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SB493 sub1 Senate Bill 493 History

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Key: Green = existing Code. Red = new code to be enacted
COMMITTEE SUBSTITUTE

FOR

Senate Bill No. 493

(By Senators McCabe, Browning, Barnes, Green, Foster, D. Facemire, Laird, Unger, Plymale, K. Facemyer,

Williams, Snyder, Wells, Hall, Stollings, Jenkins, Chafin, White and Kessler)

____________

[Originating in the Committee on Economic Development;

reported February 12, 2010.]

____________


A BILL to amend the Code of West Virginia, 1931, as amended, by adding thereto a new article, designated §11-6K-1, §11-6K-2, §11-6K-3, §11-6K-4, §11-6K-5, §11-6K-6 and §11-6K-7; and to amend said code by adding thereto a new article, designated §11-13AA-1, §11-13AA-2, §11-13AA-3, §11-13AA-4, §11-13AA-5, §11-13AA-6, §11-13AA-7, §11-13AA-8, §11-13AA-9, §11-13AA-10, §11-13AA-11, §11-13AA-12, §11-13AA-13, §11-13AA-14, §11-13AA- 15, §11-13AA-16, §11-13AA-17 and §11-13AA-18, all relating generally to the West Virginia Economic Development Act of 2010, consisting of the Twenty-First Century Business Technologies Property Valuation Act and, as to such act, specifying method for valuation of certain property; providing for initial determination by county assessors of whether certain property is used in a twenty-first century business technology; specifying procedure for protest and appeal of determination by county assessor; requiring the West Virginia Development Office to report to the Joint Committee on Government and Finance on the economic impact of such valuation beginning in 2014; consisting of the West Virginia Twenty-First Century Tax Credit Act and, as to such act, providing short title, setting forth purpose and legislative findings; defining terms; allowing credit and exemption from certain taxes; providing for computation of credit, application of credit and period for which credit is allowed; requiring application to claim credit; requiring that new jobs be good-paying jobs with health benefits; requiring identification of investment credit property and recomputation of credit in event of premature disposition of investment property; providing for forfeiture of unused tax credits and redetermination of credit allowed; imposing recapture tax under specified circumstances; allowing transfer of qualified investment to successors; providing rules for interpretation and construction of act; providing for tax credit review and accountability; specifying effective date; and providing severability clause.

Be it enacted by the Legislature of West Virginia:
That the Code of West Virginia, 1931, as amended, be amended by adding thereto a new article,
designated §11-6K-1, §11-6K-2, §11-6K-3, §11-6K-4, §11-6K-5, §11-6K-6 and §11-6K-7 ; and that said code be amended by adding thereto a new article, designated §11- 13AA-1, §11-13AA-2, §11-13AA-3, §11-13AA-4, §11-13AA-5, §11-13AA-6, §11-13AA-7, §11-13AA-8, §11-13AA-9, §11-13AA-10, §11-13AA-11, §11- 13AA-12, §11-13AA-13, §11-13AA-14, §11-13AA-15, §11-13AA-16, §11- 13AA-17 and §11-13AA-18, all to read as follows:
ARTICLE 6K. SPECIAL METHOD FOR VALUATION OF TWENTY-FIRST CENTURY
BUSINESS TECHNOLOGY PROPERTY.
§11-6K-1. Short title.
This article shall be known and cited as the "Twenty-first Century Business Technologies Property Valuation Act".
§11-6K-2. Definitions.
For the purposes of this article:
(1) "Salvage value" means five percent of original cost; and
(2) "Twenty-first century business technologies" means "twenty-first century business technologies" as defined in section three, article thirteen-aa of this chapter when the owner of the property qualifies or qualified for the tax credit allowed by that article.
§11-6K-3. Valuation of certain twenty-first century business technology property.

