Senate Bill No. 145
(By Senators Love, Yoder, Wagner, Bailey, Wooton, Anderson,
Miller, Helmick, Chafin, Schoonover, Whitlow, Manchin, Oliverio,
Ross, Sharpe, Buckalew, Deem, Boley, Minear, Dugan, Kimble,
Blatnik, Plymale, Scott, Tomblin, Mr. President, and Bowman)
[Introduced January 25, 1996;]
referred to the Committee on Small Business; and then to the
Committee on Finance.]
A BILL to amend chapter five-b of the code of West Virginia, one
thousand nine hundred thirty-one, as amended, by adding
thereto a new article, designated article three, all relating
to the West Virginia "Job Creation Zones Act of 1996";
providing for certain tax exemption for qualified new
businesses in the ten West Virginia counties with the highest rate of unemployment; and providing other conditions and
Be it enacted by the Legislature of West Virginia:
That chapter five-b of the code of West Virginia, one thousand
nine hundred thirty-one, as amended, be amended by adding thereto
a new article, designated article three, all to read as follows:
ARTICLE 3. WEST VIRGINIA JOB CREATION ZONES ACT OF 1996.
§5B-3-1. Legislative purpose.
The Legislature hereby finds and declares that the health,
safety and welfare of the people of West Virginia are enhanced by
the continual encouragement, development, growth and expansion of
private enterprises within this state, and that there are certain
economically depressed areas in the state that need particular
attention to create jobs, stimulate economic activity and affect
private sector investment rather than governmental subsidy to
improve the quality of life of their citizens. It is the purpose
of the Legislature to encourage new economic activity in these
depressed areas of the state by means of tax relief and the removal
of unnecessary governmental barriers to the production and earning
of wages and profits and the creation of economic growth.
(a) General. -- When used in this article, or in the administration of this article, terms defined in subsection (b)
shall have the meanings ascribed to them by this section, unless a
different meaning is clearly required either by the context in
which the term is used, or by specific definition, in this article.
(b) Terms defined.
(1) Agriculture and farming. -- The term "agriculture and
farming" means the production of food, fiber, and woodland products
(but not timbering activity) by means of cultivation, tillage of
the soil and by the conduct of animal, livestock, dairy, apiary,
equine or poultry husbandry, horticulture, or any plant or animal
production and all farm practices related, usual or incidental
thereto, including the storage, packing, shipping and marketing,
but not including any manufacturing, milling or processing of such
products by persons other than the producer thereof.
(2) Business. -- The term "business" means and includes all
purposeful revenue-generating activity engaged in or caused to be
engaged in with the object of gain or economic benefit, either
direct or indirect by any person.
(3) Corporation. -- The term "corporation" includes any
corporation, electing small business corporation, joint-stock
company, and any association or other organization which is taxable
as a corporation under federal income tax laws or the income tax laws of this state.
(4) Extraction of ores or minerals from the ground. -- The
phrase "extraction of ores or minerals from the ground" includes
extraction by mine owners or operators of ores or minerals from the
waste or residue of prior mining. (See §11-13A-3(c)(5))
(5) Include, includes and including. -- The terms "include,"
"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 being defined.
(6) Job creation zone. -- The term job creation zone means the
geographical area of a county of this state which during the
preceding calendar year had the highest rate of unemployment.
(7) Mining. -- The term "mining" includes not merely the
extraction of ores or minerals from the ground but also those
treatment processes necessary or incidental thereto.
(8) Natural resources. -- The term "natural resources" means
all forms of minerals, including but not limited to, rock, stone,
limestone, coal, shale, gravel, sand, clay, natural gas, oil and
natural gas liquids, which are contained in or on the soils or
waters of this state, and standing timber.
