ENGROSSED
COMMITTEE SUBSTITUTE
FOR
Senate Bill No. 680
(By Senators Tomblin, Mr. President, and Caruth, By Request of
the Executive)
____________
[Originating in the Committee on Finance;
reported February 22, 2008.]
____________
A BILL to repeal §11-23-5b of the Code of West Virginia, 1931, as
amended; to amend and reenact §11-13S-4 of said code; to amend
and reenact §11-23-5a of said code; to amend said code by
adding thereto a new section, designated §11-23-17b; to amend
and reenact §11-24-3a, §11-24-4, §11-24-7, §11-24-7b,
§11-24-13a, §11-24-13c, §11-24-13d, §11-24-13f and §11-24-42
of said code; and to amend said code by adding thereto two new
sections, designated §11-24-3b and 11-24-9b, all relating to
corporate net income tax and business franchise tax and
combined reporting; specifying percentage of taxes subject to
offset by manufacturing investment tax credit; providing
definitions; providing for eligibility of financial
organizations for tax credits; specifying amount of credit allowed; defining terms; specifying general meaning relating
to the term "tax haven"; specifying imposition of tax and
rates; specifying reductions of corporation net income tax
rate; specifying nullity for designated provisions; specifying
removal of nullity for designated provisions; specifying
apportionment rules for financial organizations; specifying
treatment of insurance companies; specifying method of filing;
specifying application of designated net operating losses;
specifying treatment of designated dividends; mandating
reporting on water's-edge unitary basis; specifying election
to report based on worldwide unitary basis; specifying
authority of Tax Commissioner to prescribe reporting basis;
and specifying effective dates.
Be it enacted by the Legislature of West Virginia:
That §11-23-5b of the Code of West Virginia, 1931, as amended,
be repealed; that §11-13S-4 of said code be amended and reenacted;
that §11-23-5a of said code be amended and reenacted; that said
code be amended by adding thereto a new section, designated
§11-23-17b; that §11-24-3a, §11-24-4, §11-24-7, §11-24-7b,
§11-24-13a, §11-24-13c, §11-24-13d, §11-24-13f and §11-24-42 of
said code be amended and reenacted; and that said code be amended
by adding thereto two new sections, designated §11-24-3b and 11-24-
9b, all to read as follows:
ARTICLE 13S. MANUFACTURING INVESTMENT TAX CREDIT.
§11-13S-4. Amount of credit allowed for manufacturing investment.
(a)
Credit allowed. -- There is allowed to eligible taxpayers
and to persons described in subdivision (5), subsection (b) of this
section a credit against the taxes imposed by articles thirteen-a,
twenty-three and twenty-four of this chapter. The amount of credit
shall be determined as hereinafter provided in this section.
(b)
Amount of credit allowable. -- The amount of allowable
credit under this article is equal to five percent of the qualified
manufacturing investment (as determined in section five of this
article) and shall reduce the severance tax, imposed under article
thirteen-a of this chapter, the business franchise tax imposed
under article twenty-three of this chapter and the corporation net
income tax imposed under article twenty-four of this chapter, in
that order, subject to the following conditions and limitations:
(1) The amount of credit allowable is applied over a ten-year
period, at the rate of one-tenth thereof per taxable year,
beginning with the taxable year in which the property purchased for
manufacturing investment is first placed in service or use in this
state;
(2)
Severance tax. -- The credit is applied to reduce the
severance tax imposed under article thirteen-a of this chapter
(determined before application of the credit allowed by section
three, article twelve-b of this chapter and before any other
allowable credits against tax and before application of the annual exemption allowed by section ten, article thirteen-a of this
chapter). The amount of annual credit allowed may not reduce the
severance tax, imposed under article thirteen-a of this chapter,
below fifty percent of the amount which would be imposed for such
taxable year in the absence of this credit against tax:
Provided,
That for tax years beginning on and after the first day of January,
two thousand nine, the amount of annual credit allowed may not
reduce the severance tax, imposed under article thirteen-a of this
chapter, below forty percent of the amount which would be imposed
for such taxable year in the absence of this credit against tax.
When in any taxable year the taxpayer is entitled to claim credit
under this article and article thirteen-d of this chapter, the
total amount of all credits allowable for the taxable year may not
reduce the amount of the severance tax, imposed under article
thirteen-a of this chapter, below fifty percent of the amount which
would be imposed for such taxable year (determined before
application of the credit allowed by section three, article
twelve-b of this chapter and before any other allowable credits
against tax and before application of the annual exemption allowed
by section ten, article thirteen-a of this chapter):
Provided,
however, That when in any taxable year beginning on and after the
first day of January, two thousand nine, the taxpayer is entitled
to claim credit under this article and article thirteen-d of this
chapter, the total amount of all credits allowable for the taxable year may not reduce the amount of the severance tax, imposed under
article thirteen-a of this chapter, below forty percent of the
amount which would be imposed for such taxable year as determined
before application of the credit allowed by section three, article
twelve-b of this chapter and before any other allowable credits
against tax and before application of the annual exemption allowed
by section ten, article thirteen-a of this chapter;
(3)
Business franchise tax. --
After application of subdivision (2) of this subsection, any
unused credit is next applied to reduce the business franchise tax
imposed under article twenty-three of this chapter (determined
after application of the credits against tax provided in section
seventeen, article twenty-three of this chapter, but before
application of any other allowable credits against tax). The
amount of annual credit allowed will not reduce the business
franchise tax, imposed under article twenty-three of this chapter,
below fifty percent of the amount which would be imposed for such
taxable year in the absence of this credit against tax:
Provided,
That for tax years beginning on and after the first day of January,
two thousand nine, the amount of annual credit allowed will not
reduce the business franchise tax, imposed under article
twenty-three of this chapter, below forty percent of the amount
which would be imposed for such taxable year in the absence of this
credit against tax. When in any taxable year the taxpayer is entitled to claim credit under this article and article thirteen-d
of this chapter, the total amount of all credits allowable for the
taxable year will not reduce the amount of the business franchise
tax, imposed under article twenty-three of this chapter, below
fifty percent of the amount which would be imposed for the taxable
year (determined after application of the credits against tax
provided in section seventeen, article twenty-three of this
chapter, but before application of any other allowable credits
against tax):
Provided, however, That when in any taxable year
beginning on and after the first day of January, two thousand nine,
the taxpayer is entitled to claim credit under this article and
article thirteen-d of this chapter, the total amount of all credits
allowable for the taxable year will not reduce the amount of the
business franchise tax, imposed under article twenty-three of this
chapter, below forty percent of the amount which would be imposed
for the taxable year as determined after application of the credits
against tax provided in section seventeen, article twenty-three of
this chapter, but before application of any other allowable credits
against tax;
(4)
Corporation net income tax. --
After application of subdivision (3) of this subsection, any
unused credit is next applied to reduce the corporation net income
tax imposed under article twenty-four of this chapter (determined
before application of any other allowable credits against tax). The amount of annual credit allowed will not reduce corporation net
income tax, imposed under article twenty-four of this chapter,
below fifty percent of the amount which would be imposed for such
taxable year in the absence of this credit against tax:
Provided,
That for tax years beginning on and after the first day of January,
two thousand nine, the amount of annual credit allowed will not
reduce corporation net income tax, imposed under article
twenty-four of this chapter, below forty percent of the amount
which would be imposed for such taxable year in the absence of this
credit against tax. When in any taxable year the taxpayer is
entitled to claim credit under this article and article thirteen-d
of this chapter, the total amount of all credits allowable for the
taxable year may not reduce the amount of the corporation net
income tax, imposed under article twenty-four of this chapter,
below fifty percent of the amount which would be imposed for the
taxable year (determined before application of any other allowable
credits against tax):
Provided, however, That when in any taxable
year beginning on and after the first day of January, two thousand
nine, the taxpayer is entitled to claim credit under this article
and article thirteen-d of this chapter, the total amount of all
credits allowable for the taxable year may not reduce the amount of
the corporation net income tax, imposed under article twenty-four
of this chapter, below forty percent of the amount which would be
imposed for the taxable year as determined before application of any other allowable credits against tax;
(5)
Pass-through entities. --
(A) If the eligible taxpayer is a limited liability company,
small business corporation or a partnership, then any unused credit
(after application of subdivisions (2), (3) and (4) of this
subsection) is allowed as a credit against the taxes imposed by
article twenty-four of this chapter on owners of the eligible
taxpayer on the conduit income directly derived from the eligible
taxpayer by its owners. Only those portions of the tax imposed by
article twenty-four of this chapter that are imposed on income
directly derived by the owner from the eligible taxpayer are
subject to offset by this credit.
(B) The amount of annual credit allowed will not reduce
corporation net income tax, imposed under article twenty-four of
this chapter, below fifty percent of the amount which would be
imposed on the conduit income directly derived from the eligible
taxpayer by each owner for such taxable year in the absence of this
credit against the taxes (determined before application of any
other allowable credits against tax):
Provided, That for tax years
beginning on and after the first day of January, two thousand nine,
the amount of annual credit allowed will not reduce corporation net
income tax, imposed under article twenty-four of this chapter,
below forty percent of the amount which would be imposed on the
conduit income directly derived from the eligible taxpayer by each owner for such taxable year in the absence of this credit against
the taxes as determined before application of any other allowable
credits against tax.
(C) When in any taxable year the taxpayer is entitled to claim
credit under this article and article thirteen-d of this chapter,
the total amount of all credits allowable for the taxable year will
not reduce the corporation net income tax imposed on the conduit
income directly derived from the eligible taxpayer by each owner
below fifty percent of the amount that would be imposed for such
taxable year on the conduit income (determined before application
of any other allowable credits against tax):
Provided, That when
in any taxable year beginning on and after the first day of
January, two thousand nine, the taxpayer is entitled to claim
credit under this article and article thirteen-d of this chapter,
the total amount of all credits allowable for the taxable year will
not reduce the corporation net income tax imposed on the conduit
income directly derived from the eligible taxpayer by each owner
below forty percent of the amount that would be imposed for such
taxable year on the conduit income as determined before application
of any other allowable credits against tax;
(6) Small business corporations, limited liability companies,
partnerships and other unincorporated organizations shall allocate
any unused credit after application of subdivisions (2), (3) and
(4) of this subsection among their members in the same manner as profits and losses are allocated for the taxable year; and
(7) No credit is allowed under this article against any tax
imposed by article twenty-one of this chapter.
