COMMITTEE SUBSTITUTE

FOR

Senate Bill No. 357

(By Senators Boley and Burdette, Mr. President)

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[Originating in the Committee on Finance;

reported February 25, 1994.]

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A BILL to amend and reenact sections two-d, two-m and two-n, article thirteen, chapter eleven of the code of West Virginia, one thousand nine hundred thirty-one, as amended, relating to state business and occupation taxes; exempting from certain of those taxes the gross income received by electric power generating plants owned by municipalities incorporated under the laws of this state; and exempting from those taxes kilowatt hours of electricity generated and sold, or purchased and resold, by plants owned by municipalities incorporated under the laws of this state.

Be it enacted by the Legislature of West Virginia:
That sections two-d, two-m and two-n, article thirteen, chapter eleven of the code of West Virginia, one thousand nine hundred thirty-one, as amended, be amended and reenacted to read as follows:
ARTICLE 13. BUSINESS AND OCCUPATION TAX.

§11-13-2d. Public service or utility business.

(a) Upon any person engaging or continuing within this state in any public service or utility business, except railroad, railroad car, express, pipeline, telephone and telegraph companies, water carriers by steamboat or steamship and motor carriers, the tax imposed by section two of this article shall be equal to the gross income of the business derived from such activity or activities multiplied by the respective rates as follows:
(1) Street and interurban and electric railways, one and four-tenths percent;
(2) Water companies, four and four-tenths percent, except as to income received by municipally-owned water plants;
(3) Electric light and power companies, four percent on sales and demand charges for domestic purposes and commercial lighting and four percent on sales and demand charges for all other purposes, and except as to income received by plants that are owned by municipalities incorporated under the laws of this state and which produce or purchase electricity and distribute the same: Provided, That electric light and power companies which engage in the supplying of public service but which do not generate or produce in this state the electric power they supply shall be taxed on the gross income derived from sales of power which they do not generate in this state at the rate of three percent on sales and demand charges for domestic purposes and commercial lighting and three percent on sales and demand charges for all other purposes, except as to income received by plants owned by municipalities incorporated under the laws of this state: Provided, however, That the sale of electric power underthis section shall be taxed at the rate of two percent on that portion of the gross proceeds derived from the sale of electric power to a plant location of a customer engaged in a manufacturing activity, if the contract demand at such plant location exceeds two hundred thousand kilowatts per hour per year, or if the usage of such plant location exceeds two hundred thousand kilowatts per hour in a year: Provided further, That the sale of electric power under this section shall be exempt from the tax imposed by this section and section two of this article if it is separately metered and consumed in an electrolytic process for the manufacture of chlorine in this state, or is separately metered and consumed in the manufacture of ferroalloy in this state, and the rate reduction herein provided to the taxpayer shall be passed on to the manufacturer of the chlorine or ferroalloy. As used in this section, the term "ferroalloy" means any of various alloys of iron and one or more other elements used as a raw material in the production of steel: And provided further, That the term does not include the final production of steel;
(4) Natural gas companies, four and twenty-nine hundredths percent on the gross income: Provided, That the sale of natural gas under this section shall be exempt from the tax imposed by this section and section two of this article to the extent that the natural gas is separately metered and is gas from which the purchaser derives hydrogen and carbon monoxide for use in the manufacture of chemicals in this state and the full economic benefit of the exception herein provided to the taxpayer shall be passed on to such purchaser of the natural gas: Provided,however, That there shall be no exemption for the sale of any natural gas from which the purchaser derives carbon monoxide or hydrogen for the purpose of resale;
(5) Toll bridge companies, four and twenty-nine hundredths percent; and
(6) Upon all other public service or utility business, two and eighty-six hundredths percent.
(b) The measure of this tax shall not include gross income derived from commerce between this state and other states of the United States or between this state and foreign countries. The measure of the tax under this section shall include only gross income received from the supplying of public service. The gross income of the taxpayer from any other activity shall be included in the measure of the tax imposed upon such other activity by the appropriate section or sections of this article.
(c) Beginning the first day of March, one thousand nine hundred eighty-nine, electric light and power companies shall determine their liability for payment of tax under this section and sections two-m and two-n of this article. If for taxable months beginning on or after the first day of March, one thousand nine hundred eighty-nine, liability for tax under section two-n of this article is equal to or greater than the sum of the power company's liability for payment of tax under subdivision (3), subsection (a) of this section and section two-m of this article, then the company shall pay the tax due under section two-n of this article and not the tax due under subdivision (3), subsection (a) of this section and section two-m of this article. If tax liability under section two-n of this article is less,then tax shall be paid under subdivision (3), subsection (a) of this section and section two-m of this article and the tax due under section two-n of this article shall not be paid. The provisions of subdivision (3), subsection (a) of this section shall expire and become null and void for taxable years beginning on or after the first day of January, one thousand nine hundred ninety-eight.
§11-13-2m. Business of generating or producing electric power; exception; rates.