(9) New business. -- The term "new business" means any sole
proprietorship and any partnership or corporation that does not engage in business in this state, or elsewhere, prior to the date
it applies to the county commission for certification as a
qualified new business. "New business" does not include: (1) the
reconfiguration or restructuring of an existing or previously
existing business, such as, but not limited to, a sole proprietor
who adds a partner thereby becoming a partnership, incorporates or
established a limited liability company for his or her business, a
partnership that adds or losses a partner, incorporates or becomes
a limited liability company, a partnership that dissolves with some
partners continuing to do business as sole proprietorships, a
corporation that creates a new subsidiary or becomes a member of a
partnership or limited liability company, any owner of a
corporation who creates a sister corporation, or (2) a business
that is related to another taxpayer. Related taxpayers shall be
determined under rules set forth in Section 267 of the Internal
Revenue Code of 1986, as amended, pertaining to nonrecognition of
loses, expenses, and interest with respect to transactions between
related taxpayers. (11) Partnership. -- The term
"partnership" includes a syndicate, group, pool, joint venture,
other unincorporated organization through or by means of which any
business, financial organization, or venture is carried on, when
such organization is treated as a partnership for federal income tax purposes. "Partnership" includes a limited liability company
which is treated as a partnership for federal income tax purposes
for the taxable year. "Partnership" does not include a
corporation, an estate, a sole proprietorship, trust, or
unincorporated organization which under Section 761 of the Internal
Revenue Code of 1986, as amended, is not treated as a partnership
for the taxable year for federal income tax purposes.
(10) Person. -- The term "person" means and includes any
individual, a trust, estate, partnership, association, company or
(11) Sale. -- The term "sale" includes (A) any transfer of the
ownership or title to property, whether for money or in exchange
for other property or services, or any combination thereof; (B) any
lease of property, whether the transaction is characterized as a
rental, lease, hire, bailment or license to use; and (C) any
provision of service for a consideration, whether direct or
(12) Service. -- The term "service" includes all activities
engaged in by a person for consideration which involve the
rendering of a service as distinguished from the sale of tangible
personal property, except that "service" does not include: (A)
services rendered by an employee to his or her employer pursuant to a contract of employment; or (B) severing or processing natural
(13) Severing of natural resources. -- The phrase "severing of
natural resources" means the physical removal of natural resources
from the earth or waters of this state by any means and the
ordinary processing of the raw natural resource product to obtain
a marketable natural resource product.
(14) Tax Commissioner. -- The term "tax commissioner" means
the tax commissioner of the state of West Virginia, or his or her
§5B-3-3. Qualified new business.
(a) Qualified new business. -- The term "qualified new
business" means any new business, as defined in section two of this
article, that does not engage, directly, or indirectly through the
activity of others, in (1) agriculture and farming; (2) severing or
processing natural resources; or (3) processing pulp, and which
during the time a county is designated as a job creation zone,
begins and continues to engage in the active conduct of a trade or
business in a job creation zone after certification as provided in
subsection (b) of this section.
(b) The new business shall not be a qualified new business
unless the county commission of the county in which
where the new business will be located by order certifies in writing each of the
following facts to the tax commissioner:
(1) That the business is a new business;
(2) That the new business will not directly compete with sales
of products or services by an existing business located in
county or an adjacent county,
(3) That the activities of the new business will not adversely
impact or harm the environment
,; and that
(4) That the new business would not likely locate in West
Virginia if it was not given the benefit of the exemption provided
(c) The tax commissioner or any business located in the county
or in an adjacent county may appeal the order of the county
commission issued under subsection (b) of this section within four
months after such order is entered by the county commission.
§5B-3-4. Designation of counties as job creation zones.
(a) The ten counties of this state that have the highest
average annual rate of unemployment for the preceding calendar
year, as determined annually by the commissioner of employment
security are each hereby designated to be a job creation zone.
This designation shall remain in effect until the first day of
January, two thousand and six, or the annual rate of unemployment for that county is such that the county no longer qualifies for
designation as a job creation zone, whichever occurs first.
(b) Upon enactment of this article, the following ten counties
of this state are designated as job creation zones: Barbour,
Braxton, Calhoun, Clay, Mingo, Pocahontas, Ritchie, Roane, Webster
(c) By the fifteenth day of December, one thousand nine
hundred ninety-six, and by each fifteenth day of December
thereafter through December, two thousand and five, the
commissioner of employment security shall submit to the governor,
the president of the Senate and the speaker of the House of
Delegates a list ranking the counties of this state based upon
their rate of unemployment, from highest to lowest, based upon the
best information then available to the commissioner of employment
security. If the ten counties with the highest rate of unemployment
are different from the counties previously designated as job
creation zones for that year, then any such county that is not
designated as a job creation zone for the then current calendar
year shall be designated by the governor as a job creation zone
beginning on the first day of January of the next calendar year.
Any county designated as a job creation zone for the then current
calendar year that ceases to be one of the ten counties with the highest rate of unemployment, shall lose its designation as a job
creation zone at the end of the then current calendar year. In the
event two or more counties have the same rate of unemployment and
the county with the tenth highest rate of unemployment cannot be
ascertained, because two or more counties eligible for designation
as the tenth highest county have the same numerical rate of
unemployment, those counties shall then be ranked, from highest to
lowest, based upon their poverty level and the tenth designation
determined based upon that ranking.
