COMMITTEE SUBSTITUTE

FOR

SENATE BILL NO. 17

(By Senators Craigo, Tomblin, Mr. President, Chafin, Jackson, Wooton, Bailey, Walker, Wagner, Manchin, Anderson, Plymale, White, Whitlow, Dittmar, Bowman, Macnaughtan, Miller, Helmick, Sharpe, Ross, Schoonover, Love, Blatnik, Grubb, Oliverio, Wiedebusch, Buckalew, Deem, Kimble, Yoder, Boley, Minear, Scott and Dugan)

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[Originating in the Committee on Finance; reported January 12, 1996.]
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A BILL to amend and reenact sections eight, fifty-one and seventy-one, article twenty-one, chapter eleven of the code of West Virginia, one thousand nine hundred thirty-one, as amended, all relating generally to imposing personal income taxes; providing a low income exclusion from federal adjusted gross income; increasing threshold for filing certain income tax returns; making technical corrections; and specifying effective dates.

Be it enacted by the Legislature of West Virginia:
That sections eight, fifty-one and seventy-one, article twenty-one, chapter eleven of the code of West Virginia, one thousand nine hundred thirty-one, as amended, be amended and reenacted, all to read as follows:
ARTICLE 21. PERSONAL INCOME TAX.
§11-21-8. Low income exclusion.
(a) Earned income exclusion. -- In the case of an eligible taxpayer, there shall be allowed as a deduction from federal adjusted gross income the amount of his or her earned income included therein, not to exceed ten thousand dollars, except that when a husband and wife file separate returns under this article, this exclusion shall not exceed five thousand dollars per separate return: Provided, That for the taxable year beginning the first day of January, one thousand nine hundred ninety-six, the exclusion provided for in this section applies only to earned income received after the thirtieth day of June, one thousand nine hundred ninety-six, and the amount excluded shall not exceed fifty percent of the annual low income exclusion amounts set forth in this subsection.
(b) "Eligible taxpayer" defined. -- The term "eligible taxpayer" means:
(1) Any unmarried individual and any husband and wife filing a joint return under this article who has or have federal adjusted gross income of ten thousand dollars or less for the taxable year; or
(2) Any husband or wife filing a separate return under this article who has federal adjusted gross income of five thousand dollars or less.
(c) "Earned income" defined. --
(1) The term "earned income" means:
(A) Wages, salaries, tips and other employee compensation; plus
(B) The amount of the taxpayer's net earnings from self- employment for the taxable year (within the meaning of Section 1402(a) of the Internal Revenue Code), but such net earnings shall be determined with regard to the deduction allowed to the taxpayer under Section 164 of the Internal Revenue Code.
(2) For purposes of this section:
(A) The earned income of an individual shall be computed without regard to any community property laws;
(B) No amount received as pension or annuity shall be taken into account; and
(C) No amount received for services provided by an individual while the individual is an inmate at a penal institution shall be taken into account.
(d) Taxable year must be full taxable year. -- Except in the case of a taxable year closed by reason of the death of the taxpayer, no credit shall be allowed under this section in the case of a taxable year covering a period of less than twelve months.
§11-21-51. Returns and liabilities.
(a) General. -- On or before the fifteenth day of the fourth month following the close of a taxable year, an income tax return under this article shall be made and filed by or for:
(1) Every resident individual required to file a federal income tax return for the taxable year, or having West Virginia adjusted gross income for the taxable year, determined under section twelve of this article in excess of the sum of his or her West Virginia personal exemptions: Provided, That the tax commissioner shall promulgate a legislative rule under the provisions of article three, chapter twenty-nine-a of this code, specifying the circumstances when an individual is not required to file a return;
(2) Every resident estate or trust required to file a federal income tax return for the taxable year, or having any West Virginia taxable income for the taxable year, determined under section eighteen of this article;
(3) Every nonresident individual having any West Virginia adjusted gross income for the taxable year, determined under section thirty-two of this article, in excess of the sum of his or her West Virginia personal exemptions, except when all of the nonresident individual's West Virginia source income is taxed on a composite return filed under this article for the taxable year; and
(4) Every nonresident estate or trust having items of income or gain derived from West Virginia sources, determined in accordance with the applicable rules of section thirty-two of this article as in the case of a nonresident individual, in excess of its West Virginia exemption.
(b) Husband and wife. --
(1) If the federal income tax liability of husband or wife is determined on a separate federal income tax return, their West Virginia income tax liabilities and returns shall be separate.
