H. B. 4687
(By Delegates Facemyer
, Michael, Kelley, Warner, Pettit,
Seacrist and Walters)
[Originating in the Committee on Finance]
[February 27, 1998]
A BILL to amend and reenact sections six and seven, article twenty- four, chapter eleven of the code of West Virginia, one
thousand nine hundred thirty-one, as amended, relating to
corporation net income tax; allocation and apportionment of
net income of corporate partner's distributive share;
providing that the allocation and apportionment shall be made
using the partnership's property, payroll and sales factors;
corporation net income tax adjustments in determining West
Virginia taxable income, beginning in taxable year one
thousand nine hundred ninety-eight; adding increasing
adjustments for foreign taxes and for net operating losses
from sources outside of the United States; amending the
decreasing adjustment for foreign source income; eliminating
the obsolete reference to the net operating loss deduction
from the allowance for certain governmental obligations and obligations secured by residential property;
and specifying
effective date.
Be it enacted by the Legislature of West Virginia:
That sections six and seven, article twenty-four, 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 24. CORPORATION NET INCOME TAX.
§11-24-6. Adjustments in determining West Virginia taxable
income.
(a) General. -- In determining West Virginia taxable income of
a corporation, its taxable income as defined for federal income tax
purposes shall be adjusted and determined before the apportionment
provided by section seven of this article, by the items specified
in this section.
(b) Adjustments increasing federal taxable income. -- There
shall be added to federal taxable income, unless already included
in the computation of federal taxable income, the following items:
(1) Interest or dividends on obligations or securities of any
state or of a political subdivision or authority thereof of the
state;
(2) Interest or dividends, less related expenses to the extent
not deducted in determining federal taxable income, on obligations
or securities of any authority, commission or instrumentality of the United States which the laws of the United States exempt from
federal income tax but not from state income taxes;
(3) Income taxes and other taxes, including franchise and
excise taxes, which are based on, measured by, or computed with
reference to net income, imposed by this state or any other taxing
jurisdiction, to the extent deducted in determining federal taxable
income;
(4) The amount of unrelated business taxable income as defined
by Section 512 of the Internal Revenue Code of 1986, as amended, of
a corporation which by reason of its purposes is generally exempt
from federal income taxes; and
(5) The amount of any net operating loss deduction taken for
federal income tax purposes under Section 172 of the Internal
Revenue Code of 1986, as amended;
(6) Any amount included in federal taxable income which is a
net operating loss from sources without the United States after
making the decreasing adjustments provided in subdivisions (5) and
(7), subsection (c) of this section for Section 951 income and
Section 78 income. Federal taxable income from sources without the
United States shall be determined in accordance with the provisions
of Sections 861, 862, and 863 of the Internal Revenue Code of 1986,
as amended; and
(7) The amount of foreign taxes deducted in determining
federal taxable income.
