permanent employment" does not include employment that
is temporary or seasonal and therefore the wages, salaries and
other compensation paid to the temporary or seasonal employees will
not be considered for purposes of sections five and seven of this article; or
(ii) A regular, part-time and permanent basis: Provided, That
the person is customarily performing the duties at least twenty
hours per week for at least six months during the taxable year.
(29) "New job" means a job which did not exist in the business
of the taxpayer in this state prior to the taxpayer's qualified
investment being made, and which is filled by a new employee.
(30) "New property" means:
(A) Property, the construction, reconstruction or erection of
which is completed on or after July 1, 2010, and placed in service
or use after that date; and
(B) Property leased or acquired by the taxpayer that is placed
in service or use in this state on or after July 1, 2010, if the
original use of the property commences with the taxpayer and
commences after that date;
(31) "NAICS" means the North American Industry Classification
System;
(32) "Original use" means the first use to which the property
is put, whether or not the use corresponds to the use of the
property by the taxpayer;
(33) "Partnership" includes a syndicate, group, pool, joint
venture or other unincorporated organization through or by means of
which any business or venture is carried on, and which is not a
trust or estate, a corporation or a sole proprietorship and which
is treated as a partnership for tax purposes under the laws of this state. The term "partner" includes a member in such a syndicate,
group, pool, joint venture or other organization;
(34) "Person" includes any natural person, corporation or
partnership;
(35) "Property purchased or leased for business expansion"
means:
(A) Included property. -- Except as provided in paragraph (B)
of this subdivision, the term "property purchased or leased for
business expansion" means real property and improvements thereto,
and tangible personal property, but only if the real or personal
property was constructed, purchased, or leased and placed in service
or use by the taxpayer, for use as a component part of a new
business facility or expanded business facility as defined in this
section, which is located within the State of West Virginia. This
term includes only:
(i) Real property and improvements thereto having a useful life
of four or more years, placed in service or use on or after July 1,
2010, by the taxpayer.
(ii) Real property and improvements thereto, acquired by
written lease having a primary term of ten or more years and placed
in service or use by the taxpayer on or after July 1, 2010.
(iii) Tangible personal property placed in service or use by
the taxpayer on or after July 1, 2010, with respect to which
depreciation, or amortization in lieu of depreciation, is allowable
in determining the personal or corporation net income tax liability of the business taxpayer under article twenty-one or twenty-four of
this chapter, and which has a useful life, at the time the property
is placed in service or use in the state, of four or more years.
(iv) Tangible personal property acquired by written lease
having a primary term of four years or longer, that commenced and
was executed by the parties thereto on or after July 1, 2010, if
used as a component part of a new or expanded business facility,
shall be included within this definition.
(v) Tangible personal property owned or leased, and used by the
taxpayer at a business location outside the state which is moved
into the State of West Virginia on or after July 1, 2010, for use
as a component part of a new or expanded business facility located
in the state: Provided, That if the property is owned, it must be
depreciable or amortizable personal property for income tax
purposes, and have a useful life of four or more years remaining at
the time it is placed in service or use in the state, and if the
property is leased, the primary term of the lease remaining at the
time the leased property is placed in service or use in the state,
must be four or more years.
(B) Excluded property. -- The term "property purchased or
leased for business expansion" does not include:
(i) Property owned or leased by the taxpayer and for which the
taxpayer was previously allowed tax credit under article thirteen-c,
thirteen-d, thirteen-e, thirteen-q, thirteen-r, thirteen-s, or
thirteen-u of this chapter, or the tax credits allowed by this article;
(ii) Property owned or leased by the taxpayer and for which the
seller, lessor, or other transferor, was previously allowed tax
credit under article thirteen-c, thirteen-d, thirteen-e, thirteen-q,
thirteen-r, thirteen-s, or thirteen-u of this chapter, or the tax
credits allowed by this article;
(iii) Repair costs, including materials used in the repair,
unless for federal income tax purposes the cost of the repair must
be capitalized and not expensed;
(iv) Airplanes;
(v) Property which is primarily used outside the state, with
use being determined based upon the amount of time the property is
actually used both within and outside the state;
(vi) Property which is acquired incident to the purchase of the
stock or assets of the seller, unless for good cause shown, the
commissioner consents to waiving this requirement;
(vii) Natural resources in place;
(viii) Purchased or leased property, the cost or consideration
for which cannot be quantified with any reasonable degree of
accuracy at the time the property is placed in service or use:
Provided, That when the contract of purchase or lease specifies a
minimum purchase price or minimum annual rent the amount thereof
shall be used to determine the qualified investment in the property
under section eight of this article if the property otherwise
qualifies as property purchased or leased for business expansion;
(36) "Photovoltaic devices" means those products designed,
manufactured, and produced to convert sunlight directly into
electricity;
(37) "Purchase" means any acquisition of property, but only if:
(A) The property is not acquired from a person whose
relationship to the person acquiring it would result in the
disallowance of deductions under Section 267 or 707 (b) of the
United States Internal Revenue Code of 1986, as amended, and in
effect on July 1, 2010;
(B) The property is not acquired by one component member of a
controlled group from another component member of the same
controlled group. The commissioner can waive this requirement if the
property was acquired from a related party for its then fair market
value; and
(C) The basis of the property for federal income tax purposes,
in the hands of the person acquiring it, is not determined:
(i) In whole or in part, by reference to the federal adjusted
basis of the property in the hands of the person from whom it was
acquired; or
(ii) Under Section 1014(e) of the United States Internal
Revenue Code of 1986, as amended, and in effect on July 1, 2010;
(38) "Qualified activity" means any business or other activity
subject to any of the taxes imposed by article thirteen, twenty-one,
twenty-three or twenty-four of this chapter (or any combination of
those articles of this chapter), but does not include the activity of severance or production of natural resources;
(39) "Related person" means:
(A) A corporation, partnership, association or trust controlled
by the taxpayer;
(B) An individual, corporation, partnership, association or
trust that is in control of the taxpayer;
(C) A corporation, partnership, association or trust controlled
by an individual, corporation, partnership, association or trust
that is in control of the taxpayer; or
(D) A member of the same controlled group as the taxpayer.
