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Introduced Version Senate Bill 724 History

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Senate Bill No. 724

(By Senators Bailey, Plymale, Jenkins and Helmick)

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[Introduced March 21, 2005; referred to the Committee

on Finance.]

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A BILL to amend the Code of West Virginia, 1931, as amended, by adding thereto a new article, designated §11-13V-1, §11-13V-2, §11-13V-3, §11-13V-4, §11-13V-5, §1-13V-6, §11-13V-7, §11-13V-8 and §11-13V-9, all relating to establishing a railroad track maintenance tax credit for the expenditure by railroads of maintaining and repairing railroad tracks in West Virginia.

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 §11-13V-1, §11-13V-2, §11-13V-3, §11-13V-4, §11-13V-5, §1-13V-6, §11-13V-7, §11-13V-8 and §11-13V-9, all to read as follows:

ARTICLE 13V. MAINTENANCE OF RAILROAD TRACK CREDIT.

11-13V-1. Short title.

This article may be cited as the "West Virginia Railroad Track
Maintenance Tax Credit Act".
§11-13V-2. Legislative findings and purpose.

The Legislature finds that the encouragement of the maintenance, expansion, growth and revitalization of railroad tracks in this state is in the public interest and promotes the general welfare of the people of this state.

§11-13V-3. Definitions.

(a) Any term used in this article has the meaning ascribed by this section, unless a different meaning is clearly required by the context of its use or by definition in this article.
(b) For the purpose of this article, the term:
(1) 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.
(2) 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.
(3) Eligible taxpayer. -- The term "eligible taxpayer" means:
(A) Any Class I, Class II, or Class III railroad, as these terms are defined by the Surface Transportation Board; and
(B) Any person who transports property using the rail facilities of a person described in paragraph (A) or who furnishes railroad-related property or services to such a person. "Eligible taxpayer" shall also include 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.
(4) Includes and including. -- The terms "includes" and "including," when used in a definition contained in this article, shall not be deemed to exclude other things otherwise within the meaning of the term defined.
(5) 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 deducting the lease payments for federal income tax purposes, the property shall be treated as purchased property under this section.
(6) 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 organization.
(7) Person. -- The term "person" includes any natural person, corporation or partnership.
(8) Qualified railroad track maintenance expenditures. -- The term "qualified railroad track maintenance expenditures" means expenditures (whether or not otherwise chargeable to capital account) for maintaining railroad track (including roadbed, bridges, and related track structures) owned or leased on or after the first day of July, two thousand six, in this state by a Class I, Class II or Class III railroad. The term "qualified railroad track maintenance expenditures" does not include administrative costs.
(9) 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).
§11-13V-4. Amount of credit allowed for railroad track maintenance.