(c) Adjustments decreasing federal taxable income. -- There
shall be subtracted from federal taxable income to the extent
included therein:
(1) Any gain from the sale or other disposition of property
having a higher fair market value on the first day of July, one
thousand nine hundred sixty-seven, than the adjusted basis at said
date for federal income tax purposes: Provided, That the amount of
this adjustment is limited to that portion of any gain which does
not exceed the difference between the fair market value and the
adjusted basis;
(2) The amount of any refund or credit for overpayment of
income taxes and other taxes, including franchise and excise taxes,
which are based on, measured by, or computed with reference to net
income, imposed by this state or any other taxing jurisdiction, to
the extent properly included in gross income for federal income tax
purposes;
(3) The amount added to federal taxable income due to the
elimination of the reserve method for computation of the bad debt
deduction;
(4) The full amount of interest expense actually disallowed in
determining federal taxable income which was incurred or continued
to purchase or carry obligations or securities of any state or of
any political subdivision thereof of the state;
(5) The amount required to be added to federal taxable income as a dividend received from a foreign (non-United States)
corporation under Section 78 of the Internal Revenue Code of 1986,
as amended, by a corporation electing to take the foreign tax
credit for federal income tax purposes;
(6) The amount of salary expenses disallowed as a deduction
for federal income tax purposes due to claiming the federal jobs
credit under Section 51 of the Internal Revenue Code of 1986, as
amended;
(7) The amount included in federal adjusted gross income by
the operation of Section 951 of the Internal Revenue Code of 1986,
as amended;
(8) Employer contributions to medical savings accounts
established pursuant to section fifteen, article sixteen, chapter
thirty-three of this code to the extent included in federal
adjusted gross income for federal income tax purposes less any
portion of employer contributions withdrawn for purposes other than
payment of medical expenses: Provided, That the amount subtracted
pursuant to this subsection for any one taxable year may not exceed
the maximum amount that would have been deductible from the
corporation's federal adjusted gross income for federal income tax
purposes if the aggregate amount of the corporation's contributions
to individual medical savings accounts established under section
fifteen, article sixteen, chapter thirty-three of this code had
been contributed to a qualified plan as defined under the Employee Retirement Income Security Act of 1974, as amended; and
(9) Any amount included in federal adjusted gross taxable
income which is foreign source income. Foreign source income
includes:
(A) Interest and dividends, other than those derived from
sources within the United States;
(B) Rents, royalties, license and technical fees from property
located or services performed without the United States or from any
interest in the property, including rents, royalties or fees for
the use of or the privilege of using without the United States any
patents, copyrights, secret process and formulas, good will,
trademarks, trade brands, franchises and other like properties; and
(C) Gains, profits or other income from the sale of intangible
or real property located without the United States.
is any amount
included in federal taxable income which is taxable income from
sources without the United States, less the adjustments provided in
subdivisions (5) and (7) of this subsection.
In determining the source of "foreign source income", the
provisions of Sections 861, 862 and 863 of the Internal Revenue
Code of 1986, as amended, shall be applied.
(d) Net operating loss deduction. -- Except as otherwise
provided in this subsection, there shall be is allowed as a
deduction for the taxable year an amount equal to the aggregate of:
(1) The West Virginia net operating loss carryovers to that year; plus (2) the net operating loss carrybacks to that year: Provided,
That no more than three hundred thousand dollars of net operating
loss from any taxable year beginning after the thirty-first day of
December, one thousand nine hundred ninety-two, may be carried back
to any previous taxable year. For purposes of this subsection, the
term "West Virginia net operating loss deduction" means the
deduction allowed by this subsection, determined in accordance with
Section 172 of the Internal Revenue Code of 1986, as amended.
(1) Special rules. --
(A) When the corporation further adjusts its adjusted federal
taxable income under section seven of this article, the West
Virginia net operating loss deduction allowed by this subsection
shall be deducted after the section seven adjustments are made;
(B) The tax commissioner shall prescribe the transition
regulations as he deems necessary for fair and equitable
administration of this subsection as amended by this act.
(2) Effective date. -- The provisions of this subsection, as
amended by chapter one hundred nineteen, acts of the Legislature,
one thousand nine hundred eighty-eight, shall apply to all taxable
years ending after the thirtieth day of June, one thousand nine
hundred eighty-eight; and to all loss carryovers from taxable years
ending on or before said thirtieth day of June.
(e) Special adjustments for expenditures for water and air
pollution control facilities. --
(1) If the taxpayer so elects under subdivision (2) of this
subsection, there shall be:
(A) Subtracted from federal taxable income the total of the
amounts paid or incurred during the taxable year for the
acquisition, construction or development within this state of water
pollution control facilities or air pollution control facilities as
defined in Section 169 of the Internal Revenue Code; and
(B) Added to federal taxable income the total of the amounts
of any allowances for depreciation and amortization of the water
pollution control facilities or air pollution control facilities,
as so defined, to the extent deductible in determining federal
taxable income.
(2) The election referred to in subdivision (1) of this
subsection shall be made in the return filed within the time
prescribed by law, including extensions thereof of the time, for
the taxable year in which the amounts were paid or incurred. The
election shall be made in that manner, and the scope of application
of that election shall be defined, as the tax commissioner may by
regulations rule prescribe, and shall be irrevocable when made as
to all amounts paid or incurred for any particular water pollution
control facility or air pollution control facility.