For purposes of this definition, "control," with respect to a
corporation, means ownership, directly or indirectly, of stock
possessing fifty percent or more of the total combined voting power
of all classes of the stock of the corporation entitled to vote.
"Control," with respect to a trust, means ownership, directly or
indirectly, of fifty percent or more of the beneficial interest in
the principal or income of the trust. The ownership of stock in a
corporation, of a capital or profits interest in a partnership or
association or of a beneficial interest in a trust is determined in
accordance with the rules for constructive ownership of stock
provided in Section 267(c) of the United States Internal Revenue
Code of 1986, as amended and in effect on July 1, 2010, other than
paragraph (3) of that section;
(40) "Renewable energy" means electrical, mechanical, or
thermal energy produced from a method that uses one or more of the following fuels or energy sources: hydrogen, biomass, solar energy,
geothermal energy, wind energy, waste heat, or hydroelectric power;
(41) "Renewable energy technology" means any technology that
generates or utilizes a renewable energy resource;
(42) "Replacement facility" means any property (other than an
expanded facility) that replaces or supersedes any other property
located within this state that:
(A) The taxpayer or a related person used in or in connection
with any activity for more than two years during the period of five
consecutive years ending on the date the replacement or superseding
property is placed in service by the taxpayer; or
(B) Is not used by the taxpayer or a related person in or in
connection with any qualified activity for a continuous period of
one year or more commencing with the date the replacement or
superseding property is placed in service by the taxpayer;
(43) "Solar energy system" means equipment that provides for
the collection and use of incident solar energy for water heating,
space heating or cooling, or other applications that would normally
require a conventional source of energy such as petroleum products,
natural gas, or electricity that performs primarily with solar
energy. In other systems in which solar energy is used in a
supplemental way, only those components that collect and transfer
solar energy shall be included in this definition;
(44) "Solar photovoltaic system" means a device that converts
incident sunlight into electrical current;
(45) "Solar thermal system" means a device that traps heat from
incident sunlight in order to heat water;
(46) "Stirling engine" means a high-temperature, high- pressure
externally heated engine that uses an alternatively heated and
cooled working gas;
(47) "Taxpayer" means any person subject to any of the taxes
imposed by article thirteen, twenty-one, twenty-three or twenty-four
of this chapter (or any combination of those articles of this
chapter);
(48) "This code" means the Code of West Virginia, 1931, as
amended;
(49) "This state" means the State of West Virginia;
(50) "Twenty-first century business technologies" includes, but
is not limited to, high technology and other high technology
business developing or using: (A)Emerging technologies such as
green computing, cloud computing and other emerging technologies in
manufacturing and other commercial businesses with a low carbon
footprint; (B) energy conservation in residential, commercial,
industrial and government buildings; (C) alternative fuels and
alternative fuel systems and technologies; (D) renewable energy
sources and technologies; and (E) clean coal technologies; and
(51) "Used property" means property acquired after December 31,
2009, that is not "new property."
§11-13AA-4. Amount of credit allowed.
(a) Credit allowed. -- Eligible taxpayers are allowed a credit against the portion of taxes imposed by this state that are
attributable to and the consequence of the taxpayer's qualified
investment as described in section six of this article in a new
business or expanded business in this state, which results in the
creation of new jobs. The amount of this credit is determined and
applied as provided in this article.
(b) Amount of credit. -- When the eligible taxpayer employs
at least ten full-time employees in this state in a business
utilizing twenty-first century business technologies and whose
qualified investment is less than $1 million, the eligible taxpayer
shall for the tax year in which the ten employees are first employed
by the eligible taxpayer and for the next four tax years be exempt
from payment of the taxes imposed by articles twenty-three and
twenty-four of this chapter on the taxable capital and West Virginia
taxable income of the business attributable to the emerging
technology business activity in this state: Provided, That the
eligible taxpayer may elect to defer for one tax year the start of
this five-year period. When the eligible business is a partnership
or other entity treated as a partnership for federal income tax
purposes, the partners, S corporation shareholders or members of the
limited liability company shall be exempt from paying the tax
imposed by article twenty-one of this chapter on his or her
distributive share attributable to the emerging technology business
activity in this state. The eligible business shall also be exempt
from paying the taxes imposed by article fifteen and fifteen-a of this chapter on tangible personal property, except motor fuel, and
services purchased for use of consumption by the eligible taxpayer
in the emerging technology business activity during the same five-
year period.
