COMMITTEE SUBSTITUTE
FOR
H. B. 2999
(By Delegates Warner, Michael and Martin)
(Originating in the
Committee on Finance)
[March 2, 1999]
A BILL to amend article thirteen-d, chapter eleven of the code of
West Virginia, one thousand nine hundred thirty-one, as
amended, by adding thereto a new section, designated section
three-f, relating to a tax credit for investment in aerospace
industrial facilities; authorizing credit for eligible
taxpayers, and members, distributive interest holders and
partners of eligible taxpayers; specifying credit amount for
qualified investment in property placed in service or use in
an aerospace industrial facility after the thirtieth day of
June, one thousand nine hundred ninety-eight; and specifying
conditions and limitations on the tax credit.
Be it enacted by the Legislature of West Virginia:
That article thirteen-d, chapter eleven of the code of West
Virginia, one thousand nine hundred thirty-one, as amended be
amended, by adding thereto a new section, designated section three-f, to read as follows:
ARTICLE 13D. TAX CREDITS FOR INDUSTRIAL EXPANSION AND
REVITALIZATION, RESEARCH AND DEVELOPMENT PROJECTS,
CERTAIN HOUSING DEVELOPMENT PROJECTS, MANAGEMENT
INFORMATION SERVICES FACILITIES, AND INDUSTRIAL
FACILITIES PRODUCING COAL-BASED LIQUIDS USED TO
PRODUCE SYNTHETIC FUELS, AND AEROSPACE INDUSTRIAL
FACILITY INVESTMENTS.
§11-13D-3f. Amount of credit allowed and application of credit
for qualified investment in an aerospace industrial
facility.
(a) Credit allowed. -- (1) There is allowed to eligible
taxpayers which have made qualified investment in an aerospace
industrial facility, a credit against the taxes imposed by articles
twenty-three and twenty-four of this chapter for qualified
investment in an aerospace industrial facility. The amount of
credit is determined as provided in this section.
(2) There is allowed to members, distributive interest holders
and partners of eligible taxpayers described in paragraph (3),
subsection (c) of this section, a credit against the taxes imposed
by article twenty-four of this chapter for qualified investment in
an aerospace industrial facility. The amount of credit is
determined as provided in this section.
(b) Credit amount for qualified investment in property placed in service or use in an aerospace industrial facility after the
thirtieth day of June, one thousand nine hundred ninety-eight. --
For property purchased or leased by an eligible taxpayer and placed
in service or use after the thirtieth day of June, one thousand
nine hundred ninety-eight, as part of an aerospace industrial
facility, the amount of allowable credit is equal to fifteen
percent of the qualified investment (as determined under subsection
(e) of this section), and reduces the taxpayer's annual business
franchise tax liability under article twenty-three of this chapter
and the taxpayer's annual corporation net income tax liability
under article twenty-four of this chapter, subject to the following
conditions and limitations:
(1) The amount of credit allowable is applied over a ten-year
period, at the rate of one-tenth thereof per taxable year,
beginning with the taxable year in which the qualified investment
is first placed in service or use in this state.
(2) When in any taxable year a taxpayer is entitled to claim
credit under this section and under any other section of this
article, (or any combination thereof), the total amount of all
credits allowed for the tax year under this article shall not
exceed the sixty percent of total tax liability offset limitations
set forth in subsection (c) of this section.
(3) No carryover to a subsequent taxable year or carryback to
a prior taxable year is allowed for any unused portion of any annual credit allowance. Such unused credit is forfeited.
(4) No credit is allowed under this article for investment in
any property for which credit is allowed under article thirteen-c
of this chapter.
(5) No credit is allowed under this section for investment in
any property for which credit is allowed under any other section of
this article.
(c) Application of credit. -- (1) The annual credit for
qualified investment in an aerospace industrial facility is first
applied to reduce the annual West Virginia business franchise tax
liability imposed under article twenty-three of this chapter for
the tax year. The amount of annual credit allowed may not reduce
the annual liability for such tax year below sixty percent of the
amount of the annual tax liability which would otherwise be imposed
for such tax year in the absence of this credit and in the absence
of all other credits against such tax, except the credits set forth
in section seventeen, article twenty-three of this chapter.
(2) After application of this credit against business
franchise tax as provided in subdivision (1) of this subsection,
the remaining annual credit, if any, is then applied to reduce the
annual West Virginia corporation net income tax liability imposed
under article twenty-four of this chapter for the tax year. The
amount of annual credit allowed may not reduce the annual
corporation net income tax liability for such tax year below sixty percent of the amount of the annual tax liability which would
otherwise be imposed for such tax year in the absence of this
credit and in the absence of all other credits against tax.