(3) Notwithstanding any other provisions of this subsection or
of section seven to the contrary, if the taxpayer's federal taxable
income is subject to allocation and apportionment under section seven, the adjustments prescribed in paragraphs (A) and (B),
subdivision (1) of this subsection shall, instead of being made to
the taxpayer's federal taxable income before allocation and
apportionment thereof as provided in section seven, be made to the
portion of the taxpayer's net income, computed without regard to
the adjustments, allocated and apportioned to this state in
accordance with section seven.
(f) Allowance for certain government obligations and
obligations secured by residential property. -- The West Virginia
taxable income of a taxpayer subject to this article as adjusted in
accordance with subsections (b), (c), (d) and (e) of this section
shall be further adjusted by multiplying the taxable income after
the adjustment by said subsections by a fraction equal to one minus
a fraction:
(1) The numerator of which is the sum of the average of the
monthly beginning and ending account balances during the taxable
year (account balances to be determined at cost in the same manner
that obligations, investments and loans are reported on Schedule L
of the Federal Form 1120) of the following:
(A) Obligations or securities of the United States, or of any
agency, authority, commission or instrumentality of the United
States and any other corporation or entity created under the
authority of the United States Congress for the purpose of
implementing or furthering an objective of national policy;
(B) Obligations or securities of this state and any political
subdivision or authority thereof of the state;
(C) Investments or loans primarily secured by mortgages, or
deeds of trust, on residential property located in this state and
occupied by nontransients; and
(D) Loans primarily secured by a lien or security agreement on
residential property in the form of a mobile home, modular home or
double-wide, located in this state and occupied by nontransients.
(2) The denominator of which is the average of the monthly
beginning and ending account balances of the total assets of the
taxpayer which are shown on Schedule L of Federal Form 1120, which
are filed by the taxpayer with the Internal Revenue Service.
(g) The amendments to the provisions of this section made
during the regular session of the Legislature in the year one
thousand nine hundred ninety-eight, apply to all taxable years
beginning on or after the thirty-first day of December, one
thousand nine hundred ninety-seven.
§11-24-7. Allocation and apportionment.
(a) General. -- Any taxpayer having income from business
activity which is taxable both in this state and in another state
shall allocate and apportion its net income as provided in this
section. For purposes of this section, the term "net income" means
the taxpayer's federal taxable income adjusted as provided in
section six.
(b) "Taxable in another state" defined. -- For purposes of
allocation and apportionment of net income under this section, a
taxpayer is taxable in another state if:
(1) In that state the taxpayer is subject to a net income tax,
a franchise tax measured by net income, a franchise tax for the
privilege of doing business, or a corporation stock tax; or
(2) That state has jurisdiction to subject the taxpayer to a
net income tax, regardless of whether, in fact, that state does or
does not subject the taxpayer to such the tax.
(c) Business activities entirely within West Virginia. -- If
the business activities of a taxpayer take place entirely within
this state, the entire net income of such the taxpayer is subject
to the tax imposed by this article. The business activities of a
taxpayer shall be deemed are considered to have taken place in
their entirety within this state if such the taxpayer is not
"taxable in another state": Provided, That the business activities
of a financial organization having its commercial domicile in this
state shall be deemed are considered to take place entirely in this
state, notwithstanding that such the organization may be "taxable
in another state": Provided, however, That the income from the
business activities of a financial organization not having its
commercial domicile in this state shall be apportioned according to
the applicable provisions of this article.
(d) Business activities partially within and partially without West Virginia; allocation of nonbusiness income. -- If the business
activities of a taxpayer take place partially within and partially
without this state and such the taxpayer is also taxable in another
state, rents and royalties from real or tangible personal property,
capital gains, interest, dividends or patent or copyright
royalties, to the extent that they constitute nonbusiness income of
the taxpayer, shall be allocated as provided in subdivisions (1)
through (4): Provided, That to the extent such the items
constitute business income of the taxpayer, they shall may not be
so allocated but they shall be apportioned to this state according
to the provisions of subsection (e) of this section and to the
applicable provisions of section seven-b of this article.