(c) Amount of credit. -- When the eligible taxpayer does not
qualify for credit under subsection (b) of this section, the amount
of credit allowable is determined by multiplying the amount of the
taxpayer's "qualified investment" (determined under section six of
this article) in "property purchased or leased for business
expansion" (as defined in section three of this article) by the
taxpayer's new jobs percentage (determined under section seven of
this article). The product of this calculation establishes the
maximum amount of credit allowable under this article due to the
qualified investment.
§11-13AA-5. Application of annual credit allowance.
(a) In general. -- The aggregate annual credit allowance for
the current taxable year is an amount equal to the sum of the
following:
(1) The one-tenth part allowed under subsection (c), section
four of this article for qualified investment placed into service
or use during a prior taxable year; plus
(2) The one-tenth part allowed under subsection (c), section
four of this article for qualified investment placed into service
or use during the current taxable year.
(b) Application of current year annual credit allowance. -- The amount determined under subsection (a) of this section is allowed
as a credit against one hundred percent of that portion of the
taxpayer's state tax liability which is attributable to and the
direct result of the taxpayer's qualified investment, and applied
as provided in subsections (c) through (f), both inclusive, of this
section, and in that order.
(c) Business and occupation taxes. -- That portion of the
allowable credit attributable to qualified investment in a business
or other activity subject to the taxes imposed by article thirteen
of this chapter under section two-o of article thirteen must first
be applied to reduce the taxes imposed or payable under section two-
o, article thirteen of this chapter, for the taxable year
(determined before application of allowable credits against tax and
the annual exemption). In no case may the credit allowed under this
article be applied to reduce any tax imposed or payable under
section two-f, or under any other section of article thirteen of
this chapter except section two-o.
(1) If the taxes due under section two-o, article thirteen of
this chapter are not solely attributable to and the direct result
of the taxpayer's qualified investment in a business or other
activity taxable under section two-o, article thirteen of this
chapter, the amount of those taxes that are attributable is
determined by multiplying the amount of taxes due under section two-
o, article thirteen of this chapter, for the taxable year
(determined before application of any allowable credits against tax and the annual exemption), by a fraction, the numerator of which is
all wages, salaries and other compensation paid during the taxable
year to all employees of the taxpayer employed in this state, whose
positions are directly attributable to the qualified investment in
a business or other activity taxable under section two-o, article
thirteen of this chapter. The denominator of the fraction shall be
the wages, salaries and other compensation paid during the taxable
year to all employees of the taxpayer employed in this state, whose
positions are directly attributable to the business or other
activity of the taxpayer that is taxable under article thirteen of
this chapter.
(2) The annual exemption allowed by section three, article
thirteen of this chapter, plus any credits allowable under articles
thirteen-d, thirteen-e, thirteen-q, thirteen-r and thirteen-s of
this chapter, shall be applied against and reduce only the portion
of article thirteen taxes not apportioned to the qualified
investment under this article: Provided, That any excess exemption
or credits may be applied against the amount of article thirteen
taxes apportioned to the qualified investment under this article,
that is not offset by the amount of annual credit against the taxes
allowed under this article for the taxable year, unless their
application is otherwise prohibited by this chapter.
(d) Business franchise tax. --
(1) After application of subsection (c) of this section, any
unused allowable credit is next applied to reduce the taxes imposed by article twenty-three of this chapter for the taxable year
(determined after application of the credits against tax provided
in section seventeen of article twenty-three of this chapter, but
before application of any other allowable credits against tax).
(2) If the taxes due under article twenty-three of this chapter
are not solely attributable to and the direct result of the
taxpayer's qualified investment in a business or other activity
taxable under article twenty-three of this chapter for the taxable
year, the amount of the taxes which are so attributable are
determined by multiplying the amount of taxes due (determined after
application of the credits against tax as provided in section
seventeen of article twenty-three of this chapter, but before
application of any other allowable credits), by a fraction, the
numerator of which is all wages, salaries and other compensation
paid during the taxable year to all employees of the taxpayer
employed in this state, whose positions are directly attributable
to the qualified investment in a business or other activity taxable
under article twenty-three of this chapter. The denominator of the
fraction is wages, salaries and other compensation paid during the
taxable year to all employees of the taxpayer employed in this
state, whose positions are directly attributable to the business or
other activity of the taxpayer that is taxable under article twenty-
three of this chapter.
(3) Any credits allowable under articles thirteen-d, thirteen-
e, thirteen-q, thirteen-r and thirteen-s of this chapter are applied against and reduce only the portion of article twenty-three taxes
not apportioned to the qualified investment under this article:
Provided, That any excess exemption or credits may be applied
against the amount of article twenty-three taxes apportioned to the
qualified investment under this article that is not offset by the
amount of annual credit against those taxes allowed under this
article for the taxable year, unless their application is otherwise
prohibited by this chapter.
