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SB249 SUB1 Senate Bill 249 History

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COMMITTEE SUBSTITUTE

FOR

Senate Bill No. 249

(By Senators McCabe, Browning, Unger, Jenkins, Foster, Wells, Stollings, Klempa, Miller and Kessler (Acting President))

____________

[Originating in the Committee on Economic Development;

reported February 7, 2011.]

____________

 

A BILL to amend the Code of West Virginia, 1931, as amended, by adding thereto a new article, designated §11-13BB-1, §11-13BB-2, §11-13BB-3, §11-13BB-4, §11-13BB-5, §11-13BB-6, §11-13BB-7, §11-13BB-8 and §11-13BB-9; and to amend said code by adding thereto a new section, designated §11-24-9d, all relating to taxation; providing a phased-in allowance of credits against corporation net income tax and personal income tax for payments in this state of ad valorem property tax on certain industrial tangible personal property consisting of machinery and equipment; and allowing a transitional credit against the portion of a taxpayer’s corporation net income tax relating to the change to combined reporting, with the amount of the credit being measured by the taxpayer’s payments in this state of ad valorem property tax on certain industrial tangible personal property consisting of machinery and equipment.

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 §11-13BB-1, §11-13BB-2, §11-13BB-3, §11-13BB-4, §11-13BB-5, §11-13BB-6, §11-13BB-7, §11-13BB-8 and §11-13BB-9; and that said code be amended by adding thereto a new section, designated §11-24-9d, all to read as follows:

ARTICLE 13BB. THE WEST VIRGINIA MANUFACTURING COMPETITIVENESS AND                 GROWTH ACT.

§11-13BB-1. Short title.

    This article shall be known and cited as the “West Virginia Manufacturing Competitiveness and Growth Act”.

§11-13BB-2. Definitions.

    (a) General. -– When used in this article, or in the administration of this article, terms defined in subsection (b) of this section have the meanings ascribed to them by this section unless a different meaning is clearly required by the context in which the term is used.

    (b) Terms defined. -–

    (1) "Affiliate" means and includes all persons, as defined in this section, which are affiliates of each other when either directly or indirectly:

    (A) One person controls or has the power to control the other; or

    (B) A third party or third parties control or have the power to control two persons, the two thus being affiliates. In determining whether concerns are independently owned and operated and whether or not an affiliation exists, consideration shall be given to all appropriate factors, including common ownership, common management and contractual relationships.

    (2) “Attributable tax” means the portion of tax that would actually be imposed on an eligible taxpayer in a tax year under article twenty-one or article twenty-four of this chapter, after applying any other credits, operating losses and other increasing and reducing modifications, which tax is directly attributable to the taxpayer’s conduct of, or ownership in an entity engaged in the conduct of, a manufacturing business in this state.

    (3) "Commissioner" or "Tax Commissioner" means the Tax Commissioner of the State of West Virginia or the Tax Commissioner's delegate.

    (4) "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.

    (5) "Delegate", when used in reference to the Tax Commissioner, means any officer or employee of the Tax Division of the Department of Revenue duly authorized by the Tax Commissioner directly, or indirectly by one or more redelegations of authority, to perform the functions mentioned or described in this article.

    (6) "Eligible taxpayer" means any person engaged in a manufacturing business the income of which is subject to the tax imposed under article twenty-one or article twenty-four of this chapter. "Eligible taxpayer" also means and includes the persons who are owners of an eligible taxpayer that is a limited liability company, small business corporation, or a partnership, that is engaged in a manufacturing business, the income of which is subject to the tax imposed under article twenty-one or article twenty-four of this chapter, or both, and also includes those persons who are members of an affiliated group of taxpayers engaged in a unitary business, in which one or more members of the affiliated group is a person whose income is subject to the tax imposed under article twenty-one or article twenty-four of this chapter, or both. Affiliates not engaged in the unitary business do not qualify as eligible taxpayers.

    (7) “Limited liability company” means any entity that is a foreign limited liability company or a limited liability company as those terms are defined in section one, article one, chapter thirty-one-b of this code.

    (8) "Manufacturing business" means a business activity classified as having a sector identifier, consisting of the first two digits of the six-digit North American Industry Classification System code number of thirty-one, thirty-two or thirty-three.

    (9) "Manufacturing machinery and equipment" means and includes all tangible personal property consisting of machinery and equipment that is classified for West Virginia ad valorem property tax purposes as industrial property as defined in section ten, article one-c of this chapter, and is used in this state by a person engaged in a manufacturing business.

    (10) "Natural person" or "individual" means a human being.

    (11) "Partnership" and "partner" means and 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 a syndicate, group, pool, joint venture or organization.

    (12) "Person" means and includes any natural person, corporation, limited liability company or partnership.

