
Senate Bill No. 593
(By Senator Hunter)
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[Introduced February 17, 2003; referred to the Committee on 
Finance.]











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A BILL to repeal section five-a, article six-a, chapter eleven of
the code of West Virginia, one thousand nine hundred thirty-
one, as amended; and to amend and reenact section two-o,
article thirteen of said chapter, relating to removing the
provision of law directing that each wind turbine installed at
a wind power project and each tower upon which the turbine is
affixed be assessed for tax purposes at salvage value; and
deleting the current provision of law capping the
applicability of the state business and occupation tax to five
percent of the official capability of a generating unit
utilizing a turbine powered primarily by wind.
Be it enacted by the Legislature of West Virginia:
That section five-a, article six-a, chapter eleven of the code
of West Virginia, one thousand nine hundred thirty-one, as amended,
be repealed; and that section two-o, article thirteen, chapter eleven of said code be amended and reenacted to read as follows:
ARTICLE 13. BUSINESS AND OCCUPATION TAX.
§11-13-2o. Business of generating or producing or selling
electricity on and after the first day of June,
one thousand nine hundred ninety-five;
definitions; rate of tax; exemptions; effective
date.

(a) Definitions. -- As used in this section:

(1) "Average four-year generation" is computed by dividing by
four the sum of a generating unit's net generation, expressed in
kilowatt hours, for calendar years one thousand nine hundred
ninety-one, one thousand nine hundred ninety-two, one thousand nine
hundred ninety-three, and one thousand nine hundred ninety-four.
For any generating unit which was newly installed and placed into
commercial operation after the first day of January, one thousand
nine hundred ninety-one and prior to the effective date of this
section, "average four-year generation" is computed by dividing the
unit's net generation for the period beginning with the month in
which the unit was placed into commercial operation and ending with
the month preceding the effective date of this section by the
number of months in the period and multiplying the resulting amount
by twelve with the result being a representative twelve-month
average of the unit's net generation while in an operational
status.

(2) "Capacity factor" means a fraction, the numerator of which
is average four-year generation and the denominator of which is the
maximum possible annual generation.

(3) "Generating unit" means a mechanical apparatus or
structure which through the operation of its component parts is
capable of generating or producing electricity and is regularly
used for this purpose.

(4) "Inactive reserve" means the removal of a generating unit
from commercial service for a period of not less than twelve
consecutive months as a result of lack of need for generation from
the generating unit or as a result of the requirements of state or
federal law or the removal of a generating unit from commercial
service for any period as a result of any physical exigency which
is beyond the reasonable control of the taxpayer.

(5) "Maximum possible annual generation" means the product,
expressed in kilowatt hours, of official capability times eight
thousand seven hundred sixty hours.

(6) "Official capability" means the nameplate capacity rating
of a generating unit expressed in kilowatts.

(7) "Peaking unit" means a generating unit designed for the
limited purpose of meeting peak demands for electricity or filling
emergency electricity requirements.

(8) "Retired from service" means the removal of a generating
unit from commercial service for a period of at least twelve consecutive months with the intent that the unit will not
thereafter be returned to active service.

(9) "Taxable generating capacity" means the product, expressed
in kilowatts, of the capacity factor times the official capability
of a generating unit, subject to the modifications set forth in
subdivisions (2) and (3), subsection (c) of this section.

(10) "Net generation" for a period means the kilowatt hours of
net generation available for sale generated or produced by the
generating unit in this state during the period less the following:

(A) Twenty-one twenty-sixths of the kilowatt hours of
electricity generated at the generating unit and sold during the
period to a plant location of a customer engaged in manufacturing
activity if the contract demand at the plant location exceeds two
hundred thousand kilowatts per hour in a year or where the usage at
the plant location exceeds two hundred thousand kilowatts per hour
in a year;

(B) Twenty-one twenty-sixths of the kilowatt hours of
electricity produced or generated at the generating unit during the
period by any person producing electric power and an alternative
form of energy at a facility located in this state substantially
from gob or other mine refuse;

(C) The total kilowatt hours of electricity generated at the
generating unit exempted from tax during the period by subsection
(b), section two-n of this article.