Notwithstanding any other provision of this code to the contrary, the value of tangible personal property directly used in a twenty-first century business technoloy for the purpose of ad valorem property taxation under this chapter and under article X of the Constitution of this state, shall be its salvage value.
§11-6K-4. Initial determination by county assessor.
The assessor of the county in which a specific item of tangible personal property is located shall determine, in writing, whether a specific item of tangible personal property is directly used in a twenty-first century business technology subject to valuation in accordance with this article. Upon making a determination that a taxpayer has tangible personal property directly used in a twenty-first century business technology, the county assessor shall notify the Tax Commissioner of that determination and shall provide information to the Tax Commissioner as he or she requires relating to that determination.
§11-6K-5. Protest and appeal.
(a) At any time after the property is returned for taxation, but prior to January 1 of the assessment year, any taxpayer may apply to the county assessor for information regarding the issue of whether any particular item or items of property constitute property directly used in a twenty-first century business technology under this article which should be subject to valuation in accordance with this article. If the taxpayer believes that some portion of the taxpayer's property is subject to this article, the taxpayer shall file objections in writing with the county assessor. The county assessor shall decide the matter by either sustaining the protest and making proper corrections, or by stating, in writing if requested, the reasons for the county assessor's refusal. The county assessor may, and if the taxpayer requests, the county assessor shall, before February 1 of the assessment year, certify the question to the Tax Commissioner in a statement sworn to by both parties, or if the parties are unable to agree, in separate sworn statements. The sworn statement or statements shall contain a full description of the property and any other information which the Tax Commissioner may require.
(b) The Tax Commissioner shall, as soon as possible on receipt of the question, but in no case later than February 28 of the assessment year, instruct the county assessor as to how the property shall be treated. The instructions issued and forwarded by mail to the county assessor are binding upon the county assessor, but either the county assessor or the taxpayer may apply to the circuit court of the county for review of the question of the applicability of this article to the property in the same fashion as is provided for appeals from the county commission in section twenty-five, article three of this chapter. The Tax Commissioner shall prescribe forms on which the questions under this section shall be certified and the Tax Commissioner has the authority to pursue any inquiry and procure any information necessary for disposition of the matter.
§11-6K-6. Effective date.
This article shall be effective on and after July 1, 2010.
§11-6K-7. Report on economic benefit.
The West Virginia Development Office shall provide to the Joint Committee on Government and Finance by March 1, 2014, and on March 1 of each of the two subsequent years, a report detailing the economic benefit of the valuation method specified in this article. The report shall include the number of new jobs created due to the provisions of this article and the ad valorem property tax impact.
ARTICLE 13AA. TWENTY-FIRST CENTURY TAX CREDIT.
§11-13AA-1. Short title.
This article may be cited as the "West Virginia Twenty-First Century Tax Credit Act."
§11-13AA-2. Purpose and legislative findings.
(a) Purpose. -- The purpose of this article is to encourage economic opportunity, greater capital investment and development of the use in this state of twenty-first century technologies by enacting the twenty-first century tax credit.
(b) Legislative findings. --
(1) All sectors of the West Virginia economy, job creation potential, and the physical environment are driven by the flow of energy and the nonstop emergence of new technologies.
(2) Energy technology plays an essential role in the efficient consumption and wise utilization of energy resources, has dramatic impacts on all state and national economies, and can help to improve environmental conditions. These facts, along with the technical and economic conditions around the world, have resulted in the demand for improved energy technologies.
(3) Leading-edge energy technologies are being developed, demonstrated, and manufactured in other states in order to meet their energy needs, as well as to support economic development by responding to the rapidly expanding world-wide export market for these technologies.
(4) Other emerging technologies are being developed, demonstrated, and manufactured in other states in order to support economic development by responding to the emergence of new technologies and the rapidly expanding world-wide export market for such technologies.
(5) West Virginia has been slow to recognize the potential economic and technical benefits of these energy and other emerging technologies.
(6) The Legislature finds that it is in public interest of the citizens of West Virginia to:
(A) Establish a foothold in the West Virginia economy for manufacturers of advanced energy and other emerging technologies that are magnets for capital investment and which spin off jobs that are characteristically knowledge-based; and
(B) Encourage the application of nanotechnology and other supporting technology to:
(i) Biotechnology and agriculture;
(ii) Manufacturing and materials;
(iii) Medicine and health;
(iv) Photonics;
(v) Nanoelectronics and computer technology;
(vi) Environment and energy;
(vii) Aeronautics and space; and
(viii) National security.
§11-13AA-3. Definitions.
(a) General. -- When used in this article, or in the administration of this article, terms defined in subsection (b) have the meanings ascribed to them by this section, unless a different meaning is clearly required by either the context in which the term is used, or by specific definition, in this article.
(b) Terms defined. --
(1) "Alternative or renewable energy sources" means and includes the following existing and new sources for the production of electricity:
(A) Solar photovoltaic or other solar electric energy.
(B) Solar thermal energy.
(C) Wind power.
(D) Large-scale hydro power, which means the production of electric power by harnessing the hydroelectric potential of moving water impoundments, including pumped storage that does not meet the requirements of low-impact hydro power under paragraph (E) of this subdivision.
(E) Low-impact hydro power, which consists of any technology that produces electric power and that harnesses the hydroelectric potential of moving water impoundments, provided the incremental hydroelectric development:
(i) Does not adversely change existing impacts to aquatic systems;
(ii) Meets the certification standards established by the Low Impact Hydro Power Institute and American Rivers, Inc., or their successors;
(iii) Provides an adequate water flow for protection of aquatic life and for safe and effective fish passage;
(iv) Protects against erosion; and
(v) Protects cultural and historic resources.
(F) Geothermal energy, which means electricity produced by extracting hot water or steam from geothermal reserves in the earth's crust and supplied to steam turbines that drive generators to produce electricity.
(G) Biomass energy, which means the generation of electricity utilizing the following:
(i) Organic material from a plant that is grown for the purpose of being used to produce electricity or is protected by the Federal Conservation Reserve Program (CRP) and provided further that crop production on CRP lands does not prevent achievement of the water quality protection, soil erosion prevention or wildlife enhancement purposes for which the land was primarily set aside; or
(ii) Any solid nonhazardous, cellulosic waste material that is segregated from other waste materials, such as waste pallets, crates and landscape or right-of-way tree trimmings or agricultural sources, including orchard tree crops, vineyards, grain, legumes, sugar and other crop by-products or residues.
(H) Biologically derived methane gas, which includes, but is not limited to, landfill methane gas and methane from the anaerobic digestion of organic materials from yard waste, such as grass clippings and leaves, food waste, animal waste and sewage sludge.
(I) Fuel cells, which means any electrochemical device that converts chemical energy in a hydrogen-rich fuel directly into electricity, heat and water without combustion.
(J)
Recycled energy, which means useful thermal, mechanical or electrical energy produced from: (i) Exhaust heat from any commercial or industrial process; (ii) waste gas, waste fuel or other forms of energy that would otherwise be flared, incinerated, disposed of or vented; and (iii) electricity or equivalent mechanical energy extracted from a pressure drop in any gas, excluding any pressure drop to a condenser that subsequently vents the resulting heat .
(K) Coalbed methane, which means methane gas produced or emitting from a coal seam, or rock or other strata in communication with a coal seam, a mined out area or a gob well.
(L) Demand-side management consisting of the management of customer consumption of electricity or the demand for electricity through the implementation of:
(i) Energy efficiency technologies, management practices or other strategies in residential, industrial, commercial, institutional or government customers that reduce electricity consumption by those customers;
(ii) Load management or demand response technologies, management practices or other strategies in residential, commercial, industrial, institutional and government customers that shift electric load from periods of higher demand to periods of lower demand; or
(iii) Industrial by-product technologies consisting of the use of a by-product from an industrial process, including the reuse of energy from exhaust gases or other manufacturing by-products that are used in the direct production of electricity at the facility of a customer;
(M) Electrical, mechanical, or thermal energy produced from a method that uses one or more of the following fuels or energy sources: hydrogen, biomass, solar energy, geothermal energy, wind energy, waste heat, or hydroelectric power .
(2) "Alternative or renewable energy system" means a facility or energy system that uses a form of alternative or renewable energy source to generate electricity and delivers the electricity it generates to the distribution system of an electric distribution company or to the transmission system operated by a regional transmission organization;
(3) "Alternative fuels" include electricity, biodiesel, natural gas, propane, and any other fuel that may be deemed appropriate in the future by the Director of the Division of Energy of the Department of Commerce;
(4) "Alternative fuel vehicles" include on-road and off-road transportation vehicles and light-duty, medium-duty, and heavy-duty vehicles that are powered by an alternative fuel or a combination of alternative fuels;
(5)"Biomass" means a power source that is comprised of, but not limited to, combustible residues or gases from forest products manufacturing, waste, byproducts, or products from agricultural and orchard crops, waste or coproducts from livestock and poultry operations, waste or byproducts from food processing, urban wood waste, municipal solid waste, municipal liquid waste treatment operations, and landfill gas;
(6) "Bioscience" means the use of compositions, methods and organisms in cellular and molecular research, development and manufacturing processes for such diverse areas as pharmaceuticals, medical therapeutics, medical diagnostics, medical devices, medical instruments, biochemistry, microbiology, veterinary medicine, plant biology, agriculture and industrial, environmental, and homeland security applications of bioscience, and future developments in the biosciences. Bioscience includes biotechnology and life sciences;
(7) "Bioscience company" means a corporation, limited liability company, S corporation, partnership, registered limited liability partnership, foundation, association, nonprofit entity, business trust, person, group, or other entity that is engaged in the business of bioscience in this state and has business operations in this state, including, without limitation, research, development, or production directed towards developing or providing bioscience products or processes for specific commercial or public purposes and are identified by the following NAICS codes: 325411, 325412, 325413, 325414, 325193, 325199, 325311, 32532, 334516, 339111, 339112, 339113, 334510, 334517, 339115, 621511, 621512, 541710, 541380, 541940, 622110. "Bioscience company" does not include a sole proprietorship;
