ENROLLED
Senate Bill No. 441
(By Senators Tomblin, Mr. President, and Caruth,
By Request of the Executive)
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[Passed March 9, 2007; in effect ninety days from passage.]
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AN ACT to amend and reenact §11-6A-5a of the Code of West Virginia,
1931, as amended; to amend and reenact §11-13-2o of said code;
and to amend said code by adding thereto a new section,
designated §11-13-2p, all relating generally to tax treatment
of wind power projects; imposing limitation on salvage
valuation of facilities at a wind power project; increasing
taxable generating capacity of wind power-generating unit for
business and occupation tax purposes; and providing credit
against additional business and occupation tax liability for
certain contractually agreed contributions to specified
counties, county school boards or municipalities.
Be it enacted by the Legislature of West Virginia:
That §11-6A-5a of the Code of West Virginia, 1931, as amended,
be amended and reenacted; that §11-13-2o of said code be amended
and reenacted; and that said code be amended by adding thereto a
new section, designated §11-13-2p, all to read as follows:
ARTICLE 6A. POLLUTION CONTROL FACILITIES TAX TREATMENT.
§11-6A-5a. Wind power projects.
(a) Notwithstanding any other provisions of this article, a
power project designed, constructed or installed to convert wind
into electrical energy shall be subject to the provisions of this
section.
(b) Each wind turbine installed at a wind power project and
each tower upon which the turbine is affixed shall be considered to
be personal property that is a pollution control facility for
purposes of this article and, subject to an allocation of the value
of project property determined by the Tax Commissioner in
accordance with this section, all of the value associated with the
wind turbine and tower shall be accorded salvage valuation:
Provided, That the portion of the total value of the facility
assigned salvage value in accordance with this section shall, on
and after the first day of July, two thousand seven, be no greater
than seventy-nine percent of the total value of the facility. All
personal property at a wind power project other than a wind turbine
and tower shall not be accorded salvage valuation and shall not be
considered to be personal property that is a pollution control
facility. For purposes of this section, "wind turbine and tower" is
limited to: The rotor, consisting of the blades and the supporting
hub; the drive train, which includes the remaining rotating parts
such as the shafts, gearbox, coupling, a mechanical brake and the
generator; the nacelle and main frame, including the wind turbine housing, bedplate and the yaw system; the turbine transformer; the
machine controls; the tower; and the tower foundation.
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 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 shall not
apply to those kilowatt hours exempt under subsection (b), section
two-n of this article. Any person taxable under this subdivision
shall be allowed a credit against the amount of tax due under this
subdivision for any electric power generation taxes or a tax
similar to the tax imposed by subdivision (1) of this subsection
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 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 for
taxable periods ending on or before the thirty-first day of
December, two thousand seven, 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: Provided
further, That for taxable periods beginning on or after the first
day of January, two thousand eight, the taxable generating capacity
of a generating unit utilizing a turbine powered primarily by wind
shall equal twelve 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 Revenue shall
promulgate rules in accordance with article three, chapter twenty-
nine-a of this 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 of this article 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.
§11-13-2p. Credit against tax based on the taxable generating
capacity of a generating unit utilizing a turbine
powered primarily by wind.
(a) For taxable periods beginning on or after the first day of
January, two thousand eight, a credit shall be allowed against tax
imposed by this article and calculated based on the taxable
generating capacity of a generating unit utilizing a turbine
powered primarily by wind. The total credit shall be equal to the
amount of qualified contractually agreed contributions as defined
in this section. The amount of total credit shall be reduced each
year by the amount of credit annually applied to reduce tax under
this section.
(b) Definitions. -- For purposes of this section:
(1) "Qualified contractually agreed contribution" means money
paid, or the lower of the cost or fair market value, at the time of
transfer, of property transferred, by the taxpayer, the owner of
the taxpayer or the operator or owner of the wind turbine unit to
a county in which the wind turbine unit is located, a county school
board of the county in which the wind turbine unit is located or to
a municipality located in the county in which the wind turbine unit
is located pursuant to a written transfer agreement.
(A) The term "qualified contractually agreed contribution"
does not include any payment in lieu of taxes or any tax, fee or levy paid to any county, county school board or municipality or to
any other governmental subdivision, agency or instrumentality of
this state or of any county or municipality.
(B) The term "qualified contractually agreed contribution"
does not include any payment in lieu of taxes or any tax, fee or
levy paid to any county, county school board or municipality or to
any other governmental subdivision, agency or instrumentality of
any state other than this state or of any county or municipality of
any state other than this state.
(C) The term "qualified contractually agreed contribution"
does not include any payment in lieu of taxes or any tax, fee or
levy paid to the United States or to any governmental subdivision
of the United States or to any agency or instrumentality of the
United States or to any foreign government or subdivision, agency
or instrumentality thereof.