(1) Net rents and royalties. --
(A) Net rents and royalties from real property located in this
state are allocable to this state.
(B) Net rents and royalties from tangible personal property
are allocable to this state:
(i) If and to the extent that the property is utilized in this
state; or
(ii) In their entirety if the taxpayer's commercial domicile
is in this state and the taxpayer is not organized under the laws
of or taxable in the state in which the property is utilized.
(C) The extent of utilization of tangible personal property in
a state is determined by multiplying the rents and royalties by a fraction, the numerator of which is the number of days of physical
location of the property in the state during the rental or royalty
period in the taxable year and the denominator of which is the
number of days of physical location of the property everywhere
during all rental or royalty periods in the taxable year. If the
physical location of the property during the rental or royalty
period is unknown or unascertainable by the taxpayer, tangible
personal property is utilized in the state in which the property
was located at the time the rental or royalty payer obtained
possession.
(2) Capital gains. --
(A) Capital gains and losses from sales of real property
located in this state are allocable to this state.
(B) Capital gains and losses from sales of tangible personal
property are allocable to this state if:
(i) The property had a situs in this state at the time of the
sale; or
(ii) The taxpayer's commercial domicile is in this state and
the taxpayer is not taxable in the state in which the property had
a situs.
(C) Capital gains and losses from sales of intangible personal
property are allocable to this state if the taxpayer's commercial
domicile is in this state.
(D) Gains pursuant to section 631 (a) and (b) of the Internal Revenue Code of 1986, as amended, from sales of natural resources
severed in this state shall be allocated to this state if they are
nonbusiness income.
(3) Interest and dividends are allocable to this state if the
taxpayer's commercial domicile is in this state.
(4) Patent and copyright royalties. --
(A) Patent and copyright royalties are allocable to this
state:
(i) If and to the extent that the patent or copyright is
utilized by the payer in this state; or
(ii) If and to the extent that the patent or copyright is
utilized by the payer in a state in which the taxpayer is not
taxable and the taxpayer's commercial domicile is in this state.
(B) A patent is utilized in a state to the extent that it is
employed in production, fabrication, manufacturing or other
processing in the state or to the extent that a patented product is
produced in the state. If the basis of receipts from patent
royalties does not permit allocation to states or if the accounting
procedures do not reflect states of utilization, the patent is
utilized in the state in which the taxpayer's commercial domicile
is located.
(C) A copyright is utilized in a state to the extent that
printing or other publication originates in the state. If the basis
of receipts from copyright royalties does not permit allocation to states or if the accounting procedures do not reflect states of
utilization, the copyright is utilized in the state in which the
taxpayer's commercial domicile is located.
(5) Corporate partner's distributive share. --
(A) Persons carrying on business as partners in a partnership,
as defined in section 761 of the Internal Revenue Code of 1986, as
amended, are liable for income tax only in their separate or
individual capacities.
(B) A corporate partner's distributive share of income, gain,
loss, deduction or credit of a partnership shall be modified as
provided in section six of this article for each partnership. Such
For taxable years beginning on or after the thirty-first day of
December, one thousand nine hundred ninety-eight,
the distributive
share shall then be allocated and apportioned as provided in this
section, seven of this article using the corporation's
proportionate share of the partnership's property, payroll and
sales factors. The sum of that portion of the distributive share
allocated and apportioned to this state shall then be treated as
distributive share allocated to this state; and that portion of
distributive share allocated or apportioned outside this state
shall be treated as distributive share allocated outside this
state, unless the taxpayer requests or the tax commissioner, under
subsection (h) of this section requires that such the distributive
share be treated differently.
(e) Business activities partially within and partially without
this state; apportionment of business income. -- All net income,
after deducting those items specifically allocated under subsection
(d), shall be apportioned to this state by multiplying such the net
income by a fraction, the numerator of which is the property factor
plus the payroll factor plus two times the sales factor, and the
denominator of which is four, reduced by the number of factors, if
any, having no denominator.