(e) Corporation net income taxes. --
(1) After application of subsections (c) and (d) of this
section, any unused credit is next applied to reduce the taxes
imposed by article twenty-four of this chapter for the taxable year
(determined before application of allowable credits against tax).
(2) If the taxes due under article twenty-four of this chapter
(determined before application of allowable credits against tax) are
not solely attributable to and the direct result of the taxpayer's
qualified investment, the amount of the taxes that is attributable
are determined by multiplying the amount of taxes due under article
twenty-four of this chapter for the taxable year (determined before
application of allowable credits against tax), by a fraction, the
numerator of which is all wages, salaries and other compensation
paid during the taxable year to all employees of the taxpayer
employed in this state whose positions are directly attributable to
the qualified investment. The denominator of the fraction is the
wages, salaries and other compensation paid during the taxable year to all employees of the taxpayer employed in this state.
(3) Any credits allowable under article twenty-four of this
chapter are applied against and reduce only the amount of article
twenty-four taxes not apportioned to the qualified investment under
this article: Provided, That any excess credits may be applied
against the amount of article twenty-four taxes apportioned to the
qualified investment under this article that is not offset by the
amount of annual credit against such taxes allowed under this
article for the taxable year, unless their application is otherwise
prohibited by this chapter.
(f) Personal income taxes. --
(1) If the person making the qualified investment is an
electing small business corporation (as defined in Section 1361 of
the United States Internal Revenue Code of 1986, as amended), a
partnership, or a limited liability company that is treated as a
partnership for federal income tax purposes, then any unused credit
(after application of subsections (c), (d) and (e) of this section)
is allowed as a credit against the taxes imposed by article twenty-
one of this chapter on the income from business or other activity
subject to tax under article thirteen or twenty-three of this
chapter that is attributable to the business activity for credit is
allowed under this article.
(2) Electing small business corporations, limited liability
companies, partnerships and other unincorporated organizations shall
allocate the credit allowed by this article among its members in the same manner as profits and losses are allocated for the taxable
year.
(3) If the amount of taxes due under article twenty-one of this
chapter (determined before application of allowable credits against
tax) that is attributable to business, is not solely attributable
to and the direct result of the qualified investment of the electing
small business corporation, limited liability company, partnership,
other unincorporated organization or sole proprietorship, the amount
of the taxes that are so attributable are determined by multiplying
the amount of taxes due under article twenty-one of this chapter
(determined before application of allowable credits against tax),
that is attributable to business by a fraction, the numerator of
which is all wages, salaries and other compensation paid during the
taxable year to all employees of the electing small business
corporation, limited liability company, partnership, other
unincorporated organization or sole proprietorship employed in this
state, whose positions are directly attributable to the qualified
investment. The denominator of the fraction is the wages, salaries
and other compensation paid during the taxable year to all employees
of the taxpayer.
(4) No credit is allowed under this section against any
employer withholding taxes imposed by article twenty-one of this
chapter.
(g) If the wages, salaries and other compensation fraction
formula provisions of subsections (c) through (f) of this section, inclusive, do not fairly represent the taxes solely attributable to
and the direct result of qualified investment of the taxpayer the
commissioner may require, in respect to all or any part of the
taxpayer's businesses or activities, if reasonable:
(1) Separate accounting or identification;
(2) Adjustment to the wages, salaries and other compensation
fraction formula to reflect all components of the tax liability;
(3) The inclusion of one or more additional factors that will
fairly represent the taxes solely attributable to and the direct
result of the qualified investment of the taxpayer and all other
project participants in the businesses or other activities subject
to tax; or
(4) The employment of any other method to effectuate an
equitable attribution of the taxes.
In order to effectuate the purposes of this subsection, the
commissioner may propose for promulgation rules, including emergency
rules, in accordance with article three, chapter twenty-nine-a of
this code.
(h) Unused credit. -- If any credit remains after application
of subsection (b) of this section, the amount thereof is carried
forward to each ensuing tax year until used or until the expiration
of the third taxable year subsequent to the end of the initial ten
year credit application period. If any unused credit remains after
the thirteenth year, the amount thereof is forfeited. No carryback
to a prior taxable year is allowed for the amount of any unused portion of any annual credit allowance.
§11-13AA-6. Qualified investment.
(a) General. -- The qualified investment in property purchased
or leased for business expansion is the applicable percentage of the
cost of each property purchased or leased for the purpose of
business expansion which is placed in service or use in this state
by the taxpayer during the taxable year.
(b) Applicable percentage. -- For the purpose of subsection
(a), the applicable percentage of any property is determined under
the following table:
If useful life is: The applicable percentage is:
Less than 4 years....................................0%
4 years or more but less than 6 years ..........33 1/3%
6 years or more but less than 8 years ..........66 2/3%
8 years or more ...................................100%
The useful life of any property, for purposes of this section, is
determined as of the date the property is first placed in service
or use in this state by the taxpayer, determined in accordance with
such rules and requirements the Tax Commissioner may prescribe.
(c) Cost. -- For purposes of subsection (a), the cost of each
property purchased for business expansion is determined under the
following rules:
(1) Trade-ins. - Cost does not include the value of property
given in trade or exchange for the property purchased for business
expansion.