(3) In the case of an eligible taxpayer that:
(A) is a limited liability company, partnership or other
business organization taxed under article twenty-three of this
chapter, but not taxed under article twenty-four of this chapter,
(B) is not treated as a corporation for federal income tax
purposes, and
(C) is a "flow through" entity or conduit for income
distributed to members, distributional interest holders or
partners, the following applies: Members, distributional interest
holders or partners, of the eligible taxpayer subject to the
corporation net income tax imposed under article twenty-four of
this chapter may apply this credit against that portion of their
annual corporation net income tax liability imposed under article
twenty-four of this chapter for the tax year on that distributive
income directly and solely derived from the eligible taxpayer. The
amount of annual credit allowed may not reduce the annual
corporation net income tax liability for such tax year below sixty
percent of the amount of the annual tax liability which would
otherwise be imposed for such tax year in the absence of this
credit and in the absence of all other credits against tax.
(d) Definitions. -- For purposes of this section:
(1) "Aerospace industrial facility" means a facility used by
an eligible taxpayer for the manufacturing, rebuilding or physical
refurbishment of:
(A) Aircraft,
(B) Aircraft engines,
(C) Aircraft engine parts,
(D) Other aircraft parts,
(E) Aircraft auxiliary equipment, including fluid power
aircraft subassemblies,
(F) Guided missiles,
(G) Space vehicles,
(H) Guided missile and space vehicle propulsion units,
(I) Guided missile parts,
(J) Propellers,
(K) Space vehicle parts, or
(L) Guided missile and space vehicle auxiliary parts.
(2) "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.
(3) "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, and any
organization which is treated as a corporation for federal income
tax purposes.
(4) "Eligible taxpayer" means, for purposes of this section,
a person subject to tax under article twenty-three or article
twenty-four of this chapter, and regularly engaged in the business
of manufacturing, rebuilding or physical refurbishment of:
(A) Aircraft,
(B) Aircraft engines,
(C) Aircraft engine parts,
(D) Other aircraft parts,
(E) Aircraft auxiliary equipment, including fluid power
aircraft subassemblies,
(F) Guided missiles,
(G) Space vehicles,
(H) Guided missile and space vehicle propulsion units,
(I) Guided missile parts,
(J) Propellers,
(K) Space vehicle parts, or
(L) Guided missile and space vehicle auxiliary parts.
The term "eligible taxpayer" does not include any person whose
only activity with respect to an aerospace industrial facility is
to lease it to another person or persons.
(5) "Placed in service or use." For purposes of the credit
allowed by this section, property shall be considered "placed in
service or use" on the earliest of the following dates:
(A) The date on which the property is physically placed in
service or use in an aerospace industrial facility;
(B) The closing date of the eligible taxpayer's federal income
tax year during which federal income tax depreciation with respect
to the property has begun, or in the case of leased property, the
closing date of the eligible taxpayer's federal income tax year
during which expenses for lease payments for the property are first
taken as a deduction from income for federal income tax purposes;
or
(C) The closing date of the eligible taxpayer's federal income
tax year during which the property is placed in a condition or
state of readiness and availability for a specifically assigned
function in an aerospace industrial facility, but where the
property has not been physically placed in service or use in the
aerospace industrial facility on that closing date.
(e) Qualified investment in an aerospace industrial facility.
-- (1) Purchased property. -- The qualified investment in tangible
personal property or real property purchased for use as a component
part of an aerospace industrial facility is the applicable
percentage of the cost of such property purchased for an aerospace
industrial facility, which is placed in service or use in this state, by the eligible taxpayer during the tax year as determined
under this section.
(2) Applicable percentage. -- For the purposes of this
subsection, the applicable percentage for any property shall be
determined under the following table:
If useful life is:
The applicable
percentage is:
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 shall
be the actual economic useful life determined as of the date such
property is first placed in service or use in this state by the
taxpayer, determined for financial accounting purposes in
accordance with generally accepted principles of accounting.
(3)(A) Cost. -- For purposes of this subsection, the cost of
each item of property purchased for use as a component part of an
aerospace industrial facility shall be the fair market value or the
actual cost, whichever is less, and in no event shall the cost
exceed the fair market value as of the date such property is first
placed in service or use in this state by the eligible taxpayer.
