H. B. 2873
(By Delegates Perdue, Hatfield, Marshall,
Martin and Butcher)
[Introduced March 4, 2005; referred to the
Committee on Health and Human Resources then Finance.]
A BILL to amend and reenact §11-13Q-2 and §11-13Q-3 of the Code of
West Virginia, 1931, as amended, all relating to the economic
opportunity tax credit; finding that creating jobs with health
care benefits promotes the public interest and the general
welfare; and requiring that eligible taxpayers provide certain
health care benefits to their employees in this state.
Be it enacted by the Legislature of West Virginia:
That §11-13Q-2 and §11-13Q-3 of the Code of West Virginia,
1931, as amended, be amended and reenacted, all to read as follows:
ARTICLE 13Q. ECONOMIC OPPORTUNITY TAX CREDIT.
§11-13Q-2. Legislative finding and purpose.
The Legislature finds that the encouragement of economic
opportunity
and the creation of jobs which offer health care
benefits to workers in this state is in the public interest and
promotes the general welfare of the people of this state. In order to encourage greater capital investment in businesses in this state
and thereby increase economic opportunity in this state, there is
hereby enacted the economic opportunity tax credit.
§11-13Q-3. Definitions.
(a)
General. -- When used in this article, or in the
administration of this article, terms defined in subsection (b)
have the meanings ascribed to them by this section, unless a
different meaning is clearly required by either the context in
which the term is used, or by specific definition, in this article.
(b)
Terms defined.
(1)
Business. -- The term "business" means any activity which
is engaged in by any person in this state which is taxable under
article thirteen, twenty-one, twenty-three or twenty-four of this
chapter (or any combination of those articles of this chapter).
(2)
Business expansion. -- The term "business expansion" means
capital investment in a new or expanded business facility in this
state.
(3)
Business facility. -- The term "business facility" means
any factory, mill, plant, refinery, warehouse, building or complex
of buildings located within this state, including the land on which
it is located, and all machinery, equipment and other real and
personal property located at or within the facility, used in
connection with the operation of the facility, in a business that
is taxable in this state, and all site preparation and start-up costs of the taxpayer for the business facility which it
capitalizes for federal income tax purposes.
(4)
Commissioner or Tax Commissioner. -- The terms
"Commissioner" and "Tax Commissioner" are used interchangeably
herein and mean the Tax Commissioner of the State of West Virginia,
or his or her designee.
(5)
Compensation. -- The term "compensation" means wages,
salaries, commissions and any other form of remuneration paid to
employees for personal services.
(6)
Controlled group. -- The term "controlled group" means one
or more chains of corporations connected through stock ownership
with a common parent corporation if stock possessing at least fifty
percent of the voting power of all classes of stock of each of the
corporations is owned directly or indirectly by one or more of the
corporations; and the common parent owns directly stock possessing
at least fifty percent of the voting power of all classes of stock
of at least one of the other corporations.
(7)
Corporation. -- The term "corporation" means any
corporation, joint-stock company or association, and any business
conducted by a trustee or trustees wherein interest or ownership is
evidenced by a certificate of interest or ownership or similar
written instrument.
(8)
Designee. -- The term "designee" in the phrase "or his
or
her designee," when used in reference to the Commissioner, means any officer or employee of the State Tax Department duly authorized
by the Commissioner directly, or indirectly by one or more
redelegations of authority, to perform the functions mentioned or
described in this article.
(9)
Eligible taxpayer. -- The term "eligible taxpayer" means
any person who makes qualified investment in a new or expanded
business facility located in this state and creates at least the
required number of new jobs and who is subject to any of the taxes
imposed by articles thirteen, twenty-one, twenty-three and
twenty-four of this chapter (or any combination of those articles):
Provided, That the Insurance Commissioner certifies that the
taxpayer provides to its employees in this state health care
benefits at least equivalent to the benefit coverage and employer
contribution in plans approved pursuant to section sixteen, article
sixteen-d, chapter thirty-three of this code. "Eligible taxpayer"
shall also include also includes an affiliated group of taxpayers
if the group elects to file a consolidated corporation net income
tax return under article twenty-four of this chapter.
(10)
Expanded facility. -- The term "expanded facility" means
any business facility (other than a new or replacement business
facility) resulting from the acquisition, construction,
reconstruction, installation or erection of improvements or
additions to existing property if the improvements or additions are
purchased on or after the first day of January, two thousand three, but only to the extent of the taxpayer's qualified investment in
the improvements or additions.