(8) "Biotechnology" means those fields focusing on technological developments in such areas as molecular biology, genetic engineering, genomics, proteomics, physiomics, nanotechnology, biodefense, biocomputing and bioinformatics;
(9) "Business" means any activity which is engaged in by any person in this state which is taxable under article thirteen, twenty-one, twenty-three or twenty-four of this chapter (or any combination of those articles of this chapter);
(10) "Clean coal technology" means any new technology that significantly reduces the environmental impact of coal usage including but not limited to coal gasification and carbon capture and storage.
(11) "Commissioner" and "Tax Commissioner" are used interchangeably herein and mean the Tax Commissioner of the State of West Virginia, or his or her designee;
(12) "Compensation" means wages, salaries, commissions, the cost of health benefits and any other form of remuneration paid to employees for personal services;
(13) "Controlled group" means one or more chains of corporations connected through stock ownership with a common parent corporation if stock possessing at least fifty percent of the voting power of all classes of stock of each of the corporations is owned directly or indirectly by one or more of the corporations; and the common parent owns directly stock possessing at least fifty percent of the voting power of all classes of stock of at least one of the other corporations;
(14) "Corporation" means any corporation, joint-stock company or association, and any business conducted by a trustee or trustees wherein interest or ownership is evidenced by a certificate of interest or ownership or similar written instrument;
(15) "Customer-generator" means a nonutility owner or operator of a net metered distributed generation system with a nameplate capacity of not greater than fifty kilowatts if installed at a residential service or not larger than fifty thousand kilowatts at other customer service locations, except for customers whose systems are above three megawatts and up to five megawatts who make their systems available to operate in parallel with the electric utility during grid emergencies as defined by the regional transmission organization or where a microgrid is in place for the primary or secondary purpose of maintaining critical infrastructure, such as homeland security assignments, emergency services facilities, hospitals, traffic signals, wastewater treatment plants or telecommunications facilities, provided that technical rules for operating generators interconnected with facilities of an electric distribution company, electric cooperative or municipal electric system have been promulgated by the Institute of Electrical and Electronic Engineers and the West Virginia Public Service Commission;
(16) "Designee" in the phrase "or his or her designee," when used in reference to the Tax Commissioner, means any officer or employee of the Tax Division of the Department of Revenue duly authorized by the commissioner directly, or indirectly by one or more redelegations of authority, to perform the functions mentioned or described in this article;
(17) "Eligible taxpayer" means any emerging technology industry that makes qualified investment in a new business facility or expanded business facility located in this state that employs emerging technologies to manufacture tangible or intangible personal property, or provide a service, for sale to another business for use or consumption by that business or for resale to consumers and creates at least the required number of new jobs and who is subject to any of the taxes imposed by articles thirteen, twenty-one, twenty-three and twenty-four of this chapter (or any combination of those articles);
(18) "Emerging technology industries" include, but are not limited to, industries employing new or state-of-the-art technology in biotechnology, marine science technology, pharmaceuticals, defense and homeland security-related technologies, advanced materials, electronics, nanotechnology, environmental, medical device, information technology, twenty-first century business technologies, plastics polymers, telecommunications industries involved in research and development of state-of-the-art medication delivery devises or other technology field or industry which the West Virginia Economic Development Authority has classified or classifies as an emerging technology. "Emerging technology industries includes, but is not limited to:
(A) Semiconductors,
(B) information,
(C) computer and software technology,
(D) energy,
(E) manufactured energy systems,
(F) micro-electromechanical systems,
(G) nanotechnology,
(H) biotechnology,
(I) medicine,
(J) life sciences,
(K) chemical processing,
(L) aerospace,
(M) defense, and
(N) other industries that the West Virginia Economic Development Authority has classified or classifies as an emerging technology industry.
(19) "Expanded facility" means any business facility (other than a new or replacement business facility) resulting from the acquisition, construction, reconstruction, installation or erection of improvements or additions to existing property if the improvements or additions are purchased on or after July 1, 2010, but only to the extent of the taxpayer's qualified investment in the improvements or additions;
(20) "Fuel cells" means those products designed, manufactured, and produced to convert hydrocarbon fuel to heat and electricity by electrochemical means;
(21) "Health insurance benefits" means benefits provided to employees that provide a subsidy of at least twenty-five percent of a health insurance premium for a health insurance policy that provides a "health benefit plan" meeting the requirements contained in the West Virginia Code of State Rules, Title 114, Series 39, Section 5 under the heading "Minimum Standards for Benefits" and complies with the applicable requirements contained in article sixteen, chapter thirty-three of this code, article twenty-four of said chapter and article twenty of said chapter; Provided, that if an employer in lieu of providing such a subsidy transfers moneys to an employee's health savings account, an amount that is equal to the cost of providing such subsidy, the employer shall be deemed to have provided health insurance benefits for such employee;
(22) "Includes" and "including," when used in a definition contained in this article, shall not be considered to exclude other things otherwise within the meaning of the term defined;
(23) "Leased property" does not include property which the taxpayer is required to show on its books and records as an asset under generally accepted principles of financial accounting. If the taxpayer is prohibited from expensing the lease payments for federal income tax purposes, the property shall be treated as purchased property under this section;
(24) "Life science" means the area of medical sciences, pharmaceutical sciences, biological sciences, zoology, botany, horticulture, ecology, toxicology, organic chemistry, physical chemistry, physiology and future advances associated with life sciences;
(25) "Microturbines" means one megawatt or smaller, high-speed generator power plant that includes the turbine, compressor, and generator, all of which are on a single shaft, as well as the power electronics to deliver power to the grid;
(26) "Nanotechnology" means the materials and systems whose structures and components exhibit novel and significantly improved physical, chemical, and biological properties, phenomena, and processes due to their nanoscale size;
(27) "New business" means any business whose ownership and activities are not closely related to a preexisting business. A mere change in the stock ownership of a corporation, or the equity ownership of a partnership or other entity treated as a partnership for federal income tax purposes, will not affect its status as an exiting business. Additionally, a new business that acquires substantially all of the assets of a corporation or other business entity or of a sole proprietorship shall not be treated as a new business for purposes of this article. In determining whether or not a new business is closely related to a preexisting business, all facts and circumstances shall be considered by the Tax Commissioner. The existence of the following factors help establish that a new business is closely related to an existing business:
(A) The new business's products or services are very similar to the products or services provided by the preexisting business;
(B) The new business markets products and services to the same class of customers as that of the preexisting business;
(C) The new business is conducted in the same general location as the preexisting business;
(D) The new business requires the use the same or similar operating assets as those used in the preexisting business;
(E) The new business's economic success builds on, or depends on, the success of the preexisting business;
(F) The activity of the new business is of a type that would normally be treated as a unit with the preexisting business in the accounting records of the preexisting business;
(G) If the new business and the preexisting business are regulated or licensed, they are regulated or licensed by the same or similar governmental authority; and
(H) Twenty percent or more of the equity of the new business is collectively owned by individuals and/or businesses that collectively owned more than fifty percent of the equity of the preexisting business.
These eight listed factors are not the only ones that may be considered by the Tax Commissioner. Others may also be taken into account, in the discretion of the Tax Commissioner. Additionally, it is not necessary for all of the eight listed factors to point to a new business as "closely related" to an existing business in order for the new business to not to be treated as a new business for purposes of this article.
(28) "New business facility" means a business facility which satisfies all the requirements of paragraphs (A), (B),(C) and (D) of this subdivision.
(A) The facility is employed by the taxpayer in the conduct of a business the net income of which is or will be taxable under article twenty-one or twenty-four of this chapter. The facility is not considered a new business facility in the hands of the taxpayer if the taxpayer's only activity with respect to the facility is to lease it to another person or persons.
(B) The facility is purchased by, or leased to, the taxpayer on or after July 1, 2010.
(C) The facility was not purchased or leased by the taxpayer from a related person: Provided, That the Tax Commissioner may waive this requirement if the facility was acquired from a related party for its fair market value and the acquisition was not tax motivated.
(D) The facility was not in service or use during the ninety days immediately prior to transfer of the title to the facility, or prior to the commencement of the term of the lease of the facility: Provided, That this ninety-day period may be waived by the Tax Commissioner if the commissioner determines that persons employed at the facility may be treated as "new employees" as that term is defined in this subsection;
(29) "New employee" means:
(A) The term "new employee" means a person residing and domiciled in this state, hired by the taxpayer to fill a position or a job in this state which previously did not exist in the taxpayer's business enterprise in this state prior to the date on which the taxpayer's qualified investment is placed in service or use in this state. In no case may the number of new employees directly attributable to the investment for purposes of this credit exceed the total net increase in the taxpayer's employment in this state: Provided, That the Tax Commissioner may require that the net increase in the taxpayer's employment in this state be determined and certified for the taxpayer's controlled group.
(B) A person is considered to be a "new employee" only if the person's duties in connection with the operation of the business facility are on:
(i) A regular, full-time and permanent basis:
(I) "Full-time employment" means employment for at least one hundred forty hours per month at a wage not less than the prevailing state or federal minimum wage, depending on which minimum wage provision is applicable to the business;
(II) "Permanent employment" does not include employment that is temporary or seasonal and therefore the wages, salaries and other compensation paid to the temporary or seasonal employees will not be considered for purposes of sections five and seven of this article; or