(2) Damaged, destroyed or stolen property. -- If property is
damaged or destroyed by fire, flood, storm or other casualty, or is stolen, then the cost of replacement property does not include any
insurance proceeds received in compensation for the loss.
(3) Rental property. --
(A) The cost of real property acquired by written lease for a
primary term of ten years or longer is one hundred percent of the
rent reserved for the primary term of the lease, not to exceed
twenty years.
(B) The cost of tangible personal property acquired by written
lease for a primary term of:
(i) Four years, or longer, is one third of the rent reserved
for the primary term of the lease;
(ii) Six years, or longer, is two thirds of the rent reserved
for the primary term of the lease; or
(iii) Eight years, or longer, is one hundred percent of the
rent reserved for the primary term of the lease, not to exceed
twenty years: Provided, That in no event may rent reserved include
rent for any year subsequent to expiration of the book life of the
equipment, determined using the straight-line method of
depreciation.
(4) Self-constructed property. -- In the case of self-
constructed property, the cost thereof is the amount properly
charged to the capital account for depreciation in accordance with
federal income tax law.
(5) Transferred property. -- The cost of property used by the
taxpayer out-of-state and then brought into this state, is determined based on the remaining useful life of the property at the
time it is placed in service or use in this state, and the cost is
the original cost of the property to the taxpayer less straight line
depreciation allowable for the tax years or portions thereof the
taxpayer used the property outside this state. In the case of leased
tangible personal property, cost is based on the period remaining
in the primary term of the lease after the property is brought into
this state for use in a new or expanded business facility of the
taxpayer, and is the rent reserved for the remaining period of the
primary term of the lease, not to exceed twenty years, or the
remaining useful life of the property (determined as aforesaid),
whichever is less.
§11-13AA-7. New jobs percentage.
(a) In general. -- The new jobs percentage is based on the
number of new jobs created in this state directly attributable to
the qualified investment of the taxpayer.
(b) When a job is attributable. -- An employee's position is
directly attributable to the qualified investment if:
(1) The employee's service is performed or his or her base of
operations is at the new or expanded business facility;
(2) The position did not exist prior to the construction,
renovation, expansion or acquisition of the business facility and
the making of the qualified investment; and
(3) But for the qualified investment, the position would not
have existed.
(c) Applicable percentage. -- For the purpose of subsection (a)
of this section, the applicable new jobs percentage is determined
under the following table:
If number of new jobs The applicable percentage is:
is at least:
1115%
2020%
28030%
52040%
(d) Certification of new jobs. -- With the annual return for
the applicable taxes filed for the taxable year in which the
qualified investment is first placed in service or use in this
state, the taxpayer shall estimate and certify the number of new
jobs reasonably projected to be created by it in this state within
the period prescribed in subsection (f) of this section that are,
or will be, directly attributable to the qualified investment of the
taxpayer. For purposes of this section, "applicable taxes" means
the taxes imposed by articles thirteen, twenty-one, twenty-three and
twenty-four of this chapter against which this credit is applied.
(e) Equivalency of permanent employees. -- The hours of part-
time employees shall be aggregated to determine the number of
equivalent full-time employees for the purpose of this section.
(f) Redetermination of new jobs percentage. -- With the annual
return for the applicable taxes imposed, filed for the third taxable
year in which the qualified investment is in service or use, the
taxpayer shall certify the actual number of new jobs created by it
in this state that are directly attributable to the qualified investment of the taxpayer.
(1) If the actual number of jobs created would result in a
higher new jobs percentage, the credit allowed under this article
shall be redetermined and amended returns filed for the first and
second taxable years that the qualified investment was in service
or use in this state.
(2) If the actual number of jobs created would result in a
lower new jobs percentage, the credit previously allowed under this
article shall be redetermined and amended returns filed for the
first and second taxable years. In applying the amount of
redetermined credit allowable for the two preceding taxable years,
the redetermined credit shall first be applied to the extent it was
originally applied in the prior two years to personal income taxes,
then to corporation net income taxes, then to business franchise
taxes and, lastly, to business and occupation taxes. Any additional
taxes due under this chapter shall be remitted with the amended
returns filed with the commissioner, along with interest, as
provided in section seventeen, article ten of this chapter, and a
ten-percent penalty determined on the amount of taxes due with the
amended return, which may be waived by the commissioner if the
taxpayer shows that the overclaimed amount of the new jobs
percentage was due to reasonable cause and not due to willful
neglect.
§11-13AA-8. New jobs compensation and benefits requirement.
(a) Notwithstanding any provision of this article to the contrary, no credit shall be allowed under this article unless the
following compensation requirements are met beginning with the tax
year when the new employee is first hired and continuing through the
period for which credit is allowed under this article:
(1) The median compensation paid to the employees filling the
new jobs must be at least $50,000 annually: Provided, That
beginning November 1, 2011, and on or before every first day of
November thereafter, the Tax Commissioner shall adjust this minimum
annual compensation requirement in the manner provided in subsection
(b) of this section, which adjustment shall apply to compensation
paid for employee services during the next calendar year;
(2) Health insurance benefits are provided to all full-time
permanent employees in this state; and
(3) Each new job is a full-time, permanent position, as those
terms are defined in section three, of this article.
