Senate Bill No. 15
(By Senators McCabe, Foster and Klempa)
[Introduced January 11, 2012; referred to the Committee on Government Organization; and then to the Committee on Finance.]
A BILL to amend the Code of West Virginia, 1931, as amended, by adding thereto a new article, designated §11-13CC-1, §11-13CC-2, §11-13CC-3, §11-13CC-4, §11-13CC-5, §11-13CC-6, §11-13CC-7, §11-13CC-8, §11-13CC-9, §11-13CC-10, §11-13CC-11, §11-13CC-12, §11-13CC-13 and §11-13CC-14, all relating to authorizing a tax credit against business franchise tax, corporate net income tax or personal income tax for eligible expenditures incurred in placing in service a residential or nonresidential energy-efficient building; defining terms; establishing the amount of tax credit permitted; requiring an application prior to taking the credit; providing the credit will be taken over a ten-year period; allowing the credit to be carried forward; providing that the tax credit is transferrable; providing for the forfeiture of the credit in certain instances; prohibiting the carryback of the credit; authorizing the recapture of the credit; providing a statute of limitations; authorizing rulemaking; and requiring reports to be made.
Be it enacted by the Legislature of West Virginia:
That the Code of West Virginia, 1931, as amended, be amended
by adding thereto a new article, designated §11-13CC-1, §11-13CC-2, §11-13CC-3, §11-13CC-4, §11-13CC-5, §11-13CC-6, §11-13CC-7, §11-13CC-8, §11-13CC-9, §11-13CC-10, §11-13CC-11, §11-13CC-12, §11-13CC-13 and §11-13CC-14, all to read as follows:
ARTICLE 13CC. ENERGY EFFICIENT BUILDING PROPERTY TAX CREDIT.
§11-13CC-1. Short title.
This article may be cited as the “Energy Efficient Building Act.”
§11-13CC-2. Legislative finding and purpose.
The Legislature finds that encouraging the construction and rehabilitation of energy efficient buildings is in the public interest and promotes the general welfare of the people of this state. It contributes to economic growth and, in time, will improve environmental quality in the state by decreasing discharge of pollutants from buildings, improving energy efficiency and reducing greenhouse gas emissions. To accomplish these ends, there is hereby enacted the energy efficient building tax credit.
(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 the context in which the term is used.
(b) Terms defined. -–
(1) "EPA" means the United States Environmental Protection Agency.
(2) "Designed to Earn the Energy Star®" means a designation given by the EPA as part of the Energy Star® program to identify plans for the construction of residential or nonresidential buildings that incorporate energy-efficient details and specifications typically found in Energy Star® qualified buildings.
(3) "Eligible buildings" means energy efficient residential or nonresidential building property to which the EPA has awarded an Energy Star® label.
(4) “Eligible expenditures” means expenses incurred on or after July 1, 2012, for the planning, construction or rehabilitation of energy efficient residential or nonresidential building property. Eligible expenditures do not include:
(A) Legal fees related to construction or remodeling;
(B) Site purchase or preparation costs;
(C) Interest related to construction or remodeling;
(D) Architectural, engineering and other professional fees related to construction or remodeling;
(E) Closing costs related to construction or remodeling; and
(F) Costs related to issuance, or procurement of loans, bond issuances or costs of capital or related administrative expenses.
(5) "Eligible building plans" means plans for the construction of residential or nonresidential buildings that incorporate energy-efficient details and specifications typically found in Energy Star® qualified buildings that have earned the Designed to Earn the Energy Star® label under the Energy Star® program.
(6) “Eligible taxpayer” means the owner of a residential or commercial building property to which the EPA has awarded an Energy Star® label, or the owner of building plans which have earned the Designed to Earn the Energy Star® label by the Energy Star® program.
(7) “Energy efficient residential or nonresidential building” means a residential or nonresidential building constructed using building materials:
(A) Which are installed on or in the building which is:
(I) Located in West Virginia; and
(ii) Within the scope of the Energy Star® performance ratings system utilized in the Energy Star® program established by 42 U.S.C. §6294a.
(B) Which are installed as part of:
(I) The interior lighting systems;
(ii) The heating, cooling, ventilation, and hot water systems; or
(iii) The building envelope.
(C) To which the Administrator of the EPA has awarded an Energy Star® label for energy efficient buildings and manufacturing plants in accordance with the requirements and procedures established by the EPA under the Energy Star® program.
(8) "Energy Star® label" means, in the context of buildings, a designation given by the EPA as part of the Energy Star® program to identify residential and nonresidential buildings that meet EPA strict energy efficiency guidelines.
(9) “Energy Star® program” means a joint voluntary program established within the United States Department of Energy and the EPA to identify and promote energy-efficient products and buildings in order to reduce energy consumption, improve energy security, and reduce pollution through voluntary labeling of, or other forms of communication about, products and buildings that meet the highest energy conservation standards.