(1) Property factor. -- The property factor is a fraction, the
numerator of which is the average value of the taxpayer's real and
tangible personal property owned or rented and used by it in this
state during the taxable year and the denominator of which is the
average value of all the taxpayer's real and tangible personal
property owned or rented and used by the taxpayer during the
taxable year, which is reported on Schedule L Federal Form 1120,
plus the average value of all real and tangible personal property
leased and used by the taxpayer during the taxable year.
(2) Value of property. -- Property owned by the taxpayer shall
be valued at its original cost, adjusted by subsequent capital
additions or improvements thereto and partial disposition thereof,
by reason of sale, exchange, abandonment, etc.: Provided, That
where records of original cost are unavailable or cannot be
obtained without unreasonable expense, property shall be valued at
original cost as determined under regulations rules of the tax commissioner. Property rented by the taxpayer from others shall be
valued at eight times the annual rental rate. The term "net annual
rental rate" is the annual rental paid, directly or indirectly, by
the taxpayer, or for its benefit, in money or other consideration
for the use of property and includes:
(A) Any amount payable for the use of real or tangible
personal property, or any part thereof of the property, whether
designated as a fixed sum of money or as a percentage of sales,
profits or otherwise.
(B) Any amount payable as additional rent or in lieu of rents,
such as interest, taxes, insurance, repairs or any other items
which are required to be paid by the terms of the lease or other
arrangement, not including amounts paid as service charges, such as
utilities, janitor services, etc. If a payment includes rent and
other charges unsegregated, the amount of rent shall be determined
by consideration of the relative values of the rent and the other
items.
(3) Movable property. -- The value of movable tangible
personal property used both within and without this state shall be
included in the numerator to the extent of its utilization in this
state. The extent of such the utilization shall be determined by
multiplying the original cost of such the property by a fraction,
the numerator of which is the number of days of physical location
of the property in this state during the taxable period, and the denominator of which is the number of days of physical location of
the property everywhere during the taxable year. The number of
days of physical location of the property may be determined on a
statistical basis or by such other reasonable method acceptable to
the tax commissioner.
(4) Leasehold improvements. -- Leasehold improvements shall,
for purposes of the property factor, be treated as property owned
by the taxpayer regardless of whether the taxpayer is entitled to
remove the improvements or the improvements revert to the lessor
upon expiration of the lease. Leasehold improvements shall be
included in the property factor at their original cost.
(5) Average value of property. -- The average value of
property shall be determined by averaging the values at the
beginning and ending of the taxable year: Provided, That the tax
commissioner may require the averaging of monthly values during the
taxable year if substantial fluctuations in the values of the
property exist during the taxable year, or where property is
acquired after the beginning of the taxable year, or is disposed
of, or whose rental contract ceases, before the end of the taxable
year.
(6) Payroll factor. -- The payroll factor is a fraction, the
numerator of which is the total compensation paid in this state
during the taxable year by the taxpayer for compensation, and the
denominator of which is the total compensation paid by the taxpayer during the taxable year, as shown on the taxpayer's federal income
tax return as filed with the Internal Revenue Service, as reflected
in the schedule of wages and salaries and that portion of cost of
goods sold which reflects compensation, or as shown on a pro forma
return.
(7) Compensation. -- The term "compensation" means wages,
salaries, commissions and any other form of remuneration paid to
employees for personal services. Payments made to an independent
contractor or to any other person not properly classifiable as an
employee shall be excluded. Only amounts paid directly to
employees are included in the payroll factor. Amounts considered
as paid directly to employees include the value of board, rent,
housing, lodging and other benefits or services furnished to
employees by the taxpayer in return for personal services, provided
such the amounts constitute income to the recipient for federal
income tax purposes.
(8) Employee. -- The term "employee" means:
(A) Any officer of a corporation; or
(B) Any individual who, under the usual common-law rule
applicable in determining the employer-employee relationship, has
the status of an employee.
