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Introduced Version Senate Bill 539 History

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Senate Bill No. 539

(By Senators Browning, Unger, Foster, Stollings, Klempa, Kessler (Mr. President), Plymale and Chafin)

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[Introduced February 8, 2012; referred to the Committee on Economic Development; and then to the Committee on Finance.]

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A BILL to amend and reenact §5B-2E-5 and §5B-2E-7a of the Code of West Virginia, 1931, as amended; and to amend said code by adding thereto three new sections, designated §5B-2E-7b, §5B-2E-7c and §5B-2E-7d, all relating generally to the West Virginia Tourism Development Act; adding a small-scale tourism development component and credit; removing annual credit cap for expansion projects; providing rules for determining credit for multiyear, multiphase projects including presumption for consumers sales and service tax collections; and adding an ancillary project component and credit.

Be it enacted by the Legislature of West Virginia:

    That §5B-2E-5 and §5B-2E-7a of the Code of West Virginia, 1931, as amended, be amended and reenacted; and that said code be amended by adding thereto three new sections, designated §5B-2E-7b, §5B-2E-7c and §5B-2E-7d, all to read as follows:

ARTICLE 2E. WEST VIRGINIA TOURISM DEVELOPMENT ACT.

§5B-2E-5. Project application; evaluation standards; consulting services; preliminary and final approval of projects.

    (a) Each eligible company that seeks to qualify a project for the tourism development project tax credit provided by section seven of this article, or for the tourism development expansion project tax credit provided by section seven-a of this article, the small scale tourism development project tax credit provided by section seven-b of this article or the ancillary tourism facilities development project tax credit provided by section seven-d of this article, as applicable, must shall file a written application for approval of the project with the development office.

    (b) With respect to each eligible company making an application to the development office for a tourism development project tax credit, or a tourism development expansion project tax credit, a small scale tourism development project tax credit or an ancillary tourism facilities development project tax credit, the development office shall make inquiries and request documentation, including a completed application, from the applicant that shall include: A description and location of the project; capital and other anticipated expenditures for the project and the sources of funding therefor; the anticipated employment and wages to be paid at the project; business plans that indicate the average number of days in a year in which the project will be in operation and open to the public; and the anticipated revenues and expenses generated by the project. The Executive Director of the Development Office shall act to grant or not to grant any preliminary approval of an application within forty-five days following its receipt or receipt of additional information requested by the development office, whichever is later.

    (c) Based upon a review of the application and additional documentation provided by the eligible company, if the Executive Director of the Development Office determines that the applicant and the project may reasonably satisfy the criteria for final approval set forth in subsection (d) of this section, then the Executive Director of the Development Office may grant a preliminary approval of the applicant and the project.

    (d) After preliminary approval by the Executive Director of the Development Office, the development office shall engage the services of a competent consulting firm or firms to analyze the data made available by the applicant and to collect and analyze additional information necessary to determine that, in the independent judgment of the consultant, the project:

    (1) Likely will attract at least twenty-five percent of its visitors from outside of this state;

    (2) Will have approved costs in excess of one million dollars $2.5 million, except that a small scale tourism development project must have approved costs in excess of $250,000 but not in excess of $2.5 million and that an ancillary tourism facilities development project must have approved costs in excess of $100,000 but not in excess of $1 million;

    (3) Will have a significant and positive economic impact on the state considering, among other factors, the extent to which the project will compete directly with or complement existing tourism attractions in the state and the amount by which increased tax revenues from the project will exceed the credit given to the approved company;

    (4) Will produce sufficient revenues and public demand to be operating and open to the public for a minimum of one hundred days per year; and

    (5) Will provide additional employment opportunities in the state.

    (e) The applicant for credit under section seven or seven-a of this article shall pay to the development office, prior to the engagement of the services of a competent consulting firm or firms pursuant to the provisions of subsection (d) of this section, for the cost of the consulting report or reports and shall cooperate with the consulting firm or firms to provide all of the data that the consultant considers necessary or convenient to make its determination under subsection (d) of this section. An applicant for credit under section seven-b of this article shall pay to the development office a fee of $1,000 per application. An applicant for credit under section seven-d of this article shall pay to the development office a fee of $500 per application. The fee shall be used by that office to reimburse costs of the small business development center, a division of the development office, to review the application and make a recommendation to the Executive Director of the Development Office under subsection (d) of this section.

