ENROLLED
H. B. 4303
(By Delegates Flanigan and Wright)
[Passed March 14, 1998; in effect ninety days from passage.]
AN ACT to amend and reenact section eighteen-a, article ten,
chapter eleven of the code of West Virginia, one thousand
nine hundred thirty-one, as amended, relating to taxation;
the penalty for underestimating individual quarterly tax
payments; and increasing the minimum amount from two hundred
fifty dollars to six hundred dollars before an addition to
tax may be imposed.
Be it enacted by the Legislature of West Virginia:
That section eighteen-a, article ten, chapter eleven of the
code of West Virginia, one thousand nine hundred thirty-one, as
amended, be amended and reenacted to read as follows:
ARTICLE 10. PROCEDURE AND ADMINISTRATION.
§11-10-18a. Additions to tax for failure to pay estimated income
or business franchise tax.
(a)
Additions to tax. -- Except as otherwise provided in
this section, in the case of any underpayment of estimated tax,
there shall be added to the tax due for the taxable year, under article twenty-one, twenty-three or twenty-four of this chapter,
an amount determined by applying the rate established under
section seventeen or seventeen-a of this article, as appropriate
for the taxable year, to the amount of the underpayment of
estimated tax, for the period of the underpayment.
(b)
Amount of underpayment. -- For purposes of subsection
(a) of this section, the amount of the underpayment shall be the
excess of the amount determined under subdivision (1) of this
subsection over the amount determined under subdivision (2) of
this subsection.
(1) The amount of the installment required to be paid on or
before the due date for the installment, if the estimated tax due
for the taxable year were an amount equal to ninety percent of
the tax shown on the annual return for the taxable year divided
by the number of installments taxpayer was required to make for
the taxable year, or, if no return was filed, ninety percent of
the tax for such year divided by the number of installment
payments taxpayer was required to make for the taxable year.
(2) The amount, if any, of the installment paid on or before
the last date prescribed for payment of that installment.
(c)
Period of underpayment. -- The period of underpayment of
an installment shall run from the date the installment was
required to be paid (due date) to whichever of the following
dates is the earlier:
(1) The due date of the annual return following the close of
the taxable year for which the installment was due (determined without regard to any extension of time for filing such annual
return); or
(2) With respect to any portion of the underpayment, the
date on which such portion is paid. For purposes of this
subdivision, a payment of estimated tax shall be credited against
unpaid required installments in the order in which such
installments are required to be paid.
(d)
Exception. -- Notwithstanding the provisions of the
preceding subsections, the additions to tax with respect to any
underpayment of any installment shall not be imposed if the total
amount of all payments of estimated tax made on or before the
last date prescribed for the payment of such installment equals
or exceeds the amount which would have been required to be paid
on or before such date if the estimated tax were whichever of the
following is lesser:
(1)
Prior year's tax. -- One hundred percent of the tax
shown on the return of the taxpayer for the preceding taxable
year, if a return showing a liability for tax was filed by the
taxpayer for the preceding taxable year and such preceding year
was a taxable year of twelve months;
(2)
Annualized tax. -- In the case of any required
installment, if the taxpayer establishes that the annualized
income installment is less than the amount determined under
subdivision (1) of this subsection and under subsection (b) of
this section, then the amount of such required installment shall
be the annualized income installment. For purposes of this subdivision, there shall be four required installments for each
taxable year and the "annualized income installment" is the
difference (if any) determined by subtracting the amount
determined under paragraph (B) of this subdivision from the
amount determined under the appropriate clause of paragraph (A)
of this subdivision. When making these computations, the rules
in paragraph (C) of this subdivision shall be followed:
(A) (i)
Corporations. -- An amount equal to the applicable
percentage of the tax of a corporation for the taxable year
computed by placing on an annualized basis its taxable income:
(I) For the first three months of the taxable year, in the
case of the first installment;
(II) For the first three months of or the first five months
of the taxable year, in the case of the second installment;
(III) For the first six months or the first eight months of
the taxable year, in the case of the third installment; and
(IV) For the first nine months or for the first eleven
months of the taxable year, in the case of the fourth
installment.
