H. B. 4024


(By Mr. Speaker, Mr. Chambers, and Delegate Burk)
(By Request of the Executive)
[Introduced January 14, 1993; referred to the
Committee on Finance.]



A BILL to amend chapter eleven of the code of West Virginia, one thousand nine hundred thirty-one, as amended, by adding thereto a new article, designated article thirteen-j, relating to the creation of a tax credit and defrayment allowance for costs of relocating a corporate commercial domicile from a location outside this state to a location in this state on or after the first day of July, one thousand nine hundred ninety-four, and for costs of relocating all or part of the operations of a corporation domiciled in West Virginia from a location in this state to another location in this state for the purpose of expanding the operations so relocated; setting forth legislative findings; specifying definitions; providing procedures for determining and allowing of the credit and defrayment allowance; specifying application of the credit; specifying restrictions and limitations on the credit; setting forth methods for apportionment of tax liabilities against which the credit is allowed; prescribing a property factor; prescribing a payroll factor; prescribing a combined property and payroll factor; specifying a ten-year credit application period; specifying that there shall be no credit carryover beyond the specified ten-year period; specifying a required application for credit to be filed with the tax commissioner; prescribing treatment of resident taxpayers which establish corporate commercial domicile; specifying penalty for failure to file the applications for credit; providing an absolute limitation for the amount of total credit certified for all taxpayers in the aggregate in any one fiscal year shall not exceed a total of one million dollars; limiting application of the credit to West Virginia domiciliaries; providing for transfer of credit to successors in business; requiring identification of property transferred into West Virginia or transferred within West Virginia for taxpayers which claim the credit; setting forth mandated interpretation and construction to be applied to the article and providing a severability clause.
Be it enacted by the Legislature of West Virginia:

That chapter eleven of the code of West Virginia, one thousand nine hundred thirty-one, as amended, be amended by adding thereto a new article, designated article thirteen-j, to read as follows:
ARTICLE 13J. CORPORATE COMMERCIAL RELOCATION TAX CREDIT.

§ 11-13J-1. Legislative finding.

The Legislature finds that the establishment by relocation of corporate commercial domiciles in this state by business and industry and expansion by relocation of domestic business and industry is conducive to economic development and the expansion, growth and improvement of the economy of the state, and that such expansion, growth and improvement are in the public interest, and promote the general welfare of the people of this state.

In order to encourage the establishment of corporate commercial domiciles in the state by business and industry, and the expansion of business and industry by relocation, there is hereby established the Corporate Commercial Relocation Tax Credit.
§ 11-13J-2. Definitions.

(a) Any term used in this article shall have the same meaning as when used in a comparable context in article twenty-four of this chapter, unless a different meaning is clearly required by the context of its use or by definition in this article.