(c) No carryover to a subsequent taxable year or carryback to
a prior taxable year is allowed for the amount of any unused
portion of any annual credit allowance.
Such Any unused credit is
forfeited.
(d)
Application for credit required. --
(1)
Application required. -- Notwithstanding any provision of
this article to the contrary, no credit is allowed or may be
applied under this article for any qualified investment property
placed in service or use until the person claiming the credit makes
written application to the Tax Commissioner for allowance of credit
as provided in this section. This application shall be in the form
prescribed by the Tax Commissioner and shall provide the number and
type of jobs created, if any, by the manufacturing investment, the
average wage rates and benefits paid to employees filling the new
jobs and any other information the Tax Commissioner may require.
This application shall be filed with the Tax Commissioner no later
than the last day for filing the annual return, determined by
including any authorized extension of time for filing the return,
required under article twenty-one or twenty-four of this chapter
for the taxable year in which the property to which the credit
relates is placed in service or use.
(2)
Failure to file. -- The failure to timely apply the
application for credit under this section results in forfeiture of
fifty percent of the annual credit allowance otherwise allowable
under this article. This penalty applies annually until
such the
application is filed.
ARTICLE 23. BUSINESS FRANCHISE TAX.
§11-23-5a. Special apportionment rules - financial organizations.
(a)
General. -- The Legislature hereby finds that the general
formula set forth in section five of this article for apportioning
the tax base of corporations and partnerships taxable in this state
as well as in another state is inappropriate for use by financial
organizations due to the particular characteristics of those
organizations and the manner in which their business is conducted.
Accordingly, the general formula set forth in section five of this
article may not be used to apportion the tax base of
such financial
organizations which shall use only the apportionment formula and
methods set forth in this section.
(b)
West Virginia financial organizations taxable in another
state. -- A financial organization that has its commercial domicile
in this state and which is taxable in another state may not
apportion its tax base as provided in section five of this article,
but shall
allocate all of its tax base to West Virginia without
apportionment: apportion its tax base to this state by multiplying
it by the special gross receipts factor calculated as provided in subsection (f) of this section. The product of this multiplication
is the portion of its tax base that is attributable to business
activity in this state. Provided, That such financial organization
shall be allowed as a credit against its tax liability under this
article the credit described in section twenty-seven of this
article
(c)
Out-of-state financial organizations with business
activities in this state. -- A financial organization that does not
have its commercial domicile in this state and which regularly
engages in business in this state shall apportion its tax base to
this state by multiplying it by the special gross receipts factor
calculated as provided in subsection (f) of this section. The
product of this multiplication is the portion of its tax base that
is attributable to business activity in this state.
(d)
Engaging in business -- nexus presumptions and exclusions.
-- A financial organization that has its commercial domicile in
another state is presumed to be regularly engaging in business in
this state if during any year it obtains or solicits business with
twenty or more persons within this state, or if the sum of the
value of its gross receipts attributable to sources in this state
equals or exceeds one hundred thousand dollars. However, gross
receipts from the following types of property, as well as those
contacts with this state reasonably and exclusively required to
evaluate and complete the acquisition or disposition of the property, the servicing of the property or the income from it, the
collection of income from the property or the acquisition or
liquidation of collateral relating to the property shall not be a
factor in determining whether the owner is engaging in business in
this state:
(1) An interest in a real estate mortgage investment conduit,
a real estate investment trust or a regulated investment company;
(2) An interest in a loan backed security representing
ownership or participation in a pool of promissory notes or
certificates of interest that provide for payments in relation to
payments or reasonable projections of payments on the notes or
certificates;
(3) An interest in a loan or other asset from which the
interest is attributed to a consumer loan, a commercial loan or a
secured commercial loan and in which the payment obligations were
solicited and entered into by a person that is independent, and not
acting on behalf, of the owner;
(4) An interest in the right to service or collect income from
a loan or other asset from which interest on the loan is attributed
as a loan described in the previous paragraph and in which the
payment obligations were solicited and entered into by a person
that is independent, and not acting on behalf, of the owner;
and or
(5) Any amounts held in an escrow or trust account with
respect to property described above.
(e)
Definitions. -- For purposes of this section:
(1) "Commercial domicile"
See means the same as that term is
defined in section three of this article.
(2) "Deposit" means: (A) The unpaid balance of money or its
equivalent received or held by a financial organization in the
usual course of business and for which it has given or it is
obligated to give credit, either conditionally or unconditionally,
to a commercial, checking, savings, time or thrift account whether
or not advance notice is required to withdraw the credit funds, or
which is evidenced by a certificate of deposit, thrift certificate,
investment certificate or certificate of indebtedness, or other
similar name, or a check or draft drawn against a deposit account
and certified by the financial organization, or a letter of credit
or a traveler's check on which the financial organization is
primarily liable:
Provided, That without limiting the generality
of the term "money or its equivalent", any
such account or
instrument must be regarded as evidencing the receipt of the
equivalent of money when credited or issued in exchange for checks
or drafts or for a promissory note upon which the person obtaining
any
such credit or instrument is primarily or secondarily liable or
for a charge against a deposit account or in settlement of checks,
drafts or other instruments forwarded to
such the bank for
collection;
(B) Trust funds received or held by
such a financial organization, whether held in the trust department or held or
deposited in any other department of
such the financial
organization;
(C) Money received or held by a financial organization or the
credit given for money or its equivalent received or held by a
financial organization in the usual course of business for a
special or specific purpose, regardless of the legal relationship
thereby established, including, without being limited to, escrow
funds, funds held as security for an obligation due the financial
organization or other, including funds held as dealers' reserves,
or for securities loaned by the financial organization, funds
deposited by a debtor to meet maturing obligations, funds deposited
as advance payment on subscriptions to United States government
securities, funds held for distribution or purchase of securities,
funds held to meet its acceptances or letters of credit and
withheld taxes:
Provided, That there shall not be included funds
which are received by the financial organization for immediate
application to the reduction of an indebtedness to the receiving
financial organization or under condition that the receipt thereof
immediately reduces or extinguishes
such an indebtedness;
(D) Outstanding drafts, including advice or authorization to
charge a financial organization's balance in another
such
organization, cashier's checks, money orders or other officer's
checks issued in the usual course of business for any purpose, but not including those issued in payment for services, dividends or
purchases or other costs or expenses of the financial organization
itself; and
(E) Money or its equivalent held as a credit balance by a
financial organization on behalf of its customer if
such the entity
is engaged in soliciting and holding
such balances in the regular
course of its business.
(3) "Financial organization" means a financial organization as
defined in subdivision (13), subsection (b), section three of this
article, as well as a partnership which derives more than fifty
percent of its gross business income from one or more of the
activities enumerated in subparagraphs (1) through (6), inclusive,
paragraph (C) of said subdivision.
(4) "Sales" means: For purposes of apportionment under this
section, the gross receipts of a financial organization included in
the gross receipts factor described in subsection (f) of this
section, regardless of their source.
(f)
Special gross receipts factor. -- The gross receipts
factor is a fraction, the numerator of which is the total gross
receipts of the taxpayer from sources within this state during the
taxable year and the denominator of which is the total gross
receipts of the taxpayer wherever earned during the taxable year:
Provided, That neither the numerator nor the denominator of the
gross receipts factor shall include receipts from obligations described in paragraphs (A), (B), (C) and (D), subdivision (1),
subsection (f), section six, article twenty-four of this chapter.
(1)
Numerator. -- The numerator of the gross receipts factor
shall include, in addition to items otherwise includable in the
sales factor under section five of this article, the following:
(A) Gross receipts from the lease or rental of real or
tangible personal property, whether as the economic equivalent of
an extension of credit or otherwise if the property is located in
this state;
(B) Interest income and other receipts from assets in the
nature of loans which are secured primarily by real estate or
tangible personal property if
such the security property is located
in the state. In the event that
such the security property is also
located in one or more other states,
such receipts shall be
presumed to be from sources within this state, subject to rebuttal
based upon factors described in rules to be promulgated by the Tax
Commissioner, including the factor that the proceeds of any
such
loans were applied and used by the borrower entirely outside of
this state;
(C) Interest income and other receipts from consumer loans
which are unsecured or are secured by intangible property that are
made to residents of this state, whether at a place of business, by
traveling loan officer, by mail, by telephone or other electronic
means or otherwise;
(D) Interest income and other receipts from commercial loans
and installment obligations which are unsecured or are secured by
intangible property if and to the extent that the borrower or
debtor is a resident of or is domiciled in this state:
Provided,
That
such receipts are presumed to be from sources in this state
and
such the presumption may be overcome by reference to factors
described in rules to be promulgated by the Tax Commissioner,
including the factor that the proceeds of any
such loans were
applied and used by the borrower entirely outside of this state;
(E) Interest income and other receipts from a financial
organization's syndication and participation in loans, under the
rules set forth in paragraphs (A) through (D), inclusive, of this
subdivision;
(F) Interest income and other receipts, including service
charges, from financial institution credit card and travel and
entertainment credit card receivables and credit card holders' fees
if the borrower or debtor is a resident of this state or if the
billings for any
such receipts are regularly sent to an address in
this state;
(G) Merchant discount income derived from financial
institution credit card holder transactions with a merchant located
in this state. In the case of merchants located within and without
this state, only receipts from merchant discounts attributable to
sales made from locations within this state shall be attributed to this state. It shall be presumed, subject to rebuttal, that the
location of a merchant is the address shown on the invoice
submitted by the merchant to the taxpayer;
(H) Gross receipts from the performance of services are
attributed to this state if:
(i) The service receipts are loan-related fees, including loan
servicing fees, and the borrower resides in this state, except
that, at the taxpayer's election, receipts from loan-related fees
which are either: (I) "Pooled" or aggregated for collective
financial accounting treatment; or (II) manually written as
nonrecurring extraordinary charges to be processed directly to the
general ledger may either be attributed to a state based upon the
borrowers' residences or upon the ratio that total interest sourced
to that state bears to total interest from all sources;
(ii) The service receipts are deposit-related fees and the
depositor resides in this state, except that, at the taxpayer's
election, receipts from deposit-related fees which are either: (I)
"Pooled" or aggregated for collective financial accounting
treatment; or (II) manually written as nonrecurring extraordinary
charges to be processed directly to the general ledger may either
be attributed to a state based upon the depositors' residences or
upon the ratio that total deposits sourced to that state bears to
total deposits from all sources;
(iii) The service receipt is a brokerage fee and the account holder is a resident of this state;
(iv) The service receipts are fees related to estate or trust
services and the estate's decedent was a resident of this state
immediately before death or the grantor who either funded or
established the trust is a resident of this state; or
(v) The service receipt is associated with the performance of
any other service not identified above and the service is performed
for an individual resident of, or for a corporation or other
business domiciled in, this state and the economic benefit of
such
service is received in this state;
(I) Gross receipts from the issuance of travelers' checks and
money orders if
such checks and money orders are purchased in this
state; and
(J) All other receipts not attributed by this rule to a state
in which the taxpayer is taxable shall be attributed pursuant to
the laws of the state of the taxpayer's commercial domicile.