(ii) A regular, part-time and permanent basis: Provided, That the person is customarily performing the duties at least twenty hours per week for at least six months during the taxable year.
(30) "New job" means a job which did not exist in the business of the taxpayer in this state prior to the taxpayer's qualified investment being made, and which is filled by a new employee.
(31) "New property" means:
(A) Property, the construction, reconstruction or erection of which is completed on or after July 1, 2010, and placed in service or use after that date; and
(B) Property leased or acquired by the taxpayer that is placed in service or use in this state on or after July 1, 2010, if the original use of the property commences with the taxpayer and commences after that date;
(32) "NAICS" means the North American Industry Classification System;
(33) "Original use" means the first use to which the property is put, whether or not the use corresponds to the use of the property by the taxpayer;
(34) "Partnership" includes a syndicate, group, pool, joint venture or other unincorporated organization through or by means of which any business or venture is carried on, and which is not a trust or estate, a corporation or a sole proprietorship and which is treated as a partnership for tax purposes under the laws of this state. The term "partner" includes a member in such a syndicate, group, pool, joint venture or other organization;
(35) "Person" includes any natural person, corporation or partnership;
(36) "Property purchased or leased for business expansion" means:
(A) Included property. -- Except as provided in paragraph (B) of this subdivision, the term "property purchased or leased for business expansion" means real property and improvements thereto, and tangible personal property, but only if the real or personal property was constructed, purchased, or leased and placed in service or use by the taxpayer, for use as a component part of a new business facility or expanded business facility as defined in this section, which is located within the State of West Virginia. This term includes only:
(i) Real property and improvements thereto having a useful life of four or more years, placed in service or use on or after July 1, 2010, by the taxpayer.
(ii) Real property and improvements thereto, acquired by written lease having a primary term of ten or more years and placed in service or use by the taxpayer on or after July 1, 2010.
(iii) Tangible personal property placed in service or use by the taxpayer on or after July 1, 2010, with respect to which depreciation, or amortization in lieu of depreciation, is allowable in determining the personal or corporation net income tax liability of the business taxpayer under article twenty-one or twenty-four of this chapter, and which has a useful life, at the time the property is placed in service or use in the state, of four or more years.
(iv) Tangible personal property acquired by written lease having a primary term of four years or longer, that commenced and was executed by the parties thereto on or after July 1, 2010, if used as a component part of a new or expanded business facility, shall be included within this definition.
(v) Tangible personal property owned or leased, and used by the taxpayer at a business location outside the state which is moved into the State of West Virginia on or after July 1, 2010, for use as a component part of a new or expanded business facility located in the state: Provided, That if the property is owned, it must be depreciable or amortizable personal property for income tax purposes, and have a useful life of four or more years remaining at the time it is placed in service or use in the state, and if the property is leased, the primary term of the lease remaining at the time the leased property is placed in service or use in the state, must be four or more years.
(B) Excluded property. -- The term "property purchased or leased for business expansion" does not include:
(i) Property owned or leased by the taxpayer and for which the taxpayer was previously allowed tax credit under article thirteen-c, thirteen-d, thirteen-e, thirteen-q, thirteen-r, thirteen-s, or thirteen-u of this chapter, or the tax credits allowed by this article;
(ii) Property owned or leased by the taxpayer and for which the seller, lessor, or other transferor, was previously allowed tax credit under article thirteen-c, thirteen-d, thirteen-e, thirteen-q, thirteen-r, thirteen-s, or thirteen-u of this chapter, or the tax credits allowed by this article;
(iii) Repair costs, including materials used in the repair, unless for federal income tax purposes the cost of the repair must be capitalized and not expensed;
(iv) Airplanes;
(v) Property which is primarily used outside the state, with use being determined based upon the amount of time the property is actually used both within and outside the state;
(vi) Property which is acquired incident to the purchase of the stock or assets of the seller, unless for good cause shown, the commissioner consents to waiving this requirement;
(vii) Natural resources in place;
(viii) Purchased or leased property, the cost or consideration for which cannot be quantified with any reasonable degree of accuracy at the time the property is placed in service or use: Provided, That when the contract of purchase or lease specifies a minimum purchase price or minimum annual rent the amount thereof shall be used to determine the qualified investment in the property under section eight of this article if the property otherwise qualifies as property purchased or leased for business expansion;
(37) "Photovoltaic devices" means those products designed, manufactured, and produced to convert sunlight directly into electricity;
(38) "Purchase" means any acquisition of property, but only if:
(A) The property is not acquired from a person whose relationship to the person acquiring it would result in the disallowance of deductions under Section 267 or 707 (b) of the United States Internal Revenue Code of 1986, as amended, and in effect on July 1, 2010;
(B) The property is not acquired by one component member of a controlled group from another component member of the same controlled group. The commissioner can waive this requirement if the property was acquired from a related party for its then fair market value; and
(C) The basis of the property for federal income tax purposes, in the hands of the person acquiring it, is not determined:
(i) In whole or in part, by reference to the federal adjusted basis of the property in the hands of the person from whom it was acquired; or
(ii) Under Section 1014(e) of the United States Internal Revenue Code of 1986, as amended, and in effect on July 1, 2010;
(39) "Qualified activity" means any business or other activity subject to any of the taxes imposed by article thirteen, twenty-one, twenty-three or twenty-four of this chapter (or any combination of those articles of this chapter), but does not include the activity of severance or production of natural resources;
(40) "Related person" means:
(A) A corporation, partnership, association or trust controlled by the taxpayer;
(B) An individual, corporation, partnership, association or trust that is in control of the taxpayer;
(C) A corporation, partnership, association or trust controlled by an individual, corporation, partnership, association or trust that is in control of the taxpayer; or
(D) A member of the same controlled group as the taxpayer.
For purposes of this definition, "control," with respect to a corporation, means ownership, directly or indirectly, of stock possessing fifty percent or more of the total combined voting power of all classes of the stock of the corporation entitled to vote. "Control," with respect to a trust, means ownership, directly or indirectly, of fifty percent or more of the beneficial interest in the principal or income of the trust. The ownership of stock in a corporation, of a capital or profits interest in a partnership or association or of a beneficial interest in a trust is determined in accordance with the rules for constructive ownership of stock provided in Section 267(c) of the United States Internal Revenue Code of 1986, as amended and in effect on July 1, 2010, other than paragraph (3) of that section;
(41) "Renewable energy" means electrical, mechanical, or thermal energy produced from a method that uses one or more of the following fuels or energy sources: hydrogen, biomass, solar energy, geothermal energy, wind energy, waste heat, or hydroelectric power;
(42) "Renewable energy technology" means any technology that generates or utilizes a renewable energy resource;
(43) "Replacement facility" means any property (other than an expanded facility) that replaces or supersedes any other property located within this state that:
(A) The taxpayer or a related person used in or in connection with any activity for more than two years during the period of five consecutive years ending on the date the replacement or superseding property is placed in service by the taxpayer; or
(B) Is not used by the taxpayer or a related person in or in connection with any qualified activity for a continuous period of one year or more commencing with the date the replacement or superseding property is placed in service by the taxpayer;
(44) "Solar energy system" means equipment that provides for the collection and use of incident solar energy for water heating, space heating or cooling, or other applications that would normally require a conventional source of energy such as petroleum products, natural gas, or electricity that performs primarily with solar energy. In other systems in which solar energy is used in a supplemental way, only those components that collect and transfer solar energy shall be included in this definition;
(45) "Solar photovoltaic system" means a device that converts incident sunlight into electrical current;
(46) "Solar thermal system" means a device that traps heat from incident sunlight in order to heat water;
(47) "Stirling engine" means a high-temperature, high- pressure externally heated engine that uses an alternatively heated and cooled working gas;
(48) "Taxpayer" means any person subject to any of the taxes imposed by article thirteen, twenty-one, twenty-three or twenty-four of this chapter (or any combination of those articles of this chapter);
(49) "This code" means the Code of West Virginia, 1931, as amended;
(50) "This state" means the State of West Virginia;
(51) "Twenty-first century business technologies" includes, but is not limited to, high technology and other high technology business developing or using: (A)Emerging technologies such as green computing, cloud computing and other emerging technologies in manufacturing and other commercial businesses with a low carbon footprint; (B) energy conservation in residential, commercial, industrial and government buildings; (C) alternative fuels and alternative fuel systems and technologies; (D) alternative or renewable energy sources and technologies; and (E) clean coal technologies; and
(51) "Used property" means property acquired after December 31, 2009, that is not "new property."
§11-13AA-4. Amount of credit allowed.
(a) Credit allowed. -- Eligible taxpayers are allowed a credit against the portion of taxes imposed by this state that are attributable to and the consequence of the taxpayer's qualified investment as described in section six of this article in a new business or expanded business in this state, which results in the creation of new jobs. The amount of this credit is determined and applied as provided in this article.
(b) Amount of credit. -- When the eligible taxpayer employs at least ten full-time employees in this state in a business utilizing twenty-first century business technologies and whose qualified investment is less than $1 million, the eligible taxpayer shall for the tax year in which the ten employees are first employed by the eligible taxpayer and for the next four tax years be exempt from payment of the taxes imposed by articles twenty-three and twenty-four of this chapter on the taxable capital and West Virginia taxable income of the business attributable to the emerging technology business activity in this state: Provided, That the eligible taxpayer may elect to defer for one tax year the start of this five-year period. When the eligible business is a partnership or other entity treated as a partnership for federal income tax purposes, the partners, S corporation shareholders or members of the limited liability company shall be exempt from paying the tax imposed by article twenty-one of this chapter on his or her distributive share attributable to the emerging technology business activity in this state. The eligible business shall also be exempt from paying the taxes imposed by article fifteen and fifteen-a of this chapter on tangible personal property, except motor fuel, and services purchased for use of consumption by the eligible taxpayer in the emerging technology business activity during the same five- year period.