Jobs that pay less than the amount specified in subdivision (1)
of subsection (a) of this section, or that pay that salary but do
not also provide benefits in addition to the salary, do not qualify
as new jobs for purposes of the credit authorized by this article.
Additionally, jobs that are less than full-time, permanent positions
do not qualify as new jobs under this article.
(b) Adjustment of annual compensation for inflation. -- The
compensation requirements for credit under this article shall be
adjusted for inflation by application of a cost-of-living
adjustment. The annual compensation amount shall be applicable, as adjusted, each year throughout the ten-year credit period. Failure
of a taxpayer entitled to credit under this article to meet the
annual compensation requirement for any year shall result in
forfeiture of the credit for that year. However, if in any
succeeding year within the original ten-year credit period, the
taxpayer pays annual compensation to its employees which exceeds the
inflation adjusted annual compensation amount for that year, the
taxpayer shall regain entitlement to take the credit for that year
only. No credit forfeited in a prior year may be taken, and the tax
year or years to which the forfeited credit would have been applied
shall be forfeited and deducted from the remainder of the years over
which the credit can be taken.
(1) Cost-of-living adjustment. -- For purposes of this section,
the cost-of-living adjustment for any calendar year is the
percentage, if any, by which the consumer price index for the
preceding calendar year exceeds the consumer price index for the
calendar year 2010.
(2) Consumer price index for any calendar year. -- For purposes
of this section, the consumer price index for any calendar year is
the average of the federal consumer price index as of the close of
the twelve-month period ending on August 31 of such calendar year.
(3) Consumer price index. -- For purposes of this section, the
term "Federal Consumer Price Index" means the last consumer price
index for all urban consumers published by the United States
Department of Labor.
(4) Rounding. -- If any increase in the annual compensation
amount under this section is not a multiple of fifty dollars, such
increase shall be rounded to the next lowest multiple of $50.
(b) Unused credit remaining in any tax year after application
against the taxes specified in section seven of this article is
forfeited and does not carry forward to any succeeding tax year and
does not carry back to a prior tax year.
(c) Reduction in number of employees credit forfeiture. -- If
during the year when a new job was created for which credit was
granted under this section or during any of the next succeeding four
tax years thereafter, net jobs that are attributable to and the
consequence of the taxpayer's business operations in this state,
decrease, counting both new jobs for which credit was granted under
this article and preexisting jobs, then the total amount of credit
to which the taxpayer is entitled under this section shall be
decreased and forfeited in the amount of $3,000 for each net job
lost.
§11-13AA-9. Application for credit required; failure to make
timely application; burden of proof.
(a) Application for credit required. -- Notwithstanding any
provision of this article to the contrary, no credit is allowed or
may be applied under this article for any qualified investment
property placed in service or use until the person asserting a claim
for the allowance of credit under this article makes written
application to the Tax Commissioner for allowance of credit as provided in this subsection. An application for credit shall be
filed, in the form prescribed by the Tax Commissioner, no later than
the last day for filing the tax returns, determined by including any
authorized extension of time for filing the return, required under
article twenty-one or twenty-four of this chapter for the taxable
year in which the property to which the credit relates is placed in
service or use and all information required by the form shall be
provided.
(b) Failure to make timely application. -- The failure to
timely apply for the credit results in the forfeiture of fifty
percent of the annual credit allowance otherwise allowable under
this article. This penalty applies annually until the application
is filed.
(c) The burden of proof is on the taxpayer to establish by
clear and convincing evidence that the taxpayer is entitled to the
benefits allowed by this article.
§11-13AA-10. Identification of investment credit property.
Every taxpayer who claims credit under this article shall
maintain sufficient records to establish the following facts for
each item of qualified property:
(1) Its identity;
(2) Its actual or reasonably determined cost;
(3) Its straight-line depreciation life;
(4) The month and taxable year in which it was placed in
service;
(5) The amount of credit taken; and
(6) The date it was disposed of or otherwise ceased to be
qualified property.
§11-13AA-11. Forfeiture of unused tax credits; redetermination of
credit allowed.
(a) Disposition of property or cessation of use. -- If during
any taxable year, property with respect to which a tax credit has
been allowed under this article:
(1) Is disposed of prior to the end of its useful life, as
determined under section eight of this article; or
(2) Ceases to be used in an eligible business of the taxpayer
in this state prior to the end of its useful life, as determined
under section eight of this article, then the unused portion of the
credit allowed for the property is forfeited for the taxable year
and all ensuing years. Additionally, except when the property is
damaged or destroyed by fire, flood, storm or other casualty, or is
stolen, the taxpayer shall redetermine the amount of credit allowed
in all earlier years by reducing the applicable percentage of cost
of the property allowed under section eight of this article, to
correspond with the percentage of cost allowable for the period of
time that the property was actually used in this state in the new
or expanded business of the taxpayer. The taxpayer shall then file
a reconciliation statement for the year in which the forfeiture
occurs and pay any additional taxes owed due to reduction of the
amount of credit allowable for the earlier years, plus interest and any applicable penalties. The reconciliation statement shall be
filed with the annual return for the primary tax for which the
taxpayer is liable under articles thirteen and twenty-three of this
chapter.
