Senate Bill No. 424
(By Senators Manchin, Oliverio and Kimble)
[Introduced February 17, 1995; referred to the Committee
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 establishment of a neighborhood investment
tax credit; short title; legislative findings and purpose;
definitions; eligibility for tax credits; certification of
program plans by the office of economic opportunity; payment
of application filing fee to the office of economic
opportunity; amount of same; providing for disapproval of
applications not certified within sixty days after receipt;
notification of certification of program plan or denial of
same; taxpayers eligible for receipt of the tax credit;
authorizing the formation of a neighborhood investment program advisory board; providing that all applications for
certification of a program plan shall be public information;
amount of credit allowed to eligible taxpayers; providing
for application of the credit against the corporation net
income tax, franchise tax, severance tax and the personal
income tax not attributable to wages, salaries or other
compensation reportable on federal form W2; prohibiting
application of the credit against employer withholding
taxes; providing for forfeiture of unused credit; procedure
for claiming the credit against tax; annual filing
requirements for claiming the credit against tax; tax credit
reporting schedule to be filed with required documentation;
proof of payment of eligible contributions and documentation
of project certification; disallowance of the credit for
failure to timely file the tax credit reporting schedule,
proof of payment of eligible contributions or other required
documentation; aggregate amount of tax credits to be allowed
in any state fiscal year; receipt and recording of
applications for certification of program plans; time of
filing; providing that when the total amount of credits
certified by the office of economic opportunity equals the maximum amount allowed in any state fiscal year, no further
certifications shall be issued for that fiscal year;
providing that applications for certification of program
plans not approved during the fiscal year in which they are
submitted are void; reapplication for certification in the
next ensuing state fiscal year; recapture of the tax credit
in certain circumstances; statute of limitations for the
issuance of assessments of tax; tax commissioner to publish
annually the names, addresses and total amount of credit
claimed for every taxpayer asserting the credit on a tax
return; inapplicability of certain statutory provisions
regarding confidentiality of taxpayer information;
authorizing joint audits and examinations by the tax
commissioner and the office of economic opportunity; and
authorizing information sharing between the tax commissioner
and the office of economic opportunity.
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. Neighborhood Investment Tax Credit.
§11-13J-1. Short title.
This article shall be known and may be cited as the
"Neighborhood Investment Tax Credit Act".
§11-13J-2. Legislative findings and purpose.
The Legislature of West Virginia hereby finds and declares
that community-based organizations can be a powerful force in
community development. In West Virginia, however, the
effectiveness of such organizations has historically been
weakened by meager resources. Private corporations and
individuals in West Virginia possess the resources to aid
community based organizations in their efforts to assist
neighborhoods, but because of the lack of clear incentives, the
private and not-for-profit sectors have often not taken advantage
of opportunities to collaborate with community-based
organizations to the fullest extent possible through investment
and participation in local programs.
Therefore, the neighborhood investment tax credit act is
hereby enacted with the intent that it provide incentives to
contribute to qualifying charitable projects. It is the intent
of the Legislature that this act encourage private sector
businesses and individuals to contribute capital, material and
services to community-based organizations which establish projects to assist neighborhoods through such services as
counseling, emergency assistance, crime prevention, education,
housing, job training and physical improvements, including
environmental clean-up programs.
(a) General. -- When used in this article, or in the
administration of this article, terms defined in subsection (b)
of this section have the meanings ascribed to them in this
section, unless a different meaning is clearly required by either
the context in which the term is used, or by specific definition
in this article.
(b) Terms defined. --
(1) "Affiliate" or "affiliates" includes all concerns which
are affiliates of each other when either directly or indirectly:
(A) One concern controls or has the power to control the
(B) A third party or third parties control or have the power
to control both. In determining whether concerns are
independently owned and operated and whether or not affiliation
exists, consideration shall be given to all appropriate factors,
including common ownership, common management and contractual
(2) "Commissioner" or "tax commissioner" are used
interchangeably herein and mean the tax commissioner of the state
of West Virginia, or his or her designee.
