SB671 INTR

Senate Bill No. 671
(By Senators Jackson, Plymale, Craigo and Unger)
____________

[Introduced February 18, 2002; referred to the Committee
on Finance

.]
____________

A BILL to amend article three, chapter eleven of the code of West Virginia, one thousand nine hundred thirty-one, as amended, by adding thereto a new section, designated section nine-a, relating generally to payment in lieu of property tax agreements; prescribing uniform minimum reporting and content requirements for payment in lieu of tax agreements; requiring that agreements be filed in county clerk's office and that copies be sent to chief inspector and secretary of tax and revenue; requiring that local levying bodies approve payment in lieu of tax agreements; requiring that summaries of agreements be updated annually; permitting chief inspector to specify content of agreement and summaries by procedural rules; specifying method for allocation and distribution of payments in lieu of property taxes, whether payment is received in money or other property; specifying how in lieu of property tax payments received by a board of education are treated for purpose of state school aid formula; defining certain terms; specifying when and how these rules apply and exempting certain agreements from their application; and providing effective dates.

Be it enacted by the Legislature of West Virginia:

That article three, chapter eleven of the code of West Virginia, one thousand nine hundred thirty-one, as amended, be amended by adding thereto a new section, designated section nine-a, to read as follows:
ARTICLE 3. ASSESSMENTS GENERALLY.
§11-3-9a. Payment in lieu of property tax agreements.

(a) In general. -- Local levying bodies that enter into payments in lieu of tax agreements with lessees of real or tangible personal property that is exempt in the name of the owner or titleholder from ad valorem property taxation shall comply with the provisions of this section.

(b) Pilot agreement requirements. -- The following requirements apply to payment in lieu of tax agreements executed after the effective date of this section:

(1) An agreement may not be executed unless the property to which the payment in lieu of tax relates has been determined to be exempt from ad valorem property tax by the assessor of the county wherein the property is situated, or by the tax commissioner under this article, or by a court of competent jurisdiction.

(2) The payment in lieu of tax agreement shall be:

(A) Approved by all local levying bodies having taxing jurisdiction that would have received tax revenues from the property that is the subject of the agreement, if such property were taxable, and is signed by the chairperson of the county commission, the president of the county board of education, and the mayor of the municipality in which any portion of the property covered by the agreement is located;

(B) Signed by the county assessor;

(D) Signed by the lessee or lessees of the property; and

(E) Signed by the payor of the payment in lieu of tax, if the payor is not the lessee.

(3) The payment in lieu of tax agreement shall contain a summary statement, in such form as may be prescribed by the chief inspector in procedural rules promulgated as provided in article three, chapter twenty-nine-a of this code, showing:

(A) The appraised value of the property to which the payment in lieu of tax relates, as of the date the agreement is signed by the county assessor;

(B) The basis for the exemption from property tax;

(D) An itemization of the exempt personal property;

(E) An acknowledgment that the exempt status is subject to annual review by the assessor;

(F) The amount of the annual payment in lieu of tax, or if the payment in lieu of tax is to be paid or made, in whole or in part, in property other than money or in a form of consideration other than money, a complete description of the annual payment in lieu of tax and the fair market value of the property other than money;

(G) The period of time, or term, over which the payment in lieu of tax agreement shall be in effect; and

(F) Any other information the chief inspector may by procedural rule require to be included in the summary statement required by this subdivision (3).

(4) The owner of the tax exempt property shall file a copy of the payment in lieu of tax agreement, including the summary statement, and each annual updated summary statement, for public inspection with the county clerk of the county or counties that are levying bodies having taxing jurisdiction over the property to which the payment in lieu of tax relates. The owner of the tax- exempt property shall promptly send a copy of the filed summary statement, and thereafter a copy of each annual updated summary statement filed, plus such other documentation and information as the state auditor may by procedural rule require to the state auditor and to the secretary of tax and revenue.

(A) For any payment in lieu of tax agreement entered into during the fiscal year of the county, the payment in lieu of tax agreement and summary statement shall be filed by the owner of the tax-exempt property with the county clerk not later than the first day of September next succeeding the end of that fiscal year. After the agreement and summary statement are file, the owner shall promptly send true copies of the filed documents to the chief inspector and the secretary of tax and revenue.

(B) The owner of the tax exempt property shall annually update the summary statement previously filed with the clerk by showing the appraised value of the property covered by the payment in lieu of tax agreement, as determined by the county assessor as of the first day of the most recently concluded assessment year preceding the filing of the updated summary statement with the county clerk, and such additional information as the chief inspector may by procedural rule require. The owner shall complete and file the annual updated summary with the county clerk after the first day of July but before the first day of September each year. When the updated summary statement is filed with the clerk, the owner shall promptly send copies thereof to the chief inspector and the secretary of tax and revenue.

(c) Application of this section. -- This section shall apply to all payments in lieu of tax agreements executed after the thirtieth day of June, two thousand two, that are entered into pursuant to any provision of this code. This section shall also apply to payments in lieu of tax payment agreements executed before the first day of July, two thousand two, when the period of the agreement is extended after the ninth day of March, two thousand two.

(d) Allocation and distribution of payments under agreement. -- All payments in lieu of tax made to any county commission, county board of education or municipality or to any county sheriff pursuant to any payment in lieu of tax agreement executed or entered into, or coming into existence on or after the first day of July, two thousand two, without regard to whether the payment in lieu of tax related thereto is in conformance with other requirements of this section, shall be distributed in the same proportions as property taxes are distributed for the tax year in which the payment is received, among all local levying bodies that would have received tax revenues if the payment in lieu of tax resulted from ad valorem property taxation of the property to which the payment in lieu of tax relates. Payments in lieu of tax made in the form of transfers of property other than money, transfers of in kind consideration, or transfers of any consideration other than money shall be valued at their then fair market value, and any entity receiving the in kind consideration shall promptly pay to the other levying bodies the money they would have received had the in lieu payment been paid in money to the county sheriff.

