Senate Bill No. 600
(By Senator McKenzie, Bowman, McCabe, Oliverio, Sprouse,
Kessler, Edgell, Mitchell, Ross, Sharpe, Deem, Anderson, Prezioso,
Snyder, Minard, Minear, Dittmar, Redd, Hunter, Helmick, Ball,
Fanning and Unger)
[Introduced February 21, 2000; 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-p, relating
to allowing a downtown business revitalization tax credit for
capital improvement in new or expanded nonmanufacturing
facilities in downtown areas of municipalities in the state
after the thirtieth day of June, two thousand; setting forth
legislative purpose, definitions and eligibility for credit;
providing for the expiration of the credit; specifying the annual credit allowance; allowing proration of credit;
allowing the credit to be used by successors; and providing
for credit recapture.
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-p, to read as follows:
ARTICLE 13P. DOWNTOWN BUSINESS REVITALIZATION TAX CREDIT.
§11-13P-1. Legislative purpose.
The Legislature finds that downtown business revitalization is
vital to the economy of the state as well as its cities and that a
sound municipal economy is in the public interest and promotes the
general welfare of the people of this state. In order to encourage
capital investment in this state through the location of new
business and the expansion of existing business in downtown areas
of cities in this state, thereby increasing employment and economic
development, there is provided to eligible taxpayers a tax credit
for capital expenditures in qualifying new facilities, or in
qualifying expanded existing facilities, that occur after the
thirtieth day of June, two thousand.
(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 by this section,
unless a different meaning is clearly required by the context in
which the term is used.
(b) Terms defined.--
(1) "Affiliate" means and includes all persons, as defined in
this section, which are affiliates of each other when either
directly or indirectly:
(A) One person controls or has the power to control the other;
(B) A third party or third parties control or have the power
to control two persons, the two thus being affiliates. In
determining whether concerns are independently owned and operated
and whether or not an affiliation exists, consideration shall be
given to all appropriate factors, including common ownership,
common management and contractual relationships.
(2) "Commissioner" or "tax commissioner" means the tax
commissioner of the state of West Virginia or the tax
(3) "Corporation" includes any corporation, a joint-stock company and any association or other organization which is taxed as
a corporation under federal income tax law.
(4) "Delegate," when used in reference to the tax
commissioner, means any officer or employee of the tax division of
the department of tax and revenue authorized by the tax
commissioner directly, or indirectly by one or more redelegations
of authority, to perform the functions mentioned or described in
(5) "Downtown area" means an area not exceeding one square
mile in, or more than ten percent of, the total area of the
municipality, whichever is greater, and which has consisted
primarily of commercial enterprises other than manufacturing.
(6)(A) "Eligible investment" means the amount of capital
investment made by an eligible taxpayer in property purchased for
a new facility or expansion of an existing facility which is the
applicable percentage of the cost of property purchased for the
purpose which is placed in service or use in this state by the
eligible taxpayer during the taxable year.
(B) Applicable percentage. -- For the purposes of paragraph
(A) of this subdivision, the applicable percentage for any property
shall be determined under the following table:
If useful life is:
The applicable percentage is:
4 years or more but less than 6 years33 1/3
6 years or more but less than 8 years66 2/3
8 years or more100
The useful life of any property for purposes of this section
shall be determined as of the date the property is first placed in
service or use in this state by the taxpayer, determined in
accordance with federal income tax law.
(C) Cost.-- For purposes of paragraph (A) of this subdivision,
the cost of each property purchased for a new facility or expansion
of an existing facility is determined using this paragraph.
(i) Trade-ins. -- Cost does not include the value of property
given in trade or exchange for the property purchased for expansion
(ii) Damaged, destroyed or stolen property. -- If property is
damaged or destroyed by fire, flood, storm or other casualty, or is
stolen, then the cost of replacement property does not include any
insurance proceeds received in compensation for the loss.
(iii) Rental property. -- The cost of property acquired by
lease for a term of ten years or longer is one hundred percent of
the rent reserved for the primary term of the lease, not to exceed twenty years.
(iv) Property purchased for multiple use. -- The use of
property purchased for multiple business use including use as a
component part of a new or expanded business, together with some
other business or activity not eligible for credit under this
article, shall be apportioned between the businesses and
occupations. The amount apportioned to the new or expanded or
revitalized business, is an eligible investment, subject to the
conditions and limitations of this section.
