H. B. 2172
(By Delegate Webb)
[Introduced January 13, 2003; referred to the
Committee on Industry and Labor, Economic Development and
Small Business then Finance.]
A BILL to amend chapter five-b of the code of West Virginia, one
thousand nine hundred thirty-one, as amended, by adding
thereto a new article, designated article four, relating to
the West Virginia "Job Creation Zones Act of 2003"; providing
for certain tax exemptions for qualified new businesses in the
ten West Virginia counties with the highest rate of
unemployment; and providing other conditions and procedures.
Be it enacted by the Legislature of West Virginia:
That chapter five-b of the code of West Virginia, one thousand
nine hundred thirty-one, as amended, be amended by adding thereto
a new article, designated article four, to read as follows:
ARTICLE 4. WEST VIRGINIA JOB CREATION ZONES ACT OF 2003.
§5B-4-1. Legislative purpose.
This article shall be known as the "West Virginia Job Creation Zones Act of 2003." The Legislature hereby finds and declares that
the health, safety and welfare of the people of West Virginia are
enhanced by the continual encouragement, development, growth and
expansion of private enterprises within this state, and that there
are certain economically depressed areas in the state that need
particular attention to create jobs, stimulate economic activity
and affect private sector investment rather than governmental
subsidy to improve the quality of life of their citizens. It is
the purpose of the Legislature to encourage new economic activity
in these depressed areas of the state by means of tax relief and
the removal of unnecessary governmental barriers to the production
and earning of wages and profits and the creation of economic
(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 either by the
context in which the term is used, or by specific definition in
(b) Terms defined.
(1) Agriculture and farming. -- The term "agriculture and
farming" means the production of food, fiber and woodland products
(but not timbering activity) by means of cultivation, tillage of the soil and by the conduct of animal, livestock, dairy, apiary,
equine or poultry husbandry, horticulture or any plant or animal
production and all farm practices related, usual or incidental
thereto, including the storage, packing, shipping and marketing,
but not including any manufacturing, milling or processing of
products by persons other than the producer thereof.
(2) Business. -- The term "business" means and includes all
purposeful revenue-generating activity engaged in or caused to be
engaged in with the object of gain or economic benefit, either
direct or indirect by any person.
(3) Corporation. -- The term "corporation" includes any
corporation, electing small business corporation, joint-stock
company, and any association or other organization which is taxable
as a corporation under federal income tax laws or the income tax
laws of this state.
(4) Extraction of ores or minerals from the ground. -- The
phrase "extraction of ores or minerals from the ground" includes
extraction by mine owners or operators of ores or minerals from the
waste or residue of prior mining.
(5) Include, includes and including. -- The terms "include,"
"includes" and "including," when used in a definition contained in
this article, does not exclude other things otherwise within the
meaning of the term being defined.
(6) Job creation zone. -- The term "job creation zone" means the geographical area of a county of this state which during the
preceding calendar year had the highest rate of unemployment.
(7) Mining. -- The term "mining" includes not merely the
extraction of ores or minerals from the ground but also those
treatment processes necessary or incidental thereto.
(8) Natural resources. -- The term "natural resources" means
all forms of minerals, including, but not limited to, rock, stone,
limestone, coal, shale, gravel, sand, clay, natural gas, oil and
natural gas liquids, which are contained in or on the soils or
waters of this state, and standing timber.
(9) New business. -- The term "new business" means any sole
proprietorship and any partnership or corporation that does not
engage in business in the county prior to the date it applies to
the county commission for certification as a qualified new
business. "New business" does not include: (A) The
reconfiguration or restructuring of an existing or previously
existing business, such as, but not limited to, a sole proprietor
who adds a partner thereby becoming a partnership, incorporates or
establishes a limited liability company for his or her business, a
partnership that adds or loses a partner, incorporates or becomes
a limited liability company, a partnership that dissolves with some
partners continuing to do business as sole proprietorships, a
corporation that creates a new subsidiary or becomes a member of a
partnership or limited liability company, any owner of a corporation who creates a sister corporation; or (B) a business
that is related to another taxpayer. Related taxpayers shall be
determined under rules set forth in Section 267 of the Internal
Revenue Code of 1986, as amended, pertaining to nonrecognition of
losses, expenses and interest with respect to transactions between
(10) Partnership. -- The term "partnership" includes a
syndicate, group, pool, joint venture, other unincorporated
organization through or by means of which any business, financial
organization or venture is carried on, when the organization is
treated as a partnership for federal income tax purposes.