(2)
Denominator. -- The denominator of the gross receipts
factor shall include all of the taxpayer's gross receipts from
transactions of the kind included in the numerator, but without
regard to their source or situs.
(g)
Effective date. -- The provisions of this section enacted
in chapter one hundred sixty-seven, Acts of the Legislature, one
thousand nine hundred ninety-one, shall apply to all taxable years
beginning on or after the first day of January, one thousand nine hundred ninety-one. The amendments to this section, enacted in the
year one thousand nine hundred ninety-six, shall apply to taxable
years beginning after the thirty-first day of December, one
thousand nine hundred ninety-five.
The amendments to this section,
enacted in the year two thousand eight, shall apply to taxable
years beginning after the thirty-first day of December, two
thousand eight.
§11-23-17b. Application of tax credits.
Except where otherwise provided, no tax credit earned by one
member of the combined group, but not fully used by or allowed to
that member, may be used, in whole or in part, by another member of
the group or applied, in whole or in part, against the tax of
another member of the combined group; and a tax credit carried over
into a subsequent year as to the member that incurred it, and
available as a credit to that member in a subsequent year, will be
considered in the computation of the capital of that member in the
subsequent year regardless of the composition of that capital as
apportioned, allocated or wholly within this state:
Provided, That
unused and unexpired economic development tax credits that were
earned during a tax year in which the taxpayer filed a consolidated
return under this article may, if otherwise allowed within the
statutory limitations applicable to the tax credit, be used, in
whole or in part, or applied, in whole or in part, against the
taxes imposed by this article on any member of the taxpayer's combined group to the extent the credits would have been allowed
had the taxpayer continued to file a consolidated return. For
purposes of this section the term economic development tax credit
means and is limited to a tax credit asserted on a tax return under
article thirteen-c, thirteen-d, thirteen-e, thirteen-f, thirteen-g,
thirteen-j, thirteen-q, thirteen-r or thirteen-s of this chapter or
under article one, chapter five-e of this code.
ARTICLE 24. CORPORATION NET INCOME TAX.
§11-24-3a. Specific terms defined.
For purposes of this article:
(1)
Business income. -- The term "business income" means
income arising from transactions and activity in the regular course
of the taxpayer's trade or business and includes income from
tangible and intangible property if the acquisition, management and
disposition of the property or the rendering of services in
connection therewith constitute integral parts of the taxpayer's
regular trade or business operations and includes all income which
is apportionable under the Constitution of the United States.
(2) "Combined group" means the group of all persons whose
income and apportionment factors are required to be taken into
account pursuant to subsection (a) or (b), section thirteen-a of
this article in determining the taxpayer's share of the net
business income or loss apportionable to this state.
(3)
Commercial domicile. -- The term "commercial domicile" means the principal place from which the trade or business of the
taxpayer is directed or managed
: Provided, That the commercial
domicile of a financial organization, which is subject to
regulation as such, shall be at the place designated as its
principal office with its regulating authority.
(4)
Compensation. -- The term "compensation" means wages,
salaries, commissions and any other form of remuneration paid to
employees for personal services.
(5)
Corporation. -- "Corporation" means any corporation as
defined by the laws of this state or organization of any kind
treated as a corporation for tax purposes under the laws of this
state, wherever located, which if it were doing business in this
state would be
a "taxpayer" subject to the tax imposed by this
article. The business conducted by a partnership which is directly
or indirectly held by a corporation shall be considered the
business of the corporation to the extent of the corporation's
distributive share of the partnership income, inclusive of
guaranteed payments to the extent prescribed by regulation. The
term "corporation" includes a joint-stock company and any
association or other organization which is taxable as a corporation
under the federal income tax law.
(6)
Delegate. -- The term "delegate" in the phrase "or his
or
her delegate", when used in reference to the Tax Commissioner,
means any officer or employee of the State Tax Department 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 or regulations promulgated
thereunder.
(7)
Domestic corporation. -- The term "domestic corporation"
means any corporation organized under the laws of West Virginia and
certain corporations organized under the laws of the State of
Virginia before the twentieth day of June, one thousand eight
hundred sixty-three. Every other corporation is a foreign
corporation.
(8)
Engaging in business. -- The term "engaging in business"
or "doing business" means any activity of a corporation which
enjoys the benefits and protection of government and laws in this
state.
(9)
Federal Form 1120. -- The term "Federal Form 1120" means
the annual federal income tax return of any corporation made
pursuant to the United States Internal Revenue Code of 1986, as
amended, or in successor provisions of the laws of the United
States, in respect to the federal taxable income of a corporation,
and filed with the federal Internal Revenue Service. In the case
of a corporation that elects to file a federal income tax return as
part of an affiliated group, but files as a separate corporation
under this article, then as to such corporation Federal Form 1120
means its pro forma Federal Form 1120.
(10)
Fiduciary. -- The term "fiduciary" means, and includes,
a guardian, trustee, executor, administrator, receiver, conservator
or any person acting in any fiduciary capacity for any person.
(11)
Financial organization. -- The term "financial
organization" means:
(A) A holding company or a subsidiary thereof. As used in
this section "holding company" means a corporation registered under
the federal Bank Holding Company Act of 1956 or registered as a
savings and loan holding company other than a diversified savings
and loan holding company as defined in Section 408(a)(1)(F) of the
federal National Housing Act, 12 U. S. C. §1730(a)(1)(F);
(B) A regulated financial corporation or a subsidiary thereof.
As used in this section "regulated financial corporation" means:
(i) An institution, the deposits, shares or accounts of which
are insured under the Federal Deposit Insurance Act or by the
federal Savings and Loan Insurance Corporation;
(ii) An institution that is a member of a federal home loan
bank;
(iii) Any other bank or thrift institution incorporated or
organized under the laws of a state that is engaged in the business
of receiving deposits;
(iv) A credit union incorporated and organized under the laws
of this state;
(v) A production credit association organized under 12 U. S. C. §2071;
(vi) A corporation organized under 12 U. S. C. §611 through
§631 (an Edge Act corporation); or
(vii) A federal or state agency or branch of a foreign bank as
defined in 12 U. S. C. §3101; or
(C) A corporation which derives more than fifty percent of its
gross business income from one or more of the following activities:
(i) Making, acquiring, selling or servicing loans or
extensions of credit. Loans and extensions of credit include:
(I) Secured or unsecured consumer loans;
(II) Installment obligations;
(III) Mortgages or other loans secured by real estate or
tangible personal property;
(IV) Credit card loans;
(V) Secured and unsecured commercial loans of any type; and
(VI) Loans arising in factoring.
(ii) Leasing or acting as an agent, broker or advisor in
connection with leasing real and personal property that is the
economic equivalent of an extension of credit as defined by the
Federal Reserve Board in 12 CFR 225.25(b)(5).
(iii) Operating a credit card business.
(iv) Rendering estate or trust services.
(v) Receiving, maintaining or otherwise handling deposits.
(vi) Engaging in any other activity with an economic effect comparable to those activities described in subparagraph (i), (ii),
(iii), (iv) or (v) of this paragraph.
(12)
Fiscal year. -- The term "fiscal year" means an
accounting period of twelve months ending on any day other than the
last day of December and on the basis of which the taxpayer is
required to report for federal income tax purposes.
(13)
Includes and including. -- The terms "includes" and
"including", when used in a definition contained in this article,
shall not be deemed to do not exclude other things otherwise within
the meaning of the term being defined.
(14) Insurance company. -- The term "insurance company" means
any corporation subject to taxation under section twenty-two,
article three, chapter twenty-nine of this code or chapter thirty-
three of this code or an insurance carrier subject to the surcharge
imposed by subdivision (1) or (3), subsection (f), section three,
article two-c, chapter twenty-three of this code or any corporation
that would be subject to taxation under any of those provisions
were its business transacted in this state.
(14) (15) "Internal Revenue Code" means
Title 26 of the United
States Code, as amended, the Internal Revenue Code as defined in
section three of this article, without regard to application of
federal treaties unless expressly made applicable to states of the
United States.
(15) (16) Nonbusiness income. -- The term "nonbusiness income" means all income other than business income.
(16) (17) "Partnership" means a general or limited partnership
or organization of any kind treated as a partnership for tax
purposes under the laws of this state.