(c) Amount of credit. -- When the eligible taxpayer does not qualify for credit under subsection (b) of this section, the amount of credit allowable is determined by multiplying the amount of the taxpayer's "qualified investment" (determined under section six of this article) in "property purchased or leased for business expansion" (as defined in section three of this article) by the taxpayer's new jobs percentage (determined under section seven of this article). The product of this calculation establishes the maximum amount of credit allowable under this article due to the qualified investment.
§11-13AA-5. Application of annual credit allowance.
(a) In general. -- The aggregate annual credit allowance for the current taxable year is an amount equal to the sum of the following:
(1) The one-tenth part allowed under subsection (c), section four of this article for qualified investment placed into service or use during a prior taxable year; plus
(2) The one-tenth part allowed under subsection (c), section four of this article for qualified investment placed into service or use during the current taxable year.
(b) Application of current year annual credit allowance. -- The amount determined under subsection (a) of this section is allowed as a credit against one hundred percent of that portion of the taxpayer's state tax liability which is attributable to and the direct result of the taxpayer's qualified investment, and applied as provided in subsections (c) through (f), both inclusive, of this section, and in that order.
(c) Business and occupation taxes. -- That portion of the allowable credit attributable to qualified investment in a business or other activity subject to the taxes imposed by article thirteen of this chapter under section two-o of article thirteen must first be applied to reduce the taxes imposed or payable under section two- o, article thirteen of this chapter, for the taxable year (determined before application of allowable credits against tax and the annual exemption). In no case may the credit allowed under this article be applied to reduce any tax imposed or payable under section two-f, or under any other section of article thirteen of this chapter except section two-o.
(1) If the taxes due under section two-o, article thirteen of this chapter are not solely attributable to and the direct result of the taxpayer's qualified investment in a business or other activity taxable under section two-o, article thirteen of this chapter, the amount of those taxes that are attributable is determined by multiplying the amount of taxes due under section two-o, article thirteen of this chapter, for the taxable year (determined before application of any allowable credits against tax and the annual exemption), by a fraction, the numerator of which is all wages, salaries and other compensation paid during the taxable year to all employees of the taxpayer employed in this state, whose positions are directly attributable to the qualified investment in a business or other activity taxable under section two-o, article thirteen of this chapter. The denominator of the fraction shall be the wages, salaries and other compensation paid during the taxable year to all employees of the taxpayer employed in this state, whose positions are directly attributable to the business or other activity of the taxpayer that is taxable under article thirteen of this chapter.
(2) The annual exemption allowed by section three, article thirteen of this chapter, plus any credits allowable under articles thirteen-d, thirteen-e, thirteen-q, thirteen-r and thirteen-s of this chapter, shall be applied against and reduce only the portion of article thirteen taxes not apportioned to the qualified investment under this article: Provided, That any excess exemption or credits may be applied against the amount of article thirteen taxes apportioned to the qualified investment under this article, that is not offset by the amount of annual credit against the taxes allowed under this article for the taxable year, unless their application is otherwise prohibited by this chapter.
(d) Business franchise tax. --
(1) After application of subsection (c) of this section, any unused allowable credit is next applied to reduce the taxes imposed by article twenty-three of this chapter for the taxable year (determined after application of the credits against tax provided in section seventeen of article twenty-three of this chapter, but before application of any other allowable credits against tax).
(2) If the taxes due under article twenty-three of this chapter are not solely attributable to and the direct result of the taxpayer's qualified investment in a business or other activity taxable under article twenty-three of this chapter for the taxable year, the amount of the taxes which are so attributable are determined by multiplying the amount of taxes due (determined after application of the credits against tax as provided in section seventeen of article twenty-three of this chapter, but before application of any other allowable credits), by a fraction, the numerator of which is all wages, salaries and other compensation paid during the taxable year to all employees of the taxpayer employed in this state, whose positions are directly attributable to the qualified investment in a business or other activity taxable under article twenty-three of this chapter. The denominator of the fraction is wages, salaries and other compensation paid during the taxable year to all employees of the taxpayer employed in this state, whose positions are directly attributable to the business or other activity of the taxpayer that is taxable under article twenty- three of this chapter.
(3) Any credits allowable under articles thirteen-d, thirteen- e, thirteen-q, thirteen-r and thirteen-s of this chapter are applied against and reduce only the portion of article twenty-three taxes not apportioned to the qualified investment under this article: Provided, That any excess exemption or credits may be applied against the amount of article twenty-three taxes apportioned to the qualified investment under this article that is not offset by the amount of annual credit against those taxes allowed under this article for the taxable year, unless their application is otherwise prohibited by this chapter.
(e) Corporation net income taxes. --
(1) After application of subsections (c) and (d) of this section, any unused credit is next applied to reduce the taxes imposed by article twenty-four of this chapter for the taxable year (determined before application of allowable credits against tax).
(2) If the taxes due under article twenty-four of this chapter (determined before application of allowable credits against tax) are not solely attributable to and the direct result of the taxpayer's qualified investment, the amount of the taxes that is attributable are determined by multiplying the amount of taxes due under article twenty-four of this chapter for the taxable year (determined before application of allowable credits against tax), by a fraction, the numerator of which is all wages, salaries and other compensation paid during the taxable year to all employees of the taxpayer employed in this state whose positions are directly attributable to the qualified investment. The denominator of the fraction is the wages, salaries and other compensation paid during the taxable year to all employees of the taxpayer employed in this state.
(3) Any credits allowable under article twenty-four of this chapter are applied against and reduce only the amount of article twenty-four taxes not apportioned to the qualified investment under this article: Provided, That any excess credits may be applied against the amount of article twenty-four taxes apportioned to the qualified investment under this article that is not offset by the amount of annual credit against such taxes allowed under this article for the taxable year, unless their application is otherwise prohibited by this chapter.
(f) Personal income taxes. --
(1) If the person making the qualified investment is an electing small business corporation (as defined in Section 1361 of the United States Internal Revenue Code of 1986, as amended), a partnership, or a limited liability company that is treated as a partnership for federal income tax purposes, then any unused credit (after application of subsections (c), (d) and (e) of this section) is allowed as a credit against the taxes imposed by article twenty- one of this chapter on the income from business or other activity subject to tax under article thirteen or twenty-three of this chapter that is attributable to the business activity for credit is allowed under this article.
(2) Electing small business corporations, limited liability companies, partnerships and other unincorporated organizations shall allocate the credit allowed by this article among its members in the same manner as profits and losses are allocated for the taxable year.
(3) If the amount of taxes due under article twenty-one of this chapter (determined before application of allowable credits against tax) that is attributable to business, is not solely attributable to and the direct result of the qualified investment of the electing small business corporation, limited liability company, partnership, other unincorporated organization or sole proprietorship, the amount of the taxes that are so attributable are determined by multiplying the amount of taxes due under article twenty-one of this chapter (determined before application of allowable credits against tax), that is attributable to business by a fraction, the numerator of which is all wages, salaries and other compensation paid during the taxable year to all employees of the electing small business corporation, limited liability company, partnership, other unincorporated organization or sole proprietorship employed in this state, whose positions are directly attributable to the qualified investment. The denominator of the fraction is the wages, salaries and other compensation paid during the taxable year to all employees of the taxpayer.
(4) No credit is allowed under this section against any employer withholding taxes imposed by article twenty-one of this chapter.
(g) If the wages, salaries and other compensation fraction formula provisions of subsections (c) through (f) of this section, inclusive, do not fairly represent the taxes solely attributable to and the direct result of qualified investment of the taxpayer the commissioner may require, in respect to all or any part of the taxpayer's businesses or activities, if reasonable:
(1) Separate accounting or identification;
(2) Adjustment to the wages, salaries and other compensation fraction formula to reflect all components of the tax liability;
(3) The inclusion of one or more additional factors that will fairly represent the taxes solely attributable to and the direct result of the qualified investment of the taxpayer and all other project participants in the businesses or other activities subject to tax; or
(4) The employment of any other method to effectuate an equitable attribution of the taxes.
In order to effectuate the purposes of this subsection, the commissioner may propose for promulgation rules, including emergency rules, in accordance with article three, chapter twenty-nine-a of this code.
(h) Unused credit. -- If any credit remains after application of subsection (b) of this section, the amount thereof is carried forward to each ensuing tax year until used or until the expiration of the third taxable year subsequent to the end of the initial ten year credit application period. If any unused credit remains after the thirteenth year, the amount thereof is forfeited. No carryback to a prior taxable year is allowed for the amount of any unused portion of any annual credit allowance.
§11-13AA-6. Qualified investment.
(a) General. -- The qualified investment in property purchased or leased for business expansion is the applicable percentage of the cost of each property purchased or leased for the purpose of business expansion which is placed in service or use in this state by the taxpayer during the taxable year.
(b) Applicable percentage. -- For the purpose of subsection (a), the applicable percentage of any property is determined under the following table:
If useful life is:
The applicable percentage is:

Less than 4 years....................................0%
4 years or more but less than 6 years ..........33 1/3%
6 years or more but less than 8 years ..........66 2/3%
8 years or more ...................................100%

The useful life of any property, for purposes of this section, is determined as of the date the property is first placed in service or use in this state by the taxpayer, determined in accordance with such rules and requirements the Tax Commissioner may prescribe.
(c) Cost. -- For purposes of subsection (a), the cost of each property purchased for business expansion is determined under the following rules:
(1) Trade-ins. - Cost does not include the value of property given in trade or exchange for the property purchased for business expansion.
(2) Damaged, destroyed or stolen property. -- If property is damaged or destroyed by fire, flood, storm or other casualty, or is stolen, then the cost of replacement property does not include any insurance proceeds received in compensation for the loss.
(3) Rental property. --
(A) The cost of real property acquired by written lease for a primary term of ten years or longer is one hundred percent of the rent reserved for the primary term of the lease, not to exceed twenty years.
(B) The cost of tangible personal property acquired by written lease for a primary term of:
(i) Four years, or longer, is one third of the rent reserved for the primary term of the lease;
(ii) Six years, or longer, is two thirds of the rent reserved for the primary term of the lease; or
(iii) Eight years, or longer, is one hundred percent of the rent reserved for the primary term of the lease, not to exceed twenty years: Provided, That in no event may rent reserved include rent for any year subsequent to expiration of the book life of the equipment, determined using the straight-line method of depreciation.
(4) Self-constructed property. -- In the case of self- constructed property, the cost thereof is the amount properly charged to the capital account for depreciation in accordance with federal income tax law.
(5) Transferred property. -- The cost of property used by the taxpayer out-of-state and then brought into this state, is determined based on the remaining useful life of the property at the time it is placed in service or use in this state, and the cost is the original cost of the property to the taxpayer less straight line depreciation allowable for the tax years or portions thereof the taxpayer used the property outside this state. In the case of leased tangible personal property, cost is based on the period remaining in the primary term of the lease after the property is brought into this state for use in a new or expanded business facility of the taxpayer, and is the rent reserved for the remaining period of the primary term of the lease, not to exceed twenty years, or the remaining useful life of the property (determined as aforesaid), whichever is less.
§11-13AA-7. New jobs percentage.
(a) In general. -- The new jobs percentage is based on the number of new jobs created in this state directly attributable to the qualified investment of the taxpayer.
(b) When a job is attributable. -- An employee's position is directly attributable to the qualified investment if:
(1) The employee's service is performed or his or her base of operations is at the new or expanded business facility;
(2) The position did not exist prior to the construction, renovation, expansion or acquisition of the business facility and the making of the qualified investment; and
(3) But for the qualified investment, the position would not have existed.
(c) Applicable percentage. -- For the purpose of subsection (a) of this section, the applicable new jobs percentage is determined under the following table:
If number of new jobs
The applicable percentage is:

is at least:

11
15%

20
20%

280
30%

520
40%


(d) Certification of new jobs. -- With the annual return for the applicable taxes filed for the taxable year in which the qualified investment is first placed in service or use in this state, the taxpayer shall estimate and certify the number of new jobs reasonably projected to be created by it in this state within the period prescribed in subsection (f) of this section that are, or will be, directly attributable to the qualified investment of the taxpayer. For purposes of this section, "applicable taxes" means the taxes imposed by articles thirteen, twenty-one, twenty-three and twenty-four of this chapter against which this credit is applied.
(e) Equivalency of permanent employees. -- The hours of part- time employees shall be aggregated to determine the number of equivalent full-time employees for the purpose of this section.
(f) Redetermination of new jobs percentage. -- With the annual return for the applicable taxes imposed, filed for the third taxable year in which the qualified investment is in service or use, the taxpayer shall certify the actual number of new jobs created by it in this state that are directly attributable to the qualified investment of the taxpayer.
(1) If the actual number of jobs created would result in a higher new jobs percentage, the credit allowed under this article shall be redetermined and amended returns filed for the first and second taxable years that the qualified investment was in service or use in this state.
(2) If the actual number of jobs created would result in a lower new jobs percentage, the credit previously allowed under this article shall be redetermined and amended returns filed for the first and second taxable years. In applying the amount of redetermined credit allowable for the two preceding taxable years, the redetermined credit shall first be applied to the extent it was originally applied in the prior two years to personal income taxes, then to corporation net income taxes, then to business franchise taxes and, lastly, to business and occupation taxes. Any additional taxes due under this chapter shall be remitted with the amended returns filed with the commissioner, along with interest, as provided in section seventeen, article ten of this chapter, and a ten-percent penalty determined on the amount of taxes due with the amended return, which may be waived by the commissioner if the taxpayer shows that the overclaimed amount of the new jobs percentage was due to reasonable cause and not due to willful neglect.
§11-13AA-8. New jobs compensation and benefits requirement.
(a) Notwithstanding any provision of this article to the contrary, no credit shall be allowed under this article unless the following compensation requirements are met beginning with the tax year when the new employee is first hired and continuing through the period for which credit is allowed under this article:
(1) The median compensation paid to the employees filling the new jobs must be at least $50,000 annually: Provided, That beginning November 1, 2011, and on or before every first day of November thereafter, the Tax Commissioner shall adjust this minimum annual compensation requirement in the manner provided in subsection (b) of this section, which adjustment shall apply to compensation paid for employee services during the next calendar year;
(2) Health insurance benefits are provided to all full-time permanent employees in this state; and
(3) Each new job is a full-time, permanent position, as those terms are defined in section three, of this article.
Jobs that pay less than the amount specified in subdivision (1) of subsection (a) of this section, or that pay that salary but do not also provide benefits in addition to the salary, do not qualify as new jobs for purposes of the credit authorized by this article. Additionally, jobs that are less than full-time, permanent positions do not qualify as new jobs under this article.
(b) Adjustment of annual compensation for inflation. -- The compensation requirements for credit under this article shall be adjusted for inflation by application of a cost-of-living adjustment. The annual compensation amount shall be applicable, as adjusted, each year throughout the ten-year credit period. Failure of a taxpayer entitled to credit under this article to meet the annual compensation requirement for any year shall result in forfeiture of the credit for that year. However, if in any succeeding year within the original ten-year credit period, the taxpayer pays annual compensation to its employees which exceeds the inflation adjusted annual compensation amount for that year, the taxpayer shall regain entitlement to take the credit for that year only. No credit forfeited in a prior year may be taken, and the tax year or years to which the forfeited credit would have been applied shall be forfeited and deducted from the remainder of the years over which the credit can be taken.
(1) Cost-of-living adjustment. -- For purposes of this section, the cost-of-living adjustment for any calendar year is the percentage, if any, by which the consumer price index for the preceding calendar year exceeds the consumer price index for the calendar year 2010.
(2) Consumer price index for any calendar year. -- For purposes of this section, the consumer price index for any calendar year is the average of the federal consumer price index as of the close of the twelve-month period ending on August 31 of such calendar year.
(3) Consumer price index. -- For purposes of this section, the term "Federal Consumer Price Index" means the last consumer price index for all urban consumers published by the United States Department of Labor.
(4) Rounding. -- If any increase in the annual compensation amount under this section is not a multiple of fifty dollars, such increase shall be rounded to the next lowest multiple of $50.
(c) Unused credit remaining in any tax year after application against the taxes specified in section seven of this article is forfeited and does not carry forward to any succeeding tax year and does not carry back to a prior tax year.
(d) Reduction in number of employees credit forfeiture. -- If during the year when a new job was created for which credit was granted under this section or during any of the next succeeding four tax years thereafter, net jobs that are attributable to and the consequence of the taxpayer's business operations in this state, decrease, counting both new jobs for which credit was granted under this article and preexisting jobs, then the total amount of credit to which the taxpayer is entitled under this section shall be decreased and forfeited in the amount of $3,000 for each net job lost.
§11-13AA-9. Application for credit required; failure to make timely application; burden of proof.

(a) Application for credit required. -- Notwithstanding any provision of this article to the contrary, no credit is allowed or may be applied under this article for any qualified investment property placed in service or use until the person asserting a claim for the allowance of credit under this article makes written application to the Tax Commissioner for allowance of credit as provided in this subsection. An application for credit shall be filed, in the form prescribed by the Tax Commissioner, no later than the last day for filing the tax returns, determined by including any authorized extension of time for filing the return, required under article twenty-one or twenty-four of this chapter for the taxable year in which the property to which the credit relates is placed in service or use and all information required by the form shall be provided.
(b) Failure to make timely application. -- The failure to timely apply for the credit results in the forfeiture of fifty percent of the annual credit allowance otherwise allowable under this article. This penalty applies annually until the application is filed.
(c) The burden of proof is on the taxpayer to establish by clear and convincing evidence that the taxpayer is entitled to the benefits allowed by this article.
§11-13AA-10. Identification of investment credit property.
Every taxpayer who claims credit under this article shall maintain sufficient records to establish the following facts for each item of qualified property:
(1) Its identity;
(2) Its actual or reasonably determined cost;
(3) Its straight-line depreciation life;
(4) The month and taxable year in which it was placed in service;
(5) The amount of credit taken; and
(6) The date it was disposed of or otherwise ceased to be qualified property.
§11-13AA-11. Forfeiture of unused tax credits; redetermination of credit allowed.

