H. B. 3231
(By Mr. Speaker, Mr. Kiss, and Delegates Frederick,
Kominar, H. White, Varner, Porter, Long, Michael and Moore)
[Introduced March 25, 2005; referred to the
Committee on Finance.]
A BILL to amend the Code of West Virginia, 1931, as amended, by
adding thereto a new article, designated §11-13V-1, §11-13V-2,
§11-13V-3, §11-13V-4, §11-13V-5, §11-13V-6, §11-13V-7,
§11-13V-8, §11-13V-9, §11-13V-10 and §11-13V-11, all relating
to establishing a road or highway infrastructure improvement
projects or coal production and processing facilities tax
credit for taxpayers subject to the tax imposed by West
Virginia code §11-13a-3; specifying short title; specifying
legislative findings and purpose for new credit; defining
terms; specifying amount of credit, application of credit, and
carry forward of unused credit; requiring filing of
application for road or highway infrastructure improvement
project credit as condition precedent to claiming credit,
specifying procedure for application for certification,
contents of application and limitation on maximum amount of
credits which can be approved; specifying computation of q
ualified investment in coal production and processing
facilities
; allowing transfer of credits to successors;
providing for forfeiture of unused tax credits and
redetermination of credit allowed
; providing penalties for
f
ailure to maintain records of qualified property
; and
establishing effective date.
Be it enacted by the Legislature of West Virginia:
That the Code of West Virginia, 1931, as amended, be amended
by adding thereto a new article, designated §11-13V-1, §11-13V-2,
§11-13V-3, §11-13V-4, §11-13V-5, §11-13V-6, §11-13V-7, §11-13V-8,
§11-13V-9, §11-13V-10 and §11-13V-11, all to read as follows:
ARTICLE 13V. TAX CREDIT FOR ROAD AND HIGHWAY INFRASTRUCTURE
IMPROVEMENTS AND COAL PRODUCTION AND PROCESSING
FACILITIES.
§11-13V-1. Short title.
This article may be cited as the "West Virginia Road and
Highways Infrastructure Improvements and Coal Production and
Processing Facilities Tax Credit Act."
§11-13V-2. Legislative finding and purpose.
The Legislature finds that the establishment and maintenance
of infrastructure projects, including a system of good roads and
highways in this state, and making of capital investments by
taxpayers subject to the tax imposed by chapter three, article
thirteen-a of the code, is in the public interest, encourages greater capital investment by other businesses in the coal
producing areas of this state, increases economic opportunity in
this state and thereby promotes the general welfare of the people
of this state. In order to promote the private investment in
infrastructure improvements to roads and highways in this state,
and capital investment by coal severance tax taxpayers there is
hereby enacted a road and highways infrastructure improvements and
coal production and processing facilities tax credit.
§11-13V-3. Definitions.
(a)
General. -- When used in this article, or in the
administration of this article, terms defined in subsection (b)
shall have the meanings ascribed to them by this section, unless a
different meaning is clearly required by either the context in
which the term is used, or by specific definition, in this article.
(b)
Terms defined. --
(1)
Corporation. -- The term "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.
(2)
Designee. -- The term "designee" in the phrase "or his or
her designee," when used in reference to the Transportation
Secretary, means any officer or employee of the Department of
Transportation duly authorized by the Transportation Secretary directly, or indirectly by one or more delegations of authority, to
perform the functions mentioned or described in this article.
(3)
Eligible taxpayer. -- The term "eligible taxpayer" means
any person who makes a qualified expenditure in a certified road or
highway infrastructure improvement project or coal production and
processing facility and who is subject to the tax imposed by
chapter three, article thirteen-a of this chapter. "Eligible
taxpayer" shall also include an affiliated group of taxpayers if
the group elects to file a consolidated severance tax return under
article thirteen-a of this chapter.
(4)
Expenditures for road or highway infrastructure
improvement projects or coal production and processing facilities.
--
(A)
Included expenditures for road or highway infrastructure
improvement projects. -- The term "expenditures for road or highway
infrastructure improvement projects" includes payments made by an
eligible taxpayer for labor done, tangible personal property,
materials, services or supplies furnished in furtherance of a road
or highway infrastructure improvement project. In addition, the
term "expenditures for road or highway infrastructure improvement
projects" includes the cost of the real property and improvements
thereto, purchased by an eligible taxpayer and donated to the state
in furtherance of a road or highway infrastructure improvement
project and the fair market value of real property and improvements thereto owned by an eligible taxpayer and donated to the state in
furtherance of a road or highway infrastructure improvement
project.