(17) (18) Person. -- The term "person" is
to be deemed
considered interchangeable with the term "corporation" in this
section. The term "person" means any individual, firm,
partnership, general partner of a partnership, limited liability
company, registered limited liability partnership, foreign limited
liability partnership, association, corporation whether or not the
corporation is, or would be if doing business in this state,
subject to the tax imposed by this article, company, syndicate,
estate, trust, business trust, trustee, trustee in bankruptcy,
receiver, executor, administrator, assignee or organization of any
kind.
(18) (19) Pro forma return. -- The term "pro forma return"
when used in this article means the return which the taxpayer would
have filed with the Internal Revenue Service had it not elected to
file federally as part of an affiliated group.
(19) (20) Public utility. -- The term "public utility" means
any business activity to which the jurisdiction of the Public
Service Commission of West Virginia extends under section one,
article two, chapter twenty-four of this code.
(20) (21) Sales. -- The term "sales" means all gross receipts of the taxpayer that are "business income" as defined in this
section.
(21) (22) State. -- The term "state" means any state of the
United States, the District of Columbia, the Commonwealth of Puerto
Rico, any territory or possession of the United States and any
foreign country or political subdivision thereof.
(22) (23) Taxable year, tax year. -- The term "taxable year"
or "tax year" means the taxable year for which the taxable income
of the taxpayer is computed under the federal income tax law.
(23) (24) Tax. -- The term "tax" includes, within its meaning,
interest and additions to tax, unless the intention to give it a
more limited meaning is disclosed by the context.
(24) (25) Tax Commissioner. -- The term "Tax Commissioner"
means the Tax Commissioner of the State of West Virginia or his
or
her delegate.
(25) (26) "Tax haven" means a jurisdiction that, for a
particular tax year in question: (A) Is identified by the
Organization for Economic Cooperation and Development as a tax
haven or as having a harmful preferential tax regime; or (B) a
jurisdiction that has no, or nominal, effective tax on the relevant
income and: (i) That has laws or practices that prevent effective
exchange of information for tax purposes with other governments
regarding taxpayers subject to, or benefitting from, the tax
regime; (ii) that lacks transparency, for purposes of this definition, a tax regime lacks transparency if the details of
legislative, legal or administrative provisions are not open to
public scrutiny and apparent or are not consistently applied among
similarly situated taxpayers; (iii) facilitates the establishment
of foreign-owned entities without the need for a local substantive
presence or prohibits these entities from having any commercial
impact on the local economy; (iv) explicitly or implicitly excludes
the jurisdiction's resident taxpayers from taking advantage of the
tax regime's benefits or prohibits enterprises that benefit from
the regime from operating in the jurisdiction's domestic market; or
(v) has created a tax regime which is favorable for tax avoidance,
based upon an overall assessment of relevant factors, including
whether the jurisdiction has a significant untaxed offshore
financial or other services sector relative to its overall economy.
For purposes of this definition, the phrase "tax regime" means a
set or system of rules, laws, regulations or practices by which
taxes are imposed on any person, corporation or entity, or on any
income, property, incident, indicia or activity pursuant to
governmental authority.
(26) (27) Taxpayer. -- The term "taxpayer" means any person
subject to the tax imposed by this article.
(27) (28) This code. -- The term "this code" means the Code of
West Virginia, one thousand nine hundred thirty-one, as amended.
(28) (29) This state. -- The term "this state" means the State of West Virginia.
(29) (30) "United States" means the United States of America
and includes all of the states of the United States, the District
of Columbia and United States territories and possessions.
(30) (31) "Unitary business" means a single economic
enterprise that is made up either of separate parts of a single
business entity or of a commonly controlled group of business
entities that are sufficiently interdependent, integrated and
interrelated through their activities so as to provide a synergy
and mutual benefit that produces a sharing or exchange of value
among them and a significant flow of value to the separate parts.
For purposes of this article and article twenty-three of this
chapter, any business conducted by a partnership shall be treated
as conducted by its partners, whether directly held or indirectly
held through a series of partnerships, to the extent of the
partner's distributive share of the partnership's income,
regardless of the percentage of the partner's ownership interest or
the percentage of its distributive or any other share of
partnership income. A business conducted directly or indirectly by
one corporation through its direct or indirect interest in a
partnership is unitary with that portion of a business conducted by
one or more other corporations through their direct or indirect
interest in a partnership if there is a synergy and mutual benefit
that produces a sharing or exchange of value among them and a significant flow of value to the separate parts and the
corporations are members of the same commonly controlled group.
(31) (32) West Virginia taxable income. -- The term "West
Virginia taxable income" means the taxable income of a corporation
as defined by the laws of the United States for federal income tax
purposes, adjusted, as provided in this article
: Provided, That in
the case of a corporation having income from business activity
which is taxable without this state, its "West Virginia taxable
income" shall be
such the portion of its taxable income as
so
defined and adjusted as is allocated or apportioned to this state
under the provisions of this article.
§11-24-3b. General meaning of definition of the term tax haven
for specified jurisdictions.
(a)
General. -- For purposes of this article and article
twenty-three of this chapter, a jurisdiction that, for a particular
tax year in question is identified by the Organization for Economic
Cooperation and Development as a tax haven or as having a harmful
preferential tax regime means and includes any and all
jurisdictions so identified as of the most recent list or
compilation of jurisdictions issued, published or adopted by the
Organization for Economic Cooperation and Development on or before
the effective date of this section.
(b)
Effective date. -- This section as enacted in the year two
thousand eight shall be effective on passage.
§11-24-4. Imposition of primary tax and rate thereof; effective
and termination dates.
Primary tax. -- (1) In the case of taxable periods beginning
after the thirtieth day of June, one thousand nine hundred
sixty-seven, and ending prior to the first day of January, one
thousand nine hundred eighty-three, a tax is hereby imposed for
each taxable year at the rate of six percent per annum on the West
Virginia taxable income of every domestic or foreign corporation
engaging in business in this state or deriving income from
property, activity or other sources in this state, except
corporations exempt under section five.
(2) In the case of taxable periods beginning on or after the
first day of January, one thousand nine hundred eighty-three, and
ending prior to the first day of July, one thousand nine hundred
eighty-seven, a tax is hereby imposed for each taxable year on the
West Virginia taxable income of every domestic or foreign
corporation engaging in business in this state or deriving income
from property, activity or other sources in this state, except
corporations exempt under section five of this article, and any
banks, banking associations or corporations, trust companies,
building and loan associations and savings and loan associations,
at the rates which follow:
(A) On taxable income not in excess of fifty thousand dollars,
the rate of six percent; and
(B) On taxable income in excess of fifty thousand dollars, the
rate of seven percent.
(3) In the case of taxable periods beginning on or after the
first day of July, one thousand nine hundred eighty-seven, a tax is
hereby imposed for each taxable year on the West Virginia taxable
income of every domestic or foreign corporation engaging in
business in this state or deriving income from property, activity
or other sources in this state, except corporations exempt under
section five of this article, at the rate of nine and
three-quarters percent. Beginning the first day of July, one
thousand nine hundred eighty-eight, and on each first day of July
thereafter for four successive calendar years, the rate shall be
reduced by fifteen one hundredths of one percent per year, with
such rate to be nine percent on and after the first day of July,
one thousand nine hundred ninety-two.
(4) In the case of taxable periods beginning on or after the
first day of January, two thousand seven, a tax is hereby imposed
for each taxable year on the West Virginia taxable income of every
domestic or foreign corporation engaging in business in this state
or deriving income from property, activity or other sources in this
state, except corporations exempt under section five of this
article, at the rate of eight and three-quarters percent.
(5) In the case of taxable periods beginning on or after the
first day of January, two thousand nine, a tax is hereby imposed for each taxable year on the West Virginia taxable income of every
domestic or foreign corporation engaging in business in this state
or deriving income from property, activity or other sources in this
state, except corporations exempt under section five of this
article, at the rate of eight percent.
(6) In the case of taxable periods beginning on or after the
first day of January, two thousand ten, a tax is hereby imposed for
each taxable year on the West Virginia taxable income of every
domestic or foreign corporation engaging in business in this state
or deriving income from property, activity or other sources in this
state, except corporations exempt under section five of this
article, at the rate of seven and one-half percent.
(7) In the case of taxable periods beginning on or after the
first day of January, two thousand eleven, a tax is hereby imposed
for each taxable year on the West Virginia taxable income of every
domestic or foreign corporation engaging in business in this state
or deriving income from property, activity or other sources in this
state, except corporations exempt under section five of this
article, at the rate of seven percent.
(8) In the case of taxable periods beginning on or after the
first day of January, two thousand twelve, a tax is hereby imposed
for each taxable year on the West Virginia taxable income of every
domestic or foreign corporation engaging in business in this state
or deriving income from property, activity or other sources in this state, except corporations exempt under section five of this
article, at the rate of six and one-half percent.
§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 of this article.
(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 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 the taxpayer is subject to the
tax imposed by this article. The business activities of a taxpayer
are considered to have taken place in their entirety within this
state if the taxpayer is not "taxable in another state"
: Provided, That for tax years beginning before the first day of January, two
thousand nine, the business activities of a financial organization
having its commercial domicile in this state are considered to take
place entirely in this state, notwithstanding that the organization
may be "taxable in another state":
Provided, however, That for tax
years beginning
before on or after the first day of January, two
thousand nine, the income from the business activities of a
financial organization
not having its commercial domicile in this
state that are taxable in another 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 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), inclusive, of this subsection
: Provided, That to the
extent the items constitute business income of the taxpayer, they
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. 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 using 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 the distributive share
be treated differently.
(C) This subdivision shall be null and void and of no force or
effect for tax years beginning on or after the first day of
January, two thousand nine.
(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) of this section, shall be apportioned to this state by
multiplying 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 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 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 the utilization shall be determined by
multiplying the original cost of 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 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
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 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
the property is ultimately received after all transportation has
been completed is the place at which 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, is delivery to the purchaser in this state and direct
delivery outside this state to a person or firm designated by the
purchaser 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 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. 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 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.
