H. B. 3136


(By Delegate Michael)
[Introduced March 30, 2001; referred to the
Committee on Finance.]




A BILL to amend and reenact section seven, article twenty-three, chapter eleven of the code of West Virginia, one thousand nine hundred thirty-one, as amended; and to amend and reenact section five, article twenty-four of said chapter, all relating to business franchise tax and corporation net income tax; and limiting the exemption from those taxes for insurance companies which pay insurance premium tax to the capital and income from insurance activities upon which premium tax is paid.

Be it enacted by the Legislature of West Virginia:
That section seven, article twenty-three, chapter eleven of the code of West Virginia, one thousand nine hundred thirty-one, as amended, be amended and reenacted; and that section five, article twenty-four of said chapter be amended and reenacted, all to read as follows:
ARTICLE 23. BUSINESS FRANCHISE TAX.
§11-23-7. Persons and organizations exempt from tax.
The following organizations and persons shall be exempt from the tax imposed by this article to the extent provided in this section:
(a) Natural persons doing business in this state that are not doing business in the form of a partnership (as defined in section three of this article) or in the form of a corporation (as defined in section three of this article). Such persons include persons doing business as sole proprietors, sole practitioners and other self-employed persons.
(b) Corporations and organizations which by reason of their purposes or activities are exempt from federal income tax: Provided, That this exemption does not apply to that portion of their capital (as defined in section three of this article) which is used, directly or indirectly, in the generation of unrelated business income (as defined in the Internal Revenue Code) of any such corporation or organization if the unrelated business income is subject to federal income tax.
(c) Insurance companies which pay this state a tax upon premiums to the extent their capital (as defined in section three of this article) is used in the generation of insurance premiums upon which a state tax upon premiums is paid. This exemption does not apply to that portion of their capital which is used, directly or indirectly, in the generation of income not derived from insurance premiums upon which a state tax upon premiums is paid.
(d) Production credit associations organized under the provisions of the federal "Farm Credit Act of 1933": Provided, That this exemption does not apply to corporations or associations organized under the provisions of article four, chapter nineteen of this code.
(e) Any trust established pursuant to section one hundred eighty-six, chapter seven, title twenty-nine of the code of the laws of the United States (enacted as section three hundred two (c) of the labor management relations act, one thousand nine hundred forty-seven), as amended prior to the first day of January, one thousand nine hundred eighty-five.
(f) Any credit union organized under the provisions of chapter thirty-one, or any other chapter of this code: Provided, That this exemption does not apply to corporations or cooperative associations organized under the provisions of article four, chapter nineteen of this code.
(g) Any corporation organized under this code which is a political subdivision of the state of West Virginia, or is an instrumentality of a political subdivision of this state, and was created pursuant to this code.
(h) Any corporation or partnership engaged in the activity of agriculture and farming, as defined in paragraph (8), subsection (b), section three of this article: Provided, That if a corporation or partnership is not exclusively engaged in such activity, its tax base under this article shall be apportioned, in accordance with regulations promulgated by the tax commissioner, among its several activities and only that portion attributable to the activity of agriculture and farming shall be exempt from tax under this article.
(i) Any corporation or partnership licensed under article twenty-three, chapter nineteen of this code, to conduct horse or dog racing meetings or a pari-mutuel system of wagering: Provided, That if the corporation or partnership is not exclusively engaged in this activity, its tax base under this article shall be apportioned, in accordance with regulations promulgated by the tax commissioner, among its several activities and only that portion attributable to the activity of conducting a horse or dog racing meeting or a pari-mutuel system of wagering shall be exempt from tax under this article.
(j) For those tax years beginning after the thirtieth day of June, one thousand nine hundred ninety-eight, any corporation or partnership operating as a hunting club: Provided, That the corporation or partnership distributes no income or dividends to its owners or stockholders. For the purposes of this subsection, a hunting club is a group of persons owning land which is used principally for hunting purposes by the members of the club and guests, and where any charges made for hunting are principally for the purpose of defraying the costs of operating and maintaining the club and club properties or establishing a reasonable reserve to meet the operating and maintenance costs of the club. The tax commissioner shall by legislative rule promulgated in accordance with article three of chapter twenty-nine of this code further prescribe the definition of a hunting club and the manner and method in which this credit may be claimed.
ARTICLE 24. CORPORATION NET INCOME TAX.
§11-24-5. Corporations exempt from tax.
The following corporations shall be exempt from the tax imposed by this article to the extent provided in this section:
(a) Corporations which by reason of their purposes or activities are exempt from federal income tax: Provided, That this exemption shall not apply to the unrelated business income, as defined in the Internal Revenue Code, of any such corporation if such income is subject to federal income tax.
(b) Insurance companies which pay this state a tax upon premiums to the extent their income is derived from insurance premiums upon which a state tax upon premiums is paid. This exemption does not apply to income from any source other than insurance premiums upon which a state tax upon premiums is paid.
(c) Production credit associations organized under the provisions of the federal "Farm Credit Act of 1933": Provided, That the exemption shall not apply to corporations or associations organized under the provisions of article four, chapter nineteen of this code.
(d) Corporations electing to be taxed under subchapter S of the Internal Revenue Code of one thousand nine hundred eighty-six, as amended: Provided, That said corporations shall file the information return required by section thirteen-b of this article.
(e) Trusts established pursuant to section one hundred eighty-six, chapter seven, title twenty-nine of the code of the laws of the United States (enacted as section three hundred two (c) of the labor management relations act, one thousand nine hundred forty-seven), as amended prior to the first day of January, one thousand nine hundred sixty-seven.






NOTE: The purpose of this bill is to exempt insurance companies, which presently are completely exempt from Business Franchise Tax and Corporation Net Income Tax if they pay insurance premium tax, from those taxes only to the extent they engage in activities which are subject to the insurance premium tax.

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