H. B. 3136
(By Delegate Michael)
[Introduced March 30, 2001; referred to the
Committee on Finance.]
A BILL to amend and reenact section seven, article twenty-three,
chapter eleven of the code of West Virginia, one thousand nine
hundred thirty-one, as amended; and to amend and reenact
section five, article twenty-four of said chapter, all
relating to business franchise tax and corporation net income
tax; and limiting the exemption from those taxes for insurance
companies which pay insurance premium tax to the capital and
income from insurance activities upon which premium tax is
paid.
Be it enacted by the Legislature of West Virginia:
That section seven, article twenty-three, chapter eleven of
the code of West Virginia, one thousand nine hundred thirty-one, as
amended, be amended and reenacted; and that section five, article
twenty-four of said chapter be amended and reenacted, all to read as follows:
ARTICLE 23. BUSINESS FRANCHISE TAX.
§11-23-7. Persons and organizations exempt from tax.
The following organizations and persons shall be exempt from
the tax imposed by this article to the extent provided in this
section:
(a) Natural persons doing business in this state that are not
doing business in the form of a partnership (as defined in section
three of this article) or in the form of a corporation (as defined
in section three of this article). Such persons include persons
doing business as sole proprietors, sole practitioners and other
self-employed persons.
(b) Corporations and organizations which by reason of their
purposes or activities are exempt from federal income tax:
Provided, That this exemption does not apply to that portion of
their capital (as defined in section three of this article) which
is used, directly or indirectly, in the generation of unrelated
business income (as defined in the Internal Revenue Code) of any
such corporation or organization if the unrelated business income
is subject to federal income tax.
(c) Insurance companies which pay this state a tax upon
premiums
to the extent their capital (as defined in section three
of this article) is used in the generation of insurance premiums upon which a state tax upon premiums is paid. This exemption does
not apply to that portion of their capital which is used, directly
or indirectly, in the generation of income not derived from
insurance premiums upon which a state tax upon premiums is paid.
(d) Production credit associations organized under the
provisions of the federal "Farm Credit Act of 1933":
Provided,
That this exemption does not apply to corporations or associations
organized under the provisions of article four, chapter nineteen of
this code.
(e) Any trust established pursuant to section one hundred
eighty-six, chapter seven, title twenty-nine of the code of the
laws of the United States (enacted as section three hundred two (c)
of the labor management relations act, one thousand nine hundred
forty-seven), as amended prior to the first day of January, one
thousand nine hundred eighty-five.
(f) Any credit union organized under the provisions of chapter
thirty-one, or any other chapter of this code:
Provided, That this
exemption does not apply to corporations or cooperative
associations organized under the provisions of article four,
chapter nineteen of this code.
(g) Any corporation organized under this code which is a
political subdivision of the state of West Virginia, or is an
instrumentality of a political subdivision of this state, and was created pursuant to this code.
(h) Any corporation or partnership engaged in the activity of
agriculture and farming, as defined in paragraph (8), subsection
(b), section three of this article:
Provided, That if a
corporation or partnership is not exclusively engaged in such
activity, its tax base under this article shall be apportioned, in
accordance with regulations promulgated by the tax commissioner,
among its several activities and only that portion attributable to
the activity of agriculture and farming shall be exempt from tax
under this article.
(i) Any corporation or partnership licensed under article
twenty-three, chapter nineteen of this code, to conduct horse or
dog racing meetings or a pari-mutuel system of wagering:
Provided,
That if the corporation or partnership is not exclusively engaged
in this activity, its tax base under this article shall be
apportioned, in accordance with regulations promulgated by the tax
commissioner, among its several activities and only that portion
attributable to the activity of conducting a horse or dog racing
meeting or a pari-mutuel system of wagering shall be exempt from
tax under this article.
(j) For those tax years beginning after the thirtieth day of
June, one thousand nine hundred ninety-eight, any corporation or
partnership operating as a hunting club:
Provided, That the corporation or partnership distributes no income or dividends to
its owners or stockholders. For the purposes of this subsection,
a hunting club is a group of persons owning land which is used
principally for hunting purposes by the members of the club and
guests, and where any charges made for hunting are principally for
the purpose of defraying the costs of operating and maintaining the
club and club properties or establishing a reasonable reserve to
meet the operating and maintenance costs of the club. The tax
commissioner shall by legislative rule promulgated in accordance
with article three of chapter twenty-nine of this code further
prescribe the definition of a hunting club and the manner and
method in which this credit may be claimed.
ARTICLE 24. CORPORATION NET INCOME TAX.
§11-24-5. Corporations exempt from tax.
The following corporations shall be exempt from the tax
imposed by this article to the extent provided in this section:
(a) Corporations which by reason of their purposes or
activities are exempt from federal income tax:
Provided, That this
exemption shall not apply to the unrelated business income, as
defined in the Internal Revenue Code, of any such corporation if
such income is subject to federal income tax.
(b) Insurance companies which pay this state a tax upon
premiums
to the extent their income is derived from insurance premiums upon which a state tax upon premiums is paid. This
exemption does not apply to income from any source other than
insurance premiums upon which a state tax upon premiums is paid.
(c) Production credit associations organized under the
provisions of the federal "Farm Credit Act of 1933":
Provided,
That the exemption shall not apply to corporations or associations
organized under the provisions of article four, chapter nineteen of
this code.
(d) Corporations electing to be taxed under subchapter S of
the Internal Revenue Code of one thousand nine hundred eighty-six,
as amended:
Provided, That said corporations shall file the
information return required by section thirteen-b of this article.
(e) Trusts established pursuant to section one hundred
eighty-six, chapter seven, title twenty-nine of the code of the
laws of the United States (enacted as section three hundred two (c)
of the labor management relations act, one thousand nine hundred
forty-seven), as amended prior to the first day of January, one
thousand nine hundred sixty-seven.
NOTE: The purpose of this bill is to exempt insurance
companies, which presently are completely exempt from Business
Franchise Tax and Corporation Net Income Tax if they pay insurance
premium tax, from those taxes only to the extent they engage in
activities which are subject to the insurance premium tax.
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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