H. B. 3077


(By Delegates Craig, Morgan, Campbell,

Amores and Stalnaker)

[Introduced February 20, 2003 ; referred to the

Committee on Finance.]
A BILL to amend and reenact section eleven, article ten, chapter eleven of the code of West Virginia, one thousand nine hundred thirty-one, as amended, relating to the West Virginia tax procedure and administration act; and authorizing tax commissioner to enter into agreements with Internal Revenue Service for offsetting tax refunds against tax liabilities.

Be it enacted by the Legislature of West Virginia:
That section eleven, article ten, 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 10. PROCEDURE AND ADMINISTRATION.
§11-10-11. Collection of tax.
(a) General. -- The tax commissioner shall collect the taxes, additions to tax, penalties and interest imposed by this article or any of the other articles of this chapter to which this article is applicable. In addition to all other remedies available for the collection of debts due this state, the tax commissioner may proceed by foreclosure of the lien provided in section twelve, or by levy and distraint under section thirteen.
(b) Prerequisite to final settlement of contracts with nonresident contractor; user personally liable. --
(1) Any person contracting with a nonresident contractor subject to the taxes imposed by articles thirteen, twenty-one and twenty-four of this chapter, shall withhold payment, in the final settlement of such contract, of such sufficient amount, not exceeding six percent of the contract price, as will in such person's opinion be sufficient to cover such taxes, until the receipt of a certificate from the tax commissioner to the effect that the above referenced taxes imposed against the nonresident contractor have been paid or provided for.
(2) If any person shall fail to withhold as provided herein, such person shall be personally liable for the payment of all such taxes attributable to the contract, not to exceed six percent of the contract price. The same shall be recoverable by the tax commissioner by appropriate legal proceedings, which may include issuance of an assessment under this article.
(c) Prerequisite for issuance of certificate of dissolution or withdrawal of corporation. -- The secretary of state shall withhold the issuance of any certificate of dissolution or withdrawal in the case of any corporation organized under the laws of this state, or organized under the laws of another state and admitted to do business in this state, until the receipt of a certificate from the tax commissioner to the effect that every tax administered under this article imposed against any such corporation has been paid or provided for, or that the applicant is not liable for any tax administered under this article.
(d) Prerequisite to final settlement of contract with this state or political subdivision; penalty. -- All state, county, district and municipal officers and agents making contracts on behalf of this state or any political subdivision thereof shall withhold payment, in the final settlement of any such contract, until the receipt of a certificate from the tax commissioner to the effect that the taxes imposed by articles thirteen, twenty-one and twenty-four of this chapter against the contractor have been paid or provided for. If the transaction embodied in such contract or the subject matter of the contract is subject to county or municipal business and occupation tax, then such payment shall also be withheld until receipt of a release from such county or municipality to the effect that all county or municipal business and occupation taxes levied or accrued against the contractor have been paid. Any official violating this section shall be subject to a civil penalty of one thousand dollars, recoverable as a debt in a civil action brought by the tax commissioner.
(e) Limited effect of tax commissioner's certificates. -- The certificates of the tax commissioner provided for in subsections (b), (c) and (d) of this section shall not bar subsequent investigations, assessments, refunds and credits with respect to the taxpayer.
(f) Payment when person sells out or quits business; liability of successor; lien. --
(1) If any person subject to any tax administered under this article sells out his or its business or stock of goods, or ceases doing business, any tax, additions to tax, penalties and interest imposed by this article or any of the other articles of this chapter to which this article is applicable shall become due and payable immediately and such person shall, within thirty days after selling out his or its business or stock of goods or ceasing to do business, make a final return or returns and pay any tax or taxes which may be due. The unpaid amount of any such tax shall be a lien upon the property of such person.
(2) The successor in business of any person who sells out his or its business or stock of goods, or ceases doing business, shall be personally liable for the payments of tax, additions to tax, penalties and interest unpaid after expiration of the thirty-day period allowed for payment: Provided, That if the business is purchased in an arms-length transaction, and if the purchaser withholds so much of the consideration for the purchase as will satisfy any tax, additions to tax, penalties and interest which may be due until the seller produces a receipt from the tax commissioner evidencing the payment thereof, the purchaser shall not be personally liable for any taxes attributable to the former owner of the business unless the contract of sale provides for the purchaser to be liable for some or all of such taxes. The amount of tax, additions to tax, penalties and interest for which the successor is liable shall be a lien on the property of the successor, which shall be enforced by the tax commissioner as provided in this article.