    (13) "Related entity", "related person", "entity related to" or "person related to" means:

    (A) An individual, corporation, partnership, affiliate, association or trust or any combination or group thereof controlled by the taxpayer;

    (B) An individual, corporation, partnership, affiliate, association or trust or any combination or group thereof that is in control of the taxpayer;

    (C) An individual, corporation, partnership, affiliate, association or trust or any combination or group thereof controlled by an individual, corporation, partnership, affiliate, association or trust or any combination or group thereof that is in control of the taxpayer; or

    (D) A member of the same controlled group as the taxpayer. For purposes of this article, "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 which entitles its owner 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, limited liability company 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, as amended: Provided, That paragraph (3), Section 267(c) of the United States Internal Revenue Code shall not apply.

    (14) "Tax year" or "taxable year" means the tax year of the taxpayer for federal income tax purposes.

    (15) "Taxpayer" means any person subject to the tax imposed under article twenty-one or twenty-four of this chapter.

    (16) "Unitary business" means a unitary business as defined in section three-a, article twenty-four of this chapter.

§11-13BB-3. Eligibility for tax credits; creation of the credit.    There shall be allowed to every eligible taxpayer a credit against the taxes imposed under articles twenty-one and twenty-four of this chapter, as determined under this article.

§11-13BB-4. Amount of credit allowed.

    (a) Credit allowed. -– Eligible taxpayers shall be allowed a credit against the taxes imposed under article twenty-one or twenty-four of this chapter, the amount and application of which shall be determined as provided in this article.

    (b) Amount of credit. -– The amount of credit allowed to an eligible taxpayer shall be equal to the amount of West Virginia ad valorem property tax which the eligible taxpayer shall have paid in this state in the tax year with respect to manufacturing machinery and equipment, reduced by the amount of credit, if any, the eligible taxpayer may have been allowed under section nine-d, article twenty-four of this chapter and shall have actually applied in the tax year against its liability for tax under article twenty-four of this chapter, multiplied by the credit percentage applicable to the taxpayer in the tax year and multiplied by the phase-in percentage applicable to the tax year, all as provided in this section.

    (c) Credit percentage. -– For purposes of this section, the credit percentage shall be one hundred percent in the case of an eligible taxpayer whose liability in a tax year for attributable tax, before application of the credit provided in this section, is less than $50,000; the credit percentage shall be sixty percent in the case of an eligible taxpayer whose liability in a tax year for attributable tax, before application of the credit provided in this section, is at least $50,000, but less than $100,000 and the credit percentage shall be forty percent in the case of an eligible taxpayer whose liability in a tax year for attributable tax, before application of the credit provided in this section, is $100,000 or more: Provided, That in the tax year beginning in calendar year 2015, the credit percentage for an eligible taxpayer whose liability for attributable tax, before application of the credit provided in this section is as least $50,000 but less than $100,000, shall be increased to eighty percent, and the credit percentage for an eligible taxpayer whose liability for attributable tax, before application of the credit provided in this section, is $100,000 or more, shall be increased to sixty percent: Provided, however, That in the tax year beginning in calendar year 2016, the credit percentage for an eligible taxpayer whose liability for attributable tax, before application of the credit provided in this section is at least $50,000, but less than $100,000, shall be increased to one hundred percent, and the credit percentage for an eligible taxpayer whose liability for attributable tax, before application of the credit provided in this section, is $100,000 or more, shall be increased to eighty percent: Provided further, That for every tax year beginning in or after calendar year 2017, the credit percentage for any eligible taxpayer shall be one hundred percent.

    (d) Phase-in percentage. -– For purposes of this section, the phase-in percentage applicable to an eligible taxpayer’s tax year beginning in the calendar year 2012, shall be twenty-five percent; the phase-in percentage applicable to an eligible taxpayer’s tax year beginning in the calendar year 2013, shall be fifty percent; the phase-in percentage applicable to an eligible taxpayer’s tax year beginning in the calendar year 2014, shall be seventy-five percent and the phase-in percentage applicable to an eligible taxpayer’s tax years beginning in the calendar year 2015, and thereafter, shall be one hundred percent.

§11-13BB-5. Application of annual credit allowance.

    (a) Application of credit against corporate net income tax. -– The credit allowed shall be applied to reduce the attributable tax liabilities of an eligible taxpayer for the current tax year imposed by article twenty-four of this chapter: Provided, That in any taxable year, the amount of credit applied by an eligible taxpayer pursuant to this subsection shall not exceed the amount of the taxpayer’s remaining liability for all tax imposed by article twenty-four of this chapter after the amount of that liability has been reduced on account of any other credit or credits allowed and applied against that liability.