(B)
Included expenditures for coal production and processing
facilities. -- The term "expenditures for coal production and
processing facilities" includes payments made by an eligible
taxpayer for labor done, tangible personal property, materials,
services or supplies furnished in furtherance of the construction,
installation or fabrication of haulroads, ventilation structures,
mine shafts, slopes, boreholes, dewatering structures, preparation
plants, loadouts, including associated facilities and apparatus, by
the producer or others, including contractors and subcontractors at
a coal mine or coal production or processing facility. In
addition, the term "expenditures for coal production and processing
facilities" includes the cost of the real property, improvements
thereto, and machinery and equipment, purchased by an eligible
taxpayer and directly used as part of a coal production or
processing facility.
(C)
Excluded expenditures. -- The terms "expenditures for road
or highway infrastructure improvement projects" and "expenditures
for coal production and processing facilities" exclude purchases of
property and services acquired:
(i) From a person whose relationship to the person making the
expenditure 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, two
thousand four.
(ii) By one component member of a controlled group from
another component member of the same controlled group.
The Tax Commissioner can waive this requirement if the
expenditure is for property or services acquired from a related
person for fair market value.
(D) Related person. -- The term "related person" means:
(i) A corporation, partnership, association or trust
controlled by the taxpayer;
(ii) An individual, corporation, partnership, association or
trust that is in control of the taxpayer;
(iii) A corporation, partnership, association or trust
controlled by an individual, corporation, partnership, association
or trust that is in control of the taxpayer; or
(iv) A member of the same controlled group as the taxpayer.
For purposes of this subdivision, "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 entitled 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 United States Internal
Revenue Code of 1986, as amended, other than paragraph (3) of that
section.
(5)
Includes and including. -- The terms "includes" and
"including," when used in a definition contained in this article,
shall not be deemed to exclude other things otherwise within the
meaning of the term defined.
(6)
Partnership and partner. -- The term "partnership"
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, and which
is not a trust or estate, a corporation or a sole proprietorship.
The term "partner" includes a member in such a syndicate, group,
pool, joint venture or organization.
(7)
Person. -- The term "person" includes any natural person,
corporation or partnership.
(8)
Road or highway. -- The terms "road" and "highway" are
used interchangeably herein and for purposes of this article shall
have the same meaning as the terms "road", "public road" and
"highway", as defined in section three, article one of chapter
seventeen of the code.
(9)
Road or highway infrastructure improvement. -- The term
"road or highway infrastructure improvement" means the
construction, improvement, repair, upgrade and modernization of
roads, public roads and highways in this state for the purpose of
widening, increasing weight limits, enhancing safety, improving
traffic flow or otherwise facilitating the commercial
transportation of goods or passengers within this state or the
ingress and egress of vehicles to commercial and industrial sites,
consistent with the purposes for which this article was enacted.
(10)
Tax Commissioner. -- The term "Tax Commissioner" means
the Commissioner of the West Virginia State Tax Department.
(11)
Taxpayer. -- The term "taxpayer" means any person subject
to the tax imposed by section three, article thirteen-a of this
chapter.
(12)
Transportation Secretary or Secretary of Transportation.
- The terms "Transportation Secretary" and "Secretary of
Transportation" are used interchangeably herein and mean the
Secretary of the Department of Transportation of the State of West
Virginia.
§11-13V-4. Credit allowed; amount of credit; application of
credit; carry forward of unused credit for ten
years.
(a)
Credit allowed. -- An eligible taxpayer shall be allowed
a credit against a portion of its annual severance tax liability. The amount of this credit shall be determined and applied as
hereinafter provided in this article.
(b)
Amount of credit. -- The amount of credit allowable is
determined by multiplying the amount of the taxpayer's
expenditures for road or highway infrastructure improvement
projects (as determined and certified by the Secretary of
Transportation), plus the amount of the taxpayer's qualified
investment in coal production and processing facilities, by fifty
percent. The product of this calculation establishes the maximum
amount of credit allowable under this article.