(v) Self-constructed property. -- In the case of
self-constructed property, its cost is the amount properly charged
to the capital account fo purposes of depreciation.
(7) "Eligible taxpayer" means a person who after the thirtieth
day of June, two thousand, makes capital expenditures in a new or
expanded existing facility located in a downtown area of a
municipality in this state, including retail businesses,
restaurants, hotels and motels, offices of professionals such as
doctors and lawyers, high technology businesses and back office
operations, but not including manufacturing facilities. Prior to
the investment for which credit is claimed a clearly delineated
downtown area must be designated as such in writing to a requesting municipality by the county development authority in which the
municipality is located, and certified in writing by the authority
as an area in need of revitalization due to the decline in the
number of businesses located in the area.
(8) "Existing facility" means a building and capital equipment
in the building which at anytime during the twelve months preceding
the month of its expansion was used by the taxpayer, or by a
(9) "Internal Revenue Code" means the Internal Revenue code of
1986, as amended, of the United States.
(10) "Manufacturing facility" means any industrial facility
used in the manufacturing of tangible personal property, including
processing resulting in a change in the condition of the property.
(11) "New facility" means a building and capital equipment in
the building that is used by the eligible taxpayer which occupies
it after the thirtieth day of June, two thousand. If the facility
was used by the taxpayer, or by a related person, at any time
during the preceding twelve months the building is not a new
(12) "Partnership" means and 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 which is treated as a partnership for federal income tax
purposes for the taxable year.
(13) "Partner" includes a member in a syndicate, group, pool,
joint venture or organization treated as a partnership for federal
income tax purposes for the taxable year.
(14) "Person" means and includes an individual, trust, estate,
partnership, limited liability company, association, company or
(15)(A) "Related entity," "related person," "entity related
to" or "person related to" means:
(i) An individual, corporation, partnership, affiliate,
association or trust or any combination or group of them controlled
by the taxpayer;
(ii) An individual, corporation, partnership, affiliate,
association or trust or any combination or group of them that is in
control of the taxpayer;
(iii) An individual, corporation, partnership, affiliate,
association or trust or any combination or group of them controlled
by an individual, corporation, partnership, affiliate, association
or trust or any combination or group of them that is in control of the taxpayer; or
(iv) A member of the same controlled group as the taxpayer.
(B) For purposes of this subdivision, "control," with respect
to a corporation, means ownership, directly or indirectly, of stock
possessing fifty percent or more of the total combined voting power
of all classes of the stock of the corporation which entitled its
owner to vote. "Control," with respect to a trust, means
ownership, directly or indirectly, of fifty percent or more of the
beneficial interest in the principal or income of the trust. The
ownership of stock in a corporation, of a capital or profits
interest in a partnership or association or of a beneficial
interest in a trust shall be determined in accordance with the
rules for constructive ownership of stock provided in section two
hundred sixty-seven(c) of the Internal Revenue Code: Provided,
That paragraph three of section two hundred sixty-seven(c) of the
Internal Revenue Code does not apply.
(16) "Tax year" or "taxable year," means the tax year of the
taxpayer for federal income tax purposes.
(17) "Taxpayer" means any person subject to the tax imposed by
articles twenty-one, twenty-three or twenty-four of this chapter.
§11-13P-3. Eligibility for tax credits; creation of the credit.
There is allowed to every eligible taxpayer a credit against
the taxes imposed in articles twenty-one, twenty-three and
twenty-four of this chapter. The amount of the credit is
determined and applied as provided in this article.
§11-13P-4. Amount of credit allowed; expiration of the credit.
(a) Credit allowable. --
(1) The amount of annual credit allowable under this article
to an eligible taxpayer is five percent of its eligible investment
as defined in section two of this article, and shall be applied for
each of the next five tax years, beginning with the taxable year in
which the eligible investment is first placed in service or use in
the municipality by the eligible taxpayer during the taxable year,
or until the credit is exhausted, whichever comes first.
(2) When the new or expanded facility is in operation for less
than twelve months of the taxable year in which it is placed in
service, the credit allowed by this subsection shall be prorated by
the ratio that the number of months in the taxpayer's taxable year
during which the new or expanded facility was in service bears to
(3) When the eligible taxpayer stops using the facility during
the taxable year, the credit allowed by this subsection shall be prorated by the ratio that the number of months in the taxpayer's
taxable year during which facility was in use bears to twelve.
