H. B. 4308
(By Mr. Speaker, Mr. Kiss, and Delegates
Beach, Pettit, Michael, Mezzatesta,
Warner and Amores)
[Introduced February 9, 1998; referred to the
Committee on Finance.]
A BILL to amend chapter eleven of the code of West Virginia, one
thousand nine hundred thirty-one, as amended, by adding
thereto a new article, designated article thirteen-n,
relating to allowing a tax credit of two hundred fifty
dollars per full-time hourly employee for eligible taxpayers
engaged in new steel manufacturing operations;
manufacturing, adding value to primary steel products; and
beginning operations within this state after the first day
of July, one thousand nine hundred ninety-eight, or for the
addition of a new product or line of an existing value-added
steel products manufacturing facility after the first day of
July, one thousand nine hundred ninety-eight; setting forth
legislative purpose; specifying definitions; setting
eligibility for credit; creation of the credit; amount of
credit allowed; expiration of the credit; annual credit allowance; proration of credit; annual computation; credit
to successors; credit recapture; administrative rules;
construction and effective date.
Be it enacted by the Legislature of West Virginia:
That chapter eleven of the code of West Virginia, one
thousand nine hundred thirty-one, as amended, be amended by
adding thereto a new article, designated article thirteen-n, to
read as follows:
ARTICLE 13N. TAX CREDIT FOR NEW STEEL MANUFACTURING OPERATIONS
AFTER JULY 1, 1998.
§11-13N-1. Legislative purpose.
The Legislature finds that production of value-added steel
products is very important to the economy of this state and that
a sound economy is in the public interest and promotes the
general welfare of the people of this state. In order to
encourage capital investment in this state, through the
manufacture of value-added steel products after the thirtieth day
of June, one thousand nine hundred ninety-eight, thereby
increasing employment and economic development, there is hereby
provided to eligible taxpayers a credit for each new job filled
by a full-time hourly employee who works in a new value-added
steel product manufacturing facility, or in a new value-added
steel product line of an existing manufacturing facility, that begins operating in this state after the thirtieth day of June,
one thousand nine hundred ninety-eight.
§11-13N-2. Definitions.
(a)
General. -- When used in this article, or in the
administration of this article, terms defined in subsection (b)
of this section have the meanings ascribed to them by this
section, unless a different meaning is clearly required by the
context in which the term is used.
(b)
Terms defined. --
(1) "Affiliate" means and includes all persons, as defined
in this section, which are affiliates of each other when either
directly or indirectly:
(A) One person controls or has the power to control the
other; or
(B) A third party or third parties control or have the power
to control two persons, the two thus being affiliates. In
determining whether concerns are independently owned and operated
and whether or not an affiliation exists, consideration shall be
given to all appropriate factors, including common ownership,
common management and contractual relationships.
(2) "Commissioner" or "tax commissioner" means the tax
commissioner of the state of West Virginia, or the tax
commissioner's designee.
(3) "Corporation" includes any corporation, a joint-stock
company and any association or other organization which is
classified as a corporation under federal income tax law.
(4) "Designee," when used in reference to the tax
commissioner, means any officer or employee of the 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 functions mentioned or described in
this article.
(5) "Eligible taxpayer" means a person who after the
thirtieth day of June, one thousand nine hundred ninety-eight,
begins manufacturing a value-added steel product at a new
manufacturing facility located in this state, or begins
manufacturing a new value-added steel product line at an existing
manufacturing facility located in this state, which results in
the creation of new jobs filled by full-time employees.
(6) "Employer" means the person for whom an individual
performs or performed any service, of whatever nature, as the
employee of such person, except that if the person for whom the
individual performs or performed the service does not have
control of the payment of wages for such services, the term
"employer" means the person having control of the payment of such
wages.
(7) "Existing manufacturing facility" means a building
which, at anytime during the twelve months preceding the month in
which manufacture of a value-added steel product begins, was
used by the taxpayer, or by a related person, to manufacture
tangible personal property.
(8) "Full-time employee" means a permanent hourly employee
of an eligible taxpayer, who is a West Virginia domiciled
resident, and works in a new value-added steel product
manufacturing facility in this state, or in a new value-added
steel product line of an existing manufacturing facility in this
state, more than eighteen hundred hours during the entire
twelve-month period ending on the last day of the taxable year of
the eligible employer, whether these hours are hours worked at
the manufacturing facility, or include hours of employer paid
vacation leave or other employer paid leave. Full-time employee
does not include an employee who is a part-time, seasonal or
temporary employee.