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 the return and the petition shall include a statement of
the petitioner's objections and of 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 requires.
(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) of this section
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
subdivision (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 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 subdivision
(1) or (2) of this subsection is sought, on the grounds that 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 burden of proof
is:
(A) If the Tax Commissioner seeks employment of one of the
methods, on the Tax Commissioner; or
(B) If the taxpayer seeks employment of one of the other methods, on the taxpayer.
(4) For tax years beginning on or after the first day of
January, two thousand nine, the provisions of sections seven-a and
seven-b of this article shall be null and void and of no force or
effect.
§11-24-7b. Special apportionment rules - financial organizations.
(a)
General. -- The Legislature hereby finds that the general
formula set forth in section seven of this article for apportioning
the business income of corporations taxable in this state as well
as in another state is inappropriate for use by financial
organizations due to the particular characteristics of those
organizations and the manner in which their business is conducted.
Accordingly, the general formula set forth in section seven of this
article may not be used to apportion the business income of
such
financial organizations, which shall use only the apportionment
formula and methods set forth in this section.
(b)
West Virginia financial organizations taxable in another
state. -- The West Virginia taxable income of a financial
organization that has its commercial domicile in this state and
which is taxable in another state shall be the sum of: (1) The
nonbusiness income component of its adjusted federal taxable income
for the taxable year which is allocated to this state as provided
in subsection (d), section seven of this article; plus (2) the
total amount of the business income component of its adjusted federal taxable income for the taxable year, without apportionment,
regardless of where such business income was derived business
income component of its adjusted federal taxable income for the
taxable year which is apportioned to this state as provided in this
section. Provided, That such financial organization shall be
allowed as a credit against its tax liability under this article
the credit described in section twenty-four of this article
(c)
Out-of-state financial organizations with business
activities in this state. -- The West Virginia taxable income of a
financial organization that does not have its commercial domicile
in this state but which regularly engages in business in this state
shall be the sum of: (1) The nonbusiness income component of its
adjusted federal taxable income for the taxable year which is
allocated to this state as provided in subsection (d), section
seven of this article; plus (2) the business income component of
its adjusted federal taxable income for the taxable year which is
apportioned to this state as provided in this section.
(d)
Engaging in business - nexus presumptions and exclusions.
-- A financial organization that has its commercial domicile in
another state is presumed to be regularly engaging in business in
this state if during any year it obtains or solicits business with
twenty or more persons within this state, or if the sum of the
value of its gross receipts attributable to sources in this state
equals or exceeds one hundred thousand dollars. However, gross receipts from the following types of property, as well as those
contacts with this state reasonably and exclusively required to
evaluate and complete the acquisition or disposition of the
property, the servicing of the property or the income from it, the
collection of income from the property or the acquisition or
liquidation of collateral relating to the property shall not be a
factor in determining whether the owner is engaging in business in
this state:
(1) An interest in a real estate mortgage investment conduit,
a real estate investment trust or a regulated investment company;
(2) An interest in a loan backed security representing
ownership or participation in a pool of promissory notes or
certificates of interest that provide for payments in relation to
payments or reasonable projections of payments on the notes or
certificates;
(3) An interest in a loan or other asset from which the
interest is attributed to a consumer loan, a commercial loan or a
secured commercial loan and in which the payment obligations were
solicited and entered into by a person that is independent, and not
acting on behalf, of the owner;
(4) An interest in the right to service or collect income from
a loan or other asset from which interest on the loan is attributed
as a loan described in the previous paragraph and in which the
payment obligations were solicited and entered into by a person that is independent, and not acting on behalf, of the owner;
and or
(5) Any amounts held in an escrow or trust account with
respect to property described above.
(e)
Definitions. -- For purposes of this section:
(1) "Commercial domicile"
See has same meaning as that term is
defined in section three-a of this article.
(2) "Deposit" means:
(A) The unpaid balance of money or its equivalent received or
held by a financial organization in the usual course of business
and for which it has given or it is obligated to give credit,
either conditionally or unconditionally, to a commercial, checking,
savings, time or thrift account whether or not advance notice is
required to withdraw the credit funds, or which is evidenced by a
certificate of deposit, thrift certificate, investment certificate
or certificate of indebtedness, or other similar name, or a check
or draft drawn against a deposit account and certified by the
financial organization, or a letter of credit or a traveler's check
on which the financial organization is primarily liable:
Provided,
That without limiting the generality of the term "money or its
equivalent", any
such account or instrument must be regarded as
evidencing the receipt of the equivalent of money when credited or
issued in exchange for checks or drafts or for a promissory note
upon which the person obtaining any
such credit or instrument is
primarily or secondarily liable or for a charge against a deposit account or in settlement of checks, drafts or other instruments
forwarded to
such the bank for collection;
(B) Trust funds received or held by
such the financial
organization, whether held in the trust department or held or
deposited in any other department of
such the financial
organization;
(C) Money received or held by a financial organization or the
credit given for money or its equivalent received or held by a
financial organization in the usual course of business for a
special or specific purpose, regardless of the legal relationship
thereby established, including, without being limited to, escrow
funds, funds held as security for an obligation due the financial
organization or other, including funds held as dealers' reserves or
for securities loaned by the financial organization, funds
deposited by a debtor to meet maturing obligations, funds deposited
as advance payment on subscriptions to United States government
securities, funds held for distribution or purchase of securities,
funds held to meet its acceptances or letters of credit, and
withheld taxes:
Provided, That there shall not be included funds
which are received by the financial organization for immediate
application to the reduction of an indebtedness to the receiving
financial organization, or under condition that the receipt thereof
immediately reduces or extinguishes
such an indebtedness;
(D) Outstanding drafts, including advice or authorization to charge a financial organization's balance in another
such
organization, cashier's checks, money orders or other officer's
checks issued in the usual course of business for any purpose, but
not including those issued in payment for services, dividends or
purchases or other costs or expenses of the financial organization
itself; and
(E) Money or its equivalent held as a credit balance by a
financial organization on behalf of its customer if
such the entity
is engaged in soliciting and holding
such balances in the regular
course of its business.
(3) "Financial organization"
See has the same meaning as that
term is defined in section three-a of this article
; and.
(4) "Sales" means, for purposes of apportionment under this
section, the gross receipts of a financial organization included in
the gross receipts factor described in subsection (g) of this
section, regardless of their source.
(f)
Apportionment rules. -- A financial organization
not
having its commercial domicile in this state which regularly
engages in business both within and without this state shall
apportion the business income component of its federal taxable
income, after adjustment as provided in section six of this
article, by multiplying the amount thereof by the special gross
receipts factor determined as provided in subsection (g) of this
section.
(g)
Special gross receipts factor. -- The gross receipts
factor is a fraction, the numerator of which is the total gross
receipts of the taxpayer from sources within this state during the
taxable year and the denominator of which is the total gross
receipts of the taxpayer wherever earned during the taxable year
:
Provided, That neither the numerator nor the denominator of the
gross receipts factor shall include receipts from obligations
described in paragraphs (A), (B), (C) and (D), subdivision (1),
subsection (f), section six of this article.
(1)
Numerator. -- The numerator of the gross receipts factor
shall include, in addition to items otherwise includable in the
sales factor under section seven of this article, the following:
(A) Receipts from the lease or rental of real or tangible
personal property whether as the economic equivalent of an
extension of credit or otherwise if the property is located in this
state;
(B) Interest income and other receipts from assets in the
nature of loans which are secured primarily by real estate or
tangible personal property if
such the security property is located
in the state. In the event that
such the security property is also
located in one or more other states,
such receipts shall be
presumed to be from sources within this state, subject to rebuttal
based upon factors described in rules to be
promulgated proposed by
the Tax Commissioner, including the factor that the proceeds of any
such loans were applied and used by the borrower entirely outside
of this state;
(C) Interest income and other receipts from consumer loans
which are unsecured or are secured by intangible property that are
made to residents of this state, whether at a place of business, by
traveling loan officer, by mail, by telephone or other electronic
means or otherwise;
(D) Interest income and other receipts from commercial loans
and installment obligations which are unsecured or are secured by
intangible property if and to the extent that the borrower or
debtor is a resident of or is domiciled in this state:
Provided,
That
such receipts are presumed to be from sources in this state
and
such the presumption may be overcome by reference to factors
described in rules to be
promulgated proposed by the Tax
Commissioner, including the factor that the proceeds of any
such
loans were applied and used by the borrower entirely outside of
this state;
(E) Interest income and other receipts from a financial
organization's syndication and participation in loans, under the
rules set forth in
items paragraphs (A) through (D),inclusive,
above of this subdivision;
(F) Interest income and other receipts, including service
charges, from financial institution credit card and travel and
entertainment credit card receivables and credit card holders' fees if the borrower or debtor is a resident of this state or if the
billings for any
such receipts are regularly sent to an address in
this state;
(G) Merchant discount income derived from financial
institution credit card holder transactions with a merchant located
in this state. In the case of merchants located within and without
this state, only receipts from merchant discounts attributable to
sales made from locations within this state shall be attributed to
this state. It shall be presumed, subject to rebuttal, that the
location of a merchant is the address shown on the invoice
submitted by the merchant to the taxpayer;
(H) Gross receipts from the performance of services are
attributed to this state if:
(i) The service receipts are loan-related fees, including loan
servicing fees, and the borrower resides in this state, except
that, at the taxpayer's election, receipts from loan-related fees
which are either: (I) "Pooled" or aggregated for collective
financial accounting treatment; or (II) manually written as
nonrecurring extraordinary charges to be processed directly to the
general ledger may either be attributed to a state based upon the
borrowers' residences or upon the ratio that total interest sourced
to that state bears to total interest from all sources;
(ii) The service receipts are deposit-related fees and the
depositor resides in this state, except that, at the taxpayer's election, receipts from deposit-related fees which are either: (I)
"Pooled" or aggregated for collective financial accounting
treatment; or (II) manually written as nonrecurring extraordinary
charges to be processed directly to the general ledger may either
be attributed to a state based upon the depositors' residences or
upon the ratio that total deposits sourced to that state bears to
total deposits from all sources;
(iii) The service receipt is a brokerage fee and the account
holder is a resident of this state;
(iv) The service receipts are fees related to estate or trust
services and the estate's decedent was a resident of this state
immediately before death or the grantor who either funded or
established the trust is a resident of this state; or
(v) The service receipt is associated with the performance of
any other service not identified above and the service is performed
for an individual resident of, or for a corporation or other
business domiciled in, this state and the economic benefit of
such
service is received in this state;
(I) Gross receipts from the issuance of travelers' checks and
money orders if
such the checks and money orders are purchased in
this state; and
(J) All other receipts not attributed by this rule to a state
in which the taxpayer is taxable shall be attributed pursuant to
the laws of the state of the taxpayer's commercial domicile.