(4) The amount of credit allowable each taxable year shall be
calculated annually based upon eligible investment made during the
taxable years for which this credit is eligible. The amount of
credit allowable for investment made during a taxable year shall be
applied over a five-year period, at the rate of one fifth of the
investment per taxable year, beginning with the taxable year in
which the eligible investment is first placed in service or use.
(b) Credit against Municipal Business and Occupation Tax. --
A municipality may authorize in its ordinance a tax credit
against its municipal business and occupation tax pursuant to this
article and subsection (f), section five, article thirteen, chapter
eight of this code, for eligible investment made by an eligible
taxpayer. The maximum amount of the credit which may be allowed
against the municipal business and occupation tax is the amount of
new additional municipal business and occupation tax revenue
resulting from the new or expanded facility. The decrease in the
amount of municipal business and occupation tax liability resulting
from the credit may not result in a tax liability for that tax, if
any, which is less than the previous taxable year. The provisions of this article apply to this municipal business and occupation tax
credit to the extent applicable.
(c) Expiration of credit. -- This credit expires on the first
day of July, two thousand five. When the first day of July, two
thousand five, falls during the taxable year of the eligible
taxpayer, the amount of credit allowable for that taxable year is
limited to that portion of the amount of credit that would have
been allowable had the credit not expired multiplied by the ratio
which the number of months during taxpayers taxable year ending
before the first day of July, two thousand five, bears to twelve.
§11-13P-5. Application of annual credit allowance.
(a) Application of credit against business franchise tax. --
The amount of credit allowed under section four of this article
shall first be applied against the eligible taxpayer's liability
for the tax imposed by article twenty-three of this chapter that is
attributable to eligible investment in a downtown area of a
(b) Application of remaining credit against income tax. --
After application of the allowable credit against the tax imposed
by article twenty-three of this chapter, as provided in subsection
(a) of this section, any remaining credit may be applied against one of the income taxes imposed by article twenty-one or
twenty-four of this chapter to the extent those taxes are
attributable to eligible investment in a facility located in a
downtown area of a facility located in this state: Provided, That
no credit is allowed against employer withholding taxes due under
article twenty-one of this chapter.
(c) Excess credit forfeited. -- If after application of
subsections (a) and (b) of this section, any of the one-fifth
annual allowable credit remains for the taxable year, the amount
remaining and not used is forfeited. Unused credit may not be
carried back to any prior taxable year and may not be carried
forward to any subsequent taxable year.
(d) Application of this credit when other credits apply. --
The credit allowed under this article shall be applied after
application of all other applicable tax credits allowed for the
taxable year against the taxes imposed by article twenty-one,
twenty-three or twenty-four of this chapter.
(e) Completion of annual schedule to assert credit. -- To
assert this credit against tax, the eligible taxpayer shall prepare
and file with the annual tax return or returns filed under article
twenty-one, twenty-three or twenty-four of this chapter, an annual schedule showing the amount of tax paid for the taxable year, and
the amount of credit allowed under this article. This annual
schedule shall set forth the information and be in the form
prescribed by the tax commissioner.
(f) Payments of estimated tax. -- A taxpayer may consider the
amount of credit allowed under this article when determining the
taxpayer's liability under articles twenty-one, twenty-three and
twenty-four of this chapter for periodic payments of estimated tax
for the taxable year, in accordance with the procedures and
requirements prescribed by the tax commissioner. The annual total
tax liability and total tax credit allowed under this article are
subject to adjustment and reconciliation pursuant to the filing of
the annual schedule required by subsection (e) of this section.
§11-13P-6. Proration of credit among partners, members of limited
liability companies, or shareholders in small
The amount of credit allowed under this article for the
taxable year to a partnership or limited liability company
classified as a partnership for the taxable year, or to an electing
small business corporation, that remains after application of the
credit against the tax imposed by article twenty-three of this chapter as provided in subsection (a), section five of this
article, shall be allocated to the individual partners, members or
shareholders, as the case may be, in proportion to their ownership
interest in the partnership, limited liability company or electing
small business corporation. The amount of credit allocated to the
individual partners, members or shareholders, as the case may be,
may be applied against the taxes imposed by articles twenty-one and
twenty-four of this chapter in accordance with the rule set forth
in subsection (b), section five of this article.