(b) Rate of tax. -- Upon every person engaging or continuing
within this state in the business of generating or producing
electricity for sale, profit or commercial use, either directly or
indirectly through the activity of others, in whole or in part, or
in the business of selling electricity to consumers, or in both
businesses, the tax imposed by section two of this article shall be
equal to:

(1) For taxpayers who generate or produce electricity for
sale, profit or commercial use, the product of twenty-two dollars
and seventy-eight cents multiplied by the taxable generating
capacity of each generating unit in this state owned or leased by
the taxpayer, subject to the modifications set forth in subsection
(c) of this section: Provided, That with respect to each
generating unit in this state which has installed a flue gas
desulfurization system, the tax imposed by section two of this
article shall, on and after the thirty-first day of January, one
thousand nine hundred ninety-six, be equal to the product of twenty
dollars and seventy cents multiplied by the taxable generating
capacity of the units, subject to the modifications set forth in
subsection (c) of this section: Provided, however, That with
respect to kilowatt hours sold to or used by a plant location
engaged in manufacturing activity in which the contract demand at
the plant location exceeds two hundred thousand kilowatts per hour
per year or if the usage at the plant location exceeds two hundred thousand kilowatts per hour in a year, in no event shall the tax
imposed by this article with respect to the sale or use of the
electricity exceed five hundredths of one cent times the kilowatt
hours sold to or used by a plant engaged in a manufacturing
activity; and

(2) For taxpayers who sell electricity to consumers in this
state that is not generated or produced in this state by the
taxpayer, nineteen hundredths of one cent times the kilowatt hours
of electricity sold to consumers in this state that were not
generated or produced in this state by the taxpayer, except that
the rate shall be five hundredths of one cent times the kilowatt
hours of electricity not generated or produced in this state by the
taxpayer which is sold to a plant location in this state of a
customer engaged in manufacturing activity if the contract demand
at such plant location exceeds two hundred thousand kilowatts per
hour per year or if the usage at such plant location exceeds two
hundred thousand kilowatts per hour in a year. The measure of tax
under this subdivision (2) shall be equal to the total kilowatt
hours of electricity sold to consumers in the state during the
taxable year, that were not generated or produced in this state by
the taxpayer, to be determined by subtracting from the total
kilowatt hours of electricity sold to consumers in the state the
net kilowatt hours of electricity generated or produced in the
state by the taxpayer during the taxable year. For the purposes of this subdivision, net kilowatt hours of electricity generated or
produced in this state by the taxpayer includes the taxpayer's pro
rata share of electricity generated or produced in this state by a
partnership or limited liability company of which the taxpayer is
a partner or member. The provisions of this subdivision (2) shall
not apply to those kilowatt hours exempt under subsection (b),
section two-n of this article. Any person taxable under this
subdivision (2) shall be allowed a credit against the amount of tax
due under this subdivision (2) for any electric power generation
taxes or a tax similar to the tax imposed by subdivision (1) of
this subsection (b) paid by the taxpayer with respect to the
electric power to the state in which the power was generated or
produced. The amount of credit allowed may not exceed the tax
liability arising under this subdivision (2) with respect to the
sale of the power.

(c) The following provisions are applicable to taxpayers
subject to tax under subdivision (1), subsection (b) of this
section:

(1) Retired units; inactive reserve. -- If a generating unit
is retired from service or placed in inactive reserve, a taxpayer
may not be liable for tax computed with respect to the taxable
generating capacity of the unit for the period that the unit is
inactive or retired. The taxpayer shall provide written notice to
the joint committee on government and finance, as well as to any other entity as may be otherwise provided by law, eighteen months
prior to retiring any generating unit from service in this state.

(2) New generating units. -- If a new generating unit, other
than a peaking unit, is placed in initial service on or after the
effective date of this section, the generating unit's taxable
generating capacity shall equal forty percent of the official
capability of the unit: Provided, That the taxable generating
capacity of a county or municipally-owned generating unit shall
equal zero percent of the official capability of the unit. and the
taxable generating capacity of a generating unit utilizing a
turbine powered primarily by wind shall equal five percent of the
official capability of the unit

(3) Peaking units. -- If a peaking unit is placed in initial
service on or after the effective date of this section, the
generating unit's taxable generating capacity shall equal five
percent of the official capability of the unit: Provided, That the
taxable generating capacity of a county or municipally-owned
generating plant shall equal zero percent of the official
capability of the unit.