(2) If the federal income tax liabilities of husband and wife other than a husband and wife described in subdivision (3) of this subsection are determined on a joint federal return, or if neither files a federal return:
(A) They shall file a joint West Virginia income tax return, and their tax liabilities shall be joint and several; or
(B) They may elect to file separate West Virginia income tax returns on a single or separate form, as may be required by the tax commissioner, if they comply with the requirements of the tax commissioner in setting forth information, and in that event their tax liabilities shall be separate.
(3) If either husband and wife is a resident and the other is a nonresident, they shall file separate West Virginia income tax returns on such single or separate forms as may be required by the tax commissioner, and in such event their tax liabilities shall be separate.
(c) Decedents. -- The return of any deceased individual shall be made and filed by his or her executor, administrator or other person charged with his or her property.
(d) Individuals under a disability. -- The return for an individual who is unable to make a return by reason of minority or other disability shall be made and filed by his or her guardian, committee, fiduciary or other person charged with the care of his or her person or property (other than a receiver in possession of only a part of his or her property), by his or her duly authorized agent.
(e) Estates and trusts. -- The return for an estate or trust shall be made and filed by the fiduciary.
(f) Joint fiduciaries. -- If two or more fiduciaries are acting jointly, the return may be made by any one of them.
(g) Tax a debt. -- Any tax under this article, and any increase, interest or penalty thereon, shall, from the time it is due and payable, be a personal debt of the person liable to pay the same, to the state of West Virginia.
(h) Cross reference. -- The provisions as to information returns by partnerships, employers and other persons, are set forth in section fifty-eight of this article. The provisions relating to composite returns of nonresidents are set forth in section fifty-one-a of this article. The provisions regarding information returns by electing small business corporations, are set forth in section thirteen-b, article twenty-four of this chapter.
(i) Effective date. -- This section, as amended by this act in the year one thousand nine hundred ninety-six, applies to all taxable years beginning after the thirty-first day of December, one thousand nine hundred ninety-five.
§11-21-71. Requirement of withholding tax from wages.
(a) General. -- Every employer maintaining an office or transacting business within this state and making payment of any wage taxable under this article to a resident or nonresident individual shall deduct and withhold from such wages for each payroll period a tax computed in such manner as to result, so far as practicable, in withholding from the employee's wages during each calendar year an amount substantially equivalent to the tax reasonably estimated to be due under this article resulting from the inclusion in the employee's West Virginia adjusted gross income of wages received during that calendar year. The method of determining the amount to be withheld shall be prescribed by the tax commissioner, with due regard to the West Virginia withholding exemption of the employee and any low income exclusion allowed to the employee under section eight of this article and asserted in good faith by the employee. This section shall not apply to payments by the United States for service in the armed forces of the United States: Provided, That the tax commissioner may execute an agreement with the secretary of the treasury, as provided in 5 U. S. C., §5517, for the mandatory withholding of tax under this section on pay to members of the national guard while participating in exercises or performing duty under 32 U. S. C., §502, and on pay to members of the ready reserve while participating in scheduled drills or training periods or serving on active duty for training under 10 U. S. C., §270(a).
(b) Withholding exemptions. -- For purposes of this section:
(1) An employee is entitled to the same number of West Virginia withholding exemptions as the number of withholding exemptions to which he or she is entitled for federal income tax withholding purposes. An employer may rely upon the number of federal withholding exemptions claimed by the employee, except where the employee claims a higher number of West Virginia withholding exemptions.
(2) With respect to any taxable year beginning after the thirty-first day of December, one thousand nine hundred eighty- six, the amount of each West Virginia exemption is two thousand dollars whether the individual is a resident or nonresident.
(c) Exception for certain nonresidents. -- If the income tax law of another state of the United States or of the District of Columbia results in its residents being allowed a credit under section forty of this article sufficient to offset all taxes required by this article to be withheld from wages of an employee, the tax commissioner may by rule relieve the employers of such employees from withholding requirements of this article with respect to such employees.
(d) Effective date. -- The provisions of this section, as amended in the year one thousand nine hundred ninety-six, apply to all taxable years or portions thereof beginning after the thirtieth day of June, one thousand nine hundred ninety-six.