(2)
Denominator. -- The denominator of the gross receipts
factor shall include all of the taxpayer's gross receipts from
transactions of the kind included in the numerator, but without
regard to their source or situs.
(h)
Effective date. -- The provisions of this section enacted
as chapter one hundred sixty-seven, Acts of the Legislature, one
thousand nine hundred ninety-one, shall apply to all taxable years
beginning on or after the first day of January, one thousand nine
hundred ninety-one. Amendments to this section enacted in the year
one thousand nine hundred ninety-six shall apply to taxable years
beginning after the thirty-first day of December, one thousand nine
hundred ninety-five.
The amendments to this section, enacted in
the year two thousand eight, shall apply to taxable years beginning
after the thirty-first day of December, two thousand eight.
§11-24-9b. Limited tax credits - Financial organizations.
(a) Definitions.
For purposes of this section:
(1) "Adjusted base year tax liability" means the taxpayer's
corporation net income tax liability under this article, for the
tax year ending immediately on or before the thirty first day of
December, two thousand eight, before application of any surtax,
alternative minimum tax or credit allowed, authorized or imposed
under this chapter, adjusted by:
(A) Adding the base year liabilities, if any, of affiliates, subsidiaries and related entities that are included in the
taxpayer's current year combined report, but which were not
included in the taxpayer's base year filing configuration, and
(B) Subtracting the base year liabilities, if any, of
affiliates, subsidiaries and related entities that were included in
the taxpayer's base year filing configuration, but that are not
included in the taxpayer's current year combined report.
(2) "Adjusted primary tax liability" means the current year's
liability of the taxpayer under this article before application of
any surtax, alternative minimum tax or credit allowed, authorized
or imposed under this chapter for the current tax year:
(3) "Financial organization" means a financial organization as
defined in section three-a of this article.
(b)
Credit authorized. -- A credit shall be allowed against
the adjusted primary tax liability of every financial organization
under this article, in an amount equal to a portion of the increase
in the adjusted primary tax liability of the financial organization
under this article for the taxable year, over the amount of the
adjusted primary tax liability of the financial organization under
this article for the taxable year beginning immediately on or after
the first day of January, two thousand eight. The portion of the
increase in the adjusted primary tax liability under this article
that shall be allowed as a credit under this section is eighty
percent for taxable years beginning on an after the first day of January, two thousand nine; sixty percent for taxable years
beginning on and after the first day of January, two thousand ten;
forty percent for taxable years beginning on and after the first
day of January, two thousand eleven; twenty percent for taxable
years beginning on and after the first day of January, two thousand
twelve; ten percent for taxable years beginning on and after the
first day of January, two thousand thirteen; and zero percent for
taxable years beginning on and after the first day of January, two
thousand fourteen;
Provided, That the credit allowed by this
section may not be used to reduce the adjusted primary tax
liability of any financial organization under this article in any
taxable year below one million dollars.
§11-24-13a. Method of filing for business taxes.
(a)
Privilege to file consolidated return. --
(1) An affiliated group of corporations as defined for
purposes of filing a consolidated federal income tax return shall,
subject to the provisions of this section and in accordance with
any regulations prescribed by the Tax Commissioner, have the
privilege of filing a consolidated return with respect to the tax
imposed by this article for the taxable year in lieu of filing
separate returns. The making of a consolidated return shall be
upon the condition that all corporations which at any time during
the taxable year have been members of the affiliated group are
included in
such the return and consent to the filing of
such the return. The filing of a consolidated return
shall be is considered
as such consent. When a corporation is a member of an affiliated
group for a fractional part of the year, the consolidated return
shall include the income of
such the corporation for that part of
the year during which it is a member of the affiliated group.
(2) For tax years beginning on and after the first day of
January, two thousand nine, the provisions of this subsection are
null and void and of no further force or effect.
(b)
Election binding. --
(1) If an affiliated group of corporations elects to file a
consolidated return under this article for any taxable year ending
after the thirtieth day of June, one thousand nine hundred
eighty-seven,
such the election once made shall not be revoked for
any subsequent taxable year without the written approval of the Tax
Commissioner consenting to the revocation.
(2) For tax years beginning on and after the first day of
January, two thousand nine, the provisions of this subsection are
null and void and of no further force or effect.
(c)
Consolidated return - financial organizations. --
An affiliated group that includes one or more financial
organizations may elect under this section to file a consolidated
return when that affiliated group complies with all of the
following rules:
(1) The affiliated group of which the financial organization is a member must file a federal consolidated income tax return for
the taxable year.
(2) All members of the affiliated group included in the
federal consolidated return must consent to being included in the
consolidated return filed under this article. The filing of a
consolidated return under this article is conclusive proof of
such
consent.
(3) The West Virginia taxable income of the affiliated group
shall be the sum of:
(A) The pro forma West Virginia taxable income of all
financial organizations having their commercial domicile in this
state that are included in the federal consolidated return, as
shown on a combined pro forma West Virginia return prepared for
such the financial organizations; plus
(B) The pro forma West Virginia taxable income of all
financial organizations not having their commercial domicile in
this state that are included in the federal consolidated return, as
shown on a combined pro forma West Virginia return prepared for
such the financial organizations; plus
(C) The pro forma West Virginia taxable income of all other
members included in the federal consolidated income tax return, as
shown on a combined pro forma West Virginia return prepared for all
such nonfinancial organization members, except that income, income
adjustments and exclusions, apportionment factors and other items considered when determining tax liability shall not be included in
the pro forma return prepared under this paragraph for a member
that is totally exempt from tax under section five of this article
or for a member that is subject to a different special industry
apportionment rule provided
for in this article. When a different
special industry apportionment rule applies, the West Virginia
taxable income of a
member(s) member subject to that special
industry apportionment rule
shall be is determined on a separate
pro forma West Virginia return for the
member(s) member subject to
that special industry rule and the West Virginia taxable income
so
determined shall be included in the consolidated return.
(4) The West Virginia consolidated return is prepared in
accordance with regulations of the Tax Commissioner promulgated as
provided in article three, chapter twenty-nine-a of this code.
(5) The filing of a consolidated return does not distort
taxable income. In any proceeding, the burden of proof that
taxpayer's method of filing does not distort taxable income shall
be upon the taxpayer.
(6) For tax years beginning on and after the first day of
January, two thousand nine, the provisions of this subsection are
null and void and of no further force or effect.
(d)
Combined return. --
(1) A combined return may be filed under this article by a
unitary group, including a unitary group that includes one or more financial organizations, only pursuant to the prior written
approval of the Tax Commissioner. A request for permission to file
a combined return must be filed on or before the statutory due date
of the return, determined without inclusion of any extension of
time to file the return. Permission to file a combined return may
be granted by the Tax Commissioner only when taxpayer submits
evidence that conclusively establishes that failure to allow the
filing of a combined return will result in an unconstitutional
distortion of taxable income. When permission to file a combined
return is granted, combined filing will be allowed for the
tax
years stated in the Tax Commissioner's letter. The combined return
must be filed in accordance with regulations of the Tax
Commissioner promulgated in accordance with article three, chapter
twenty-nine-a of this code.
(2) For tax years beginning on and after the first day of
January, two thousand nine, the provisions of this subsection are
null and void and of no further force or effect.
(e)
Method of filing under this article deemed controlling for
purposes of other business taxes articles. --
Notwithstanding the provisions of section nine-a, article
twenty-three of this chapter or any other provision of this code to
the contrary, the taxpayer shall file on the same basis under
article twenty-three of this chapter as
such the taxpayer files
under this article for the taxable year.
(f)
Regulations. --
The Tax Commissioner shall prescribe
such regulations as he
may deem or she considers necessary in order that the tax liability
of any affiliated group or combined group of corporations filing a
consolidated return, or of any unitary group of corporations filing
a combined return, and of each corporation in the affiliated or
unitary group, both during and after the period of affiliation, may
be returned, determined, computed, assessed, collected and adjusted
in
such a manner as the Tax Commissioner
deems considers necessary
to clearly reflect the income tax liability and the income factors
necessary for the determination of
such liability and in order to
prevent avoidance of
such tax liability.
(g)
Computation and payment of tax. --
In any case in which a consolidated or combined return is
filed, or required to be filed, the tax due under this article from
the affiliated, combined or unitary group shall be determined,
computed, assessed, collected and adjusted in accordance with
regulations prescribed by the Tax Commissioner, in effect on the
last day prescribed by section thirteen of this article for the
filing of
such the return, and such affiliated, combined or unitary
group, as the case may be, shall be treated as the taxpayer.
However, when any member of an affiliated, combined or unitary
group that files a consolidated or combined return under this
article is allowed to claim credit against its tax liability under this article for payment of any other tax, the amount of credit
allowed may not exceed that member's proportionate share of the
affiliated, combined or unitary group's precredit tax liability
under this article, as shown on its pro forma return.