(a) Credit allowed. -- There is allowed to eligible taxpayers a credit against the taxes imposed by article twenty-three of this chapter. The amount of credit shall be determined as hereinafter provided in this section.
(b) Amount of credit allowable. -- The amount of credit allowable is equal to twenty-five percent of the qualified railroad track maintenance expenditures paid or incurred by an eligible taxpayer during the taxable year, and shall reduce the business franchise tax imposed under article twenty-three of this chapter, subject to the following conditions and limitations:
(1) Business franchise tax. -- The credit is 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).
(2) Limitation. -- The credit allowed under subsection (a) for any taxable year shall not exceed the product of one thousand dollars, and the number of miles of railroad track (including roadbed, bridges and related track structures) owned or leased by the taxpayer in this state as of the close of the taxable year.
(3) Phase-in of credit. -- The amount of credit allowed under subsection (b) of section 4 of article 13V of chapter 11 shall be further limited as follows:
For tax years of the taxpayer beginning on or after the first day of January, two thousand six, the credit is limited to fifty percent of the amount of credit otherwise allowable.
For tax years of the taxpayer beginning on or after the first day of January, two thousand seven, the credit is limited to sixty percent of the amount of credit otherwise allowable.
For tax years of the taxpayer beginning on or after the first day of January, two thousand eight, the credit is limited to seventy percent of the amount of credit otherwise allowable.
For tax years of the taxpayer beginning on or after the first day of January, two thousand nine, the credit is limited to eighty percent of the amount of credit otherwise allowable.
For tax years of the taxpayer beginning on or after the first day of January, two thousand ten, the credit is limited to ninety percent of the amount of credit otherwise allowable.
For tax years of the taxpayer beginning on or after the first day of January, two thousand eleven, the credit is limited to one hundred percent of the amount of credit otherwise allowable.
(4) Pass-through entities. -- If the eligible taxpayer is a limited liability company, small business corporation or a partnership, then any unused credit (after application of subdivision (2) 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.
(5) Small business corporations. -- Limited liability companies, partnerships and other unincorporated organizations shall allocate any unused credit (after application of subdivision (2) of this subsection) among their members in the same manner as profits and losses are allocated for the taxable year.
(6) No credit is allowed under this article against any tax imposed by article twenty-one of this chapter.
(c) No carry-over to a subsequent taxable year or carry back to a prior taxable year is allowed for the amount of any unused portion of any annual credit allowance. Such 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 railroad track maintenance expenditures 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. 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-three of this chapter for the taxable year in which the qualified railroad track maintenance expenditures are incurred.
(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 application is filed.
§11-13V-5. Forfeiture of tax credits.
Disposition of property or cessation of use. -- If during any taxable year, property with respect to which a tax credit has been allowed under this article:
(a) Is disposed of prior to the end of the taxable year; or
(b) Ceases to be used in an industrial facility of the taxpayer in this state prior to the end of the taxable year, then the taxpayer is only allowed a credit for qualified railroad track maintenance expenditures incurred prior to the date of the disposition of the property or the cessation of its use.
§11-13V-6. Transfer of railroad track to successors.
(a) Mere change in form of business. -- Property may not be treated as disposed of under section five of this article, by reason of a mere change in the form of conducting the business as long as the property is retained in a business in this state for use in the activity of railroad transportation in West Virginia, and the taxpayer retains a controlling interest in the successor business. In this event, the successor business is allowed to claim the amount of credit still available with respect to the property or industrial facility transferred, and the taxpayer (transferor) may not be required to redetermine the amount of credit allowed in earlier years.
(b) Transfer or sale to successor. -- Property will not be treated as disposed of under section five of this article by reason of any transfer or sale to a successor business which continues to use the property in railroad transportation in West Virginia. Upon transfer or sale, the successor shall be allowed a credit for qualified railroad track maintenance expenditures incurred on or after the transfer or sale, and the taxpayer (transferor) shall not be required to redetermine the amount of credit allowed in earlier years.
§11-13V-7. Identification of qualified railroad track maintenance expenditures.

Every taxpayer who claims credit under this article shall maintain sufficient records to establish each amount of qualified railroad track maintenance expenditures.
§11-13V-8. Failure to keep records of qualified railroad track maintenance expenditures.

A taxpayer who does not keep the records required for qualified railroad track maintenance expenditures, is subject to the following rules:
(a) A taxpayer is treated as having not incurred any qualified railroad track maintenance expenditures; and
(b) If a taxpayer cannot establish when qualified railroad track maintenance expenditures reported for purposes of claiming this credit returned during the taxable year were incurred, the taxpayer is treated as having incurred the expenditures in the most recent prior year in which similar expenditures were incurred.
§11-13V-9. Tax credit review and accountability.
(a) Beginning on the first day of February, two thousand ten, and on the first day of February every third year thereafter, the Commissioner shall submit to the Governor, the President of the Senate and the Speaker of the House of Delegates a tax credit review and accountability report evaluating the cost effectiveness of the credit allowed under this article during the most recent three-year period for which information is available. The criteria to be evaluated includes, but is not limited to, for each year of the three-year period:
(1) The numbers of taxpayers claiming the credit; and
(2) The cost of the credit.
(b) Taxpayers claiming the credit shall provide 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.


Note: The purpose of this bill is to establish a railroad track maintenance tax credit for the expenditure by railroads of maintaining and repairing railroad track in West Virginia. The new credit would apply against the Business Franchise Tax.

This article is new; therefore, strike-throughs and underscoring have been omitted.
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