COMMITTEE SUBSTITUTE
FOR
H. B. 4047
(By
Mr. Speaker, Mr. Kiss, and Delegate Trump)
[By Request of the Executive]
(Originating in the Committee on Finance)
[March 1, 2004]
A BILL to
amend the code of West Virginia, 1931, as amended, by
adding thereto a new article, designated §11-13U-1, §11-13U-2,
§11-13U-3, §11-13U-4, §11-13U-5, §11-13U-6, §11-13U-7, §11-
13U-8, §11-13U-9 and §11-13U-10, all relating to the high-
growth business investment tax credit.
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 §11-13U-1, §11-13U-2,
§11-13U-3, §11-13U-4, §11-13U-5, §11-13U-6, §11-13U-7, §11-13U-8
§11-13U-9 and §11-13U-10, all to read as follows:
ARTICLE 13U. HIGH-GROWTH BUSINESS INVESTMENT TAX CREDIT.
§11-13U-1. Short title.
This article may be cited as the "High-Growth Business
Investment Tax Credit".
§11-13U-2. Legislative finding and purpose.
The Legislature finds the encouragement of investment in
potentially high-growth research and development businesses in this state is in the public interest and promotes economic growth and
development for the people of this state. In order to encourage
investment in start-up, growth-oriented, research and development
businesses in this state and thereby increase employment and
economic development, there is hereby provided a high-growth
business investment tax credit.
§11-13U-3. Definitions.
As used in this article, the following terms have the meanings
ascribed to them in this section, unless the context in which the
term is used clearly requires another meaning or a specific
different definition is provided:
(1) "Alter ego" means a qualified research and development
company where one or more of the following criteria are satisfied
in relation to the eligible taxpayer:
(A) The ownership of the business is "substantially related"
to the ownership of the eligible taxpayer. "Substantially related"
means a five percent or more common ownership interest; or
(B) The board of directors of the qualified research and
development company is controlled by the eligible taxpayer:
Provided, That an eligible taxpayer is deemed to have control of
the board of directors of a qualified research and development
company if it controls a simple majority of the board of directors.
(2) "Corporate headquarters" means the place at which the
corporation has its commercial domicile and from which the business
of the corporation is primarily conducted.
(3) "Eligible taxpayer" means a person that has received certification from the economic development authority that a
portion of the annual available high growth business investment
credit has been allocated to it, that is subject to the tax imposed
by either article twenty-three, article twenty-four or article
twenty-one of this chapter, and that has made a qualified
investment in a qualified research and development credit company.
(4) "Person" includes any natural person, corporation, limited
liability company, or partnership.
(5) "Qualified investment" means an equity financing of a West
Virginia qualified strategic research and development company. The
investment must be in cash or cash equivalents and may not be an
exchange of in-kind property.
(6) "Qualified research and development company" for purposes
of the high growth business investment tax credit means an entity
that has been certified by the state tax commissioner as eligible
for the West Virginia research and development tax credit set forth
in article thirteen-r, chapter eleven of this code, that has annual
gross receipts of less than twenty million dollars and has annual
payroll of less then two million five hundred thousand dollars.
(7) "Tax credit" means the high-growth business development
tax credit authorized by this article.
(8) "Taxable year" means the tax year of the eligible
taxpayer.
§11-13U-4. High-growth business investment tax credit.
(a)
Credit allowed. -- There shall be allowed to each eligible
taxpayer in a qualified research and development company that maintains its corporate headquarters in West Virginia a tax credit
for the taxable year in which the investment was made. The total
tax credit that may be used by an eligible taxpayer shall be equal
to fifty percent of the total value of the qualified investment in
the taxable year the qualified investment was actually made.
(b) No more than one million dollars of the tax credits
allowed under subsection (a) of this section shall be allocated by
the economic development authority during any fiscal year. The
economic development authority shall allocate the tax credits in
the order the applications therefor are received.
(c)
Business franchise tax. -- The tax credit is first applied
to reduce the taxes imposed upon the eligible taxpayer by article
twenty-three of this chapter for the taxable year (determined after
application of the credits against tax provided in section
seventeen of said article, but before application of any other
allowable credits against tax).
(d)
Corporation net income taxes. -- After application of
subsection (c) of this section, any unused tax credit is next
applied to reduce the taxes imposed upon the eligible taxpayer by
article twenty-four of this chapter for the taxable year
(determined before application of allowable credits against tax).
(e) If the eligible taxpayer is a limited liability company,
an electing small business corporation (as defined in section 1361
of the United States Internal Revenue Code of 1986, as amended), or
a partnership, any unused tax credit remaining after application of
subsections (c) and (d) of this section is allowed as a tax credit against the taxes imposed by article twenty-four of this chapter on
owners of the eligible taxpayer.
(1) Electing small business corporations (as defined above in
subsection (e)), limited liability companies, and partnerships
shall allocate the tax credit allowed by this article among their
members in the same manner as profits and losses are allocated for
the taxable year.
(2) No tax credit is allowed under this article against any
withholding tax imposed by, or payable under, article twenty-one of
this chapter.
(f)
Personal income tax taxes. -- After application of
subsections (c), (d) and (e) of this section, any unused tax credit
is next applied to reduce the taxes imposed by article twenty-one
of this chapter for the taxable year (determined before application
of allowable credits against tax) of the eligible taxpayer.
(g) If the eligible taxpayer is a limited liability company,
an electing small business corporation (as defined in subsection
(e) of this section) or a partnership, any unused tax credit
remaining after application of subsections (c), (d), (e) and (f) of
this section is allowed as a tax credit against the taxes imposed
by article twenty-one of this chapter on owners of the eligible
taxpayer.