(c)
Application of credit. -- The amount of credit allowable
may be taken against up to twenty percent of taxpayer's annual
severance tax liability imposed by section three, article
thirteen-a of this chapter. Where taxpayer's expenditure involves
a road or highway infrastructure improvement the credit may be
taken in the year the improvement is completed, as certified by the
Transportation Secretary. Where the expenditure involves coal
production and processing facilities, the credit may be taken in
the year the property is first placed into service or use by the
taxpayer. The annual credit allowance shall be taken in the manner
prescribed in section six of this article. The aggregate annual
credit allowance may be claimed by taxpayer against its severance
tax liability shown on its monthly tax returns at the rate of one
twelfth of the annual credit allowance per month.
(d) Unused credit. -- If any credit remains after application
of subsection (c) of this section, the amount thereof may be
carried forward to each ensuing tax year until used or until the
expiration of the ninth taxable year subsequent to the year in
which the credit was first available. If any unused credit remains
after the tenth year, the amount thereof is forfeited. No carry
back to a prior taxable year is allowed for the amount of any
unused portion of any annual credit allowance.
(e) Placed in service or use. -- For purposes of the credit
allowed by this section, property is considered placed in service
or use in the earlier of the following taxable years:
(1) The taxable year in which, under the taxpayer's
depreciation practice, the period for depreciation with respect to
the property begins; or
(2) The taxable year in which the property is placed in a
condition or state of readiness and availability for a specifically
assigned function.
§11-13V-5. Application for road or highway infrastructure
improvement project; contents of application;
review of credit application; limitation on total
credits authorized; taking of credit.
(a) Application for credit required. -- Notwithstanding any
provision of this article to the contrary, no credit shall be
allowed or applied under this article for any expenditure for road or highway infrastructure improvements until the person asserting
a claim for the allowance of credit receives certification of the
project from the Transportation Secretary, as provided in this
section. Applications for certification of a road or highway
infrastructure improvement project shall be filed with the
Transportation Secretary and approved prior to the commencement of
any project construction.
(b) Contents of application for certification. --
Applications for certification of a road or highway infrastructure
improvement project shall contain a detailed description of the
project, all engineering drawings required to construct the
infrastructure improvements contemplated by the project
application, a list of contractors who will work on the project, a
description of the work each contractor will perform, the project
timetable, a detailed breakdown of the cost of the project, the
amount of credit requested and any other information which the
Transportation Secretary or his or her designee require.
(c) Review of application. -- Once a project application is
filed, the Transportation Secretary shall work with taxpayer to
insure that the application contains all of the information
required by this section. Applications for credit may be
supplemented or amended at any time after filing until all of the
information required by subsection (b) has been provided. Once a
complete application has been filed, the Transportation Secretary shall review it to determine whether the project should be
certified as eligible for credit under this article.
(d) Limitation on total credits authorized. -- The Secretary
is authorized to certify no more than one hundred million dollars
of expenditures for road or highway infrastructure improvements as
eligible for the credit provided in this article. The Secretary
shall keep track of the total expenditures approved and will cease
accepting applications once the expenditure limit has been reached.
(e) Taking of credit. -- The eligible taxpayer claiming the
credit for certified expenditures for road or highway
infrastructure improvements shall include information supporting
the computation of the credit and any other information the
Transportation Secretary requires with its severance tax returns
filed under this chapter.
§11-13V-6. Qualified investment in coal production and processing
facilities.
(a) General. -- The qualified investment in coal production
and processing facilities is the applicable percentage of the cost
of each expenditure for coal production and processing facilities
which is placed in service or use in this state by the taxpayer
during the taxable year.
(b) Applicable percentage. -- For the purpose of subsection
(a), the applicable percentage of any property is determined
under the following table:If useful life is: The applicable percentage is:
Less than 4 years.........................................0%
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,
is determined as of the date the property is first placed in
service or use in this state by the taxpayer, determined in
accordance with such rules and requirements the Tax Commissioner
may prescribe.
(c) Cost. -- For purposes of subsection (a), the cost of each
property purchased for business expansion is determined under the
following rules:
(1) Trade-ins. -- Cost does not include the value of property
given in trade or exchange for the property purchased for business
expansion.
(2) 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.
(3) Rental property. - -(A) The cost 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.
(B) The cost 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 may rent reserved include
rent for any year subsequent to expiration of the book life of the
equipment, determined using the straight-line method of
depreciation.
(4) Self-constructed property. -- In the case of
self-constructed property, the cost thereof is the amount properly
charged to the capital account for depreciation in accordance with
federal income tax law.