(3) "Community services" means services provided at no
charge, including, but not limited to, the following:
(A) Providing any type of health, personal finance,
psychological or behavioral, housing, legal, marital or
educational counseling and advice;
(B) Providing emergency assistance or medical care;
(C) Establishing, maintaining or operating recreational or
(D) Providing economic development assistance to
individuals, groups or neighborhood organizations in an
economically disadvantaged area;
(E) Providing communities, groups or neighborhood
organizations assistance in environmental clean-up projects and
establishing waste recycling projects that are not mandated by
either federal or state statute.
(4) "Compensation" means wages, salaries, commissions and
any other form of remuneration paid to employees for personal
(5) "Corporation" means any corporation, joint-stock company
or association, and any business conducted by a trustee or
trustees wherein interest or ownership is evidenced by a
certificate of interest or ownership or similar written
(6) "Crime prevention" means any activity which aids in the
reduction of crime in an economically disadvantaged area.
(7) "Designee," when used in the phrase "tax commissioner or
his or her designee," means any officer or employee of the tax
division of the department of tax and revenue, duly authorized by
the commissioner to perform the functions mentioned or described
in this article.
(8) "Director" means the director of the West Virginia
office of economic opportunity.
(9) "Economically disadvantaged area" means an area
determined by the West Virginia office of economic opportunity to
qualify for special consideration on the basis of current
indices of social and economic conditions, which shall include,
but not be limited to, the median per capita income of the area
in relation to the median per capita income of the state.
(A) An economically disadvantaged area may qualify as such only pursuant to a designation issued by the office of economic
opportunity. This designation shall expire after the passage of
five calendar years, unless expressly limited to a shorter time
by specific order of the office of economic opportunity, and no
area may be designated as an economically disadvantaged area for
more than ten years, either consecutively or in the aggregate.
(B) No fewer than two thirds of all areas designated as
economically disadvantaged by the office of economic opportunity
under this article at any one time shall be located in rural
(10) "Education" means any type of scholastic instruction
to, or scholarship by, an individual that enables that individual
to prepare for better life opportunities. The term does not
include courses in physical training, physical conditioning,
physical education, sports training, sports camps and similar
training or conditioning courses, except for physical therapy
prescribed by a physician or other person licensed to prescribe
courses of medical treatment under West Virginia law.
(11) An "eligible contribution":
(A) Consists of cash, tangible personal property valued at
its fair market value, real property valued at its fair market value, or a contribution of in-kind professional services valued
at fair market value.
(B) For purposes of this definition, the value of in-kind
professional services will not qualify as an eligible
contribution unless the services are:
(i) Reasonably priced and valued and are reasonably
necessary services, other than those encompassed by the program
plan, that are customarily and normally provided by the
contributor in the normal course of business to customers,
clients or patients;
(ii) Not reimbursable, in whole or in part, from sources
other than the tax credit provided under this article; and
(iii) Are services which are not available elsewhere in the
(C) No contribution of cash, property or professional
services or any combination thereof, having a value of less than
five hundred dollars and contributed in any one tax year, may
qualify as an eligible contribution.
(12) "Eligible taxpayer" means:
(A) Any person subject to the taxes imposed by article
twenty-one, twenty-three or twenty-four of this chapter, who makes an eligible contribution to a community based organization
pursuant to the terms of a program plan certified by the director
of the West Virginia office of economic opportunity for the
purpose of providing neighborhood assistance, community services,
crime prevention, or of providing job training or education for
individuals not employed by the prospective contributing taxpayer
or an affiliate of the prospective contributing taxpayer or a
person related to the prospective contributing taxpayer, in an
economically disadvantaged area; and
(B) An affiliated group of taxpayers, if it elects to file
a consolidated corporation net income tax return under article
twenty-four of this chapter and one or more of the individual
taxpayers affiliated with the group would qualify as an eligible
taxpayer under paragraph (A) of this subdivision.
(13) "Includes" and "including," when used in a definition
contained in this article, does not exclude things which
otherwise come within the meaning of the term defined.
(14) "Job training" means instruction to an individual that
is intended to enable the individual to acquire academic or
vocational skills so as to become employable or be able to seek
a higher grade of employment.