(1) Electing small business corporations (as defined in
subsection (e) of this section), limited liability companies, and
partnerships shall allocate the tax credit allowed by this article
among their members in the same manner as profits and losses are allocated for the taxable year.
(2) No tax credit is allowed under this article against any
withholding tax imposed by, or payable under, article twenty-one of
this chapter.
(h) The total amount of tax credit that may be used in any
taxable year by any eligible taxpayer in combination with the
owners of the eligible taxpayer under subsections (e) and (g) of
this section may not exceed fifty thousand dollars. The total
amount of qualified investment that a qualified research and
development company may accept from all eligible taxpayers in any
taxable year is one million dollars.
(i)
Unused credit carry forward. -- If the tax credit allowed
under this article in any taxable year exceeds the sum of the taxes
enumerated in subsections (c), (d), (e), (f) and (g) of this
section for that taxable year, the eligible taxpayer and owners of
eligible taxpayers described in subsections (e) and (g) of this
section may apply the excess as a tax credit against those taxes,
in the order and manner stated in this section, for succeeding
taxable years until the earlier of the following:
(1) The full amount of the excess tax credit is used; or
(2) The expiration of the fourth taxable year after the
taxable year in which the investment was made. The tax credit
remaining thereafter is forfeited.
(j) No tax credit is allowed or may be applied under this
article until the taxpayer seeking to claim the tax credit has:
(1) Filed with the economic development authority a written application for the tax credit;
(2) Filed with the economic development authority the research
and development program or project certification issued pursuant to
section six, article thirteen-r of this chapter for the qualified
research and development company that will benefit from the
investment;
(3) Filed with the economic development authority the
certificate of incorporation for the qualified research and
development company that will benefit from the investment; and
(4) Received from the economic development authority
certification of the amount of tax credit to be allocated to the
eligible taxpayer.
§11-13U-5. Restrictions on investment.
(a) No qualified investment may be made in a qualified
research and development company that is the alter ego of the
eligible taxpayer.
(b) The eligible taxpayer shall maintain its qualified
investment for a minimum period of five years: Provided, That an
eligible taxpayer receiving repayment or return of a qualified
investment (exclusive of interest, dividends or other earnings on
the investment) shall within three calendar months from the date of
repayment or return reinvest the repaid or returned amount of the
initial investment in another qualified research and development
company for a period of time at least equal to the remainder of the
initial five-year term.
§11-13U-6. Penalty.
An eligible taxpayer that fails to maintain a qualified
investment for the required period of time stated in section five
of this article shall pay to the state tax commissioner a penalty
equal to all of the tax credits asserted under this article by the
eligible taxpayer with interest, calculated at the rate set forth
in section seventeen-a, article ten of this chapter, from the date
the tax credits were certified as allocated to the eligible
taxpayer. The tax commissioner shall give notice to the eligible
taxpayer of any penalties imposed under this section. The penalty
shall be assessed and collected in the same manner as tax. The tax
commissioner shall deposit any amounts received under this
subsection in the general revenue fund.
§11-13U-7. Disclosure of tax credits.
Notwithstanding any provision in this code to the contrary,
the tax commissioner shall annually publish in the state register
the name and address of every eligible taxpayer and the amount of
any tax credit asserted under this article.
§11-13U-8. Tax credit review and accountability.
(a) Beginning on the first day of February, two thousand six,
and on the first day of February every third year thereafter, the
tax commissioner shall submit to the governor, the president of the
Senate and the speaker of the House of Delegates a tax credit
review and accountability report evaluating the cost effectiveness
of the tax credit allowed under this article during the most recent
three-year period for which information is available:
Provided,
That the requirement to file the credit review and accountability report terminates the thirtieth day of June, two thousand eleven,
unless the termination of entitlement to the tax credit as stated
in section ten of this article terminates. The criteria to be
evaluated includes, but is not limited to, for each year of the
three-year period:
(1) The numbers of eligible taxpayers claiming the tax credit;
(2) The net number, type, and duration of new jobs created by
all qualified research and development companies in which taxpayers
claiming the credit made investment in and the wages and benefits
paid by such companies;
(3) The cost of the tax credit;
(4) The cost of the tax credit per new job created; and
(5) Comparison of employment trends for the industry and for
taxpayers within the industry that claim the tax credit.
(b) Eligible taxpayers claiming the tax credit shall provide
any information required by the tax commissioner for the purpose of
preparing the report:
Provided, That such information shall be
subject to the confidentiality and disclosure provisions of
sections five-d and five-s, article ten of this chapter.
§11-13U-9. Rules.
The state tax department and the economic development
authority may promulgate rules in accordance with article three,
chapter twenty-nine-a of this code to carry out the policy and
purposes of this article, to provide any necessary clarification of
the provisions of this article and to efficiently provide for the
general administration of this article.
§11-13U-10. Effective date; expiration of credit.
The provisions of this article become effective on the first
day of July, two thousand five, and apply only to qualified
investment made on or after that date:
Provided, That no
entitlement to the tax credit shall result from any qualified
investment made after the thirtieth day of June, two thousand
eight:
Provided further, That unless sooner terminated by law, the
high growth business investment tax credit act will terminate on
the first day of July, two thousand eight. Taxpayers who have
gained entitlement to the tax credit pursuant to qualified
investment prior to the earlier of the first day of July, two
thousand eight, or termination of the tax credit prior to that date
shall retain that entitlement and apply the credit in due course
pursuant to the requirements and limitations of this article.