(10) “Energy Star® performance ratings system” means the ratings system used by the EPA in the Energy Star® program for buildings and manufacturing plants to award the Energy Star® label.
(11) “Placed in service” means the eligible building is placed in a condition or state of readiness and availability for use as a residential or nonresidential building.
(12) "Tax Commissioner" means the appointed official, or his or her designee, charged with administering the West Virginia State Tax Department.
§11-13CC-4. Amount of credit allowed.
(a) Credit allowed. -–
(1) Eligible taxpayers are allowed a credit against the taxes imposed by articles twenty-three, twenty-four and twenty-one of this chapter, in that order, for owning a residential or commercial building to which the EPA has awarded an Energy Star® label, or owning building plans which have earned the Designed to Earn the Energy Star® label.
(2) Taxpayers who have taken the credit based on ownership of eligible building plans must complete construction of the eligible building and obtain Energy Star® certification for the completed building within three years from the time the credit was initially taken.
(A) If the building fails to obtain Energy Star® certification by the end of year three, the credit allowed under this article shall be redetermined and amended returns filed for the first and second taxable years.
(B) In applying the amount of redetermined credit allowable for the two preceding taxable years, the redetermined credit shall first be applied to the extent it was originally applied in such prior two years to business franchise taxes, then to corporation net income taxes, then to personal income taxes. Any additional taxes due under this chapter shall be remitted with the amended returns filed with the Tax Commission, along with interest, as provided in section seventeen, article ten of this chapter, and a ten percent penalty.
(b) 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 Energy Star® eligible building placed in service or use or for any Designed to Earn the Energy Star® building plans until the eligible taxpayer claiming the credit makes written application to the Tax Commissioner for allowance of credit as provided in this subsection. This application shall be in the form prescribed by the Tax Commissioner, and 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 file the application for credit under this section results in forfeiture of fifty percent of the annual credit otherwise allowable under this article. This penalty applies annually until the application is filed.
(c) Amount of credit allowed.--
The amount of credit allowed by subsection (a) is the greater of:
(1) One and one-half percent of eligible expenditures; or
(2) One dollar per square foot of the eligible building as constructed or as designed and portrayed on the building plan.
§11-13CC-5. Application of credit.
(a) Application of credit over ten years. -- The amount of credit allowable must be taken over a ten-year period, at the rate of one tenth of the amount thereof per taxable year, beginning with the taxable year in which the taxpayer places the eligible building in service or use in this state: Provided, That the taxpayer may elect to delay the beginning of the ten-year period until the next succeeding taxable year after the taxable year in which the taxpayer places the eligible building in service or use in this state or the building plan is approved to receive the Designed to Earn the Energy Star® label. This election shall be made in the annual income tax return filed under this chapter for the taxable year in which the eligible building is first placed into service or use by the taxpayer. Once made, the election cannot be revoked. In the event of a failure to make a timely election to delay the beginning of the credit application period, the credit shall be applied beginning in the taxable year in which the taxpayer places the eligible building in service or use in this state. No retroactive election to delay the beginning of the credit application period is allowed.
(b) Business franchise tax. -– The credit is first applied to reduce the taxes imposed by article twenty-three of this chapter for the taxable year, determined after application of the credits against tax provided in section seventeen of that article, but before application of any other allowable credits against tax.
(c) Corporation net income taxes. -– After application of subsection (b) of this section, any unused credit is next applied to reduce the taxes imposed by article twenty-four of this chapter for the taxable year, determined before application of allowable credits against tax.
(d) Personal income tax. -–
(1) If the eligible taxpayer is an electing small business corporation (as defined in Section 1361 of the United States Internal Revenue Code of 1986, as amended), a partnership, a limited liability company that is treated as a partnership for federal income tax purposes or a sole proprietorship, then any unused credit, after application of subsections (b) and (c) of this section, as applicable, is allowed as a credit against the taxes imposed by article twenty-one of this chapter. Any individual taking the credit may also take the credit against the taxes imposed by article twenty-one of this chapter
(2) Electing small business corporations, limited liability companies, partnerships and other unincorporated organizations shall allocate the credit allowed by this article among its members in the same manner as profits and losses are allocated for the taxable year.
§11-13CC-6. Limitation on use of credit.
(a) Withholding. –- No credit is allowed under this section against any employer withholding taxes imposed by article twenty-one of this chapter.
(b) No other tax credit authorized. -- The credit allowed or authorized under the provisions of this article is not allowed, authorized or applied against tax if any tax credit is authorized, applied for or used or applied against tax by the taxpayer, or by any other person, under article thirteen-d, article thirteen-e, article thirteen-q, article thirteen-r, or article thirteen-s of this chapter, or any combination thereof, for, or with relation to, investment in any building, or facility for which credit is, or may be, allowed, authorized or applied against tax under this article.