Cost is determined under the following rules:
(B) Trade-ins. -- Cost does not include the value of property given in trade or exchange for the property purchased for use as a
component part of an aerospace industrial facility.
(C) 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.
(4) Rental property. -- (A) The qualified investment in
tangible personal property or real property leased for use as a
component part of an aerospace industrial facility is the portion
specified in this subdivision of the cost of such property
purchased for an aerospace industrial facility, which is placed in
service or use in this state, by the eligible taxpayer during the
tax year as determined under this section.
(B) The qualified investment in leases 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. Leases of realty having a
primary term of less than ten years do not qualify for purposes of
this section.
(C) The qualified investment in leases 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 does rent reserved include
rent for any year subsequent to expiration of the book life of the
property, determined using the straight-line method of
depreciation.
(5) Transferred property. -- (A) The cost of property owned
and 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 taxpayer used the property outside this state.
(B) 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 an
aerospace industrial facility of an eligible 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, whichever is less.
(C) Qualified investment in transferred property is computed
by applying the four year, six year and eight year requirements of
this section to the cost thereof with the applicable four year, six year and eight year period determined based on the remaining useful
life or remaining primary lease term at the time the property is
placed in service or use in this state.
(6) Property purchased for multiple use. -- Investment in
property purchased for use in an aerospace industrial facility and
for some other use does not qualify for purposes of this credit.
(7) Self-constructed property. -- In the case of self-
constructed property, the cost thereof is the amount properly
charged to the capital account for purposes of depreciation for
federal income tax purposes.
(8) Specific exclusions from qualification. -- The following
investment does not constitute qualified investment in an aerospace
industrial facility, and does not qualify for purposes of this
credit.
(A) Investment by purchase or lease in natural resources in
place.
(B) Investment in purchased or leased property, the cost or
consideration for which cannot be quantified with any reasonable
degree of accuracy at the time such property is placed in service
or use: Provided, That when the contract of purchase or lease
specifies a minimum purchase price which can be quantified or
minimum annual rent which can be quantified, the amount thereof
shall be used to determine the cost thereof. If the property and
lease otherwise qualify under the, primary lease term requirements and other requirements of this section for property purchased or
leased for use as a component part of an aerospace industrial
facility, then qualified investment in such property is determined
in accordance with the four year, six year and eight year useful
life or primary lease term requirements of this subsection.
(C) Investment in property purchased, or leased, or placed in
service or use prior to the first day of July, one thousand nine
hundred ninety-eight.
(D) Investment in the purchase, acquisition or transfer of any
facility or component thereof that was in service or use during the
ninety days immediately prior to transfer of the title to such
facility or component thereof, or to the commencement of the term
of the lease of such facility or component thereof, unless upon
application of the taxpayer, setting forth good and sufficient
cause, the tax commissioner consents to waiving this ninety day
period.
(E) Investment in any facility or component part thereof that
was acquired by the taxpayer from a related person. The tax
commissioner may waive this requirement if the facility was
acquired from a related party for its fair market value, and 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 such 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 the first day of
January, one thousand nine hundred ninety-eight.
(F) Investment in or cost incurred for property owned or
leased by the taxpayer and for which credit was previously taken
under article thirteen-c, article thirteen-d or thirteen-e of this
chapter: Provided, That this paragraph shall not be construed to
prevent the transfer of this credit in the event of a mere change
in the form of doing business of an eligible taxpayer, or transfer
of credit to successors in business in accordance with section
seven of this article.
(G) Repair costs, including costs or materials used in the
repair, unless for federal income tax purposes, the cost of the
repair must be capitalized.
(H) Investment in airplanes.
(I) Investment in property which is primarily used outside
this state.
(J) Investment in property acquired incident to the purchase
of a corporation, business organization or ongoing business or a
substantial portion thereof through transfer of stock, ownership
interests or assets thereof, or any other transfer, merger or
purchase, unless for good cause shown, the tax commissioner
consents to waiving this requirement: Provided, That this paragraph
shall not be construed to prevent the transfer of this credit in the event of a mere change in the form of doing business of an
eligible taxpayer, or transfer of credit to successors in business
in accordance with section seven of this article.
(K) Investment in property 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 the first day of January, one thousand nine hundred
ninety-nine.
(L) Investment in property acquired by one component member of
a controlled group from another component member of the same
controlled group: Provided, That, the tax commissioner can waive
this requirement if the property was acquired from a related party
for its then fair market value, and 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 such 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 the first day of
January, one thousand nine hundred ninety-nine.