(e) Effect of in lieu payments on state aid to public schools. -- The allocated state aid share under the state school aid formula set forth in article nine-a, chapter eighteen of this code shall be adjusted in any county receiving payments in lieu of tax subject to this section in accordance with the requirements of section twelve, article nine-a, chapter eighteen of this code.

(f) Certain terms defined. -- When used in this section, or in the administration of this section, the following terms shall have the meanings ascribed to them by this subsection, unless a different meaning is clearly required by the context in which the term is used.

(1) "Chief inspector" means the state auditor acting in his or her capacity as chief inspector and supervisor of local government offices, as described in section eleven, article nine, chapter six of this code.

(2) "Exempt property" means tangible personal property and real property that is exempt from property tax, and includes property owned by, or title to which is held by, a tax exempt person, organization, entity or agency, including, but not limited to, the United States, this state, any other state of the United States, any territory or protectorate of the United States, or any other governmental entity, agency division or subdivision.

(3) "Leasehold interest" means any direct, indirect or derivative right or privilege of a lessee to enter upon, hold, occupy, use or operate tax exempt property for the purpose of directly or indirectly deriving gain, income or profit for such lessee or for another. Unless specifically exempted or excluded, any leasehold interest is taxable under this article, including leasehold interests that are not alienable, or not subject to subleasing or which otherwise have restricted marketability or no marketability.

(4) "Lessee" means and includes any person that enters upon, holds, uses, occupies or operates for any commercial or for profit purpose: (A) Any tax exempt property, or (B) property that is owned by a tax exempt entity, or (C) property to which title is held by a tax exempt entity, without regard to whether such entry, holding, occupation, use or operation occurs pursuant to a formal lease or other agreement: Provided, That the term "lessee" does not mean or include the tax exempt owner or tax exempt titleholder of the exempt property. The term "lessee" means and includes any lessee, sublessee, assignee, subassignee, any affiliate, agent or representative of any lessee, sublessee, assignee, subassignee, or any person having a direct, indirect or derivative right or privilege, granted by or agreed to by any tax exempt titleholder or owner of exempt property, to enter upon, hold, occupy, use or operate such tax exempt property, including but not limited to, any contract operator or other person engaged in entry, holding, use, occupation or operation of such property for the purpose of directly or indirectly deriving gain, income or profit for such operator or person, or for another.

(5) "Levying body having taxing jurisdiction" means a property tax levying body that has jurisdiction to tax property, or that would have jurisdiction to tax property if such property were not exempt from tax.

(6) "Payment in lieu of tax" means any payment received as a substitute for, or instead of, a property tax. For purposes of this definition, the term "payment" includes any transfer or contribution of money, property, in kind consideration or any other consideration, without regard to whether any formal or written payment in lieu of tax agreement exists with relation to the payment.

(A) Any payment, as herein defined, made by a lessee or any affiliate of a lessee to any local levying body having taxing jurisdiction over the property entered upon, held, used, occupied or operated by the lessee, or any such payment made to any other person at the request or direction of any such levying body or any officer, employee, agent or representative thereof, constitutes a payment in lieu of tax if such payment is made as a substitute for property tax.

(B) Any such payment not made as direct consideration for the purchase of property or services, for payment of due and owing local, county or municipal service fees or for payment of due and owing taxes, shall be presumed to be a payment in lieu of tax subject to the requirements of this section. Payments characterized as charitable, eleemosynary or public service contributions made by a lessee or any affiliate of a lessee to any local levying body having taxing jurisdiction over the tax exempt property held, used, occupied or operated by the lessee, or such payments made to any other person at the request or direction of any such levying body or at the request or direction of any officer, employee, agent or representative thereof shall be presumed to be a payment in lieu of tax subject to this section.

(7) "Payment in lieu of tax agreement" means any agreement, arrangement, or understanding for the making of a payment in lieu of tax, existing between any lessee and any local levying body having taxing jurisdiction over the property entered upon, held, used, occupied or operated by the lessee.

(8) "Person" means and includes any individual, firm, association, company, partnership, limited partnership, corporation, joint-stock company, agency, syndicate, limited liability company, trust, receiver, trustee, fiduciary or conservator or other legal entity or any other group or combination acting as a unit, in the plural as well as the singular number, unless the intention to give a more limited meaning is disclosed by the context in which the term is used.

(g) Exceptions to application of this section. -- This section does not apply to, or with relation to, property held in a foreign trade zone that is exempt from tax under 19 U.S.C. §81o(e), or any successor section thereto, or any interest therein, or to, or with relation to, property exempt from tax under the freeport exemption set forth in section one-c, article ten of the constitution of this state and section thirteen, article five, chapter eleven of this code, or to, or with relation to, any interest therein.

(h) Effective date. -- This section shall take effect the first day of July, two thousand two, and shall apply to all payments in lieu of tax agreements executed on or after that date, except as otherwise expressly provided in this section.

NOTE: The purpose of this bill is to prescribe uniform minimum reporting and content requirements for payment in lieu of tax agreements, to require that all local levying bodies approve a payment in lieu of tax agreement, and to provide for allocation and distribution of payments in lieu of property tax. These rules would apply to payment in lieu of property tax agreements executed after June 30, 2002.

This section is new; therefore, strike-throughs and underscoring have been omitted.