"Partnership" includes a limited liability company which is treated
as a partnership for federal income tax purposes for the taxable
year. "Partnership" does not include a corporation, an estate, a
sole proprietorship, trust or unincorporated organization which
under Section 761 of the Internal Revenue Code of 1986, as amended,
is not treated as a partnership for the taxable year for federal
income tax purposes.
(11) Person. -- The term "person" means and includes any
individual, trust, estate, partnership, association, company or
(12) Qualified new business. -- The term "qualified new
business" means any new business, as defined in section two of this
article, that does not engage, directly or indirectly through the activity of others, in: (A) Agriculture and farming; (B) severing
or processing natural resources; or (C) processing pulp, and which
during the time a county is designated as a job creation zone,
begins and continues to engage in the active conduct of a trade or
business in a job creation zone after certification as provided in
subsection (a) of section three of this article.
(13) Sale. -- The term "sale" includes: (A) Any transfer of
the ownership or title to property, whether for money or in
exchange for other property or services or any combination thereof;
(B) any lease of property, whether the transaction is characterized
as a rental, lease, hire, bailment or license to use; and (C) any
provision of service for a consideration, whether direct or
(14) Service. -- The term "service" includes all activities
engaged in by a person for consideration which involve the
rendering of a service as distinguished from the sale of tangible
personal property, except that "service" does not include: (A)
Services rendered by an employee to his or her employer pursuant to
a contract of employment; or (B) severing or processing natural
(15) Severing or processing natural resources. -- The phrase
"severing or processing natural resources" means the physical
removal of natural resources from the earth or waters of this state
by any means and the ordinary processing of the raw natural resource product to obtain a marketable natural resource product.
(16) Tax commissioner. -- The term "tax commissioner" means
the tax commissioner of the state of West Virginia, or his or her
§5B-4-3. Qualified new business.
(a) A new business is not a qualified new business unless the
county commission of the county in which the new business will be
located by order certifies in writing each of the following facts
to the tax commissioner:
(1) That the business is a new business;
(2) That the new business will not directly compete with sales
of products or services by an existing business located in that
county or an adjacent county;
(3) That the activities of the new business will not adversely
impact or harm the environment; and
(4) That the new business would not likely locate in the
county if it were not given the benefit of the exemption provided
(b) Any business located in the county or in an adjacent
county may appeal the order of the county commission issued under
subsection (a) of this section within four months after the order
is entered by the county commission.
§5B-4-4. Designation of counties as job creation zones.
(a) The ten counties of this state that have the highest average annual rate of unemployment for the preceding calendar
year, as determined annually by the commissioner of the bureau of
employment programs, are each hereby designated a job creation
zone. This designation remains in effect until the first day of
January, two thousand six, or when the annual rate of unemployment
for that county is such that the county no longer qualifies for
designation as a job creation zone, whichever occurs first.
(b) Upon enactment of this article the commissioner of the
bureau of employment programs shall forthwith submit to the
governor, the president of the Senate and the speaker of the House
of Delegates a list ranking the counties of this state based upon
their rate of unemployment for the preceding year, from highest to
lowest, based upon the best information then available to the
commissioner of the bureau of employment programs.
(c) By the fifteenth day of December, two thousand three, and
by each fifteenth day of December of each year thereafter through
December, two thousand seven, the commissioner of the bureau of
employment programs shall submit to the governor, the president of
the Senate and the speaker of the House of Delegates a list ranking
the counties of this state based upon their rate of unemployment,
from highest to lowest, based upon the best information then
available to the commissioner of the bureau of employment programs.
If the ten counties with the highest rate of unemployment are
different from the counties previously designated as job creation zones for that year, then any county that is not designated as a
job creation zone for the then current calendar year shall be
designated by the governor as a job creation zone beginning on the
first day of January of the next calendar year. Any county
designated as a job creation zone for the then current calendar
year that ceases to be one of the ten counties with the highest
rate of unemployment, shall lose its designation as a job creation
zone at the end of the then current calendar year. In the event
two or more counties have the same rate of unemployment and the
county with the tenth highest rate of unemployment cannot be
ascertained, because two or more counties eligible for designation
as the tenth highest county have the same numerical rate of
unemployment, those counties shall then be ranked, from highest to
lowest, based upon their poverty level and the tenth designation
determined based upon that ranking.
§5B-4-5. Job creation zone tax deductions and exemptions.