(4) Transfers of interests in generating units. -- If a
taxpayer acquires an interest in a generating unit, the taxpayer
shall include the computation of taxable generating capacity of the
unit in the determination of the taxpayer's tax liability as of the
date of the acquisition. Conversely, if a taxpayer transfers an interest in a generating unit, the taxpayer may not for periods
thereafter be liable for tax computed with respect to the taxable
generating capacity of the transferred unit.

(5) Proration, allocation. -- The tax commissioner shall
promulgate rules in conformity with the provisions of article
three, chapter twenty-nine-a of this code to provide for the
administration of this section and to equitably prorate taxes for
a taxable year in which a generating unit is first placed in
service, retired or placed in inactive reserve, or in which a
taxpayer acquires or transfers an interest in a generating unit, to
equitably allocate and reallocate adjustments to net generation,
and to equitably allocate taxes among multiple taxpayers with
interests in a single generating unit, it being the intent of the
Legislature to prohibit multiple taxation of the same taxable
generating capacity.

So as to provide for an orderly transition with respect to the
rate making effect of this section, those electric light and power
companies which, as of the effective date of this section, are
permitted by the West Virginia public service commission to utilize
deferred accounting for purposes of recovery from ratepayers of any
portion of business and occupation tax expense under this article
shall be permitted, until the time that action pursuant to a rate
application or order of the commission provides for appropriate
alternative rate making treatment for such expense, to recover the tax expense imposed by this section by means of deferred accounting
to the extent that the tax expense imposed by this section exceeds
the level of business and occupation tax under this article
currently allowed in rates.

(6) Electricity generated by manufacturer or affiliate for use
in manufacturing activity. -- When electricity used in a
manufacturing activity is generated in this state by the person who
owns the manufacturing facility in which the electricity is used
and the electricity generating unit or units producing the
electricity so used are owned by the manufacturer, or by a member
of the manufacturer's controlled group, as defined in section 267
of the Internal Revenue Code of 1986, as amended, the generation of
the electricity may not be taxable under this article: Provided,
That any electricity generated or produced at the generating unit
or units which is sold or used for purposes other than in the
manufacturing activity shall be taxed under this section and the
amount of tax payable shall be adjusted to be equal to an amount
which is proportional to the electricity sold for purposes other
than the manufacturing activity. The department of tax and revenue
shall promulgate rules in accordance with article three, chapter
twenty-nine-a of the code: Provided, however, That the rules shall
be promulgated as emergency rules.

(d) Beginning the first day of June, one thousand nine hundred
ninety-five, electric light and power companies that actually paid tax based on the provisions of subdivision (3), subsection (a),
section two-d of this article or section two-m of this article for
every taxable month in one thousand nine hundred ninety-four shall
determine their liability for payment of tax under this article in
accordance with subdivisions (1) and (2) of this subsection. All
other electric light and power companies shall determine their
liability for payment of tax under this article exclusively under
this section beginning the first day of June, one thousand nine
hundred ninety-five and thereafter.

(1) If for taxable months beginning on or after the first day
of June, one thousand nine hundred ninety-five, liability for tax
under this section is equal to or greater than the sum of the power
company's liability for payment of tax under subdivision (3),
subsection (a), section two-d of this article and this section,
then the company shall pay the tax due under this section and not
the tax due under subdivision (3), subsection (a), section two-d of
this article and section two-m of this article. If tax liability
under this section is less then the tax shall be paid under
subdivision (3), subsection (a), section two-d of this article and
section two-m and the tax due under this section may not be paid.

(2) Notwithstanding subdivision (1) of this subsection, for
taxable years beginning on or after the first day of January, one
thousand nine hundred ninety-eight, all electric and light power
companies shall determine their liability for payment of tax under this article exclusively under this section.

NOTE: The purpose of this bill is to
remove the provision of
law directing that each wind turbine installed at a wind power
project and each tower upon which the turbine is affixed be
assessed for tax purposes at salvage value. The bill also deletes
the current provision of law capping the applicability of the state
business and occupation tax to five percent of the official
capability of a generating unit utilizing a turbine powered
primarily by wind.

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