(b) For purposes of this article, the following definitions apply:
(1) Corporation - - The term "corporation" means and includes a joint-stock company and any association or other organization which is taxable as a corporation under the federal income tax law.
(2) Eligible taxpayer --
(A) The term "eligible taxpayer" means a corporation which has relocated all or a portion of its business from a location outside this state to a location in this state on or after the first day of July, one thousand nine hundred ninety-four, and which has become a taxpayer, as herein defined, and which otherwise qualifies for the tax credit authorized under this article. The term "eligible taxpayer" includes an affiliated group of corporations which elects to file a consolidated, unitary or combined tax return under article twenty-four of this chapter, which group contains at least one corporation which has relocated all or a portion of its business from a location outside this state to a location in this state on or after the first day of July, one thousand nine hundred ninety-four, and which has become a taxpayer, as herein defined, and which otherwise qualified for the tax credit authorized under this article.
(B) The term "eligible taxpayer" also means a corporation which has established all or a portion of its business in this state and which, on or after the first day of July, one thousand nine hundred ninety-four, has relocated all or part of its operations from a location in this state to another location in this state for the purpose of expanding the operations so relocated.
(3) Employee -- The term "employee" means and is limited to a natural person subject to the West Virginia personal income tax under article twenty-one of this chapter and residing and domiciled in this state, hired by a taxpayer to fill a full-time or part-time job.
(4) Natural person -- The term "natural person" means a human being.
(5) Person -- The term "person" means and includes a legal or natural person and is deemed interchangeable with the term "corporation" for purposes of this article.
(6) Reasonable and necessary expenses incurred to relocate a corporate commercial domicile or operation -- The term "reasonable and necessary expenses incurred to relocate a corporate commercial domicile or operation" means only those expenses incurred and paid to unrelated third parties by a corporation which becomes an eligible taxpayer to move that corporation's corporate commercial domicile into this state from a location outside this state, or to relocate all or part of its operations from a location in this state to another location in this state for the purpose of expanding the operations so relocated; which expenses are, upon application by the corporation, determined by the tax commissioner to have been both reasonable and necessary to effectuate the relocation. In no case shall the term "reasonable and necessary expenses incurred to relocate a corporate commercial domicile or operation" include any capital investment in land, buildings, equipment or inventory in this state or any other state; nor shall the term include any expenses incurred in this state or any other state to "butt out," terminate, accelerate, relieve or otherwise alter or liquidate any liability or obligation under any lease of realty or personal property, or any supply contract or any other express or implied legal obligation or contract or any use, custom or course of dealing; which supply contract, obligation, contract, use, custom or course of dealing was preexistent prior to the relocation and unrelated to the relocation. The term "reasonable and necessary expenses incurred to relocate a corporate commercial domicile or operation" shall not include any expense incurred to directly or indirectly pay or reimburse the cost of relocation of any former, current or prospective owner, officer or employee of any corporation which becomes an eligible taxpayer, or the cost of any temporary or permanent housing for any such owner, officer or employee.
(7) State -- The term "state" means any state of the United States, the District of Columbia, the Commonwealth of Puerto Rico, any territory or possession of the United States, and any foreign country or political subdivision thereof.
(8) Taxable year -- The term "taxable year" means the taxable year for which the taxable income of the taxpayer is computed under the federal income tax.
(9) Tax commissioner -- The term "tax commissioner" means the tax commissioner of the state of West Virginia or the delegate of the tax commissioner.
(10) Taxpayer - - The term "taxpayer" means any person subject to the tax imposed by article twenty-four of this chapter.
(11) This code -- The term "this code" means the code of West Virginia, one thousand nine hundred thirty-one, as amended.
(12) This state -- The term "this state" means and shall be limited to the State of West Virginia.
§ 11-13J-3. Credit allowed for corporate relocation.

(a) Credit allowed. -- An eligible taxpayer shall be allowed a credit under this article, the amount of which shall be determined as provided in subsection (b) of this section.

(b) Determination of credit. -- The amount of credit allowed by subsection (a) of this section shall be an amount not to exceed the reasonable and necessary expenses incurred to relocate a corporate commercial domicile from a location outside this state to a location in this state or a corporate business operation from a location in this state to another location in this state for the purpose of expansion.
(c) Application of credit. -- The credit allowed by this article shall be applied over a period not to exceed ten consecutive years:
(1) Against up to one hundred percent of that portion of the eligible taxpayer's annual liability for the West Virginia business franchise tax imposed under article twenty-three of this chapter attributable to that portion of the eligible taxpayer's operations resulting from relocation of its corporate commercial domicile from a location outside this state to a location in this state, or attributable to relocation of a business operation from a location within this state to another location within this state for the purpose of expansion.
(2) If any credit remains after application as authorized in subdivision (1) of this subsection, against up to one hundred percent of that portion of the eligible taxpayer's annual liability for the West Virginia corporation net income tax imposed under article twenty-four of this chapter attributable to that portion of the eligible taxpayer's operations resulting from relocation of its corporate commercial domicile from a location outside this state to a location in this state or attributable to relocation of a business operation from a location within this state to another location within this state for the purpose of expansion.
(3) Credit defrayment allowance --
(A) If the sum of the amounts offset under subdivisions (1) and (2) of this subsection is less than thirty percent of that portion of the amount of tax withheld under article twenty-one of this chapter from employees of the eligible taxpayer during the taxable year which is attributable to the portion of the operations relocated to this state from a location outside this state, or attributable to the portion of operations resulting from an expansion undertaken pursuant to a relocation of a business operation from a location within this state for the purpose of expansion, then the eligible taxpayer may apply to this state, by filing an application form to be prescribed by the tax commissioner, for a payment of a further amount of this credit, which amount shall be the difference between the sum of the amounts offset under subdivisions (1) and (2) of this subsection is less than thirty percent of that portion of the amount of tax withheld under article twenty-one of this chapter from employees of the eligible taxpayer during the taxable year which is attributable to the portion of the operations relocated to this state from a location outside this state, or attributable to the portion of operations resulting from an expansion undertaken pursuant to a relocation of a business operation from a location within this state to another location within this state for the purpose of expansion. This payment shall be paid to the eligible taxpayer out of the general fund in the manner of a refund of a tax overpayment.
(B) The application for this payment shall be filed no later than the last day of the due date, without extensions, for filing the tax return required under article twenty-four of this chapter for the taxable year, and all information required by the prescribed form shall be provided.
(C) That portion of the amount of tax withheld under article twenty-one of this chapter from employees of the eligible taxpayer during the taxable year which is attributable to the portion of the operations relocated to this state from a location outside this state, or attributable to the portion of operations resulting from an expansion undertaken pursuant to a relocation of a business operation from a location within this state for the purpose of expansion shall be determined by multiplying the total amount of tax withheld under article twenty-one of this chapter from employees of the eligible taxpayer during the taxable year by the payroll factor prescribed in section three of this article.
§ 11-13J-4. Restrictions and limitations on credits allowed by this article.