(11)
Includes and including. -- The terms "includes" and
"including," when used in a definition contained in this article,
shall not be considered to exclude other things otherwise within
the meaning of the term defined.
(12)
Leased property. -- The term "leased property" does not
include property which the taxpayer is required to show on its
books and records as an asset under generally accepted principles
of financial accounting. If the taxpayer is prohibited from
expensing the lease payments for federal income tax purposes, the
property shall be treated as purchased property under this section.
(13)
New business facility. -- The term "new business
facility" means a business facility which satisfies all the
requirements of paragraphs (A), (B), (C) and (D) of this
subdivision.
(A) The facility is employed by the taxpayer in the conduct of
a business the net income of which is or would be taxable under
article twenty-one or twenty-four of this chapter. The facility is
not considered a new business facility in the hands of the taxpayer
if the taxpayer's only activity with respect to the facility is to
lease it to another person or persons.
(B) The facility is purchased by, or leased to, the taxpayer
on or after the first day of January, two thousand three.
(C) The facility was not purchased or leased by the taxpayer
from a related person. The Commissioner may waive this requirement
if the facility was acquired from a related party for its fair
market value and the acquisition was not tax motivated.
(D) The facility was not in service or use during the ninety
days immediately prior to transfer of the title to the facility, or
prior to the commencement of the term of the lease of the facility:
Provided, That this ninety-day period may be waived by the
Commissioner if the Commissioner determines that persons employed
at the facility may be treated as "new employees" as that term is
defined in this subsection.
(14)
New employee. --
(A) The term "new employee" means a person residing and
domiciled in this state, hired by the taxpayer to fill a position
or a job in this state which previously did not exist in the
taxpayer's business enterprise in this state prior to the date on
which the taxpayer's qualified investment is placed in service or
use in this state. In no case may the number of new employees
directly attributable to the investment for purposes of this credit
exceed the total net increase in the taxpayer's employment in this
state:
Provided, That the Commissioner may require that the net
increase in the taxpayer's employment in this state be determined
and certified for the taxpayer's controlled group:
Provided,
however, That persons filling jobs saved as a direct result of taxpayer's qualified investment in property purchased or leased for
business expansion may be treated as new employees filling new jobs
if the taxpayer certifies the material facts to the Commissioner
and the Commissioner expressly finds that:
(i) But for the new employer purchasing the assets of a
business in bankruptcy under chapter seven or eleven of the United
States Bankruptcy Code and the new employer making qualified
investment in property purchased or leased for business expansion,
the assets would have been sold by the United States Bankruptcy
Court in a liquidation sale and the jobs saved would have been
lost; or
(ii) But for the taxpayer's qualified investment in property
purchased or leased for business expansion in this state, the
taxpayer would have closed its business facility in this state and
the employees of the taxpayer located at the facility would have
lost their jobs:
Provided, That the Commissioner may not make this
certification unless the Commissioner finds that the taxpayer is
insolvent as defined in 11 U.S.C. §101(32) or that the taxpayer's
business facility was destroyed, in whole or in significant part,
by fire, flood or other act of God.
(B) A person is considered to be a "new employee" only if the
person's duties in connection with the operation of the business
facility are on:
(i) A regular, full-time and permanent basis:
(I) "Full-time employment" means employment for at least one
hundred forty hours per month at a wage not less than the
prevailing state or federal minimum wage, depending on which
minimum wage provision is applicable to the business;
(II) "Permanent employment" does not include employment that
is temporary or seasonal and therefore the wages, salaries and
other compensation paid to the temporary or seasonal employees will
not be considered for purposes of sections five and seven of this
article; or
(ii) A regular, part-time and permanent basis:
Provided, That
the person is customarily performing the duties at least twenty
hours per week for at least six months during the taxable year.
(15)
New job. -- The term "new job" means a job which did not
exist in the business of the taxpayer in this state prior to the
taxpayer's qualified investment being made, and which is filled by
a new employee.
(16)
New property. -- The term "new property" means:
(A) Property, the construction, reconstruction or erection of
which is completed on or after the first day of January, two
thousand three, and placed in service or use after that date; and
(B) Property leased or acquired by the taxpayer that is placed
in service or use in this state on or after the first day of
January, two thousand three, if the original use of the property
commences with the taxpayer and commences after that date.