(ii)
Individuals. -- An amount equal to the applicable
percentage of the tax of an individual for the taxable year
computed by placing on an annualized basis the taxable income of
the individual for months in the taxable year ending before the
due date for the installment.
(B) The aggregate amount of any prior required installments
for the taxable year.
(C)
Special rules. -- For purposes of this subdivision:
(i)
Annualization. -- Taxpayer's taxable income shall be
placed on an annualized basis in the same manner that taxable
income is annualized for federal income tax purposes for the
taxable year.
(ii)
Applicable percentage. -- The applicable percentage
shall be determined from the following table:
In the case of the followingThe applicable
required installments:percentage is:
1st..............................................22.5
2nd..............................................45
3rd..............................................67.5
4th..............................................90
(e)
Additional exceptions. --
(1)
Where tax amount is small. -- No addition to tax shall
be imposed under subsection (a) of this section for any taxable
year if the tax shown on the return for such taxable year (or, if
no return is filed, the tax), reduced by the credit allowable for
withheld tax, is less than six hundred dollars.
(2)
Where individual has no personal income tax liability
for preceding taxable year. -- No addition to tax shall be
imposed under subsection (a) of this section for any taxable year
if:
(A) The individual's preceding taxable year was a taxable
year of twelve months;
(B) The individual did not have any West Virginia personal income tax liability for the preceding taxable year;
(C) The individual was a citizen or resident of the United
States throughout the preceding taxable year; and
(D) The individual's West Virginia personal income tax
liability for the current taxable year is less than five thousand
dollars.
(3)
Waiver in certain cases. -- No addition to tax shall be
imposed under subsection (a) of this section with respect to any
underpayment if and to the extent the tax commissioner determines
that by reason of casualty, disaster or other unusual
circumstances the imposition of such addition to tax would be
against equity and good conscience.
(f)
Tax computed after application of credits against tax.
-- For purposes of this section, the term "tax" means the amount
of any annual tax or fee administered under this article that is
generally payable in two or more installment payments during the
taxable year, minus the amount of credits allowable against such
tax or fee, other than taxes withheld from the taxpayer under
section seventy-one or seventy-one-a, article twenty-one of this
chapter (relating to taxes withheld on wages, or from
distributions of pass-through income to nonresident partners, S
corporation shareholders or beneficiaries of an estate or trust).
(g)
Application of section in case of personal income tax
withheld on wages. --
(1)
In general. -- For purposes of applying this section,
the amount of the credit allowed under section seventy-one, article twenty-one of this chapter, for the taxable year shall be
deemed a payment of estimated tax, and an equal part of such
amount shall be deemed to have been paid on each installment
payment due date for such taxable year, unless the taxpayer
establishes the specific dates on which all amounts were actually
withheld, in which case the amounts so withheld shall be deemed
payments of estimated tax on the dates on which such amounts were
actually withheld.
(2)
Separate application. -- The taxpayer may apply
subdivision (1) of this subsection separately with respect to:
(A) Wage withholding; and
(B) All other amounts withheld for which credit is allowed
under section seventy-one, article twenty-one of this chapter.
(h)
Application of section in case of income tax withheld by
pass-through entities from distributions to nonresidents. -- For
purposes of applying this section, the amount of credit allowed
under section seventy-one-a, article twenty-one of this chapter
to a nonresident distributee of a pass-through entity, shall be
deemed to be a payment of estimated income tax for the taxable
year of the nonresident distributee, and an equal part of such
amount shall be deemed (only for purposes of this section) to
have been paid on each installment due date for the taxable year
of the distributee, unless the distributee establishes the dates
on which all amounts were actually withheld, in which case the
amounts so withheld shall be deemed payments of estimated tax on
the dates on which such amounts were actually withheld.
