Senate Bill No. 663

(By Senators Chafin, Craigo and Bailey)

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[Introduced February 23, 1998; referred to the Committee on Finance.]
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A BILL to amend and reenact section three, article twelve-b, chapter eleven of the code of West Virginia, one thousand nine hundred thirty-one, as amended; and to amend and reenact section three, article thirteen-a of said chapter, all relating to minimum severance tax on coal and severance and business privilege taxes.

Be it enacted by the Legislature of West Virginia:
That section three, article twelve-b, chapter eleven of the code of West Virginia, one thousand nine hundred thirty-one, as amended, be amended and reenacted; and that section three, article thirteen-a of said chapter be amended and reenacted, all to read as follows:
ARTICLE 12B. MINIMUM SEVERANCE TAX ON COAL.

§11-12B-3. Imposition of tax, credit.

(a) Imposition of tax. -- Upon every person exercising the privilege of engaging within this state in severing, extracting, reducing to possession or producing coal for sale, profit or commercial use, there is hereby imposed an annual minimum severance tax equal to fifty cents per ton of coal produced by the taxpayer for sale, profit or commercial use during the taxable year: Provided, That for taxable years ending after the thirty-first day of May, one thousand nine hundred ninety-three, the minimum severance tax imposed on coal produced by the taxpayer for sale, profit or commercial use during such taxable year shall be seventy-five cents per ton, with such rate increase to apply only to tons of coal produced after the thirty-first day of May, one thousand nine hundred ninety-three: Provided, however, That the minimum severance tax imposed on coal produced by the taxpayer for sale, profit or commercial use during the taxable year may not exceed an amount equal to the severance tax imposed on the taxpayer during the taxable year by section three, article thirteen-a of this chapter, before application of any credits allowed by this chapter.
(b) Credit against article thirteen-a tax. -- A person who pays the minimum severance tax imposed by this article shall be allowed a credit against the severance tax imposed on the privilege of producing coal by section three, article thirteen-a of this chapter, but not including the additional severance tax on coal imposed by section six of said article. The amount of credit allowed shall be equal to the liability of the taxpayer for the taxable year for payment of the minimum severance tax on coal imposed by this article: Provided, That the amount of credit allowed by this section shall not exceed the severance tax liability of the taxpayer for the taxable year determined under section three of said article exclusive of the additional tax on coal imposed by section six of said article after application of all credits to which the taxpayer may be entitled except any credit allowed pursuant to chapter five-e of this code, any credit for installment payments of estimated tax paid pursuant to section six of this article during the taxable year and any credit for overpayment of article thirteen-a tax. Notwithstanding anything herein to the contrary, in no event shall the credit allowed under chapter five-e of this code be allowed as a credit against the minimum severance tax imposed by this article.
ARTICLE 13A. SEVERANCE TAXES.

§11-13A-3. Imposition of tax or privilege of severing coal, limestone or sandstone, or furnishing certain health care services, effective dates therefor; reduction of severance rate for coal mined by underground methods based on seam thickness.
(a) Imposition of tax. -- Upon every person exercising the privilege of engaging or continuing within this state in the business of severing, extracting, reducing to possession and producing for sale, profit or commercial use coal, limestone or sandstone, or in the business of furnishing certain health care services, there is hereby levied and shall be collected from every person exercising such privilege an annual privilege tax.
(b) Rate and measure of tax. -- The tax imposed in subsection (a) of this section shall be five percent of the gross value of the natural resource produced or the health care service provided, as shown by the gross income derived from the sale or furnishing thereof by the producer or the provider of the health care service, except as otherwise provided in this article. In the case of coal, this five percent rate of tax includes the thirty-five one hundredths of one percent additional severance tax on coal imposed by the state for the benefit of counties and municipalities as provided in section six of this article.
(c) "Certain health care services" defined. -- For purposes of this section, the term "certain health care services" means, and is limited to, behavioral health services and community care services.
(d) Tax in addition to other taxes. -- The tax imposed by this section shall apply to all persons severing or processing (or both severing and processing) in this state natural resources enumerated in subsection (a) of this section, and to all persons providing certain health care services in this state as enumerated in subsection (c) of this section, and shall be in addition to all other taxes imposed by law.
(e) Effective date. -- This section, as amended in the year one thousand nine hundred ninety-three, shall apply to gross proceeds derived after the thirty-first day of May of such year. The language of this section, as in effect on the first day of January of such year, shall apply to gross proceeds derived prior to the first day of June of such year and, with respect to such gross proceeds, shall be fully and completely preserved.
(f) Reduction of severance tax rate for thin seam coal. -- For tax years beginning after the effective date of this subsection eleventh day of April, one thousand nine hundred ninety-seven, any person exercising the privilege of engaging within this state in the business of severing coal for the purposes provided in subsection (a) of this section, shall be allowed a reduced rate of tax on coal mined by underground methods in accordance with the following:
(i) For coal mined by underground methods from seams with an average thickness of thirty-seven inches to forty-five inches, the tax imposed in subsection (a) of this section shall be two percent of the gross value of the coal produced. For coal mined by underground methods from seams with an average thickness of less than thirty-seven inches, the tax imposed in subsection (a) of this section shall be one percent of the gross value of the coal produced. Gross value is determined from the sale of the mined coal by the producer. This rate of tax includes the thirty-five one hundredths of one percent additional severance tax imposed by the state for the benefit of counties and municipalities as provided in section six of this article.
(ii) This reduced rate of tax applies to any new underground mine producing coal after the effective date of this subsection eleventh day of April, one thousand nine hundred ninety-seven, from seams of less than forty-five inches in average thickness or any existing mine that has not produced coal from seams forty- five inches or less in thickness in the one hundred eighty days immediately preceding the effective date of this subsection eleventh day of April, one thousand nine hundred ninety-seven.
(iii) The seam thickness shall be based on the weighted average isopach mapping of actual coal thickness by mine as certified by a professional engineer.
(iv) Whenever the reduced rate of tax provided in this subsection (f) applies to coal produced from seams of less than forty-five inches in average thickness, the minimum severance tax imposed by article twelve-b of this chapter does not apply to the tons of coal produced from those seams. This provision does apply to tons produced on or after the effective date of this subdivision (iv).




NOTE: This bill provides that the minimum severance tax on coal does not exceed the amount of the severance tax imposed on coal, prior to application of any credits against the severance tax. It also seeks to clarify that when the gross proceeds from sales of thin seam coal are subject to the reduced severance tax rate, the tons of thin seam tax are not subject to the 75 cents per ton minimum severance tax.

Strike-throughs indicate language that would be stricken from the present law, and underscoring indicates new language that would be added.