(17)
Original use. -- The term "original use" means the first
use to which the property is put, whether or not the use
corresponds to the use of the property by the taxpayer.
(18)
Partnership and partner. -- The term "partnership"
includes a syndicate, group, pool, joint venture or other
unincorporated organization through or by means of which any
business, financial operation or venture is carried on, and which
is not a trust or estate, a corporation or a sole proprietorship.
The term "partner" includes a member in such a syndicate, group,
pool, joint venture or other organization.
(19)
Person. -- The term "person" includes any natural person,
corporation or partnership.
(20)
Property purchased or leased for business expansion.
(A)
Included property. -- Except
as provided in paragraph (B),
the term "property purchased or leased for business expansion"
means real property and improvements thereto, and tangible personal
property, but only if the real or personal property was
constructed, purchased, or leased and placed in service or use by
the taxpayer, for use as a component part of a new or expanded
business facility as defined in this section, which is located
within the State of West Virginia. This term includes only:
(1) Real property and improvements thereto having a useful
life of four or more years, placed in service or use on or after
the first day of January, two thousand three, by the taxpayer.
(2) Real property and improvements thereto, acquired by
written lease having a primary term of ten or more years and placed
in service or use by the taxpayer on or after the first day of
January, two thousand three.
(3) Tangible personal property placed in service or use by the
taxpayer on or after the first day of January, two thousand three,
with respect to which depreciation, or amortization in lieu of
depreciation, is allowable in determining the personal or
corporation net income tax liability of the business taxpayer under
article twenty-one or twenty-four of this chapter, and which has a
useful life, at the time the property is placed in service or use
in the state, of four or more years.
(4) Tangible personal property acquired by written lease
having a primary term of four years or longer, that commenced and
was executed by the parties thereto on or after the first day of
January, two thousand three, if used as a component part of a new
or expanded business facility, shall be included within this
definition.
(5) Tangible personal property owned or leased, and used by
the taxpayer at a business location outside the state which is
moved into the State of West Virginia on or after the first day of
January, two thousand three, for use as a component part of a new
or expanded business facility located in the state:
Provided, That
if the property is owned, it must be depreciable or amortizable personal property for income tax purposes, and have a useful life
of four or more years remaining at the time it is placed in service
or use in the state, and if the property is leased, the primary
term of the lease remaining at the time the leased property is
placed in service or use in the state, must be four or more years.
(B)
Excluded property. -- The term "property purchased or
leased for business expansion" does not include:
(i) Property owned or leased by the taxpayer and for which the
taxpayer was previously allowed tax credit under article
thirteen-c, thirteen-d or thirteen-e of this chapter, or the tax
credits allowed by this article.
(ii) Property owned or leased by the taxpayer and for which
the seller, lessor, or other transferor, was previously allowed tax
credit under article thirteen-c, thirteen-d or thirteen-e of this
chapter, or the tax credits allowed by this article.
(iii) Repair costs, including materials used in the repair,
unless for federal income tax purposes the cost of the repair must
be capitalized and not expensed.
(iv) Airplanes.
(v) Property which is primarily used outside the state, with
use being determined based upon the amount of time the property is
actually used both within and outside the state.
(vi) Property which is acquired incident to the purchase of
the stock or assets of the seller, unless for good cause shown, the Commissioner consents to waiving this requirement.
(vii) Natural resources in place.
(viii) Purchased or leased property, the cost or consideration
for which cannot be quantified with any reasonable degree of
accuracy at the time the property is placed in service or use:
Provided, That when the contract of purchase or lease specifies a
minimum purchase price or minimum annual rent the amount thereof
shall be used to determine the qualified investment in the property
under section eight of this article if the property otherwise
qualifies as property purchased or leased for business expansion.
(21)
Purchase. -- The term "purchase" means any acquisition of
property, but only if:
(A) The property is not acquired from a person whose
relationship to the person acquiring it would result in the
disallowance of deductions under Section 267 or 707 (b) of the
United States Internal Revenue Code of 1986, as amended, and in
effect on the first day of January, two thousand three.
