Senate Bill No. 294
(By Senators Tomblin (Mr. President) and Sprouse
By Request of the Executive)
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[Introduced January24, 2002; referred to the Committee
on Economic Development; and then to the Committee on Finance
.]
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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, relating generally to
business franchise tax; exempting from tax persons and
organizations to the extent they provide venture capital to
West Virginia businesses; defining terms; specifying
effective date of exemption; and making technical
corrections.
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 to read as follows:
ARTICLE 23. BUSINESS FRANCHISE TAX.
§11-23-7. Persons and other 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 Natural
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.
(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 subdivision
(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.
(k) For tax years beginning after the thirty-first day of
December, two thousand two, any person or other organization
engaged in the activity of providing venture capital to West
Virginia businesses: Provided, That if the person or
organization is not exclusively engaged in that activity, only
that portion of its tax base under this article that is
attributable to the providing of venture capital to West
Virginia businesses shall be exempt from tax under this article,
and its tax liability under this article shall be determined by
multiplying its pre-credit tax liability by a fraction equal to
one minus a fraction, the numerator of which is its gross
receipts attributable to its venture capital activities in this
state and the denominator of which is its total gross receipts
from all of its business activities in this state. For purposes
of this exemption, a "person or organization engaged in the
activity of providing venture capital to West Virginia business"
means a certified West Virginia capital company as defined in
section four, article one, chapter five-e of this code.
NOTE: The purpose of this bill is to exempt from Business
Franchise Tax venture capital provided to West Virginia
businesses.
Strike-throughs indicate language that would be stricken
from the present law, and underscoring indicates new language
that would be added.