(a) Disposition of property or cessation of use. -- If during any taxable year, property with respect to which a tax credit has been allowed under this article:
(1) Is disposed of prior to the end of its useful life, as determined under section eight of this article; or
(2) Ceases to be used in an eligible business of the taxpayer in this state prior to the end of its useful life, as determined under section eight of this article, then the unused portion of the credit allowed for the property is forfeited for the taxable year and all ensuing years. Additionally, except when the property is damaged or destroyed by fire, flood, storm or other casualty, or is stolen, the taxpayer shall redetermine the amount of credit allowed in all earlier years by reducing the applicable percentage of cost of the property allowed under section eight of this article, to correspond with the percentage of cost allowable for the period of time that the property was actually used in this state in the new or expanded business of the taxpayer. The taxpayer shall then file a reconciliation statement for the year in which the forfeiture occurs and pay any additional taxes owed due to reduction of the amount of credit allowable for the earlier years, plus interest and any applicable penalties. The reconciliation statement shall be filed with the annual return for the primary tax for which the taxpayer is liable under articles thirteen and twenty-three of this chapter.
(b) Cessation of operation of business facility. -- If during any taxable year the taxpayer ceases operation of a business facility in this state for which credit was allowed under this article, before expiration of the useful life of property with respect to which tax credit has been allowed under this article, then the unused portion of the allowed credit is forfeited for the taxable year and for all ensuing years. Additionally, except when the cessation is due to fire, flood, storm or other casualty, the taxpayer shall redetermine the amount of credit allowed in earlier years by reducing the applicable percentage of cost of the property allowed under section eight of this article, to correspond with the percentage of cost allowable for the period of time that the property was actually used in this state in a business of the taxpayer that is taxable under article thirteen, twenty-three or twenty-four of this chapter, or in the case of a sole proprietorship, article twenty-one of this chapter. The taxpayer shall then file a reconciliation statement with the annual return for the primary tax for which the taxpayer is liable under article thirteen, twenty-one or twenty-three of this chapter, for the year in which the forfeiture occurs, and pay any additional taxes owed due to the reduction of the amount of credit allowable for the earlier years, plus interest and any applicable penalties.
(c) Reduction in number of employees. -- If during any taxable year subsequent to the taxable year in which the new jobs percentage is redetermined as provided in section nine of this article, the average number of employees of the taxpayer, for the then current taxable year, employed in positions created because of and directly attributable to the qualified investment falls below the minimum number of new jobs created upon which the taxpayer's annual credit allowance is based, the taxpayer shall calculate what his or her annual credit allowance would have been had his or her new jobs percentage been determined based upon the average number of employees, for the then current taxable year, employed in positions created because of and directly attributable to the qualified investment. The difference between the result of this calculation and the taxpayer's annual credit allowance for the qualified investment as determined under section four of this article, is forfeited for the then current taxable year, and for each succeeding taxable year unless for a succeeding taxable year the taxpayer's average employment in positions directly attributable to the qualified investment once again meets the level required to enable the taxpayer to utilize its full annual credit allowance for that taxable year.
§11-13AA-12. Recapture of credit; recapture tax imposed.
(a) When recapture tax applies. --
(1) Any person who places qualified investment property in service or use and who fails to use the qualified investment property for at least the period of its useful life (determined as of the time the property was placed in service or use), or the period of time over which tax credits allowed under this article with respect to the property are applied under this article, whichever period is less, and who reduces the number of its employees filling new jobs in its business in this state, which were created and are directly attributable to the qualified investment property, after the third taxable year in which the qualified investment property was placed in service or use, or fails to continue to employ individuals in all the new jobs created as a direct result of the qualified investment property and used to qualify for the credit allowed by this article, prior to the end of the tenth taxable year after the qualified investment property was placed in service or use, the person shall pay the recapture tax imposed by subsection (b) of this section.
(2) This section does not apply when section thirteen of this article applies. However, the successor, or the successors, and the person, or persons, who previously claimed credit under this article with respect to the qualified investment property and the new jobs attributable thereto, are jointly and severally liable for payment of any recapture tax subsequently imposed under this section with respect to the qualified investment property and new jobs.
(b) Recapture tax imposed. -- The recapture tax imposed by this subsection is the amount determined as follows:
(1) Full recapture. -- If the taxpayer prematurely removes qualified investment property placed in service (when considered as a class) from economic service in the taxpayer's qualified investment business activity in this state, and the number of employees filling the new jobs created by the person falls below the number of new jobs required to be created in order to qualify for the amount of credit being claimed or the requirements of section eight of this article are not satisfied, the taxpayer shall recapture the amount of credit claimed under section seven of this article for the taxable year, and all preceding taxable years, on qualified investment property which has been prematurely removed from service. The amount of tax due under this subdivision is an amount equal to the amount of credit that is recaptured under this subdivision.
(2) Partial recapture. -- If the taxpayer prematurely removes qualified investment property from economic service in the taxpayer's qualified investment business activity in this state, and the number of employees filling the new jobs created by the person remains ten or more, but falls below the number necessary to sustain continued application of credit determined by use of the new job percentage upon which the taxpayer's one-tenth annual credit allowance was determined under section four or section ten of this article, taxpayer shall recapture an amount of credit equal to the difference between: (A) The amount of credit claimed under section seven of this article for the taxable year, and all preceding taxable years; and (B) the amount of credit that would have been claimed in those years if the amount of credit allowable under section four or ten of this article had been determined based on the qualified investment property which remains in service using the average number of new jobs filled by employees in the taxable year for which recapture occurs. The amount of tax due under this subdivision is an amount equal to the amount of credit that is recaptured under this subdivision.
(3) Additional recapture. -- If after a partial recapture under subdivision (2) of this subsection, the taxpayer further reduces the number of employees filling new jobs, the taxpayer shall recapture an additional amount determined as provided under subdivision (1) of this subsection. The amount of tax due under this subdivision is an amount equal to the amount of credit that is recaptured under this subdivision.
(c) Recapture of credit allowed for projects. -- The commissioner may file in the West Virginia register an emergency legislative rule explaining how the provisions of this section are applied in the case of projects certified under section six of this article.
(d) Payment of recapture tax. -- The amount of tax recaptured under this section is due and payable on the day the person's annual return is due for the taxable year in which this section applies, under article twenty-one or twenty-four of this chapter. When the employer is a partnership, limited liability company or S corporation for federal income tax purposes, the recapture tax shall be paid by those persons who are partners in the partnership, members in the company, or shareholders in the S corporation, in the taxable year in which recapture occurs under this section.
(e) Rules. -- The Tax Commissioner may promulgate such rules as may be useful or necessary to carry out the purpose of this section and to implement the intent of the Legislature. Rules shall be promulgated in accordance with the provisions of article three, chapter twenty-nine-a of this code.
§11-13AA-13. Transfer of qualified investment to successors.
(a) Mere change in form of business. -- Property may not be treated as disposed of under section eleven of this article, by reason of a mere change in the form of conducting the business as long as the property is retained in the successor business in this state, and the transferor business retains a controlling interest in the successor business. In this event, the successor business is allowed to claim the amount of credit still available with respect to the business facility or facilities transferred, and the transferor business may not be required to redetermine the amount of credit allowed in earlier years.
(b) Transfer or sale to successor. -- Property is not treated as disposed of under section eleven of this article by reason of any transfer or sale to a successor business which continues to operate the business facility in this state. Upon transfer or sale, the successor shall acquire the amount of credit that remains available under this article for each subsequent taxable year and the transferor business is not required to redetermine the amount of credit allowed in earlier years.
§11-13AA-14. Failure to keep records of investment credit property.

A taxpayer who does not keep the records required for identification of investment credit property is subject to the following rules:
(1) A taxpayer is treated as having disposed of, during the taxable year, any investment credit property which the taxpayer cannot establish was still on hand, in this state, at the end of that year.
(2) If a taxpayer cannot establish when investment credit property reported for purposes of claiming this credit returned during the taxable year was placed in service, the taxpayer is treated as having placed it in service in the most recent prior year in which similar property was placed in service, unless the taxpayer can establish that the property placed in service in the most recent year is still on hand. In that event, the taxpayer will be treated as having placed the returned property in service in the next most recent year.
§11-13AA-15. Interpretation and construction.
(a) No inference, implication or presumption of legislative construction or intent may be drawn or made by reason of the location or grouping of any particular section, provision or portion of this article; and no legal effect may be given to any descriptive matter or heading relating to any section, subsection or paragraph of this article.
(b) The provisions of this article shall be reasonably construed in order to effectuate the legislative intent recited in section two of this article.
§11-13AA-16. Tax credit review and accountability.
(a) Beginning on February 1, 2014, and every third year thereafter, the Tax Commissioner shall submit to the Governor, the President of the Senate and the Speaker of the House of Delegates a tax credit review and accountability report evaluating the cost effectiveness of the credit allowed by this article during the most recent three-year period for which information is available. The criteria to be evaluated shall include, but not be limited to, for each year of the three-year period:
(1) The numbers of taxpayers claiming the credit;
(2) The net number of new jobs created by all taxpayers claiming the credit;
(3) The cost of the credit;
(4) The cost of the credit per new job created; and
(5) Comparison of employment trends for an industry and for taxpayers within the industry that claim the credit.
(b) Taxpayers claiming the credit shall provide any information the Tax Commissioner may require to prepare the report: Provided, That the information provided is subject to the confidentiality and disclosure provisions of sections five-d and five-s, article ten of this chapter.
§11-13AA-17. Effective date.

The credit allowed by this article is allowed for qualified investment placed in service or use on or after July 1, 2010, subject to the rules contained in this section.
§11-13AA-18. Severability.
(a) If any provision of this article or the application thereof is for any reason adjudged by any court of competent jurisdiction to be invalid, the judgment may not affect, impair or invalidate the remainder of the article, but shall be confined in its operation to the provision thereof directly involved in the controversy in which the judgment shall have been rendered, and the applicability of the provision to other persons or circumstances may not be affected thereby.
(b) If any provision of this article or the application thereof is made invalid or inapplicable by reason of the repeal or any other invalidation of any statute therein addressed or referred to, such invalidation or inapplicability may not affect, impair or invalidate the remainder of the article, but shall be confined in its operation to the provision thereof directly involved with, pertaining to, addressing or referring to the statute, and the application of the provision with regard to other statutes or in other instances not affected by any such repealed or invalid statute may not be abrogated or diminished in any way.


NOTE: The purpose of this bill is to enact the West Virginia Economic Development Act of 2010 consisting of the Twenty-first Century Business Technologies Property Valuation Act and the Twenty- First Century Tax Credit Act, the purpose of which is to encourage the development and use of emerging technologies to create good jobs and grow West Virginia's economy.

Sections 11-6K-1 et seq. and sections 11-13AA-1 et seq. are new, therefore strike-throughs and underscoring have been omitted.
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