(9) Compensation. -- Compensation is paid or accrued in this
state if:
(A) The employee's service is performed entirely within this state; or
(B) The employee's service is performed both within and
without this state, but the service performed without the state is
incidental to the individual's service within this state. The word
"incidental" means any service which is temporary or transitory in
nature, or which is rendered in connection with an isolated
transaction; or
(C) Some of the service is performed in this state and:
(i) The employee's base of operations or, if there is no base
of operations, the place from which the service is directed or
controlled is in the state; or
(ii) The base of operations or the place from which the
service is directed or controlled is not in any state in which some
part of the service is performed, but the employee's residence is
in this state.
The term "base of operations" is the place of more or less
permanent nature from which the employee starts his or her work and
to which he or she customarily returns in order to receive
instructions from the taxpayer or communications from his or her
customers or other persons or to replenish stock or other
materials, repair equipment, or perform any other functions
necessary to the exercise of his or her trade or profession at some
other point or points. The term "place from which the service is
directed or controlled" refers to the place from which the power to direct or control is exercised by the taxpayer.
(10) Sales factor. -- The sales factor is a fraction, the
numerator of which is the gross receipts of the taxpayer derived
from transactions and activity in the regular course of its trade
or business in this state during the taxable year (business
income), less returns and allowances. The denominator of the
fraction shall be is the total gross receipts derived by the
taxpayer from transactions and activity in the regular course of
its trade or business during the taxable year (business income),
and reflected in its gross income reported and as appearing on the
taxpayer's Federal Form 1120, and consisting of those certain
pertinent portions of the (gross income) elements set forth:
Provided, That if either the numerator or the denominator includes
interest or dividends from obligations of the United States
government which are exempt from taxation by this state, the amount
of such interest and dividends, if any, shall be subtracted from
the numerator or denominator in which it is included.
(11) Allocation of sales of tangible personal property. --
(A) Sales of tangible personal property are in this state if:
(i) The property is received in this state by the purchaser,
other than the United States government, regardless of the f.o.b.
point or other conditions of the sale. In the case of delivery by
common carrier or other means of transportation, the place at which
such the property is ultimately received after all transportation has been completed shall be considered as is the place at which
such the property is received by the purchaser. Direct delivery in
this state, other than for purposes of transportation, to a person
or firm designated by the purchaser, constitutes is delivery to the
purchaser in this state, and direct delivery outside this state to
a person or firm designated by the purchaser does not constitute is
not delivery to the purchaser in this state, regardless of where
title passes or other conditions of sale; or
(ii) The property is shipped from an office, store, warehouse,
factory or other place of storage in this state and the purchaser
is the United States government.
(B) All other sales of tangible personal property delivered or
shipped to a purchaser within a state in which the taxpayer is not
taxed, as defined in subsection (b) of this section, shall be
excluded from the denominator of the sales factor.
(12) Allocation of other sales. -- Sales, other than sales of
tangible personal property are in this state if:
(A) The income-producing activity is performed in this state;
or
(B) The income-producing activity is performed both in and
outside this state and a greater proportion of the income- producing activity is performed in this state than in any other
state, based on costs of performance; or
(C) The sale constitutes business income to the taxpayer, or the taxpayer is a financial organization not having its commercial
domicile in this state, and in either case the sale is a receipt
described as attributable to this state in subsection (b), section
seven-b of this article.
(13) Financial organizations and other taxpayers with business
activities partially within and partially without this state. --
Notwithstanding anything contained in this section to the contrary,
in the case of financial organizations and other taxpayers, not
having their commercial domicile in this state, the rules of this
subsection shall apply to the apportionment of income from their
business activities except as expressly otherwise provided in
subsection (b), section seven-b of this article.