    (f) The Executive Director of the Development Office, within sixty days following receipt of the consultant’s final, written report or reports, shall review, in light of the consultant’s report or reports, the reasonableness of the project’s budget and timetable for completion and, in addition to the criteria for final approval set forth in subsection (d) of this section, the following criteria:

    (1) The quality of the proposed project and how it addresses economic problems in the area in which the project will be located;

    (2) Whether there is substantial and credible evidence that the project is likely to be started and completed in a timely fashion;

    (3) Whether the project will, directly or indirectly, improve the opportunities in the area where the project will be located for the successful establishment or expansion of other industrial or commercial businesses;

    (4) Whether the project will, directly or indirectly, assist in the creation of additional employment opportunities in the area where the project will be located;

    (5) Whether the project helps to diversify the local economy;

    (6) Whether the project is consistent with the goals of this article;

    (7) Whether the project is economically and fiscally sound using recognized business standards of finance and accounting; and

    (8) The ability of the eligible company to carry out the project.

    (g) The development office may establish other criteria for consideration when approving the applications.

    (h) The Executive Director of the Development Office may give its final approval to the applicant’s application for a project and may grant to the applicant the status of an approved company. The Executive Director of the Development Office shall act to approve or not approve any application within sixty days following the receipt of the consultant’s final, written report or reports or the receipt of any additional information requested by the development office, whichever is later. The decision by the Executive Director of the Development Office is final.

§5B-2E-7a. Amount of credit allowed for tourism development expansion project; approved projects.

    (a) Approved companies are allowed a credit against the West Virginia consumers sales and service tax imposed by article fifteen, chapter eleven of this code and collected by the approved company on sales generated by or arising from the operations of the tourism development expansion project: Provided, That the tourism development expansion project tax credit allowed under this section is separate and distinct from any credit allowed for a tourism development project in accordance with the provisions of section seven of this article: Provided, however, That if the consumers sales and service tax collected by the approved company is not solely attributable to sales resulting from the operation of the tourism development expansion project, the credit shall only be applied against that portion of the consumers sales and service tax collected in excess of the base tax revenue amount. The amount of this credit is determined and applied as provided in this article.

    (b) The maximum amount of credit allowable in this article is equal to twenty-five percent of the approved company’s approved costs as provided in the agreement: Provided, That if the tourism development expansion project site is located within the permit area or an adjacent area of a surface mining operation, as these terms are defined in section three, article three, chapter twenty-two of this code, from which all coal has been or will be extracted prior to the commencement of the tourism development project, the maximum amount of credit allowable is equal to thirty-five percent of the approved company’s approved costs as provided in the agreement.

    (c) 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 project is opened to the public, unless the approved company elects to delay the beginning of the ten-year period until the next succeeding taxable year. This election shall be made in the first consumers sales and service tax return filed by the approved company following the date the project is opened to the public. Once made, the election cannot be revoked.

    (d) The amount determined under subsection (b) of this section is allowed as a credit against the consumers sales and service tax collected by the approved company on sales from the operation of the tourism development expansion project. The amount determined under said subsection may be used as a credit against taxes required to be remitted on the approved company’s monthly consumers sales and service tax returns that are filed pursuant to section sixteen, article fifteen, chapter eleven of this code. The approved company shall claim the credit by reducing the amount of consumers sales and service tax required to be remitted with its monthly consumers sales and service tax returns by the amount of its aggregate annual credit allowance until such time as the full current year annual credit allowance has been claimed. Once the total credit claimed for the tax year equals the approved company's aggregate annual credit allowance no further reductions to its monthly consumers sales and service tax returns will be permitted.

    (e) If any credit remains after application of subsection (d) of this section, the amount of credit is carried forward to each ensuing tax year until used or until the expiration of the third taxable year subsequent to the end of the initial ten-year credit application period. If any unused credit remains after the thirteenth year, that amount is forfeited. No carryback to a prior taxable year is allowed for the amount of any unused portion of any annual credit allowance.

    (f) The total amount of tourism development expansion project tax credits for all approved companies pursuant to this section may not exceed $1,500,000 each calendar year: Provided, That this cap shall be eliminated for calendar years beginning on or after January 1, 2013, for project applications approved by the development office after June 30, 2012.

§5B-2E-7b. Amount of credit allowed for small scale tourism development project; approved projects.

    (a) As used in this article, “small scale tourism development project” means a tourism development project as defined in section three of this article where the cost of the project will exceed $250,000 but will not exceed $2.5 million, except that a small scale tourism development project may include the construction, reconstruction or rehabilitation or expansion of a lodging facility where the project, as specifically set forth and defined in the application, consists of no more than thirty guest rooms, notwithstanding any other provision in this article to the contrary.

    (b) Approved companies are allowed a credit against the West Virginia consumers sales and service tax imposed by article fifteen, chapter eleven of this code and collected by the approved company on sales generated by or arising from the operations of the small scale tourism development project. A project that qualifies for the credit allowed by this section may not claim any credit under sections seven, seven-a or seven-d of this article. The amount of this credit is determined and applied as provided in this article.