(b) Cessation of operation of business facility. -- If during
any taxable year the taxpayer ceases operation of a business
facility in this state for which credit was allowed under this
article, before expiration of the useful life of property with
respect to which tax credit has been allowed under this article,
then the unused portion of the allowed credit is forfeited for the
taxable year and for all ensuing years. Additionally, except when
the cessation is due to fire, flood, storm or other casualty, the
taxpayer shall redetermine the amount of credit allowed in earlier
years by reducing the applicable percentage of cost of the property
allowed under section eight of this article, to correspond with the
percentage of cost allowable for the period of time that the
property was actually used in this state in a business of the
taxpayer that is taxable under article thirteen, twenty-three or
twenty-four of this chapter, or in the case of a sole
proprietorship, article twenty-one of this chapter. The taxpayer
shall then file a reconciliation statement with the annual return
for the primary tax for which the taxpayer is liable under article
thirteen, twenty-one or twenty-three of this chapter, for the year
in which the forfeiture occurs, and pay any additional taxes owed
due to the reduction of the amount of credit allowable for the earlier years, plus interest and any applicable penalties.
(c) Reduction in number of employees. -- If during any taxable
year subsequent to the taxable year in which the new jobs percentage
is redetermined as provided in section nine of this article, the
average number of employees of the taxpayer, for the then current
taxable year, employed in positions created because of and directly
attributable to the qualified investment falls below the minimum
number of new jobs created upon which the taxpayer's annual credit
allowance is based, the taxpayer shall calculate what his or her
annual credit allowance would have been had his or her new jobs
percentage been determined based upon the average number of
employees, for the then current taxable year, employed in positions
created because of and directly attributable to the qualified
investment. The difference between the result of this calculation
and the taxpayer's annual credit allowance for the qualified
investment as determined under section four of this article, is
forfeited for the then current taxable year, and for each succeeding
taxable year unless for a succeeding taxable year the taxpayer's
average employment in positions directly attributable to the
qualified investment once again meets the level required to enable
the taxpayer to utilize its full annual credit allowance for that
taxable year.
§11-13AA-12. Recapture of credit; recapture tax imposed.
(a) When recapture tax applies. --
(1) Any person who places qualified investment property in service or use and who fails to use the qualified investment
property for at least the period of its useful life (determined as
of the time the property was placed in service or use), or the
period of time over which tax credits allowed under this article
with respect to the property are applied under this article,
whichever period is less, and who reduces the number of its
employees filling new jobs in its business in this state, which were
created and are directly attributable to the qualified investment
property, after the third taxable year in which the qualified
investment property was placed in service or use, or fails to
continue to employ individuals in all the new jobs created as a
direct result of the qualified investment property and used to
qualify for the credit allowed by this article, prior to the end of
the tenth taxable year after the qualified investment property was
placed in service or use, the person shall pay the recapture tax
imposed by subsection (b) of this section.
(2) This section does not apply when section thirteen of this
article applies. However, the successor, or the successors, and the
person, or persons, who previously claimed credit under this article
with respect to the qualified investment property and the new jobs
attributable thereto, are jointly and severally liable for payment
of any recapture tax subsequently imposed under this section with
respect to the qualified investment property and new jobs.
(b) Recapture tax imposed. -- The recapture tax imposed by this
subsection is the amount determined as follows:
(1) Full recapture. -- If the taxpayer prematurely removes
qualified investment property placed in service (when considered as
a class) from economic service in the taxpayer's qualified
investment business activity in this state, and the number of
employees filling the new jobs created by the person falls below the
number of new jobs required to be created in order to qualify for
the amount of credit being claimed or the requirements of section
eight of this article are not satisfied, the taxpayer shall
recapture the amount of credit claimed under section seven of this
article for the taxable year, and all preceding taxable years, on
qualified investment property which has been prematurely removed
from service. The amount of tax due under this subdivision is an
amount equal to the amount of credit that is recaptured under this
subdivision.
(2) Partial recapture. -- If the taxpayer prematurely removes
qualified investment property from economic service in the
taxpayer's qualified investment business activity in this state, and
the number of employees filling the new jobs created by the person
remains ten or more, but falls below the number necessary to sustain
continued application of credit determined by use of the new job
percentage upon which the taxpayer's one-tenth annual credit
allowance was determined under section four or section ten of this
article, taxpayer shall recapture an amount of credit equal to the
difference between: (A) The amount of credit claimed under section
seven of this article for the taxable year, and all preceding taxable years; and (B) the amount of credit that would have been
claimed in those years if the amount of credit allowable under
section four or ten of this article had been determined based on the
qualified investment property which remains in service using the
average number of new jobs filled by employees in the taxable year
for which recapture occurs. The amount of tax due under this
subdivision is an amount equal to the amount of credit that is
recaptured under this subdivision.
(3) Additional recapture. -- If after a partial recapture under
subdivision (2) of this subsection, the taxpayer further reduces the
number of employees filling new jobs, the taxpayer shall recapture
an additional amount determined as provided under subdivision (1)
of this subsection. The amount of tax due under this subdivision
is an amount equal to the amount of credit that is recaptured under
this subdivision.