(f) Income-producing activity. -- The term "income-producing
activity" applies to each separate item of income and means the
transactions and activity directly engaged in by the taxpayer in
the regular course of its trade or business for the ultimate
purpose of obtaining gain or profit. Such The activity does not
include transactions and activities performed on behalf of the
taxpayer, such as those conducted on its behalf by an independent
contractor. "Income-producing activity" includes, but is not
limited to, the following:
(1) The rendering of personal services by employees with
utilization of tangible and intangible property by the taxpayer in
performing a service;
(2) The sale, rental, leasing, licensing or other use of real
property;
(3) The sale, rental, leasing, licensing or other use of
tangible personal property; or
(4) The sale, licensing or other use of intangible personal
property.
The mere holding of intangible personal property is not, in
itself, an income-producing activity: Provided, That the conduct
of the business of a financial organization shall constitute is an
income-producing activity.
(g) Cost of performance. -- The term "cost of performance"
means direct costs determined in a manner consistent with generally
accepted accounting principles and in accordance with accepted
conditions or practices in the trade or business of the taxpayer.
(h) Other methods of allocation and apportionment. --
(1) General. -- If the allocation and apportionment provisions
of subsections (d) and (e) of this section do not fairly represent
the extent of the taxpayer's business activities in this state, the
taxpayer may petition for or the tax commissioner may require, in
respect to all or any part of the taxpayer's business activities,
if reasonable:
(A) Separate accounting;
(B) The exclusion of one or more of the factors;
(C) The inclusion of one or more additional factors which will fairly represent the taxpayer's business activity in this state; or
(D) The employment of any other method to effectuate an
equitable allocation or apportionment of the taxpayer's income.
Such The petition shall be filed no later than the due date of the
annual return for the taxable year for which the alternative method
is requested, determined without regard to any extension of time
for filing such the return, and the petition shall include a
statement of the petitioner's objections and of such the
alternative method of allocation or apportionment as it believes to
be proper under the circumstances with such detail and proof as the
tax commissioner may require.
(2) Alternative method for public utilities. -- If the
taxpayer is a public utility and if the allocation and
apportionment provisions of subsections (d) and (e) do not fairly
represent the taxpayer's business activities in this state, the
taxpayer may petition for, or the tax commissioner may require, as
an alternative to the other methods provided for in paragraph (1)
of this subsection, the allocation and apportionment of the
taxpayer's net income in accordance with any system of accounts
prescribed by the public service commission of this state pursuant
to the provisions of section eight, article two, chapter twenty- four of this code: Provided, That the allocation and apportionment
provisions of such the system of accounts fairly represent the
extent of the taxpayer's business activities in this state for the purposes of the tax imposed by this article.
(3) Burden of proof. -- In any proceeding before the tax
commissioner or in any court in which employment of one of the
methods of allocation or apportionment provided for in paragraph
(1) or (2) of this subsection is sought, on the ground that the
allocation and apportionment provisions of subsections (d) and (e)
do not fairly represent the extent of the taxpayer's business
activities in this state, the burden of proof shall is:
(A) If the tax commissioner seeks employment of one of such
the methods, be on the tax commissioner; or
(B) If the taxpayer seeks employment of one of such the other
methods, be on the taxpayer.
NOTE: The purpose of this bill is to make technical
corrections and clarifications to the Corporation Net Income Tax
concerning the decreasing and increasing adjustments to taxable
income for foreign source income of corporations. The bill also
makes a technical correction to subsection (f), the allowance for
certain governmental obligations and obligations secured by
residential property, used when determining West Virginia taxable
income of a corporation which has a net operating loss. The bill
eliminates the reference to subsection (d), net operating loss.
The reference to net operating loss became obsolete in 1988 when
subsection (d) was amended to create a West Virginia net operating
loss deduction. Presently, a taxpayer cannot accurately calculate
either the allowance or the deduction because each provision
requires the other to be calculated first.
Another purpose of this bill is to change the method of
apportioning a corporate partner's distributive share by using the
partnership's factors instead of the corporation's proportionate
share of those factors. Current law provides a preference to
partnership distributions of multistate partnerships and
corporations which is not available to corporations that may not
apportion their adjusted federal taxable income.
Strike-throughs indicate language that would be stricken from the present law, and underscoring indicates new language that would
be added.
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