    (c) The maximum amount of credit allowable in this article is equal to twenty-five percent of the approved company's approved costs as provided in the agreement: Provided, That if the small scale tourism development project site is located within the permit area or an adjacent area of a surface mining operation, as these terms are defined in section three, article three, chapter twenty-two of this code, from which all coal has been or will be extracted prior to the commencement of the tourism development project, the maximum amount of credit allowable is equal to thirty-five percent of the approved company's approved costs as provided in the agreement.

    (d) 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 project is opened to the public, unless the approved company elects to delay the beginning of the ten-year period until the next succeeding taxable year. This election shall be made in the first consumers sales and service tax return filed by the approved company following the date the project is opened to the public. Once made, the election cannot be revoked.

    (e) The amount determined under subsection (c) of this section is allowed as a credit against the consumers sales and service tax collected by the approved company on sales from the operation of the small scale tourism development project. The amount determined under that subsection may be used as a credit against taxes required to be remitted on the approved company’s monthly consumers sales and service tax returns that are filed pursuant to section sixteen, article fifteen, chapter eleven of this code. The approved company shall claim the credit by reducing the amount of consumers sales and service tax required to be remitted with its monthly consumers sales and service tax returns by the amount of its aggregate annual credit allowance until such time as the full current year annual credit allowance has been claimed. Once the total credit claimed for the tax year equals the approved company’s aggregate annual credit allowance no further reductions to its monthly consumers sales and service tax returns will be permitted.

    (f) If any credit remains after application of subsection (e) of this section, the amount of credit is carried forward to each ensuing tax year until used or until the expiration of the third taxable year subsequent to the end of the initial ten-year credit application period. If any unused credit remains after the thirteenth year, that amount is forfeited. No carryback to a prior taxable year is allowed for the amount of any unused portion of any annual credit allowance.

    (g) The total amount of small scale tourism development project tax credits for all approved companies pursuant to this section may not exceed $1.5 million each calendar year.

    (h) The company approved to claim the small scale tourism development project credit allowed by this section shall be subject to the forfeiture of unused tax credit provisions and the recapture tax provision of section eight of this article. Additionally, the approved company is required to submit to the development office the information required by section eight of this article and may transfer the credit allowed by this section to a successor business subject to the rules provided in section eight of this article.

§5B-2E-7c. Computation and allowance of credit for multi phase, multi year projects; sales tax presumption.

    (a) When an approved project, whether an original project or an expansion project, will be completed in two or more phases over a period of forty-eight months or less, with such period computed beginning with the month in which construction first began, and the phases have separate completion dates and separate dates on which they will be open to the public, the baseline consumers sales and service tax collections for that approved destination tourism development project shall be the taxes collected during the twelve month period immediately preceding the month in which the first phase of the approved project is open to the public. The amount of the credit, allowed by this article shall be twenty-five percent of the cost of the first phase applied in equal installments over a ten-year period, and shall be applied against the additional consumers sales and service taxes collected over the baseline collections during the ten-year period that begins on the first day of the calendar month in which the first phase of the project is first open to the public. When each subsequent phase of the approved project is completed and is opened to the public, twenty-five percent of the cost of that phase of the project shall constitute the amount of credit that may be claimed over a ten-year period that begins on the first day of the calendar month in which that phase is open to the public. In determining the amount of sales tax that the project may retain, the baseline sales tax collections applicable to the first phase of the project shall be used for all phases of the approved project.

    (b) For purposes of this article, it shall be presumed that the owners or lessees of the project collect and remit consumers sales and service taxes on a calendar year basis, with the annual return for the calendar year filed at the end of January following the close of the sales tax year as required by section twenty-one, article fifteen, chapter eleven of this code.

§5B-2E-7d. Amount of credit allowed for ancillary tourism facilities development project; approved projects.

    (a) The following words and terms used in this section shall have the meanings ascribed in this section:

    (1) “Ancillary tourism facilities development project” means the acquisition, including the acquisition of real estate by a leasehold interest with a minimum of ten years, construction, expansion and/or equipping of a new or existing facility located at or near an existing tourism attraction that exists for the sole purpose of providing recreational, entertainment or lodging for use by tourists, as specifically set forth and defined in the application, where the cost of the project will exceed $100,000 but will not exceed $1 million: Provided, That an ancillary tourism facilities development project does not include the construction, reconstruction, rehabilitation or expansion of a lodging facility with more than thirty guest rooms, notwithstanding any other provision in this article to the contrary. All ancillary tourism facilities development projects shall be in accordance with the applicable county ancillary tourism facilities development plan.

