H. B. 3027
(By Delegates Pethtel, Stemple, Amores,
Varner, Kominar and Craig)
[Introduced February 14, 2003; referred to the
Committee on Finance.]
A BILL to amend article ten, chapter eleven of the code of West
Virginia, one thousand nine hundred thirty-one, as amended, by
adding thereto a new section, designated section five-v,
relating to authorizing the tax commissioner to waive tax,
interest and penalties in specified circumstances which are
otherwise imposed on uncompensated members of the governing
board or board of directors of certain tax exempt
organizations that result from liabilities of the tax exempt
organization being attributed to those members; specifying
manner and forum for appeals.
Be it enacted by the Legislature of West Virginia:
That article ten, 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 five-v, to read as
follows:
ARTICLE 10. PROCEDURE AND ADMINISTRATION.
§11-10-5v. Waiver of derivative tax, interest and penalty imposed
on board members or directors of charitable and tax
exempt organizations imposed on innocent governing
board resulting from defaults or delinquencies of
the organization.
(a) Notwithstanding any provision of this code to the
contrary, the tax commissioner may waive imposition of derivative
tax liabilities and associated interest and penalties on one or
more uncompensated members of the governing board or of the board
of directors on an organization qualified and classified as a tax
exempt organization under section 501 (c) (3) or section 501 (c)
(4) of the Internal Revenue Code of 1986, as amended.
(b) (1) For purposes of this section, the term "derivative
liabilities" means liabilities of the tax exempt organization for
any tax administered under this article, including, but not limited
to, employee personal income tax withholding trust fund tax
remittance liabilities and consumers sales and service tax trust
fund tax remittance liabilities, that are attributed by law to one
or more members of the governing board or board of directors of the tax exempt organization so as to become personal liabilities of
that member or members.
(2) For purposes of this section a member is uncompensated if
the member is not paid or otherwise remunerated directly or
indirectly:
(A) For service on the governing board or board of directors;
or
(B) For any other service rendered to the tax exempt
organization; or
(C) For service to any entity affiliated with the tax exempt
organization; or
(D) For any sale of real or tangible personal property or
intangible personal property during the preceding calendar year to
the tax exempt organization or to any person, entity or
organization affiliated with the tax exempt organization.
(3) Reimbursement of actual expenses incurred to carry out the
duties and responsibilities of board membership shall not be
treated as compensation.
(4) Compensation paid to a person or organization having a
relationship to the member that is specified in section 267(b) of
the Internal Revenue Code of 1986, as amended, constitutes compensation to the member for purposes of this section.
(c) The tax commissioner may only issue the waiver authorized
by this section if the tax commissioner determines that:
(1) The board member or members were mislead, defrauded or
deceived as to the accrual or existence of unpaid tax liabilities
owed by the tax exempt organization, and had no reason to know of
the accrual or existence of the liabilities owed; or
(2) The board member or members took no active role in the
day-to-day management of the tax exempt organization and the tax
liability resulted from a computational or clerical error or good
faith reliance on erroneous professional advice which the member or
members could not have reasonably discovered through the exercise
of due diligence; or
(3) The board member or members reasonably believed that the
tax had been paid or accumulated for payment and the amounts
believed to have been so paid or accumulated were in fact lost,
stolen, destroyed or otherwise rendered irretrievable, without the
acquiescence or consent of the member or members.
(d) The petition for a waiver under this section shall be made
in writing and filed with the tax commissioner in that form and
pursuant to those procedures as the tax commissioner may prescribe.
(e) Any controversy arising pursuant to this section shall be
resolved through an appeal to the office of tax appeals in
accordance with the provisions of article ten-a of this chapter.
The issuance of a waiver under this section is within the
discretion of the tax commissioner and the tax commissioner's
determination shall not be overturned absent a showing of abuse of
discretion.
(f) This section shall not be interpreted as restricting the
authority of the tax commissioner to otherwise compromise, assess,
correct, adjust or reassess any amount of tax, interest or penalty
determined to be due under this article.
NOTE: The purpose of this bill is to authorize the Tax
Commissioner to waive imposition of personal tax liability,
interest or penalties on members of the governing boards of
charitable and tax exempt section 501 (c) (3) and 501 (c) (4)
organizations for tax liabilities owed by the organization which
would otherwise be attributed to innocent board members.
This section is new; therefore, strike-throughs and
underscoring have been omitted.