(a) The amount of credit allowed under this article shall be limited to the greater of:

(1) One hundred percent of the tax liability for the tax imposed on the eligible taxpayer under articles twenty-three and twenty-four of this chapter attributable to the portion of the operations relocated to this state from a location outside this state, or the portion of operations resulting from an expansion undertaken pursuant to a relocation of a business operation from a location within this state to another location within this state for the purpose of expansion, or
(2) Thirty percent of the portion of annual tax withheld from employees of an eligible taxpayer under article twenty-one of this chapter which is attributable to the portion of the operations relocated to this state from a location outside this state, or the portion of operations resulting from an expansion undertaken pursuant to a relocation of a business operation from a location within this state to another location within this state for the purpose of expansion.
(b) Apportionment. - - That portion of the eligible taxpayer's operations resulting from relocation of its corporate commercial domicile from a location outside this state to a location in this state or relocation of a business operation from a location within this state to another location within this state for the purpose of expansion shall consist only of that portion of the annual tax liability under each of the said articles twenty-three and twenty-four of this chapter, which is attributable to the operations of the eligible taxpayer, the corporate commercial domicile of which was relocated to this state, or the operations of which were relocated from a location within this state to another location within this state for the purpose of expansion; based upon apportionment of the said annual tax liabilities of the eligible taxpayer using a combined payroll and property apportionment factor.
(1) The property factor shall be a fraction:
(A) The numerator of which is the value of property of the eligible taxpayer which was relocated from outside this state to a location in this state, or in the case of operations which were relocated from a location within this state to another location within this state for the purpose of expansion, the value of property so relocated; and
(B) The denominator of which is all property of the eligible taxpayer.
The value of property for purposes of this property factor shall be original cost.
(2) The payroll factor shall be a fraction:
(A) The numerator of which is the annual payroll of employees of the eligible taxpayer which is attributable to the relocation of the corporate commercial domicile from a location outside of this state to a location in this state, or, in the case of an eligible taxpayer, the operations of which were relocated from a location within this state to another location within this state for the purpose of expansion; the increase in payroll attributable to the expanded operations so relocated over the last annual payroll for the operations so relocated prior to the relocation; and
(B) The denominator of which is all payroll of the eligible taxpayer.
(3) The combined property and payroll factor shall be a fraction:
(A) The numerator of which shall be the sum of the property factor, as determined under subdivision (2) of this subsection, and the payroll factor, as determined under subdivision (2) of this subsection; and
(B) The denominator of which shall be two.
(c) Ten year credit application period; no carryover of credit. - - The credit allowed under this article shall be applied for a period not to exceed ten consecutive tax years, beginning in the first tax year when the relocation of a corporate commercial domicile or operation of an eligible taxpayer began. Any amount of credit remaining after the expiration of such ten consecutive tax years shall be forfeited, and shall not carry over to any other taxable year.
(d) Establishment of corporate commercial domicile by a resident taxpayer. -- In the case of a taxpayer which had preexisting operations or property in this state prior to the relocation of its corporate commercial domicile to this state, and which relocates tangible personal property from a location outside this state to a location inside this state, thus establishing its corporate commercial domicile in this state by exceeding the requirement that more than fifty percent of the payroll and property of the corporation be West Virginia payroll and West Virginia property, that eligible taxpayer shall be treated as a taxpayer which has relocated operations within this state from a location in this state to another location in this state for the purpose of expansion.
(e) Application for credit required. -- No credit shall be allowed or applied under this article for any taxpayer until the person asserting a claim for the allowance of such credit makes written application to the tax commissioner for allowance of credit and receives written certification of the application from the tax commissioner. The application for credit shall be filed no later than the last day of the due date, without extensions, for filing the tax return required under article twenty-four of this chapter for the taxable year in which the corporate commercial domicile relocation or relocation of operations was completed, and all information required by the tax commissioner's prescribed form shall be provided.
(f) Failure to file. -- The failure to timely apply for the credit shall result in forfeiture of the credit otherwise allowable under this article.
(g) Absolute limitation. -- Total credit certified for all taxpayers in the aggregate in any one year shall not exceed a total of one million dollars.
(h) Credit limited to domiciliaries. -- This credit shall not be allowed to any person or taxpayer which has not established its corporate commercial domicile in this state prior to applying for this credit.
§ 11-13J-5. Transfer of credit to successors.