    (b) Application of credit against personal income tax. -– After application of subsection (a) of this section, any unused credit is then applied to reduce the attributable tax liabilities of an eligible taxpayer for the current tax year imposed by article twenty-one of this chapter: Provided, That in any taxable year, the amount of credit applied by an eligible taxpayer pursuant to this subsection shall not exceed the amount of the taxpayer’s remaining liability for all tax imposed by article twenty-one of this chapter after the amount of that liability has been reduced on account of any other credit or credits allowed and applied against that liability.

    (c) Carry forward of unused credits. -– The amount of any credit allowed by section four of this article, which is not applied to reduce the taxpayer’s liability for the tax imposed by article twenty-one or by article twenty-four of this chapter in the current tax year, may, until the allowed credit is exhausted, be carried forward to, and applied in, subsequent tax years against the taxpayer’s liability for the attributable tax imposed by article twenty-one or article twenty-four of this chapter, after the taxpayer’s total liability for tax imposed under either article has been reduced on account of any other credit or credits otherwise allowed and applied against that liability.

    (d) Annual schedule. -– For purposes of asserting the credit against tax, the taxpayer shall prepare and file an annual schedule showing the amount of tax paid for the taxable year, the amount of credit allowed, applied and carried forward under this article. The annual schedule shall set forth the information and be in the form prescribed by the Tax Commissioner.

§11-13BB-6. Availability of credit to successors.

    (a) Transfer or sale of assets. -–

    (1) Where there has been a transfer or sale of the business assets of an eligible taxpayer to a successor which subsequent to the transfer constitutes an eligible taxpayer as defined in this article, which continues to operate the manufacturing business in this state, and which remains subject to the taxes prescribed under article twenty-one or twenty-four of this chapter, the successor eligible taxpayer is entitled to the credit allowed under this article: Provided, That the successor taxpayer otherwise remains in compliance with the requirements of this article for entitlement to the credit.

    (2) For any taxable year during which a transfer, or sale of the business assets of an eligible taxpayer to a successor eligible taxpayer under this section occurs, or a merger occurs pursuant to which credit is allowed under this article, the credit allowed under this article shall be apportioned between the predecessor eligible taxpayer and the successor eligible taxpayer based on the number of days during the taxable year that each taxpayer based and the number of days during the taxable year that each taxpayer owned the business assets transferred.

    (b) Entity purchases. -– When an entity which is an eligible taxpayer entitled to the credit allowed under this article is purchased through a purchase of equity interests in the entity by a new owner and the eligible taxpayer remains a legal entity so as to retain its legal identity as such, the entitlement of that entity and its owners to the credit allowed under this article will not be affected by the ownership change: Provided, That the entity otherwise remains in compliance with the requirements of this article for entitlement to the credit.

    (c) Mergers. -–

    (1) When an entity which is an eligible taxpayer entitled to the credit allowed under this article is merged with another entity, the surviving entity, and its owners in the case of a limited liability company, small business corporation or partnership, shall be entitled to the credit to which the predecessor eligible taxpayer was originally entitled: Provided, That the surviving entity otherwise complies with the provisions of this article.

    (2) The amount of credit available in any taxable year during which a merger occurs shall be apportioned between the predecessor eligible taxpayer and the successor eligible taxpayer or taxpayers based on the number of days during the taxable year that each owned the transferred business assets.

    (d) No provision of this section or of this article shall be construed to allow sales or other transfers of the tax credit allowed under this article. The credit allowed under this article can be transferred only in circumstances where there is a valid successorship as described under this section.

§11-13BB-7. Credit recapture; interest; penalties; additions to tax; statute of limitations.

    (a) If it appears upon audit or otherwise that any person or entity has taken the credit against tax allowed under this article and was not entitled to take the credit, then the credit improperly taken under this article shall be recaptured. Amended returns shall be filed for any tax year for which the credit was improperly taken. Any additional taxes due under this chapter shall be remitted with the amended return or returns filed with the Tax Commissioner, along with interest, as provided in section seventeen, article ten of this chapter and such other penalties and additions to tax as may be applicable pursuant to the provisions of article ten of this chapter.

    (b) Notwithstanding the provisions of article ten of this chapter, penalties and additions to tax imposed under article ten of this chapter may be waived at the discretion of the Tax Commissioner: Provided, That interest is not subject to waiver.

    (c) Notwithstanding the provisions of article ten of this chapter, the statute of limitations for the issuance of an assessment of tax by the Tax Commissioner shall be five years from the date of filing of any tax return on which this credit was taken or five years from the date of payment of any tax liability calculated pursuant to the assertion of the credit allowed under this article, whichever is later.

§11-13BB-8. Report on credit.

    (a) The Tax Commissioner shall provide to the Joint Committee on Government and Finance by July 1, 2013, and on July 1 of each year thereafter, a report detailing the amount of credit claimed pursuant to this article. The report is to include the amount of credit claimed against the personal income tax and the amount of credit claimed against the corporate net income tax.