(a) Notwithstanding any provision of this code to the contrary
and subject to section six of this article, the following tax
deductions and exemptions apply to job creation zones:
(1) A qualified new business that is a corporation is exempt
from payment of the taxes imposed on it by articles twenty-three
and twenty-four, chapter eleven of this code, to the extent the
taxes are attributable to the new business.
(2) A new business that is a partnership or electing small business corporation, is exempt from paying the tax imposed by
article twenty-three, chapter eleven of this code, that is
attributable to the new business; and the partners or shareholders,
as the case may be, are exempt from paying the tax imposed by
article twenty-one, chapter eleven of this code, on items of
income, gain, loss or deduction attributable to their respective
interests in the new business.
(3) Any person who loans money to a qualified new business is
allowed to subtract from federal adjusted gross income, or from
federal taxable income if the person is a taxable corporation, any
interest income on the loan or loans to the new business, to the
extent the interest income is included in federal adjusted gross
income, or federal taxable income if the person is a taxable
corporation, when determining that person's West Virginia adjusted
gross income, or West Virginia taxable income if the person is a
taxable corporation, earned or received from the qualified new
(4) Any person who purchases capital stock of a new business
or purchases any other ownership interest in a new business and
later sells that stock or ownership interest is allowed to subtract
from federal adjusted gross income, or from federal taxable income
if the person is a taxable corporation, any gain from the sale to
the extent the gain is included in federal adjusted gross income,
or federal taxable income if the person is a taxable corporation, when determining that person's West Virginia adjusted gross income,
or West Virginia taxable income if the person is a taxable
(b) Effective date. -- The deductions and exemptions allowed
by this section are first allowed for taxable years ending after
the effective date of this article.
§5B-4-6. Job creation zone conditions for tax deductions and
(a) The following additional conditions apply to job creation
zone qualified new businesses:
(1) The deductions and exemptions from tax allowed by this
article are allowed any qualified new business that begins doing
business before the first day of January, two thousand eight;
(2) The deductions and exemptions from tax provided in this
article apply for a period of ten calendar years beginning with the
calendar year during which the qualified new business begins doing
(A) Interest on loans to a qualified new business are taxable
beginning the first day of January of the eleventh year;
(B) Each qualified new business that is a corporation shall
determine the fair market value of its capital stock as of the
thirty-first day of December of the tenth calendar year. The
difference between the shareholder's cost or other basis for the
stock and the stock's fair market value on the thirty-first day of December of the tenth year is the amount of gain that may be
excluded from tax when there is a sale or other taxable
distribution of the stock after that date;
(C) The fair market value of a qualified new business that is
a sole proprietorship or partnership shall similarly be determined
as of the thirty-first day of December of the tenth year. The
difference between the fair market value so determined and the
owner's basis or other cost is the amount of gain that may be
excluded from tax under article twenty-one, chapter eleven of this
code when there is a sale or taxable termination of the qualified
new business after that date.
(b) The deductions and exemptions allowed by this article to
a qualified new business or other person are not transferable or
assignable to any other person.
(c) If after a business is certified as a qualified new
business, that business acquires, by purchase or otherwise, an
existing business, the deductions and exemptions allowed by section
five of this article do not apply to capital or income attributable
to the acquired business or to any loans for operation of the
(d) If the principal office or principal operation of a
qualified new business subsequently moves out of the job creation
zone in which it was located when the qualified new business began
doing business, the deductions and exemptions allowed by this article shall immediately terminate and be forfeited, unless the
move is to another area of this state that, at the time of the
move, is a job creation zone.
(e) Any amendments to this article apply to qualified new
businesses that begin doing business on or after the effective date
of the amendment and may not be retroactively imposed to limit
deductions and exemptions allowed by this article.
(f) Records. -- Any person who claims exemption from tax under
subsection (a) of this section, shall maintain sufficient records
to establish their entitlement to claim the exemption asserted.
§5B-4-7. Administrative rules.
The tax commissioner may propose rules for legislative
approval in accordance with the provisions of article three,
chapter twenty-nine-a of this code, as may be necessary to
implement and administer the tax deductions and exemptions provided
in this article.
NOTE: The purpose of this bill is to create the "West
Virginia Job Creation Zones Act of 2003" which provides certain tax
exemptions to qualified new businesses, and exempts from taxation
interest earned on loans to qualified new businesses and gains from
the sale of stock in a qualified new business. The qualified new
business must be in one of the ten counties in the state with the
highest unemployment rate.
This article is new; therefore, strike-throughs and
underscoring have been omitted.