(9) "Internal Revenue Code" means the Internal Revenue Code
of 1986, as amended, of the United States.
(10) "Manufacturing facility" means any facility which is
used in the manufacturing of tangible personal property
(including processing resulting in a change in the condition of
such property).
(11) "New value-added steel product line" means the
manufacture of a value-added steel product in an existing
manufacturing facility in this state that first begins
manufacturing the new value-added steel product line after the
thirtieth day of June, one thousand nine hundred ninety-eight.
(12) "New value-added steel product manufacturing facility"
means a building that is primarily used by the eligible taxpayer
to manufacture a value-added steel product that is first placed
in service and used for that purpose by the eligible taxpayer
after the thirtieth day of June, one thousand nine hundred
ninety-eight. If the facility was used by the taxpayer, or by a
related person, to manufacture tangible personal property at any
time during the twelve months preceding the month in which the
facility is first used by the taxpayer to manufacture a value- added steel product, the building is not a new value-added steel
product manufacturing facility.
(13) "New job" means a job at a new value-added steel
product manufacturing facility located in this state, or at a new
value-added steel product line at an existing manufacturing
facility located in this state, which did not exist in this state
with any employer as of the first day of the second calendar
month preceding the calendar month in which the new value-added
steel product manufacturing facility begins to manufacture value-added steel products, or in which the new value-added steel
product line begins to manufacture value-added steel products in
an existing manufacturing facility located in this state, that is
filled by a full-time employee of the eligible taxpayer.
(14) "Partnership" means and includes a syndicate, group,
pool, joint venture or other unincorporated organization through
or by means of which any business, financial operation or venture
is carried on, which is classified as a partnership for federal
income tax purposes for the taxable year.
(15) "Partner" includes a member in a syndicate, group,
pool, joint venture or organization classified as a partnership
for federal income tax purposes for the taxable year.
(16) "Part-time employee" means any employee who normally
works twenty hours or less per week.
(17) "Seasonal employee" means an employee who normally
works on a full-time basis less than five months in a year.
(18) "Temporary employee" means an employee performing
services under a contractual arrangement with the employer of two
years or less duration.
(19) "Person" means and includes an individual, a trust,
estate, partnership, association, company or corporation.
(20) "Related entity," "related person," "entity related
to" or "person related to" means:
(A) An individual, corporation, partnership, affiliate,
association or trust or any combination or group thereof
controlled by the taxpayer;
(B) An individual, corporation, partnership, affiliate,
association or trust or any combination or group thereof that is
in control of the taxpayer;
(C) An individual, corporation, partnership, affiliate,
association or trust or any combination or group thereof
controlled by an individual, corporation, partnership, affiliate,
association or trust or any combination or group thereof that is
in control of the taxpayer; or
(D) A member of the same controlled group as the taxpayer.
For purposes of this subdivision (20), "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 which
entitles its owner 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 shall be determined in accordance
with the rules for constructive ownership of stock provided in section 267(c) of the Internal Revenue Code:
Provided, That
paragraph (3) of section 267(c) of the Internal Revenue Code
shall not apply.
(21) "Tax year" or "taxable year," means the tax year of the
taxpayer for federal income tax purposes.
(22) "Taxpayer" means any person subject to the tax imposed
by article twenty-one, twenty-three or twenty-four of this
chapter.
(23) "Value-added steel product" means any product that adds
to, increases or enhances the value of any raw, base or
unimproved steel product through processes including, but not
limited to, anodization, coating, fabrication, machining,
molding, stamping and any other processing which adds value.
§11-13N-3. Eligibility for tax credits; creation of the credit.
There shall be allowed to every eligible taxpayer a credit
against the taxes imposed in articles twenty-one, twenty-three
and twenty-four of this chapter. The amount of this credit shall
be determined and applied as provided in this article.
§11-13N-4. Amount of credit allowed; expiration of the credit.