(g) Priority in distribution of estate or property in receivership; personal liability of fiduciary. -- All taxes due and unpaid under this article shall be paid from the first money available for distribution, voluntary or compulsory, in receivership, bankruptcy or otherwise, of the estate of any person, firm or corporation, in priority to all claims, except taxes and debts due the United States which under federal law are given priority over the debts and liens created by this article. Any trustee, receiver, administrator, executor or person charged with the administration of an estate who shall violate the provisions of this section shall be personally liable for any taxes accrued and unpaid under this article, which are chargeable against the person, firm or corporation whose estate is in administration.
(h) Injunction. -- If the taxpayer fails for a period of more than sixty days to fully comply with any of the provisions of this article or of any other article of this chapter to which this article is applicable, the tax commissioner may institute a proceeding to secure an injunction to restrain the taxpayer from doing business in this state until the taxpayer fully complies with the provisions of this article or any of such other articles. No bond shall be required of the tax commissioner in any action instituted under this subsection.
(i) Costs. -- In any proceeding under this section, upon judgment or decree for the tax commissioner, he shall be awarded his costs.
(j) Refunds; credits; right to offset. --
(1) Whenever a taxpayer has a refund or credit due it for an overpayment of any tax administered under this article, the tax commissioner may reduce the amount of such refund or credit by the amount of any tax administered under this article, whether it be the same tax or any other tax, which is owed by the same taxpayer, and collectible as provided in subsection (a) of this section.
(2) The tax commissioner may enter into agreements with the Internal Revenue Service that provide for offsetting state tax refunds against federal tax liabilities; offsetting federal tax refunds against state tax liabilities; and establishing the amount of the offset fee per transaction which both agencies may charge each other: Provided, That offsets under subdivision (1) of this subsection shall occur prior to offset under this subdivision. At such times as moneys are received as a result of an offset of a taxpayer's federal tax refund under the provisions of section 6402(e) of the Internal Revenue Code, the taxpayer shall be given credit against state tax liability for the amount of the offset less a deduction for the offset fee imposed by the Internal Revenue Service.
(k) Spouse relieved of liability in certain cases. --
(1) In general. -- Under regulations prescribed by the tax commissioner, if: -
(A) A joint personal income tax return has been made for a taxable year;
(B) On such return there is a substantial understatement of tax attributable to grossly erroneous items of one spouse;
(C) The other spouse establishes that in signing the return he or she did not know, and had no reason to know, that there was such substantial understatement; and
(D) Taking into account all the facts and circumstances, it is inequitable to hold the other spouse liable for the deficiency in tax for such taxable year attributable to such substantial understatement, then the other spouse shall be relieved of any liability for tax (including interest, additions to tax, and other amounts) for such taxable year to the extent such liability is attributable to such substantial understatement.
(2) Grossly erroneous items. -- For purposes of this subsection, the term "grossly erroneous items" means, with respect to any spouse. -
(A) Any item of gross income attributable to such spouse which is omitted from gross income; and
(B) Any claim of a deduction, credit, or basis by such spouse in an amount for which there is no basis in fact or law.
(3) Substantial understatement. -- For purposes of this subsection, the term "substantial understatement" means any understatement (as defined in regulations prescribed by the tax commissioner) which exceed five hundred dollars.
(4) Understatement must exceed specified percentage of spouse's income. --
(A) Adjusted gross income of $20,000 or less. -- If the spouse's adjusted gross income for the preadjustment year is twenty thousand dollars or less, this subsection shall apply only if the liability described in paragraph (1) is greater than ten percent of such adjusted gross income.
(B) Adjusted gross income of more than twenty thousand dollars. -- If the spouse's adjusted gross income for the preadjustment year is more than twenty thousand dollars, subparagraph (A) shall be applied by substituting "twenty-five percent" for "ten percent."
(C) Preadjustment year. -- For purposes of this paragraph, the term "preadjustment year" means the most recent taxable year of the spouse ending before the date the deficiency notice is mailed.
(D) Computation of spouse's adjusted gross income. -- If the spouse is married to another spouse at the close of the preadjustment year, the spouse's adjusted gross income shall include the income of the new spouse (whether or not they file a joint return).
(E) Exception for omissions from gross income. -- This paragraph shall not apply to any liability attributable to the omission of an item from gross income.
(5) Adjusted gross income. -- For purposes of this subsection, the term "adjusted gross income" means the West Virginia adjusted gross income of the taxpayer, determined under article twenty-one of this chapter.


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