§5B-3-5. Job creation zone tax deductions and exemptions.
(a) Notwithstanding any provision of this code to the contrary
and subject to section five of this article, the following tax
deductions and exemptions apply to job creation zones.
(1) A qualified new business that is a corporation shall be
exempt from payment of the taxes imposed on it by articles
twenty-three, and twenty-four, chapter eleven of this code, to the
extent such taxes are attributable to the new business.
(2) A new business that is a partnership or electing small
business corporation, shall be exempt from paying the tax imposed
by article twenty-three, chapter eleven of this code, that is
attributable to the new business; and the partners or shareholders,
as the case may be, shall be exempt from paying the tax imposed by article twenty-one, chapter eleven of this code, on items of
income, gain, loss or deduction attributable to their respective
interests in the new business.
(2) Any person who loans money to a qualified new business is
allowed to subtract from federal adjusted gross income, or from
federal taxable income if such person is a taxable corporation, any
interest income on the loan or loans to the new business, to the
extent such interest income is included in federal adjusted gross
income, or federal taxable income if such person is a taxable
corporation, when determining such person's West Virginia adjusted
gross income, or West Virginia taxable income if such person is a
taxable corporation, earned or received from the qualified new
(3) Any person who purchases capital stock of a new business
or purchases any other ownership interest in a new business and
later sells that stock or ownership interest is allowed to subtract
from federal adjusted gross income, or from federal taxable income
if such person is a taxable corporation, any gain from the sale to
the extent such gain is included in federal adjusted gross income,
or federal taxable income if such person is a taxable corporation,
when determining such person's West Virginia adjusted gross income,
or West Virginia taxable income if such person is a taxable corporation.
(b) Effective date. -- The deductions and exemptions allowed
by this section are first allowed for taxable years ending after
the effective date of this article.
§5B-3-6. Job creation zone conditions for tax deductions
(a) The following additional conditions apply to job creation
zone qualified new businesses:
(1) The deductions and exemptions from tax allowed by this
article shall be allowed any qualified new business that begins
doing business before the first day of January two thousand and
(2) The deductions and exemptions from tax provided for in
this article shall apply for a period of twenty calendar years
beginning with the calendar year during which the qualified new
business begins doing business.
(A) Interest on loans to a qualified new business shall be
taxable beginning the first day of January of the twenty-first
(B) Each qualified new business that is a corporation shall
determine the fair market value of its capital stock as of the
thirty-first day of December of the twentieth calendar year. The difference between the shareholder's cost or other basis for the
stock and the stock's fair market value on the thirty-first day of
December of the twentieth year is the amount of gain that may be
excluded from tax when there is a sale or other taxable
distribution of the stock after that date.
(C) The fair market value of a qualified new business that is
a sole proprietorship or partnership shall similarly be determined
as of the thirty-first day of December of the twentieth year. The
difference between the fair market value so determined and the
owner's basis or other cost is the amount of gain that may be
excluded from tax under article twenty-one, chapter eleven of this
code when there is a sale or taxable termination of the qualified
new business after that date.
(b) The deductions and exemptions allowed by this article to
a qualified new business or other person are not transferable or
assignable to any other person.
(c) If after a business is certified as a qualified new
business, that business acquires, by purchase or otherwise, an
existing business, the deductions and exemptions allowed by section
six of this article do not apply to capital or income attributable
to the acquired business or to any loans for operation of the
(d) If the principal office or principal operations of a
qualified new business subsequently moves out of the job creation
zone in which it was located when the qualified new business began
doing business, the deductions and exemptions allowed by this
article shall immediately terminate and be forfeited, unless the
move is to another area of this state that, at the time of the
move, is a job creation zone.
(e) Any amendments to this article shall apply to qualified
new businesses that begin doing business on or after the effective
date of the amendment and shall not be retroactively imposed to
limit deductions and exemptions allowed by this article.
(f) Records. -- Any person who claims exemption from tax
under subsection (a) of this section, shall maintain sufficient
records to establish such person's entitlement to claim the
§5B-3-7. Administrative rules.
The tax commissioner may promulgate such rules as may be
necessary to implement and administer the tax deductions and
exemptions provided in this article, as provided in article three,
chapter twenty-nine-a of this code.