The amount of credit that remains available to an eligible taxpayer at the time of a transfer, merger, acquisition or asset purchase, where substantially all operations relocated in this state are transferred to a successor which carries on with those operations, shall be transferred to the successor in business from the original predecessor eligible taxpayer on the date of transfer, merger, acquisition or asset purchase.

The amount of time remaining at the time of transfer, merger, acquisition or asset purchase over which the predecessor eligible taxpayer could have applied its remaining credit shall be the time over which the successor may apply the credit acquired. In no case shall transferred credit be applied over a period extending longer than the remaining time period applicable to the original eligible taxpayer, and in no case shall the amount of credit applied exceed the credit remaining and available to a predecessor at the time of transfer.
§ 11-13J-6. Identification of property transferred into the state of West Virginia from a location outside this state by an eligible taxpayer or of property of a business operation relocated from a location within this state to another location within this state for the purpose of expansion.

Every taxpayer which claims credit under this article shall maintain sufficient records to establish the identity of property transferred to the new location.

§ 11-13J-7. Interpretation and construction.

(a) No inference, implication or presumption of legislative construction or intent shall be drawn or made by reason of the location or grouping of any particular section, provision, or portion of this article; and no legal effect shall be given to any descriptive matter or heading relating to any section, subsection or paragraph of this article.

(b) The provisions of this article shall be strictly construed, and the person claiming entitlement to the credit allowed under this article shall bear the burden of proving any claim of such entitlement.
§ 11-13J-8. Severability.

(a) If any provision of this article or the application thereof shall for any reason be adjudged by any court of competent jurisdiction to be invalid, such judgment shall not affect, impair or invalidate the remainder of the said article, but shall be confined in its operation to the provision thereof directly involved in the controversy in which such judgment shall have been rendered, and the applicability of such provision to other persons or circumstance shall not be affected thereby.

(b) If any provision of this article or the application thereof shall be made invalid or inapplicable by reason of the failure of the Legislature to enact any statute therein addressed or referred to, or by reason of the repeal or any other invalidation of any statute therein addressed or referred to, such failure to reenact on such repeal or invalidation of any such statute shall not affect, impair or invalidate the remainder of the said article, but shall be confined in its operation to the provision thereof directly involved with, pertaining to, addressing or referring to the said statute, and the application of such provision with regard to other statutes or in other instances not affected by any such invalid or repealed statute shall not be abrogated or diminished in any way.



NOTE: The purpose of this bill is to create the corporate commercial relocation tax credit, a tax credit to promote the relocation of corporate commercial domiciles from locations outside the State of West Virginia to locations in the State of West Virginia, and to promote the relocation of corporate operations from one location in the State of West Virginia to another location within the State of West Virginia for the purpose of expanding operations in the State of West Virginia. The credit would apply against 100% of the West Virginia business franchise tax attributable to relocation, and against 100% of the West Virginia corporation net income tax attributable to relocation, and would, in addition, provide a direct payment out of the general fund to corporations entitled to the credit in the amount of the excess of 30% of the personal income tax withholdings of the employees of the corporation over the amount of the business franchise tax and corporation net income tax offset by the credit.

Article 13J is new; therefore, strike-throughs and underscoring have been omitted.