(15) "Neighborhood assistance" means:
(A) Furnishing financial assistance, labor, material or
technical advice to aid in the physical or economic improvement
of any part or all of an economically disadvantaged area; or
(B) Furnishing technical advice to promote higher employment
in an economically disadvantaged area.
(16) "Community-based organization" means any organization
(A) Is performing community services in an economically
disadvantaged area; and
(B) Is exempt from income taxation under Section 501(c)(3)
of the Internal Revenue Code.
(17) "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, an estate, a corporation or a sole
proprietorship. The term "partner" includes a member in such a
syndicate, group, pool, joint venture or organization.
(18) "Person" includes any natural person, corporation,
limited liability company or partnership.
(19) "Related person" or "person related to" a certain taxpayer includes:
(A) An individual, corporation, partnership, affiliate,
association or trust, or any combination thereof, which is
controlled by the taxpayer;
(B) An individual, corporation, partnership, affiliate,
association or trust, or any combination thereof, that exercises
control over the taxpayer;
(C) An individual, corporation, partnership, affiliate,
association or trust, or any combination thereof, which is
controlled by an individual, corporation, partnership, affiliate,
association or trust, or any combination thereof, that exercises
control over the taxpayer; and
(D) A member of the same group as one that exercises control
over the taxpayer.
For purposes of this article, when used with respect to a
corporation, "control" means ownership, direct or indirect, of
stock possessing fifty percent or more of the total combined
voting power of all classes of the stock of such corporation
entitled to vote. When used with respect to a trust, "control"
means ownership, direct or indirect, of fifty percent or more of
the beneficial interest in the principal or income of the trust. The ownership of stock in a corporation, a capital or profits
interest in a partnership or association or a beneficial interest
in a trust shall be determined in accordance with the rules for
determining constructive ownership of stock provided in Section
267(c), Internal Revenue Code, as amended, except for paragraph
(3) of said section.
(20) "State fiscal year" means the twelve-month period which
begins on the first day of July and ends on the thirtieth day of
June in the following year.
(21) "Taxpayer" means any person subject to the tax imposed
by article twenty-one, twenty-three or twenty-four of this
chapter, or any combination thereof.
§11-13J-4. Eligibility for tax credits; certification of program
plans by the office of economic opportunity;
notification thereof; neighborhood investment
program advisory board; application for
certification constitutes public information;
filing fee to accompany application.
(a) A community-based organization which seeks to solicit
eligible contributions under this article shall submit to the
director an application for certification of a program plan, in
a form as the director shall prescribe, which sets forth the program to be implemented, the identity of all of the persons and
organizations that will participate in the program, the area
selected, the amount of eligible contributions to be solicited by
the community-based organization and the schedule for
implementing the program.
(b) The director shall certify, or deny certification of,
the program plan of a community-based organization within sixty
days after receipt of a properly completed application for
approval. Those applications not approved by the director within
sixty days after receipt of a properly completed application
shall be deemed disapproved by operation of law.
(c) The office of economic opportunity shall promptly
notify an applicant whether an application for certification of
a program plan has been approved or disapproved.
(d) Those taxpayers who make eligible contributions to a
community-based organization or organizations under one or more
certified program plans, and who otherwise comply with the
requirements of this article so as to become eligible taxpayers,
as defined in this article, are eligible to receive a tax credit
as provided in section five of this article. No tax credit may
be granted under this article to any taxpayer without the issuance of a certification under this section.
(e) The office of economic opportunity may establish a
neighborhood investment program advisory board made up of not
more than ten members to serve in an advisory capacity and
provide advice and guidance to the office of economic opportunity
on project plans, proposals and applications.
(f) All applications for certification of a program plan
filed with the office of economic opportunity shall be public
information, regardless of whether the plan is certified, and any
application submitted to the office may be viewed and copied by
members of the public and may be published by the office of
economic opportunity at its discretion.
(g) All applications for certification filed under this
article shall be accompanied by a filing fee in the amount of
three percent of the amount of the total tax credit sought by the
§11-13J-5. Credit allowed; amount; taxes against which credit
may be applied; carry-forward provision.