(a) Upon every person engaging or continuing within this state in the business of generating or producing electric power for sale, profit or commercial use, either directly or through the activity of others, in whole or in part, when the sale thereof is not subject to tax under section two-d of this article, the amount of the tax shall be equal to the value of the electric power, as shown by the gross proceeds derived from the sale thereof by the generator or producer of the same multiplied by a rate of four percent, except that the rate shall be two percent on that portion of the gross proceeds derived from the sale of electric power to a plant location of a customer engaged in a manufacturing activity, if the contract demand at such plant location exceeds two hundred thousand kilowatts per hour per year, or if the usage at such plant location exceeds two hundred thousand kilowatts per hour in a year.
(b) The measure of this tax shall be the value of all electric power generated or produced in this state for sale, profit or commercial use, regardless of the place of sale or the fact that transmission may be to points outside this state: Provided, That the gross income received by plants that are owned by municipalities incorporated under the laws of this state and which generate or produce electricity shall not be subject to tax under this article.
(c) Beginning the first day of March, one thousand nine hundred eighty-nine, every person taxable under this section shall determine their liability for payment of tax under this section and under subdivision (3), subsection (a), section two-d of this article and section two-n of this article. If for taxable months beginning on or after the first day of March, one thousand nine hundred eighty-nine such person's liability for payment of tax under this section and subdivision (3), subsection (a), section two-d of this article is less than the amount of such person's liability for payment of tax under section two-n of this article, then such person shall pay the tax due under said section and not the sum of the amount of tax due under this section and under subdivision (3), subsection (a), section two-d of this article. If the tax due under section two-n of this article is less, then the amount of tax due under this section and subdivision (3), subsection (a), section two-d of this article shall be paid. The provisions of this section shall expire and become null and void for taxable years beginning on or after the first day of January, one thousand nine hundred ninety-eight.
§11-13-2n. Business of generating or producing or selling electric power; exemptions; rates.

(a) Rate of tax. -- Upon every person engaging or continuing within this state in the business of generating or producingelectricity for sale, profit or commercial use, either directly or indirectly through the activity of others, in whole or in part, or in the business of selling electricity to consumers, or in both businesses, the tax imposed by section two of this article shall be equal to:
(1) Twenty-six hundredths of one cent times the kilowatt hours of net generation available for sale that was generated or produced in this state by the taxpayer during the taxable year, except that this rate shall be five hundredths of one cent times the kilowatt hours of net generation available for sale that was generated or produced in this state by the taxpayer and sold to a plant location of a customer engaged in manufacturing activity if the contract demand at such plant location exceeds two hundred thousand kilowatts per hour per year or if the usage at such plant location exceeds two hundred thousand kilowatts per hour in a year: Provided, That in order to encourage the development of industry to improve the environment of this state, the tax imposed by this section on any person generating or producing electric power and an alternative form of energy at a facility located within this state substantially from gob or other mine refuse shall be equal to five hundredths of one cent times the kilowatt hours of net generation or production available for sale. The measure of tax under this subdivision shall be equal to the total kilowatt hours of net generation available for sale that was generated or produced in this state by the taxpayer during the taxable year, regardless of the place of sale or use, or the fact that transmission may be made to points outside this state.
(2) Nineteen hundredths of one cent times the kilowatt hours of electricity sold to consumers in this state that were not generated or produced in this state by the taxpayer, except that the rate shall be five hundredths of one cent times the kilowatt hours of electricity not generated or produced in this state by the taxpayer which is sold to a plant location in this state of a customer engaged in manufacturing activity if the contract demand at such plant location exceeds two hundred thousand kilowatts per hour per year or if the usage at such plant location exceeds two hundred thousand kilowatts per hour in a year. The measure of tax under this subdivision shall be equal to the total kilowatt hours of electricity sold to consumers in this state during the taxable year, that were not generated or produced in this state by the taxpayer, to be determined by subtracting from the total kilowatt hours of electricity sold to consumers in the state the net kilowatt hours of electricity generated or produced in the state by the taxpayer during the taxable year.
The West Virginia public service commission shall, upon application of a public utility, allow an immediate pass-through to the utility's customers in this state in the form of a rate surcharge the increase enacted by the Legislature during its third extraordinary session, one thousand nine hundred ninety, in the tax imposed by this article upon electricity generated or produced in this state and sold to consumers in this state and upon electricity not generated or produced in this state that is sold to consumers in this state.
(b) Exemptions. -- The provisions of this section shall notapply to:
(1) Kilowatt hours of electricity generated and sold, or purchased and resold, by plants owned by municipalities incorporated under the laws of this state.
(2) Kilowatt hours of electric power that are separately metered and consumed in an electrolytic process for the manufacture of chlorine.
(3) Kilowatt hours of electric power that are separately metered and consumed in the manufacture of ferroalloy. As used in this subdivision, the term "ferroalloy" means any of the various alloys of iron and one or more other elements used as a raw material in the production of steel but shall not include electric power used in the production of steel.
(4) The full economic benefits provided to the taxpayer by subdivisions (2) and (3) of this subsection shall be passed on to the manufacturer of the chlorine or ferroalloy.
(c) Credit. -- Any person taxable under subdivision (2), subsection (a) of this section shall be allowed a credit against the amount of tax due under said subdivision for any electric power generation taxes paid by the taxpayer with respect to such electric power to the state in which such power was generated or produced. The amount of credit allowed shall not exceed the tax liability arising under said subdivision with respect to the sale of such power.
(d) Transition rule. -- Beginning the first day of March, one thousand nine hundred eighty-nine, electric light and power companies shall determine their liability for payment of tax under this section and sections two-d and two-m of this article. If for taxable months beginning on or after the first day of March, one thousand nine hundred eighty-nine, liability for tax under this section is equal to or greater than the sum of the power company's liability for payment of tax under subdivision (3), subsection (a), section two-d of this article and section two-m of this article, then the company shall pay the tax due under this section and not the tax due under subdivision (3), subsection (a), section two-d of this article and section two-m of this article. If tax liability under this section is less, then tax shall be paid under subdivision (3), subsection (a), section two-d of this article and section two-m of this article and the tax due under this section shall not be paid. The provisions of this subsection shall expire and become null and void for taxable years beginning on or after the first day of January, one thousand nine hundred ninety-eight.
(e) Effective date. -- The amendments to this section made in the year one thousand nine hundred ninety shall take effect on the first day of October, one thousand nine hundred ninety: Provided, That as to calendar months ending before such date, the tax rates specified in this section, as then in effect shall be fully and completely preserved.