(c) Recapture of credit allowed for projects. -- The
commissioner may file in the West Virginia register an emergency
legislative rule explaining how the provisions of this section are
applied in the case of projects certified under section six of this
article.
(d) Payment of recapture tax. -- The amount of tax recaptured
under this section is due and payable on the day the person's annual
return is due for the taxable year in which this section applies,
under article twenty-one or twenty-four of this chapter. When the
employer is a partnership, limited liability company or S corporation for federal income tax purposes, the recapture tax shall
be paid by those persons who are partners in the partnership,
members in the company, or shareholders in the S corporation, in the
taxable year in which recapture occurs under this section.
(e) Rules. -- The Tax Commissioner may promulgate such rules
as may be useful or necessary to carry out the purpose of this
section and to implement the intent of the Legislature. Rules shall
be promulgated in accordance with the provisions of article three,
chapter twenty-nine-a of this code.
§11-13AA-13. Transfer of qualified investment to successors.
(a) Mere change in form of business. -- Property may not be
treated as disposed of under section eleven of this article, by
reason of a mere change in the form of conducting the business as
long as the property is retained in the successor business in this
state, and the transferor business retains a controlling interest
in the successor business. In this event, the successor business is
allowed to claim the amount of credit still available with respect
to the business facility or facilities transferred, and the
transferor business may not be required to redetermine the amount
of credit allowed in earlier years.
(b) Transfer or sale to successor. -- Property is not treated
as disposed of under section eleven of this article by reason of any
transfer or sale to a successor business which continues to operate
the business facility in this state. Upon transfer or sale, the
successor shall acquire the amount of credit that remains available under this article for each subsequent taxable year and the
transferor business is not required to redetermine the amount of
credit allowed in earlier years.
§11-13AA-14. Failure to keep records of investment credit
property
.
A taxpayer who does not keep the records required for
identification of investment credit property is subject to the
following rules:
(1) A taxpayer is treated as having disposed of, during the
taxable year, any investment credit property which the taxpayer
cannot establish was still on hand, in this state, at the end of
that year.
(2) If a taxpayer cannot establish when investment credit
property reported for purposes of claiming this credit returned
during the taxable year was placed in service, the taxpayer is
treated as having placed it in service in the most recent prior year
in which similar property was placed in service, unless the taxpayer
can establish that the property placed in service in the most recent
year is still on hand. In that event, the taxpayer will be treated
as having placed the returned property in service in the next most
recent year.
§11-13AA-15. Interpretation and construction.
(a) No inference, implication or presumption of legislative
construction or intent may be drawn or made by reason of the
location or grouping of any particular section, provision or portion of this article; and no legal effect may be given to any descriptive
matter or heading relating to any section, subsection or paragraph
of this article.
(b) The provisions of this article shall be reasonably
construed in order to effectuate the legislative intent recited in
section two of this article.
§11-13AA-16. Tax credit review and accountability.
(a) Beginning on February 1, 2014, and every third year
thereafter, the Tax Commissioner shall submit to the Governor, the
President of the Senate and the Speaker of the House of Delegates
a tax credit review and accountability report evaluating the cost
effectiveness of the credit allowed by this article during the most
recent three-year period for which information is available. The
criteria to be evaluated shall include, but not be limited to, for
each year of the three-year period:
(1) The numbers of taxpayers claiming the credit;
(2) The net number of new jobs created by all taxpayers
claiming the credit;
(3) The cost of the credit;
(4) The cost of the credit per new job created; and
(5) Comparison of employment trends for an industry and for
taxpayers within the industry that claim the credit.
(b) Taxpayers claiming the credit shall provide any information
the Tax Commissioner may require to prepare the report: Provided,
That the information provided is subject to the confidentiality and disclosure provisions of sections five-d and five-s, article ten of
this chapter.
§11-13AA-17. Effective date.
The credit allowed by this article is allowed for qualified
investment placed in service or use on or after July 1, 2010,
subject to the rules contained in this section.
§11-13AA-18. Severability.
(a) If any provision of this article or the application thereof
is for any reason adjudged by any court of competent jurisdiction
to be invalid, the judgment may not affect, impair or invalidate the
remainder of the article, but shall be confined in its operation to
the provision thereof directly involved in the controversy in which
the judgment shall have been rendered, and the applicability of the
provision to other persons or circumstances may not be affected
thereby.
(b) If any provision of this article or the application thereof
is made invalid or inapplicable by reason of the repeal or any other
invalidation of any statute therein addressed or referred to, such
invalidation or inapplicability may not affect, impair or invalidate
the remainder of the article, but shall be confined in its operation
to the provision thereof directly involved with, pertaining to,
addressing or referring to the statute, and the application of the
provision with regard to other statutes or in other instances not
affected by any such repealed or invalid statute may not be
abrogated or diminished in any way.
NOTE: The purpose of this bill is to enact the West Virginia
Economic Development Act of 2010 consisting of the Twenty-first
Century Business Technologies Property Valuation Act and the Twenty-
First Century Tax Credit Act, the purpose of which is to encourage
the development and use of emerging technologies to create good jobs
and grow West Virginia's economy.
Sections 11-6K-1 et seq. and sections 11-13AA-1 et seq. are
new, therefore strike-throughs and underscoring have been omitted.