§11-13V-7. Transfer of tax credit to successors.
(a) Mere change in form of business. -- The tax credit allowed
in this article shall not be lost by reason of a mere change in the
form of conducting the business in this state, if the transferor
business retains a controlling interest in the successor business.
In this event, the successor business shall be allowed to claim the
amount of credit still available with respect to the project.
(b) Transfer or sale to successor. -- The tax credit allowed in this article shall not be lost by reason of any transfer or sale
of the stock or assets of the eligible taxpayer to a successor
business which continues to operate in this state. Upon transfer
or sale, the successor shall acquire the amount of credit that
remains available under this article for each subsequent taxable
year.
§11-13V-8. Forfeiture of unused tax credits; redetermination of
credit allowed.
(a) Disposition of property or cessation of use. -- If during
any taxable year, property with respect to which a tax credit has
been allowed under this article:
(1) Is disposed of prior to the end of its useful life, as
determined under section eight of this article; or
(2) Ceases to be used in an eligible business of the taxpayer
in this state prior to the end of its useful life, as determined
under section six of this article, then the unused portion of the
credit allowed for the property is forfeited for the taxable year
and all ensuing years. Additionally, except when the property is
damaged or destroyed by fire, flood, storm or other casualty, or is
stolen, the taxpayer shall redetermine the amount of credit allowed
in all earlier years by reducing the applicable percentage of cost
of the property allowed under section six of this article, to
correspond with the percentage of cost allowable for the period of
time that the property was actually used in this state in the business of the taxpayer. The taxpayer shall then file a
reconciliation statement for the year in which the forfeiture
occurs and pay any additional taxes owed due to reduction of the
amount of credit allowable for the earlier years, plus interest and
any applicable penalties. The reconciliation statement shall be
filed with taxpayer's annual severance tax return.
(b) Cessation of operation of coal production or processing
facility. -- If during any taxable year the taxpayer ceases
operation of a coal production or processing facility in this state
for which credit was allowed under this article, before expiration
of the useful life of property with respect to which tax credit has
been allowed under this article, then the unused portion of the
credit is forfeited. Additionally, except when the cessation is
due to fire, flood, storm or other casualty, the taxpayer shall
redetermine the amount of credit allowed by reducing the applicable
percentage of cost of the property allowed under section six of
this article, to correspond with the percentage of cost allowable
for the period of time that the property was actually used in this
state in a business of the taxpayer. The taxpayer shall then file
a reconciliation statement with its annual severance tax return,
for the year in which the forfeiture occurs, and pay any additional
taxes owed due to the reduction of the amount of credit allowable
for the earlier years, plus interest and any applicable penalties.
§11-13V-9. Identification of qualified property.
Every taxpayer who claims credit under this article shall
maintain sufficient records to establish the following facts for
each item of qualified property:
(1) Its identity;
(2) Its actual or reasonably determined cost;
(3) Its straight-line depreciation life;
(4) The month and taxable year in which it was placed in
service;
(5) The amount of credit taken; and
(6) The date it was disposed of or otherwise ceased to be
qualified property.
§11-13V-10. Failure to keep records of qualified property.
A taxpayer who does not keep the records required for
identification of qualified property is subject to the following
rules:
(1) A taxpayer is treated as having disposed of, during the
taxable year, any qualified property which the taxpayer cannot
establish was still on hand, in this state, at the end of that
year.
(2) If a taxpayer cannot establish when qualified property on
which the credit was claimed was placed in service, the taxpayer is
treated as having placed it in service in the most recent prior
year in which similar property was placed in service, unless the
taxpayer can establish that the property placed in service in the most recent year is still on hand. In that event, the taxpayer
will be treated as having placed the property in service in the
next most recent year.
§11-13V-11. Effective date.
The credit allowed by this article shall be allowed for tax
years beginning on or after the first day of January, two thousand
six.
NOTE: The purpose of this bill is to create a credit against
the severance tax to encourage private companies to make
infrastructure improvements to highways, roads and bridges in this
state; to limit the total amount of road and highway infrastructure
improvement credits which can be certified by the Secretary of
Transportation; to encourage greater capital investment in coal
production and processing facilities; to increase economic
opportunity in this state; and to authorize the claiming of the
credits.
This article is new; therefore, strike-throughs and
underscoring have been omitted.