(B) The property is not acquired by one component member of a
controlled group from another component member of the same
controlled group. The Commissioner can waive this requirement if
the property was acquired from a related party for its then fair
market value; and
(C) The basis of the property for federal income tax purposes,
in the hands of the person acquiring it, is not determined:
(i) In whole or in part, by reference to the federal adjusted
basis of the property in the hands of the person from whom it was
acquired; or
(ii) Under Section 1014 (e) of the United States Internal
Revenue Code of 1986, as amended, and in effect on the first day of
January, two thousand two.
(22)
Qualified activity. -- The term "qualified activity"
means any business or other activity subject to any of the taxes
imposed by article thirteen, twenty-one, twenty-three or
twenty-four of this chapter (or any combination of those articles
of this chapter), but does not include the activity of severance or
production of natural resources.
(23)
Related person. -- The term "related person" means:
(A) A corporation, partnership, association or trust
controlled by the taxpayer;
(B) An individual, corporation, partnership, association or
trust that is in control of the taxpayer;
(C) A corporation, partnership, association or trust
controlled by an individual, corporation, partnership, association
or trust that is in control of the taxpayer; or
(D) A member of the same controlled group as the taxpayer.
For purposes of this section, "control," with respect to a
corporation, means ownership, directly or indirectly, of stock
possessing fifty percent or more of the total combined voting power of all classes of the stock of the corporation entitled to vote.
"Control," with respect to a trust, means ownership, directly or
indirectly, of fifty percent or more of the beneficial interest in
the principal or income of the trust. The ownership of stock in a
corporation, of a capital or profits interest in a partnership or
association or of a beneficial interest in a trust is determined in
accordance with the rules for constructive ownership of stock
provided in Section 267 (c) of the United States Internal Revenue
Code of 1986, as amended, other than paragraph (3) of that section.
(24)
Replacement facility. -- The term "replacement facility"
means any property (other than an expanded facility) that replaces
or supersedes any other property located within this state that:
(A) The taxpayer or a related person used in or in connection
with any activity for more than two years during the period of five
consecutive years ending on the date the replacement or superseding
property is placed in service by the taxpayer; or
(B) Is not used by the taxpayer or a related person in or in
connection with any qualified activity for a continuous period of
one year or more commencing with the date the replacement or
superseding property is placed in service by the taxpayer.
(25)
Research and development. -- The term "research and
development" means systematic scientific, engineering or
technological study and investigation in a field of knowledge in
the physical, computer or software sciences, often involving the formulation of hypotheses and experimentation, for the purpose of
revealing new facts, theories or principles, or increasing
scientific knowledge, which may reveal the basis for new or
enhanced products, equipment or manufacturing processes.
(A) Research and development includes, but is not limited to,
design, refinement and testing of prototypes of new or improved
products, or design, refinement and testing of manufacturing
processes before commercial sales relating thereto have begun. For
purposes of this section, commercial sales includes, but is not
limited to, sales of prototypes or sales for market testing.
(B) Research and development does not include:
(i) Market research;
(ii) Sales research;
(iii) Efficiency surveys;
(iv) Consumer surveys;
(v) Product market testing;
(vi) Product testing by product consumers or through consumer
surveys for evaluation of consumer product performance or consumer
product usability;
(vii) The ordinary testing or inspection of materials or
products for quality control (quality control testing);
(viii) Management studies;
(ix) Advertising;
(x) Promotions;
(xi) The acquisition of another's patent, model, production or
process or investigation or evaluation of the value or investment
potential related thereto;
(xii) Research in connection with literary, historical, or
similar activities;
(xiii) Research in the social sciences, economics, humanities
or psychology and other nontechnical activities; and
(xiv) The providing of sales services or any other service,
whether technical service or nontechnical service.
(26)
Taxpayer. -- The term "taxpayer" means any person subject
to any of the taxes imposed by article thirteen, twenty-one,
twenty-three or twenty-four of this chapter (or any combination of
those articles of this chapter).
(27)
This code. -- The term "this code" means the Code of West
Virginia, one thousand nine hundred thirty-one, as amended.
(28)
This state. -- The term "this state" means the State of
West Virginia.
(29)
Used property. -- The term "used property" means property
acquired after the thirty-first day of December, two thousand two,
that is not "new property."
NOTE: The purpose of this bill is to require that in order to
be eligible to claim the Economic Opportunity Tax Credit, a
taxpayer must provide certain health care benefits to its employees
in this state.
Strike-throughs indicate language that would be stricken from
the present law, and underscoring indicates new language that would
be added.
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