(a)
Credit allowable. -- The amount of annual credit
allowable under this article to an eligible taxpayer shall be two
hundred fifty dollars for each new job at a new value-added steel
product manufacturing facility located in this state, or at a new value-added steel product line of an existing manufacturing
facility located in this state, that is filled by a full-time
employee of the eligible taxpayer during the taxable year,
subject to the following:
(1) When the new value-added steel product manufacturing
facility, or the new steel product line of an existing value- added steel product manufacturing facility, is in operation for
less than twelve months of the taxable year in which it is placed
in service, the credit allowed by subsection (a) of this section
shall be prorated by the ratio that the number of months in the
taxpayer's taxable year during which the new value-added steel
products facility, or the new products line of an existing value- added steel product manufacturing facility, was in service bears
to twelve.
(2) When the eligible taxpayer stops manufacturing value- added steel products at the new value-added steel product
manufacturing facility, or at the new steel product line of an
existing value-added steel product manufacturing facility, during
the taxable year, the credit allowed by subsection (a) of this
section shall be prorated by the ratio that the number of months
in the taxpayer's taxable year during which the new value-added
steel products facility, or the new products line of an existing
value-added steel product manufacturing facility, was in operation manufacturing value-added steel product bears to
twelve.
(3) When determining the number of full-time employees who
fill new jobs at the new value-added steel product manufacturing
facility located in this state, or who fill new jobs at a new
value-added steel product line of an existing manufacturing
facility located in this state, the eligible taxpayer shall not
include any position occupied by any employee of the eligible
taxpayer, or of a related person, which existed in this state as
of the first day of the second calendar month preceding the
calendar month in which the new value-added steel product
manufacturing facility, or a new value-added steel product line
at an existing value-added steel products manufacturing facility
first becomes operational, whether such positions are filled by
permanent, seasonal, temporary or part-time employees.
(4) The amount of credit allowable each taxable year shall
be calculated annually based upon the number of new jobs filled
by full-time employees during the taxable year.
(b)
Expiration of credit. -- This credit shall expire on the
first day of July, two thousand five. When the first day of July
in the year two thousand five falls during the taxable year of
the eligible taxpayer, the amount of credit allowable for that
taxable year shall be limited to that portion of the amount of credit that would have been allowable had the credit not expired
multiplied by the ratio of the number of months during taxpayers
taxable year ending before the first day of July, two thousand
five, bears to twelve.
§11-13N-5. Application of annual credit allowance.
(a)
Application of credit against business franchise tax. --
The amount of credit allowed under section four of this article
shall first be applied against the eligible taxpayer's liability
for the tax imposed by article twenty-three of this chapter that
is attributable to a new value-added steel product manufacturing
facility located in this state and to a new value-added steel
product production line at an existing manufacturing facility
located in this state.
(b)
Application of remaining credit against income tax. --
After application of the allowable credit against the tax imposed
by article twenty-three of this chapter, as provided in
subsection (a) of this section, any remaining credit may be
applied against the taxes imposed by article twenty-one or
twenty-four of this chapter to the extent those taxes are
attributable to a new value-added steel product manufacturing
facility located in this state and to a new value-added steel
product production line at an existing manufacturing facility
located in this state:
Provided, That no credit shall be allowed against employer withholding taxes due under article twenty-one
of this chapter.
(c)
Excess credit carried over. -- If after application of
subsections (a) and (b) of this section, any credit remains for
the taxable year, the amount remaining may be carried over and
applied as a credit against the tax liability of the taxpayer in
accordance with this section to each of the next five taxable
years unless sooner used. Unused credit may not be carried back
to any prior taxable year.
(d)
Application of this credit when other credits apply. --
The credit allowed under this article shall be applied after
application of all other applicable tax credits allowed for the
taxable year against the taxes imposed by article twenty-one,
twenty-three or twenty-four of this chapter.
(e)
Completion of annual schedule to assert credit. -- To
assert this credit against tax, the eligible taxpayer shall
prepare and file with the annual tax return filed under
article twenty-one, twenty-three or twenty-four of this chapter,
an annual schedule showing the amount of tax paid for the taxable
year, and the amount of credit allowed under this article. This
annual schedule shall set forth the information and be in the
form prescribed by the tax commissioner.
(f)
Payments of estimated tax. -- A taxpayer may consider the amount of credit allowed under this article when determining
the taxpayer's liability under articles twenty-one, twenty-three
and twenty-four of this chapter for periodic payments of
estimated tax for the taxable year, in accordance with the
procedures and requirements prescribed by the tax commissioner.
The annual total tax liability and total tax credit allowed under
this article are subject to adjustment and reconciliation
pursuant to the filing of the annual schedule required by
subsection (e) of this section.