§11-13CC-7. Excess credit; carryforward; carryback prohibited.
(a) If the tax credit allowed under this article in any taxable year exceeds the sum of the taxes enumerated in section four of this article for that taxable year, the excess may be applied against those taxes, in the order and manner stated in section four of this article, for succeeding taxable years until the earlier of the following:
(1) Five taxable years have elapsed; or
(2) The full amount of the excess tax credit is used.
(b) No carryback to a prior taxable year is allowed for the amount of any unused portion of any annual credit allowance.
(c) The transfer or sale of this credit does not extend the time in which the credit can be used. The carry forward period for the credit that is transferred or sold begins on the date on which the credit was originally allowed to be used by the original taxpayer for which credit entitlement was initially authorized.
§11-13CC-8. Transfer or sale of credit.
(a) Any tax credit issued in accordance with this article, which has been issued to an eligible taxpayer, and to the extent not previously claimed against the tax of the eligible taxpayer or the owner of the credit, may be transferred or sold by such eligible taxpayer to another West Virginia taxpayer, subject to the following conditions:
(1) A single transfer or sale may involve one or more transferees, assignees or purchasers. A transfer of sale of the credits may involve multiple transfers to one or more transferees, assignees or purchasers.
(2) Transferors and sellers shall apply to the tax department for approval of any transfer, sale or assignment of the tax credit. Any amount of the tax credit that has been transferred or assigned is subject to the same limitations and conditions that apply to the eligible transferor taxpayer’s or seller’s entitlement, use and application of the credit. The application for sale, transfer or assignment of the credit shall include the transferor’s tax credit balance prior to transfer, the credit certificate number, the name of the seller, the transferor’s remaining tax credit balance after transfer, if any, all tax identification numbers for both transferor and transferee, the date of transfer, the amount transferred, a copy of the credit certificate and any other information required by the Tax Commissioner.
(3) The Tax Commissioner may not approve the transfer or assignment of a tax credit to a taxpayer if the seller or transferor has an outstanding tax obligation with the State of West Virginia.
(b) The transferee, assignee or purchaser shall apply such credits as required by this article, and subject to all conditions and limitations of this article.
(c) For purposes of this chapter, any proceeds received by the eligible company or transferor for its assignment or sale of the tax credits allowed pursuant to this section are exempt from the West Virginia consumers sales and service tax and use tax and from the corporate net income tax and personal income tax.
§11-13CC-9. Credit recapture.
(a) If it appears upon audit or otherwise that any taxpayer has taken the credit against tax allowed under this article and was not entitled to take the credit, then the credit improperly taken under this article shall be recaptured.
(b) Amended returns shall be filed for any tax year for which the credit was improperly taken. Any additional taxes due under this chapter shall be remitted with the amended return or returns filed with the Tax Commissioner, along with interest, as provided in section seventeen, article ten of this chapter and such other penalties and additions to tax as may be applicable pursuant to the provisions of article ten of this chapter.
§11-13CC-10. Interest; penalties; additions to tax.
Notwithstanding the provisions of article ten of this chapter, penalties and additions to tax imposed under article ten of this chapter may be waived at the discretion of the Tax Commissioner: Provided, That interest is not subject to waiver, except in accordance with the provisions of article ten of this chapter.
§11-13CC-11. Statute of limitations.
Notwithstanding the provisions of article ten of this chapter, the statute of limitations for the issuance of an assessment of tax by the Tax Commissioner shall be five years from the date of filing of any tax return on which this credit was taken or five years from the date of payment of any tax liability, calculated pursuant to the assertion of the credit allowed under this article, whichever is later.
§11-13CC-12. Report on credit.
(a) The Tax Commissioner shall provide to the Joint Committee on Government and Finance by July 1, 2014, and on July 1 of each year thereafter, a report detailing the amount of credit claimed pursuant to this article. The report is to include the amount of credit claimed against the business franchise tax, the amount of credit claimed against the corporate net income tax and the amount of credit claimed against the personal income tax.
(b) Taxpayers claiming the credit shall provide the information as the Tax Commissioner may require to prepare the report: Provided, That the information is subject to the confidentiality and disclosure provisions of sections five-d and five-s, article ten of this chapter.
§11-13CC-13. Legislative rules.
The Tax Commissioner shall propose for legislative approval rules pursuant to the provisions of article three, chapter twenty-nine-a of this code, as may be necessary to carry out the purposes of this article.
§11-13CC-14. Effective date.
This article shall be effective for business franchise tax years, corporate net income tax years and personal income tax years beginning on or after January 1, 2012.
NOTE: The purpose of the Bill is to authorize a tax credit against business franchise tax, corporate net income tax or personal income tax for eligible expenditures incurred in placing in service a residential or nonresidential energy-efficient building.
§11-13CC-1 through §11-13CC-14 is new; therefore, strike-throughs and underscoring have been omitted.