(h)
Consolidated or combined return may be required. --
The Tax Commissioner may require any person or corporation to
make and file a separate return or to make and file a composite,
unitary, consolidated or combined return, as the case may be, in
order to clearly reflect the taxable income of such corporations.
(i)
Effective date. --
The amendments to this section made by chapter one hundred
seventy-nine, Acts of the Legislature in the year one thousand nine
hundred ninety, shall apply to all taxable years ending after the
eighth day of March, one thousand nine hundred ninety. Amendments
to this article enacted by this act in the year one thousand nine
hundred ninety-six shall apply to taxable years beginning on or
after the first day of January, one thousand nine hundred
ninety-six, except that financial organizations that are part of an
affiliated group may elect, after the effective date of this act,
to file a consolidated return prepared in accordance with the
provisions of this section, as amended, and subject to applicable
statutes of limitation, for taxable years beginning on or after the
first day of January, one thousand nine hundred ninety-one, but
before the first day of January, one thousand nine hundred ninety-six, notwithstanding provisions then in effect prohibiting
out-of-state financial organizations from filing consolidated
returns for those years:
Provided, That when the statute of
limitation on filing an amended return for any of those years
expires before the first day of July, one thousand nine hundred
ninety-six, the consolidated return for
such that year, if filed,
must be filed by said first day of July.
(j)
Combined reporting required. --
For tax years beginning on and after the first day of January,
two thousand nine,
and notwithstanding the provisions of section
nine-a, article twenty-three of this chapter or any other provision
of this code to the contrary, any taxpayer engaged in a unitary
business with one or more other corporations shall file a combined
report which includes the income, determined under section
thirteen-c or thirteen-d of this article, and the allocation and
apportionment of income provisions of this article, of all
corporations that are members of the unitary business, and
such
other information as
may be required by the Tax Commissioner.
Notwithstanding any provision to the contrary in this article, the
income of an insurance company, the allocation or apportionment of
income related thereto and the apportionment factors of an
insurance company shall not be included in a combined report filed
under this article unless specifically required to be included by
the Tax Commissioner.
(k)
Combined reporting at Tax Commissioner's discretion. --
(1) The Tax Commissioner may require the combined report to
include the income and associated apportionment factors of any
persons that are not included pursuant to subsection (j) of this
section, but that are members of a unitary business, in order to
reflect proper apportionment of income of the entire unitary
businesses.
The Tax Commissioner may require combination of
persons that are not or would not be doing business in this state
pursuant to this section.
(2) If the Tax Commissioner determines that the reported
income or loss of a taxpayer engaged in a unitary business with any
person not included pursuant to subsection (j) of this section
represents an avoidance or evasion of tax by
such the taxpayer, the
Tax Commissioner may, on a case-by-case basis, require all or any
part of the income and associated apportionment factors
of such
person be included in the taxpayer's combined report.
(3) With respect to inclusion of associated apportionment
factors pursuant to this section, the Tax Commissioner may require
the exclusion of any one or more of the factors, the inclusion of
one or more additional factors which will fairly represent the
taxpayer's business activity in this state, or the employment of
any other method to effectuate a proper reflection of the total
amount of income subject to apportionment and an equitable
allocation and apportionment of the taxpayer's income.
§11-24-13c. Determination of taxable income or loss using
combined report.
(a) The use of a combined report does not disregard the
separate identities of the taxpayer members of the combined group.
Each taxpayer member is responsible for tax based on its taxable
income or loss apportioned or allocated to this state, which shall
include, in addition to other types of income, the taxpayer
member's apportioned share of business income of the combined
group, where business income of the combined group is calculated as
a summation of the individual net business incomes of all members
of the combined group. A member's net business income is
determined by removing all but business income, expense and loss
from that member's total income, as provided in this section and
section thirteen-d of this article.
(b)
Components of income subject to tax in this state;
application of tax credits and post-apportionment deductions. --
(1) Each taxpayer member is responsible for tax based on its
taxable income or loss apportioned or allocated to this state,
which shall include:
(A) Its share of any business income apportionable to this
state of each of the combined groups of which it is a member,
determined under subsection (c) of this section;
(B) Its share of any business income apportionable to this
state of a distinct business activity conducted within and without the state wholly by the taxpayer member, determined under the
provisions for apportionment of business income set forth in this
article;
(C) Its income from a business conducted wholly by the
taxpayer member entirely within the state;
(D) Its income sourced to this state from the sale or exchange
of capital or assets, and from involuntary conversions, as
determined under subsection (g), section thirteen-d of this
article;
(E) Its nonbusiness income or loss allocable to this state,
determined under the provisions for allocation of nonbusiness
income set forth in this article;
(F) Its income or loss allocated or apportioned in an earlier
year, required to be taken into account as state source income
during the income year, other than a net operating loss; and
(G) Its net operating loss carryover. If the taxable income
computed pursuant to this section and section thirteen-d of this
article results in a loss for a taxpayer member of the combined
group, that taxpayer member has a West Virginia net operating loss,
subject to the net operating loss limitations, and carryover
provisions of this article. This West Virginia net operating loss
is applied as a deduction in a prior or subsequent year only if
that taxpayer has West Virginia source positive net income, whether
or not the taxpayer is or was a member of a combined reporting group in the prior or subsequent year:
Provided, That net
operating loss carryovers that were earned during a tax year in
which the taxpayer filed a consolidated return under this article
may be applied as a deduction from the West Virginia taxable income
of any member of the taxpayer's controlled group until the net
operating loss carryover is used or expires pursuant to the net
operating loss provisions of this article.
(2) Except where otherwise provided, no tax credit or
post-apportionment deduction earned by one member of the group, but
not fully used by or allowed to that member, may be used, in whole
or in part, by another member of the group or applied, in whole or
in part, against the total income of the combined group; and a
post-apportionment deduction carried over into a subsequent year as
to the member that incurred it, and available as a deduction to
that member in a subsequent year, will be considered in the
computation of the income of that member in the subsequent year
regardless of the composition of that income as apportioned,
allocated or wholly within this state:
Provided, That unused and
unexpired economic development tax credits that were earned during
a tax year in which the taxpayer filed a consolidated return under
this article may, if otherwise allowed within the statutory
limitations applicable to the tax credit, be used, in whole or in
part, against taxes imposed by this article on any member of the
taxpayer's combined group to the extent the credits would have been allowed had the taxpayer continued to file a consolidated return.
For purposes of this section the term "economic development tax
credit" means, and is limited to, a tax credit asserted on a tax
return under article thirteen-c, thirteen-d, thirteen-e,
thirteen-f, thirteen-g, thirteen-j, thirteen-q, thirteen-r or
thirteen-s of this chapter or under article one, chapter five-e of
this code.
(c)
Determination of taxpayer's share of the business income
of a combined group apportionable to this state. --
The taxpayer's share of the business income apportionable to
this state of each combined group of which it is a member shall be
the product of:
(1) The business income of the combined group, determined
under section thirteen-d of this article; and
(2) The taxpayer member's apportionment percentage, determined
in accordance with this article,
including in the property, payroll
and sales factor numerators the taxpayer's property, payroll and
sales, respectively, associated with the combined group's unitary
business in this state and including in the denominator the
property, payroll and sales of all members of the combined group,
including the taxpayer, which property, payroll and sales are
associated with the combined group's unitary business wherever
located.
The property, payroll and sales of a partnership shall be included in the determination of the partner's apportionment
percentage in proportion to a ratio the numerator of which is the
amount of the partner's distributive share of partnership's unitary
income included in the income of the combined group in accordance
with section thirteen-d of this article and the denominator of
which is the amount of the partnership's total unitary income.
§11-24-13d. Determination of the business income of the combined
group.
The business income of a combined group is determined as
follows:
(a) From the total income of the combined group, determined
under subsection (b) of this section, subtract any income and add
any expense or loss, other than the business income, expense or
loss of the combined group.
(b) Except as otherwise provided, the total income of the
combined group is the sum of the income of each member of the
combined group determined under federal income tax laws, as
adjusted for state purposes, as if the member were not consolidated
for federal purposes. The income of each member of the combined
group shall be determined as follows:
(1) For any member incorporated in the United States, or
included in a consolidated federal corporate income tax return, the
income to be included in the total income of the combined group
shall be the taxable income for the corporation after making allowable adjustments under this article.
(2) For any member not included in subdivision (1) of this
subsection, the income to be included in the total income of the
combined group shall be determined as follows:
(A) A profit and loss statement shall be prepared for each
foreign branch or corporation in the currency in which the books of
account of the branch or corporation are regularly maintained.
(B) Adjustments shall be made to the profit and loss statement
to conform it to the accounting principles generally accepted in
the United States for the preparation of such statements except as
modified by this regulation.
(C) Adjustments shall be made to the profit and loss statement
to conform it to the tax accounting standards required by this
article.
(D) Except as otherwise provided by regulation, the profit and
loss statement of each member of the combined group, and the
apportionment factors related thereto, whether United States or
foreign, shall be translated into the currency in which the parent
company maintains its books and records.
(E) Income apportioned to this state shall be expressed in
United States dollars.
(3) In lieu of the procedures set forth in subdivision (2) of
this subsection, and subject to the determination of the Tax
Commissioner that it reasonably approximates income as determined under this article, any member not included in subdivision (1) of
this subsection may determine its income on the basis of the
consolidated profit and loss statement which includes the member
and which is prepared for filing with the Securities and Exchange
Commission by related corporations. If the member is not required
to file with the Securities and Exchange Commission, the Tax
Commissioner may allow the use of the consolidated profit and loss
statement prepared for reporting to shareholders and subject to
review by an independent auditor. If above statements do not
reasonably approximate income as determined under this article, the
Tax Commissioner may accept those statements with appropriate
adjustments to approximate that income.
(c) If a unitary business includes income from a partnership,
the income to be included in the total income of the combined group
shall be the member of the combined group's direct and indirect
distributive share of the partnership's unitary business income.