§11-13N-6. Proration of credit among partners, members of
limited liability companies, or shareholders in
small business corporations.
The amount of credit allowed under this article for the
taxable year to a partnership or limited liability company
classified as a partnership for the taxable year, or to an
electing small business corporation, that remains after
application the credit against the tax imposed by article
twenty-three of this chapter as provided in subsection (a),
section five of this article shall be allocated to the individual
partners, members or shareholders, as the case may be, in
proportion to their ownership interest in the partnership,
limited liability company or electing small business corporation.
The amount of credit allocated to the individual partners, members or shareholders, as the case may be, may be applied
against the taxes imposed by articles twenty-one and twenty-four
of this chapter in accordance with the rule set forth in
subsection (b), section five of this article.
§11-13N-7. Annual computation of the number of new jobs held by
full-time employees.
(a) The eligible taxpayer shall annually determine the
number of new jobs held by full-time permanent employees of the
eligible taxpayer in the taxable year by calculating the average
number of full-time employees holding jobs for each month of the
taxable year by averaging the beginning and ending monthly
employment of full-time employees, then totaling the monthly
averages and dividing that total by twelve.
(b) The eligible taxpayer shall also annually determine the
number of new jobs filled during the taxable year by full-time
employees of the eligible taxpayer employed at a new value- added product manufacturing facility, or at a new value-added
steel product line at an existing manufacturing facility, located
in this state that is owned or operated by the eligible taxpayer,
by calculating the average number of new jobs held by full-time
employees for each month of the taxable year by averaging the
beginning and ending monthly employment of full-time employees
holding new jobs, then totaling the monthly averages and dividing that total by twelve.
(c) Preexisting jobs carried over from a corporation or
other entity merged with the taxpayer, and not reflective of a
true increase in the number of new jobs in West Virginia, or
preexisting jobs formerly in place with a contract service
provider which are taken over or supplanted by the internal
operations of the taxpayer, or any other increase in the count of
jobs in place with a taxpayer which is not reflective of new
jobs, as defined in section two of this article, shall not count
as new jobs for purposes of the credit allowed under this
article.
(d) The tax commissioner may prescribe by rule alternative
methods for determining the number of jobs held by full-time
permanent employees in the taxable year upon a finding by the tax
commissioner that an alternative method is appropriate for
ascertaining an accurate and realistic determination of new jobs
held by full-time employees in the taxable year. For purposes of
prescribing alternative methods, the tax commissioner may require
the deduction or inclusion of jobs in place with contract service
providers that provide or at any time provided any service to any
eligible taxpayer or to any member of the affiliated group
related to any eligible taxpayer or to any one or more entities
related to the eligible taxpayer:
Provided, That deduction, or inclusion of those jobs shall only pertain to jobs held by
employees of the contract service provider that are attributable
or that were formerly attributable to the service provided by the
contract service provider to the taxpayer. The tax commissioner
may require any deconsolidation of any filing entity, or may
require an alternative method based on separate accounting,
unitary combination, combination of the affiliated group or
combination of the taxpayer and one or more entities related to
the taxpayer, or any other method determined by the tax
commissioner to be appropriate for ascertaining an accurate and
realistic determination of new jobs held by full-time employees
in the taxable year.
§11-13N-8. Availability of credit to successors.
(a)
Transfer or sale. -- When there is a transfer or sale of
the business assets of an eligible taxpayer to a successor
taxpayer which continues to operate the new value-added steel
product manufacturing facility located in this state, or the
new value-added steel product line of an existing manufacturing
facility located in this state, the successor taxpayer is
entitled to the credit allowed under this article:
Provided,
That the successor taxpayer otherwise remains in compliance with
the requirements of this article for entitlement to the credit.
(b)
Allocation of credit between eligible taxpayer and successor eligible taxpayer. -- For any taxable year during which
a transfer, or sale of the business assets of an eligible
taxpayer to a successor taxpayer under this section occurs, or a
merger allowed under this section occurs, the credit allowed
under this article shall be apportioned between the predecessor
eligible taxpayer and the successor taxpayer based on the number
of days during the taxable year that each taxpayer acted as the
legal employer of individuals filling new jobs for which the
credit allowed under this article is based and the number of days
during the taxable year that each taxpayer owned the new value- added steel product manufacturing facility located in this state,
or the new value-added steel product line of an existing
manufacturing facility located in this state.
