H. B. 3230
(By Delegates Michael, Kominar,
Craig, Pino and Proudfoot)
[Introduced March 25, 2005; referred to the
Committee on Finance.]
A BILL to amend and reenact §11-23-7 of the Code of West Virginia,
1931, as amended; and to amend and reenact §11-24-5 of said
code, all relating to exemptions for certain insurance
companies from business franchise tax and corporation net
income tax; and limiting the exemptions to that portion of the
tax base which is based on income subject to a tax upon
premiums.
Be it enacted by the Legislature of West Virginia:
That §11-23-7 of the Code of West Virginia, 1931, as amended,
be amended and reenacted; and that §11-24-5 of said code be amended
and reenacted, all to read as follows:
ARTICLE 23. BUSINESS FRANCHISE TAX.
§11-23-7. Persons and other organizations exempt from tax.
The following organizations and persons are exempt from the
tax imposed by this article to the extent provided in this section:
(a) Natural persons doing business in this state that are not
doing business in the form of a partnership (as defined in section
three of this article) or in the form of a corporation (as defined
in section three of this article). Natural persons include persons
doing business as sole proprietors, sole practitioners and other
self-employed persons;
(b) Corporations and organizations which by reason of their
purposes or activities are exempt from federal income tax:
Provided, That this exemption does not apply to that portion of
their capital (as defined in section three of this article) which
is used, directly or indirectly, in the generation of unrelated
business income (as defined in the Internal Revenue Code) of any
corporation or organization if the unrelated business income is
subject to federal income tax;
(c) Insurance companies which pay this state a tax upon
premiums
and companies that pay the surcharge imposed by subsection
(f), section three, article two-c, chapter twenty-three of this
code: Provided, That this exemption does not apply to that portion
of their capital which is used, directly or indirectly, in the
generation of income that is not subject to a tax upon premiums or
the surcharge imposed by subsection (f), section three of said
article two-c;
(d) Production credit associations organized under the
provisions of the federal "Farm Credit Act of 1933":
Provided, That this exemption does not apply to corporations or associations
organized under the provisions of article four, chapter nineteen of
this code;
(e) Any trust established pursuant to section one hundred
eighty-six, chapter seven, title twenty-nine of the code of the
laws of the United States (enacted as section three hundred two (c)
of the labor management relations act, one thousand nine hundred
forty-seven), as amended prior to the first day of January, one
thousand nine hundred eighty-five;
(f) Any credit union organized under the provisions of chapter
thirty-one, or any other chapter of this code:
Provided, That this
exemption does not apply to corporations or cooperative
associations organized under the provisions of article four,
chapter nineteen of this code;
(g) Any corporation organized under this code which is a
political subdivision of the State of West Virginia, or is an
instrumentality of a political subdivision of this state, and was
created pursuant to this code;
(h) Any corporation or partnership engaged in the activity of
agriculture and farming, as defined in subdivision (8), subsection
(b), section three of this article:
Provided, That if a
corporation or partnership is not exclusively engaged in that
activity, its tax base under this article is apportioned, in
accordance with regulations promulgated by the Tax Commissioner, among its several activities and only that portion attributable to
the activity of agriculture and farming is exempt from tax under
this article;
(i) Any corporation or partnership licensed under article
twenty-three, chapter nineteen of this code, to conduct horse or
dog racing meetings or a pari-mutuel system of wagering:
Provided,
That if the corporation or partnership is not exclusively engaged
in this activity, its tax base under this article is apportioned,
in accordance with regulations promulgated by the Tax Commissioner,
among its several activities and only that portion attributable to
the activity of conducting a horse or dog racing meeting or a
pari-mutuel system of wagering is exempt from tax under this article;
(j) For those tax years beginning after the thirtieth day of June,
one thousand nine hundred ninety-eight, any corporation or
partnership operating as a hunting club:
Provided, That the
corporation or partnership distributes no income or dividends to
its owners or stockholders. For the purposes of this subsection,
a hunting club is a group of persons owning land which is used
principally for hunting purposes by the members of the club and
guests, and where any charges made for hunting are principally for
the purpose of defraying the costs of operating and maintaining the
club and club properties or establishing a reasonable reserve to
meet the operating and maintenance costs of the club. The Tax
Commissioner shall by legislative rule promulgated in accordance with article three of chapter twenty-nine of this code further
prescribe the definition of a hunting club and the manner and
method in which this credit may be claimed; and
(k) For tax years beginning after the thirty-first day of
December, two thousand two, any person or other organization
engaged in the activity of providing venture capital to West
Virginia businesses:
Provided, That if the person or organization
is not exclusively engaged in that activity, only that portion of
its tax base under this article that is attributable to the
providing of venture capital to West Virginia businesses is exempt
from tax under this article, and its tax liability under this
article is determined by multiplying its pre-credit tax liability
by a fraction equal to one minus a fraction, the numerator of which
is its gross receipts attributable to its venture capital
activities in this state and the denominator of which is its total
gross receipts from all of its business activities in this state.
For purposes of this exemption, a "person or organization engaged
in the activity of providing venture capital to West Virginia
business" means a certified West Virginia capital company as
defined in section four, article one, chapter five-e of this code.
ARTICLE 24. CORPORATION NET INCOME TAX.
§11-24-5. Corporations exempt from tax.
The following corporations shall be exempt from the tax
imposed by this article to the extent provided in this section:
(a) Corporations which by reason of their purposes or
activities are exempt from federal income tax:
Provided, That this
exemption shall not apply to the unrelated business income, as
defined in the Internal Revenue Code, of any such corporation if
such income is subject to federal income tax.
(b) Insurance companies which pay this state a tax upon
premiums
and companies that pay the surcharge imposed by subsection
(f), section three, article two-c, chapter twenty-three of this
code: Provided, That this exemption does not apply to that portion
of their taxable income from activity that is not subject to a tax
upon premiums or the surcharge imposed by subsection (f), section
three of said article two-c;
(c) Production credit associations organized under the
provisions of the federal "Farm Credit Act of 1933":
Provided,
That the exemption shall not apply to corporations or associations
organized under the provisions of article four, chapter nineteen of
this code.
(d) Corporations electing to be taxed under subchapter S of
the Internal Revenue Code of one thousand nine hundred eighty-six,
as amended:
Provided, That said corporations shall file the
information return required by section thirteen-b of this article.
(e) Trusts established pursuant to section one hundred
eighty-six, chapter seven, title twenty-nine of the code of the
laws of the United States (enacted as section three hundred two (c) of the labor management relations act, one thousand nine hundred
forty-seven), as amended prior to the first day of January, one
thousand nine hundred sixty-seven.
NOTE: The purpose of this bill is to limit the exemptions
insurance companies and companies that pay the surcharge imposed by
W.Va. Code §23-2C-3(f) have from Business Franchise Tax and
Corporation Net Income Tax to the portion of the tax base which is
based on income subject to a tax upon premiums.
Strike-throughs indicate language that would be stricken from
the present law, and underscoring indicates new language that would
be added.