(a) Eligible taxpayers shall be allowed a credit against
taxes imposed by this state, the application of which and the
amount of which shall be determined as provided in this article.
(b) The amount of credit that may be allowed is fifty percent of the amount of the taxpayer's "eligible contribution."
(c) The credit allowed by this section may be claimed
against the following taxes: Corporation net income tax,
franchise tax, severance tax and personal income tax. Taxpayers
who may claim this credit include electing small business
corporations, as defined in Section 1361 of the Internal Revenue
Code, limited liability companies that are treated as
partnerships for purposes of the federal income tax, partnerships
and sole proprietorships.
(d) The unused portion of the total amount of credit
allowed may be carried forward for a maximum period of four
additional years, beginning with the tax year after that in which
the taxpayer irrevocably transfers its eligible contribution to
the program plan transferee. Notwithstanding any other provision
of this code to the contrary, the tax credit which a taxpayer
receives under this article may not exceed one hundred thousand
dollars in any tax year. A tax credit shall be allowed under
this article only for the tax year in which the eligible
contribution is irretrievably transferred to the program plan
transferee and the next four consecutive tax years.
§11-13J-6. Application of credit allowance against tax;
exceptions; forfeiture of unused credits.
(a) The aggregate amount determined under subsection (a) of
this section shall be allowed as a credit for the tax year
beginning on and after the first day of July, one thousand nine
hundred ninety-five except that:
(1) No credit may be allowed under this section against any
employer withholding taxes imposed by article twenty-one of this
(2) No credit may be allowed under this section against any
tax due under article twenty-one of this chapter on any wage,
salary or other compensation paid to any employee of any electing
small business corporation, limited liability company,
partnership, other unincorporated organization or sole
proprietorship or against any amount of tax due on any wage,
salary or other compensation reported on federal form W2.
(b) If any unused credit remains after a period of five
years from the initial certification and contribution, the amount
thereof shall be forfeited. No carryover to a subsequent tax
year or carryback to a prior tax year may be allowed for the
amount of any unused portion of any credit allowed under this
article after the expiration of the five-year period.
§11-13J-7. Assertion of the tax credit against tax; schedule to
be prescribed by commissioner; required documentation; filing procedure; disallowance of
credit by commissioner.
(a) Any eligible taxpayer which desires to claim a tax
credit as provided in this article must file with the West
Virginia tax commissioner, in a form that the tax commissioner
shall prescribe, an annual tax credit reporting schedule which
states the amount of the eligible contribution that the taxpayer
has made. This tax credit reporting schedule must be accompanied
by a certificate issued by the director of the office of economic
opportunity which evidences approval of the community-based
program plan by the director of the office of economic
opportunity, pursuant to which the contribution was made.
(b) In the tax credit reporting schedule required under this
section, the taxpayer shall provide all information required by
the tax commissioner.
(c) The tax credit reporting schedule shall be filed with
the annual return for the taxes imposed by article twenty-four of
this chapter, for the tax year in which the eligible contribution
is first irrevocably transferred to a transferee pursuant to a
certified program plan: Provided, That if the eligible taxpayer
is not required to file a tax return under article twenty-four of
this chapter, then the tax credit reporting schedule shall be filed with the annual return for the taxes imposed by article
twenty-three of this chapter for such year: Provided, however,
That if the eligible taxpayer is not required to file a tax
return under article twenty-four or article twenty-three of this
chapter, the tax credit reporting schedule shall be filed with
the annual return for the taxes imposed by article twenty-one of
this chapter for such year.
(d) The tax credit reporting schedule shall be accompanied
by such proof of payment as the tax commissioner may prescribe,
showing that the amount to be contributed under the certified
program plan has been paid to the transferee designated in the
certified plan solely for the certified program.
(e) The tax commissioner may disallow any credit claimed
under this article for which a properly completed tax credit
reporting schedule, a properly completed and valid statement or
proof of payment of the eligible contribution or other required
documentation, statement or proof is not timely filed.
§11-13J-8. Limitation on total amount of tax credits allowed
during fiscal year; applications void by operation of law;
reapplication in following fiscal year.