(i)
Special rule where personal income tax return filed on
or before the thirty-first day of January. -- If on or before the
last day of the first month following the end of the taxable
year, the taxpayer files his or her annual personal income tax
return for that taxable year and pays in full the amount computed
on the return as payable, then no addition to tax shall be
imposed under subsection (a) of this section with respect to any
underpayment of the fourth required installment for that taxable
year.
(j)
Special rules for farmers. -- For purposes of this
section, if an individual is a farmer for any taxable year:
(1) There is only one required installment for that taxable
year;
(2) The due date for such installment is the fifteenth day
of January of the following taxable year;
(3) The amount of such installment shall be equal to the
required annual payment determined under subsection (b) of this
section by substituting "sixty-six and two-thirds percent" for
"ninety percent"; and
(4) Subsection (h) of this section shall be applied:
(A) By substituting "the first day of March" for the phrase
"the thirty-first day of January"; and
(B) By treating the required installment described in
subdivision (1) of this subsection as the fourth required
installment.
(k)
Fiscal years and short years. --
(1)
Fiscal years. -- In applying this section to a taxable
year beginning on any date other than the first day of January,
there shall be substituted, for the months specified in this
section, the months of the fiscal year that correspond thereto.
(2)
Short taxable year. -- The application of this section
to taxable years of less than twelve months shall be in
accordance with regulations prescribed by the tax commissioner.
(l)
Reserved.
(m)
Estates and trusts. --
(1)
In general. -- Except as otherwise provided in this
subsection, this section shall apply to any estate or trust.
(2)
Exception for certain estates and certain trusts. --
With respect to any taxable year ending before the date two years
after the date of the decedent's death, this section shall not
apply to:
(A) The estate of such decedent; or
(B) Any trust all of which was treated for federal income
tax purposes as owned by the decedent and to which the residue of
the decedent's estate will pass under his or her will (or, if no
will is admitted to probate, which is the trust primarily
responsible for paying debts, taxes and expenses of
administration).
(3)
Special rule for annualizations. -- In the case of any
estate or trust to which this section applies, paragraph (A),
subdivision (2), subsection (d) of this section shall be applied
by substituting "ending before the date one month before the due date of the installment" for the phrase "ending before the due
date for the installment".
(n)
Rules. -- The tax commissioner may prescribe such rules
as the commissioner deems necessary to carry out the purpose of
this section. This includes, but is not limited to, equitable
rules allowing payment of adjusted seasonal installments in lieu
of annualized income installments when the commissioner
determines, based on known facts and circumstances, that payment
of the annualized income installment will result in significant
hardship to the taxpayer due to the seasonal nature of taxpayer's
business, and equitable rules for payment of estimated personal
income tax by an individual who is: (1) An employee; (2)
employed in another state for some portion or all of the taxable
year; and (3) required to pay personal income taxes to such other
state on (or measured by) wages earned in that state, for which
credit is allowed under section twenty, article twenty-one of
this chapter.
(o)
Effective date. --
(1) This section, as amended in the year one thousand nine
hundred ninety-two, shall apply to taxable years beginning after
the thirtieth day of June, one thousand nine hundred ninety-two,
and this section as in effect on the first day of January, one
thousand nine hundred ninety-two, is preserved and shall apply to
taxable years beginning before the first day of July, one
thousand nine hundred ninety-two.
(2) This section, as amended in the year one thousand nine hundred ninety-three, shall apply to taxable years ending after
the thirtieth day of June, one thousand nine hundred ninety- three. For taxable years ending on or before such dates, the
provisions of this section as in effect for such years are fully
preserved.
(3) This section, as amended in the year one thousand nine
hundred ninety-eight, shall apply to taxable years ending
after the thirtieth day of June, one thousand nine hundred
ninety-eight. For taxable years ending on or before these dates,
the provisions of this section as in effect for those years are
fully preserved.