    (b) Taxpayers claiming the credit shall provide the information as the Tax Commissioner may require to prepare the report: Provided, That the information is subject to the confidentiality and disclosure provisions of sections five-d and five-s, article ten of this chapter.

§11-13BB-9. Effective date.

    This article shall be effective for tax years beginning on or after January 1, 2012.

ARTICLE 24. CORPORATION NET INCOME TAX.

§11-24-9d. Transitional credit against portion of tax attributable to adoption of combined reporting for property tax paid on industrial tangible personal property, consisting of machinery and equipment.

    (a) Definition. -– For purposes of this section:

    (1) “Combined reporting tax increase” means that portion of the taxpayer’s liability in a tax year for the amount of tax imposed under this article without regard for the credit allowed by this section, if any, that exceeds the amount of liability that the taxpayer would otherwise have for tax imposed under this article, without regard for the credit allowed by this section, in the tax year but for the requirement that the taxpayer comply with the provisions of section thirteen-a of this article relating to the filing of combined reports by taxpayers engaged in a unitary business with one or more other taxpayers.

    (2) “Manufacturer” means persons engaged in a business activity classified as having a sector identifier, consisting of the first two digits of the six-digit North American Industry Classification System Code number, of thirty-one, thirty-two or thirty-three.

    (b) Credit allowed. -– For the tax years beginning on or after January 1, 2012, a credit shall be allowed against the tax imposed on every manufacturer under this article in an amount to the lesser of: (1) The amount of ad valorem property tax which the taxpayer shall have paid in this state in the tax year with respect to tangible personal property consisting of machinery and equipment, that is classified for ad valorem property tax purposes as industrial property as defined in section ten, article one-c of this chapter; or (2) the portion of the taxpayer’s combined reporting tax increase for the tax year as determined in this section. The portion of the combined reporting tax increase for the tax year under this article is one hundred percent for the taxable year beginning on and after January 1, 2012; fifty percent for the taxable year beginning on and after January 1, 2013: Provided, That no credit shall be allowed for the payment of ad valorem property tax with respect to industrial property used to extract, produce, process, handle, store or transport natural resource products consisting of fossil fuels or fossil fuel products during the course of their production as such which is subject to the severance tax imposed under article thirteen-a of this chapter: Provided, however, That in any taxable year, the amount of credit allowed to, and applied by, the taxpayer pursuant to this section shall not exceed the amount of the taxpayer’s remaining liability for the tax imposed by this article after the amount of that liability has been reduced on account of any other credit or credits allowed and applied against that liability, except for any other credit which may be allowed and applied against that liability, which is measured, entirely or in part, by the taxpayer’s liability for ad valorem property tax and which the taxpayer shall have paid in this state in the tax year, with respect to tangible personal property consisting of machinery and equipment that is classified for ad valorem property tax purposes as industrial property as defined in section ten, article one-c of this chapter.

    (c) Carry forward of unused credits. -– Except as expressly provided in this section, the amount of any credit allowed by this section, which is not applied to reduce the taxpayer’s liability for the tax imposed by this article in the current tax year, may, until it is exhausted, be carried forward to, and applied in, subsequent tax years against the taxpayer’s liability for the tax imposed by this article after that liability has been reduced on account of any other credit or credits allowed and applied against that liability, except for any other credit which may be allowed and applied against that liability, which is measured, entirely or in part, by the taxpayer’s liability for ad valorem property tax and which the taxpayer shall have paid in this state in the tax year, with respect to tangible personal property consisting of machinery and equipment that is classified for ad valorem property tax purposes as industrial property as defined in section ten, article one-c of this chapter: Provided, That the taxpayer shall not be authorized to carry over any credit to any tax year starting in or after the calendar year 2015.

    (d) Termination of credit. -– The credit otherwise allowed by this section shall not be allowed or applied to reduce any liability for tax imposed under this article for any tax year starting in or after the calendar year 2014.

 

 


    NOTE: The purpose of this bill is to provide a phased-in credit against corporation net income tax and personal income tax for ad valorem property taxes paid in this state with respect to industrial tangible personal property consisting of machinery and equipment, and to provide a transitional credit against the portion of a taxpayer’s corporation net income tax resulting from its use of combined reporting, the amount of the credit being measured by the lesser of the amount of ad valorem property taxes paid in the tax year by the taxpayer in this state with respect to industrial tangible personal property consisting of machinery and equipment or the amount of increased corporation net income tax paid due to combined reporting.


    §11-13BB-1, §11-13BB-2, §11-13BB-3, §11-13BB-4, §11-13BB-5, §11-13BB-6, §11-13BB-7, §11-13BB-8, §11-13BB-9 and §11-24-9d are new; therefore, strike-throughs and underscoring have been omitted.

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