(d) All dividends paid by one to another of the members of the
combined group shall, to the extent those dividends are paid out of
the earnings and profits of the unitary business included in the
combined report, in the current or an earlier year, be eliminated
from the income of the recipient.
Except as otherwise provided,
this provision shall not apply to dividends received from members
of the unitary business which are not a part of the combined group.
Except when specifically required by the Tax Commissioner to be included, all dividends paid by an insurance company directly or
indirectly to a corporation that is part of a unitary business with
the insurance company shall be deducted or eliminated from the
income of the recipient of the dividend.
(e) Except as otherwise provided by regulation, business
income from an intercompany transaction between members of the same
combined group shall be deferred in a manner similar to 26 C. F. R.
1.1502-13. Upon the occurrence of any of the following events,
deferred business income resulting from an intercompany transaction
between members of a combined group shall be restored to the income
of the seller and shall be apportioned as business income earned
immediately before the event:
(1) The object of a deferred intercompany transaction is:
(A) Resold by the buyer to an entity that is not a member of
the combined group;
(B) Resold by the buyer to an entity that is a member of the
combined group for use outside the unitary business in which the
buyer and seller are engaged; or
(C) Converted by the buyer to a use outside the unitary
business in which the buyer and seller are engaged; or
(2) The buyer and seller are no longer members of the same
combined group, regardless of whether the members remain unitary.
(f) A charitable expense incurred by a member of a combined
group shall, to the extent allowable as a deduction pursuant to Internal Revenue Code Section 170, be subtracted first from the
business income of the combined group, subject to the income
limitations of that section applied to the entire business income
of the group and any remaining amount shall then be treated as a
nonbusiness expense allocable to the member that incurred the
expense, subject to the income limitations of that section applied
to the nonbusiness income of that specific member. Any charitable
deduction disallowed under the foregoing rule, but allowed as a
carryover deduction in a subsequent year, shall be treated as
originally incurred in the subsequent year by the same member and
the rules of this section shall apply in the subsequent year in
determining the allowable deduction in that year.
(g) Gain or loss from the sale or exchange of capital assets,
property described by Internal Revenue Code Section 1231(a)(3) and
property subject to an involuntary conversion shall be removed from
the total separate net income of each member of a combined group
and shall be apportioned and allocated as follows:
(1) For each class of gain or loss (short term capital, long
term capital, Internal Revenue Code Section 1231 and involuntary
conversions) all members' business gain and loss for the class
shall be combined without netting between
such classes and each
class of net business gain or loss separately apportioned to each
member using the member's apportionment percentage determined under
subsection (c), section thirteen-c of this article.
(2) Each taxpayer member shall then net its apportioned
business gain or loss for all classes, including any such
apportioned business gain and loss from other combined groups,
against the taxpayer member's nonbusiness gain and loss for all
classes allocated to this state, using the rules of Internal
Revenue Code Sections 1222 and 1231, without regard to any of the
taxpayer member's gains or losses from the sale or exchange of
capital assets, Section 1231 property and involuntary conversions
which are nonbusiness items allocated to another state.
(3) Any resulting state source income or loss, if the loss is
not subject to the limitations of Internal Revenue Code Section
1211 of a taxpayer member produced by the application of the
preceding subsections shall then be applied to all other state
source income or loss of that member.
(4) Any resulting state source loss of a member that is
subject to the limitations of Section 1211 shall be carried over by
that member and shall be treated as state source short-term capital
loss incurred by that member for the year for which the carryover
applies.
(h) Any expense of one member of the unitary group which is
directly or indirectly attributable to the nonbusiness or exempt
income of another member of the unitary group shall be allocated to
that other member as corresponding nonbusiness or exempt expense,
as appropriate.
§11-24-13f. Water's-edge reporting mandated absent affirmative
election to report based on worldwide unitary
combined reporting basis; initiation and withdrawal
of worldwide combined reporting election.
(a)
Water's-edge election reporting. --
Taxpayer members of a unitary group that meet the requirements
of Absent an election under subsection (b) of this section
may
elect to
report based upon a worldwide unitary combined reporting
basis, taxpayer members of a unitary group shall determine each of
their apportioned shares of the net business income or loss of the
combined group
pursuant to on a water's-edge
election unitary
combined reporting basis. Under such election In determining tax
under this article and article twenty-three of this chapter on a
water's-edge unitary combined reporting basis, taxpayer members
shall take into account all or a portion of the income and
apportionment factors of only the following members otherwise
included in the combined group pursuant to section thirteen-a of
this article:
(1) The entire income and apportionment factors of any member
incorporated in the United States or formed under the laws of any
state, the District of Columbia or any territory or possession of
the United States;
(2) The entire income and apportionment factors of any member,
regardless of the place incorporated or formed, if the average of its property, payroll and sales factors within the United States is
twenty percent or more;
(3) The entire income and apportionment factors of any member
which is a domestic international sales corporation as described in
Internal Revenue Code Sections 991 to 994, inclusive; a foreign
sales corporation as described in Internal Revenue Code Sections
921 to 927, inclusive; or any member which is an export trade
corporation, as described in Internal Revenue Code Sections 970 to
971, inclusive;
(4) Any member not described in subdivision (1), (2) or (3) of
this subsection shall include
the portion of its income derived
from or attributable to sources within the United States, as
determined under the Internal Revenue Code without regard to
federal treaties, and its apportionment factors related thereto;
its business income which is effectively connected, or treated as
effectively connected under the provisions of the Internal Revenue
Code, with the conduct of a trade or business within the United
States and, for that reason, subject to federal income tax;
(5) Any member that is a "controlled foreign corporation", as
defined in Internal Revenue Code Section 957, to the extent of the
income of that member that is defined in Section 952 of Subpart F
of the Internal Revenue Code (Subpart F income) not excluding
lower-tier subsidiaries' distributions of such income which were
previously taxed, determined without regard to federal treaties, and the apportionment factors related to that income; any item of
income received by a controlled foreign corporation shall be
excluded if such income was subject to an effective rate of income
tax imposed by a foreign country greater than ninety percent of the
maximum rate of tax specified in Internal Revenue Code Section 11;
(6) Any member that earns more than twenty percent of its
income, directly or indirectly, from intangible property or
service-related activities that are deductible against the business
income of other members of the
combined water's-edge group, to the
extent of that income and the apportionment factors related
thereto; and
(7) The entire income and apportionment factors of any member
that is doing business in a tax haven
where "doing business in a
tax haven" is defined as being engaged in activity sufficient for
that tax haven jurisdiction to impose a tax under United States
constitutional standards. If the member's business activity within
a tax haven is entirely outside the scope of the laws, provisions
and practices that cause the jurisdiction to meet the criteria set
forth in the definition of a tax haven, the activity of the member
shall be treated as not having been conducted in a tax haven.
(b)
Initiation and withdrawal of election to report based on
worldwide unitary combined reporting. --
(1)
A water's-edge election An election to report West
Virginia tax based on worldwide unitary combined reporting is effective only if made on a timely filed, original return for a tax
year by every member of the unitary business subject to tax under
this article. The Tax Commissioner shall develop rules and
regulations governing the impact, if any, on the scope or
application of a
water's-edge worldwide unitary combined reporting
election, including termination or deemed election, resulting from
a change in the composition of the unitary group, the combined
group, the taxpayer members and any other similar change.
(2)
Such The election shall constitute consent to the
reasonable production of documents and taking of depositions in
accordance with the provisions of this code.
(3) In the discretion of the Tax Commissioner, a
water's-edge
worldwide unitary combined reporting election may be disregarded,
in part or in whole, and the income and apportionment factors of
any member of the taxpayer's unitary group may be included in
or
excluded from the combined report without regard to the provisions
of this section, if any member of the unitary group fails to comply
with any provision of this article.
or if a person otherwise not
included in the water's-edge combined group was availed of with a
substantial objective of avoiding state income tax
(4) In the discretion of the Tax Commissioner, the Tax
Commissioner may mandate worldwide unitary combined reporting, in
part or in whole, and the income and apportionment factors of any
member of the taxpayer's unitary group may be included in or excluded from the combined report without regard to the provisions
of this section, if any member of the unitary group fails to comply
with any provision of this article or if a person otherwise not
included in the water's-edge combined group was availed of with a
substantial objective of avoiding state income tax.
(4) (5) A water's-edge A worldwide unitary combined reporting
election is binding for and applicable to the tax year it is made
and all tax years thereafter for a period of ten years. It may be
withdrawn or reinstituted after withdrawal, prior to the expiration
of the ten-year period, only upon written request for reasonable
cause based on extraordinary hardship due to unforeseen changes in
state tax statutes, law or policy and only with the written
permission of the Tax Commissioner. If the Tax Commissioner grants
a withdrawal of election, he or she shall impose reasonable
conditions
as necessary to prevent the evasion of tax or to clearly
reflect income for the election period prior to or after the
withdrawal. Upon the expiration of the ten-year period, a taxpayer
may withdraw from the
water's-edge worldwide unitary combined
reporting election.
Such withdrawal Withdrawal must be made in
writing within one year of the expiration of the election and is
binding for a period of ten years, subject to the same conditions
as applied to the original election. If no withdrawal is properly
made, the
water's-edge worldwide unitary combined reporting
election shall be in place for an additional ten-year period, subject to the same conditions as applied to the original election.
(c) For purposes of determining the tax imposed by article
twenty-three of this chapter, the term "income", as used in this
section, shall be interpreted to mean the tax base or capital, as
applicable, for purposes of the tax imposed under article twenty-
three of this chapter.
§11-24-42. Effective date.
The provisions of this article as amended or added by this act
enacted in the year two thousand eight shall
take effect on the
first day of July, one thousand nine hundred eighty-eight, and
apply to all taxable years
ending after that date beginning after
the thirty-first day of December, two thousand eight: Provided,
That if an effective date is expressly provided in
such any
provision, that specific effective date shall control in lieu of
this general effective date provision.