(a) The total amount of tax credits allowed by the
commissioner under this article may not exceed two million dollars in any state fiscal year.
(b) The office of economic opportunity shall record the time
of filing of each application for certification of a program plan
required under section four of this article and shall certify and
approve the applications, if they otherwise qualify for
certification under this article, in the applicable state fiscal
(c) When the total amount of tax credits certified under
this article equals the maximum amount of tax credits allowed in
any state fiscal year, no further certifications shall be issued
in that fiscal year, as specified in subsection (a) of this
(d) All applications which are not certified during the same
state fiscal year in which they are filed are void by operation
of law, effective on the last day of the state fiscal year in
which they are filed, and all applicants who elect to seek
certification of a program plan so voided shall refile on or
after the first day of the state fiscal year next ensuing without
regard to any prior year's application or previous denial of
§11-13J-9. Credit recapture; when additional taxes due;
interest; penalty; waiver by commissioner; statute of limitations.
If it appears upon an audit or otherwise that a taxpayer has
not made the contribution as represented in its application for
certification of a program plan or in its claim for credit
against tax, or should it appear that any otherwise eligible
contribution made by a taxpayer was made for the direct or
indirect benefit of the taxpayer making the contribution or for
the direct or indirect benefit of any person related to the
taxpayer, the credit provided for by this article shall be
recaptured, and amended returns shall be filed for any tax year
for which the credit was claimed. Any additional taxes due under
this chapter shall be remitted with the amended return or
returns, along with interest, as provided in section seventeen,
article ten of this chapter, and a ten percent penalty, which may
be waived by the tax commissioner if the taxpayer shows that the
claim for credit was reasonable under the circumstances then
existing and not due to willful neglect or intentional
misrepresentation. 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 the filing of any tax return on which this credit was claimed or five years from the date of payment of any
tax liability calculated pursuant to the assertion of this
credit, whichever is later.
§11-13J-10. Tax commissioner to publish certain information
relating to tax credit.
The tax commissioner shall annually publish in the state
register the name and address of every taxpayer who has claimed
the credit provided for in this article, along with the amount of
the credit claimed by that taxpayer, and the confidentiality
provisions of section four-a, article one, section five-d,
article ten of this chapter, or of any other similar provision of
this code shall not apply to this information.
§11-13J-11. Joint audits and examinations authorized;
(a) In addition to or in lieu of discretionary audits
conducted by the tax commissioner, the tax commissioner may in
his or her discretion perform joint audits or examinations, in
concert with the office of economic opportunity, of the books and
records and other information, as appropriate: (i) Of any
taxpayer which has filed an application for certification of a
program plan with the office of economic opportunity under
section four of this article; (ii) of any taxpayer which has claimed a credit provided for in this article on its tax return;
or (iii) of any person believed to have information relevant to
the validity of any claim for or the granting of such a credit.
(b) For purposes of any joint audit, or any other proceeding
relating to a tax credit taken, asserted or sought under this
article, the tax commissioner may share any information as he or
she may deem appropriate with the office of economic opportunity,
notwithstanding the provisions of section four-a, article one,
section five-d, article ten of this chapter, or any other
provision of this code to the contrary.
NOTE: The purpose of this bill is to establish a
Neighborhood Investment Tax Credit Act which will allow a tax
credit for those taxpayers who make contributions of cash,
certain property or certain in-kind professional services to
community based organizations which provide community assistance
and which are designated as charitable organizations under
Section 501(c)(3) of the Internal Revenue Code. The tax credit
would be fifty percent of the amount of the eligible contribution
and would apply against the business franchise tax, corporate
severance tax, corporation net income tax, and nonwage, nonsalary
personal income tax and could be taken in the year in which
approved and taken, up to one hundred thousand dollars, with a
carry-forward provision for any remaining credit to be taken for
the next four ensuing tax years. The total amount of all such
credits which the tax commissioner could certify in any given
fiscal year would be two million dollars. The bill allows for
recapture of tax credits taken in certain circumstances;
provides for certain information relating to the credit to be
public information; and provides for joint audits and information
This article is new; therefore, strike-throughs and
underscoring have been omitted.