(c)
Stock purchases. -- When a corporation which is an
eligible taxpayer entitled to the credit allowed under this
article is purchased through a stock purchase by a new owner, and
the corporation remains a legal entity so as to retain its
corporate identity, the entitlement of that corporation to the
credit allowed under this article will not be affected by the
ownership change.
(d)
Mergers. --
(1) When a corporation or other entity which is an eligible
taxpayer entitled to the credit allowed under this article is merged with another corporation, or entity, the surviving
corporation, or entity, shall be entitled to the credit to which
the predecessor eligible taxpayer was originally entitled only if
the surviving corporation, or entity, otherwise complies with the
provisions of this article.
(2) The amount of credit available in any taxable year
during which a merger occurs shall be apportioned between the
predecessor eligible taxpayer and the successor eligible taxpayer
based on the number of days during the taxable year that each
taxpayer acted as the legal employer of employees holding the new
jobs upon which the credit allowed under this article is based
and the number of days during the taxable year that each owned
the transferred business assets:
Provided, That when the taxable
year of the predecessor eligible taxpayer and the taxable year of
the successor eligible taxpayer are different, the apportionment
shall be made in accordance with legislative rules prescribed by
the tax commissioner.
(e) No provision of this section or of this article shall be
construed to allow sales or other transfers of the tax credit
allowed under this article. The credit allowed under this
article may be transferred only in circumstances where there is
a valid successorship as described under this section.
§11-13N-9. Credit recapture; interest; penalties; additions to tax; statute of limitations.
(a) If it appears upon audit or otherwise that any person
has improperly claimed the credit allowed by this article, the
amount improperly claimed and which the person was not entitled
to take shall be recaptured. Amended returns shall be filed for
any taxable year for which the credit was improperly taken. Any
additional taxes due under this chapter shall be remitted with
the amended return or returns filed with the tax commissioner,
along with interest, as provided in section seventeen, article
ten of this chapter, and a ten percent penalty plus such other
penalties and additions to tax as may be applicable under the
provisions of article ten of this chapter.
(b)
Recapture for jobs lost. --
(1) In any tax year the number of individuals employed in
full-time positions by the eligible taxpayer decreases by more
than ten percent, credit recapture shall apply, and the taxpayer
shall return to the state an amount of tax determined by
multiplying five hundred dollars by the number of full-time jobs
lost which exceed ten percent. An amended return shall be filed
for the tax year for which credit recapture is required. Any
additional taxes due under this chapter shall be remitted with
the amended return filed with the tax commissioner, along with
interest, as provided in section seventeen, article ten of this chapter, and a ten percent penalty plus such other penalties and
additions to tax as may be applicable under the provisions of
article ten of this chapter.
(2) Notwithstanding the provisions of article ten of this
chapter, penalties and additions to tax imposed under article ten
of this chapter and the ten percent penalty imposed under this
section may be waived, in whole or in part, at the discretion of
the tax commissioner. However, interest may not be waived.
(c) Notwithstanding the provisions of article ten of this
chapter, the time within which a notice of assessment may be
issued by the tax commissioner to recover recapture tax shall be
five years from the date of filing of any tax return on which
this credit was taken or five years from the date of payment of
any tax liability calculated pursuant to the assertion of the
credit allowed under this article, whichever is later.
§11-13N-10. Administrative rules.
The tax commissioner may prescribe such rules as may be
necessary to carry out the purposes of this article, including,
but not limited to, rules relating to applicability of credit,
method of claiming of credit, credit recapture, documentation
necessary to claim credit and rules preventing abuse of this
article by related persons or by change in the form of doing
business. All rules promulgated under this article shall be promulgated in accordance with article three, chapter
twenty-nine-a of this code.
§11-13N-11. Construction of article.
The provisions of this article shall be reasonably
construed. The burden of proof is on the person claiming the
credit allowed by this article to establish by clear and
convincing evidence that the person is entitled to the amount of
credit asserted for the taxable year.
§11-13N-12. Effective date.
This article shall be effective for taxable years beginning
on or after the first day of July, one thousand nine hundred
ninety-eight.
NOTE: The purpose of this bill is to create certain tax
credits for companies engaged in new value-added steel
manufacturing operations.
This article is new; therefore, strike-throughs and
underscoring have been omitted.