    (2) “County ancillary tourism facilities development plan” means a comprehensive ancillary tourism facilities development plan developed by the local economic development organization designated as the lead entity for economic development by the county commission of the county in which the ancillary tourism facilities development project will be located, as revised, amended or supplemented, from time to time, by the local development organization. Any such plan or plans shall be based on studies of governmental, social, economic, environmental and physical conditions and trends and shall aim at the coordinated development of ancillary tourism facilities in the county in order to promote the general health, welfare, convenience and prosperity of its people through the encouragement and development of tourism facilities that support existing tourism attractions by attracting individuals who are not residents of the state into a geographical area in which travel was not planned or will extend the stay of travelers who are not residents of the state in an area in which travel has been planned. The plan or plans, or parts thereof, shall be prepared by persons appropriately qualified under state statutes dealing with the applicable profession or occupation. The plan or plans shall be submitted for review and approval by the Secretary of Commerce prior to adoption by the local economic development organization designated as the lead entity for economic development activities by the county commission of the county in which the ancillary tourism facilities development project will be located.

    (b) In addition to the requirements set forth in section five of this article, an ancillary tourism facilities development project shall demonstrate in its application the ability to either attract individuals who are not residents of the state into a geographical area in which travel was not planned or will extend the stay of travelers who are not residents of the state in an area in which travel has been planned.

    (c) Approved companies are allowed a credit against the West Virginia consumers sales and service tax imposed by article fifteen, chapter eleven of this code and collected by the approved company on sales generated by or arising from the operations of the ancillary tourism facilities development project. A project that qualifies for the credit allowed by this section may not claim any credit under section seven, seven-a or seven-b of this article. The amount of this credit is determined and applied as provided in this article.

    (d) The maximum amount of credit allowable in this article is equal to twenty-five percent of the approved company's approved costs as provided in the agreement: Provided, That if the ancillary tourism facilities development project site is located within the permit area or an adjacent area of a surface mining operation, as these terms are defined in section three, article three, chapter twenty-two of this code, from which all coal has been or will be extracted prior to the commencement of the tourism development project, the maximum amount of credit allowable is equal to thirty-five percent of the approved company’s approved costs as provided in the agreement: Provided, however, That if the ancillary tourism facilities development project involves the restoration or rehabilitation of a structure that is listed individually in the National Register of Historic Places or is located in a National Register Historic District and certified by the State Historic Preservation Officer as contributing to the historic significance of the district and the rehabilitation or restoration project has been approved in advance by the State Historic Preservation Officer, the maximum amount of credit allowable is equal to fifty percent of the approved company’s approved costs as provided in the agreement.

    (e) 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 project is opened to the public, unless the approved company elects to delay the beginning of the ten-year period until the next succeeding taxable year. This election shall be made in the first consumers sales and service tax return filed by the approved company following the date the project is opened to the public. Once made, the election cannot be revoked.

    (f) The amount determined under subsection (d) of this section is allowed as a credit against the consumers sales and service tax collected by the approved company on sales from the operation of the ancillary tourism facilities development project. The amount determined under said subsection may be used as a credit against taxes required to be remitted on the approved company’s monthly consumers sales and service tax returns that are filed pursuant to section sixteen, article fifteen, chapter eleven of this code. The approved company shall claim the credit by reducing the amount of consumers sales and service tax required to be remitted with its monthly consumers sales and service tax returns by the amount of its aggregate annual credit allowance until such time as the full current year annual credit allowance has been claimed. Once the total credit claimed for the tax year equals the approved company’s aggregate annual credit allowance, no further reductions to its monthly consumers sales and service tax returns will be permitted.

    (g) If any credit remains after application of subsection (f) of this section, the amount of credit is carried forward to each ensuing tax year until used or until the expiration of the third taxable year subsequent to the end of the initial ten-year credit application period. If any unused credit remains after the thirteenth year, that amount is forfeited. No carryback to a prior taxable year is allowed for the amount of any unused portion of any annual credit allowance.

    (h) The total amount of ancillary tourism facilities development project tax credits for all approved companies pursuant to this section may not exceed $500,000 each calendar year.

    (i) The company approved to claim the ancillary tourism facilities development project tax credit allowed by this section shall be subject to the forfeiture of unused tax credit provisions and the recapture tax provision of section eight of this article. Additionally, the approved company shall be required to submit to the development office the information required by section eight of this article and shall be allowed to transfer the credit allowed by this section to a successor business subject to the rules provided in section eight of this article.



    NOTE: The purpose of this bill is to amend the Tourism Development Act by adding a small scale tourism development component and credit to the Act; by removing the cap on the amount of annual credit that may be awarded for destination tourism expansion projects approved after June 30, 2012; by providing a rule for determining the amount of allowable credit when an approved project is a multi-year, multi-phase project, including a presumption that consumers sales and service tax is collected on calendar year basis; and by adding an ancillary tourism facilities development component and credit.


    Strike-throughs indicate language that would be stricken from the present law, and underscoring indicates new language that would be added.


    §5B-2E-7b, §5B-2E-7c and §5B-2E-7d are new; therefore, strike-throughs and underscoring have been omitted.

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