§11-13P-7. Availability of credit to successors.
(a) Transfer or sale. -- When there is a transfer or sale of
the business assets of an eligible taxpayer to a successor taxpayer
which continues to operate the facility in the downtown area of the
municipality, the successor taxpayer is entitled to the credit
allowed under this article if the successor taxpayer otherwise
remains in compliance with the requirements of this article for
entitlement to the credit.
(b) Allocation of credit between eligible taxpayer and
successor eligible taxpayer. -- For any taxable year during which
a transfer or sale of the business assets of an eligible taxpayer
to a successor taxpayer under this section occurs, or a merger allowed under this section occurs, the credit allowed under this
article shall be apportioned between the predecessor eligible
taxpayer and the successor taxpayer based on the number of days
during the taxable year that each taxpayer owned the facility for
which credit is allowed.
(c) Stock purchases. -- When a corporation which is an
eligible taxpayer entitled to the credit allowed under this article
is purchased through a stock purchase by a new owner, and the
corporation remains a legal entity so as to retain its corporate
identity, the entitlement of that corporation to the credit allowed
under this article is not affected by the ownership change.
(1) When a corporation or other entity which is an eligible
taxpayer entitled to the credit allowed under this article is
merged with another corporation or entity, the surviving
corporation or entity is entitled to the credit to which the
predecessor eligible taxpayer was originally entitled only if the
surviving corporation or entity otherwise complies with the
provisions of this article.
(2) The amount of credit available in any taxable year during
which a merger occurs shall be apportioned between the predecessor eligible taxpayer and the successor eligible taxpayer based on the
number of days during the taxable year that each owned the
transferred business assets: Provided, That when the taxable year
of the predecessor eligible taxpayer and the taxable year of the
successor eligible taxpayer are different, the apportionment shall
be made as prescribed by the tax commissioner.
(e) No provision of this section or of this article allows
sales or other transfers of the tax credit allowed under this
article. The credit allowed under this article may be transferred
only in circumstances where there is a valid successorship as
described under this section.
§11-13P-8. Credit recapture; interest; penalties; additions to
tax; statute of limitations.
(a) If it appears upon audit or otherwise that any person has
improperly claimed the credit allowed by this article, the amount
improperly claimed and which the person was not entitled to take
shall be recaptured. An amended return shall be filed for any
taxable year for which the credit was improperly taken. Any
additional taxes due under this chapter shall be remitted with the
amended return or returns filed with the tax commissioner, along
with interest, as provided in section seventeen, article ten of this chapter, and a ten percent penalty plus such other penalties
and additions to tax as may be applicable under the provisions of
article ten of this chapter.
(b) Recapture for jobs lost. --
(1) If in any tax year the eligible facility ceases to
operate, credit recapture applies for that year, and the taxpayer
shall return to the state an amount of tax determined as provided
in subsection (a) of this section.
(2) Notwithstanding the provisions of article ten of this
chapter, penalties and additions to tax imposed under article ten
of this chapter and the ten percent penalty imposed under this
section may be waived, in whole or in part, at the discretion of
the tax commissioner. However, interest may not be waived.
(c) Notwithstanding the provisions of article ten of this
chapter, the time within which a notice of assessment may be issued
by the tax commissioner to recover recaptured tax is five years
from the date of filing of any tax return on which this credit was
taken or five years from the date of payment of any tax liability
calculated pursuant to the assertion of the credit allowed under
this article, whichever is later.
§11-13P-9. Legislative rules.
The tax commissioner may propose rules for legislative
approval pursuant to the provisions of article three, chapter
twenty-nine-a of this code, as may be necessary to carry out the
purposes of this article including, but not limited to, rules
relating to applicability of credit, method of claiming credit,
credit recapture, documentation necessary to claim credit and
preventing abuse of this article by related persons or by change in
the form of doing business.
§11-13P-10. Construction of article.
The provisions of this article shall be reasonably construed.
The burden of proof is on the person claiming the credit allowed by
this article to establish by clear and convincing evidence that the
person is entitled to the amount of credit asserted for the taxable
§11-13P-11. Effective date.
This article is effective for taxable years beginning on or
after the first day of July, two thousand.
The purpose of this bill is to encourage businesses to
locate or expand in the downtown areas of cities in the State which
are in need of revitalization due to a decline in business in those
This article is new; therefore, strike-throughs and
underscoring have been omitted.