(2) "Taxpayer" means any person that is legally liable for tax
imposed by this article that is calculated based on the taxable
generating capacity of a generating unit utilizing a turbine
powered primarily by wind.
(3) "Wind turbine unit" means, and is limited to, an
electricity-generating unit utilizing a turbine powered primarily
by wind that has a taxable generating capacity determined in
accordance with subdivision (2), subsection (c), section two-o of
this article.
(4) "Written transfer agreement" means a written contract or
written promise to transfer money or property to a county in which
the wind turbine unit is located, a county school board of the
county in which the wind turbine unit is located or a municipality
located in the county in which the wind turbine unit is located,
executed not later than the first day of March, two thousand seven,
by the taxpayer, the owner of the taxpayer or the operator or owner
of the wind turbine unit and executed by the county commission of
the county in which the wind turbine unit is located or by any
officer or representative of the county commission having authority
to execute binding legal documents for the county commission, the
county school board of the county in which the wind turbine unit is
located or any officer or representative of the county school board
having authority to execute binding legal documents for the county
school board, or the city council, mayor or city manager of a
municipality located in the county in which the wind turbine unit
is located or any officer or representative of the municipality
having authority to execute binding legal documents for the
municipality.
(c) Credit limitations. --
(1) The total amount of credit allowable under this section is
limited to the amount of qualified contractually agreed
contributions made pursuant to a written transfer agreement.
(2) The credit allowed under this section may only be applied
to offset annual tax imposed by this article that is measured by
the taxable generating capacity of the wind turbine unit. No other
tax imposed by or under this article may be offset by the credit
allowed under this section and no other tax imposed by this code
may be offset by the credit.
(3) The credit allowed under this section shall be applied
after application of the credit allowed under article thirteen-d of
this chapter, as applicable, and after any other applicable credits
allowed by this chapter against tax imposed by this article.
(4) The amount of credit allowed under this section and the
amount of the credit allowed under article thirteen-d of this
chapter may not, in combination, reduce the amount of annual tax
imposed by this article on the taxable generating capacity of the
wind turbine unit to an amount that is less than fifty percent of
the amount of annual tax that would have been imposed by this
article on the wind turbine unit if the taxable generating capacity
of the wind turbine unit was set at five percent of the official
capacity of the wind turbine unit.
(d) Time over which credit may be applied. --
(1) The total amount of credit determined under subsection (a)
of this section shall be reduced annually by the amount of credit
applied in each tax year to offset tax under this section.
(2) The credit allowed under this section may be applied
annually, beginning on the later of:
(A) The year a qualified contractually agreed contribution in
money was paid or a qualified contractually agreed contribution in
property was delivered to the county, the county school board or
the municipality; or
(B) The year in which title thereto irrevocably passed to the
transferee;
(3) The credit may thereafter be taken in each succeeding tax
year until the amount of total credit has been exhausted or until
the ninth succeeding tax year after the contractually agreed
contribution of money was so paid or the contractually agreed
contribution of property was so delivered. Credit remaining after
the ninth succeeding tax year is forfeited.
(4) Credit to which a taxpayer is entitled under this section
shall be applied in an order and sequence such that the credit
earned earliest in time shall be applied first in any tax year to
offset tax under this section.
(e) Credit for successor businesses and transferees of a wind
turbine unit; apportionment. --
(1) Mere change in form of business. -- The credit allowed
under this section shall not be forfeited by reason of a mere
change in the form of the entity or organization that is conducting
the business so long as the successor business continues to remain a taxpayer, as defined in this section, in this state, operating
the wind turbine unit that was originally owned or operated by the
predecessor taxpayer. Such successor shall acquire the amount of
credit that remains available under this section for each
subsequent taxable year until the credit expires or is exhausted,
based on the years remaining and amount of credit remaining to
which the transferor was entitled at the time of the transfer.
(2) Transfer or sale to successor. -- The credit allowed under
this section shall not be forfeited by reason of a transfer or sale
to a successor business of a wind turbine unit so long as the
successor business continues to remain a taxpayer, as defined in
this section, in this state, operating the wind turbine unit that
was originally owned or operated by the predecessor taxpayer. Upon
transfer or sale of a wind turbine unit, the successor shall
acquire the amount of credit that remains available under this
section for each subsequent taxable year until the credit expires
or is exhausted, based on the years remaining and amount of credit
remaining to which the transferor was entitled at the time of the
transfer.
(3) Apportionment in the year of transfer. -- Upon transfer or
sale, the successor shall acquire the amount of credit that remains
available under this section for each taxable year subsequent to
the taxable year of the transferor during which the transfer
occurred and, for the year of transfer, an amount of annual credit for the year in the same proportion as the number of days remaining
in the transferor's taxable year bears to the total number of days
in the transferor's taxable year.