H. B. 4420
(By Delegates White, Kominar and Boggs)
[Introduced February 5, 2008; referred to the
Committee on Finance.]
A BILL to
amend and reenact §11-24-3a of the Code of West Virginia,
1931, as amended; and to amend said code by adding thereto a
new section, designated §11-24-4b, all relating to corporate
net income tax; terms defined; and taxes levied.
Be it enacted by the Legislature of West Virginia:
That §11-24-3a of the Code of West Virginia, 1931, as amended,
be amended and reenacted; and that said code be amended by adding
thereto a new section, designated §11-24-4b, all to read as
ARTICLE 24. CORPORATION NET INCOME TAX.
§11-24-3a. Specific terms defined.
For purposes of this article:
(1) Business income. -- The term "business income" means
income arising from transactions and activity in the regular course
of the taxpayer's trade or business and includes income from tangible and intangible property if the acquisition, management and
disposition of the property or the rendering of services in
connection therewith constitute integral parts of the taxpayer's
regular trade or business operations and includes all income which
is apportionable under the Constitution of the United States.
(2) Combined group means the group of all persons whose income
and apportionment factors are required to be taken into account
pursuant to subsection (a) or (b), section thirteen-a of this
article in determining the taxpayer's share of the net business
income or loss apportionable to this state.
(3) Commercial domicile. -- The term "commercial domicile"
means the principal place from which the trade or business of the
taxpayer is directed or managed: Provided, That the commercial
domicile of a financial organization, which is subject to
regulation as such, shall be at the place designated as its
principal office with its regulating authority.
(4) Compensation. -- The term "compensation" means wages,
salaries, commissions and any other form of remuneration paid to
employees for personal services.
(5) Corporation. -- "Corporation" means any corporation as
defined by the laws of this state or organization of any kind
treated as a corporation for tax purposes under the laws of this
state, wherever located, which if it were doing business in this
state would be a "taxpayer". The business conducted by a partnership which is directly or indirectly held by a corporation
shall be considered the business of the corporation to the extent
of the corporation's distributive share of the partnership income,
inclusive of guaranteed payments to the extent prescribed by
regulation. The term "corporation" includes a joint-stock company
and any association or other organization which is taxable as a
corporation under the federal income tax law.
(6) Delegate. -- The term "delegate" in the phrase "or his or
her delegate", when used in reference to the Tax Commissioner,
means any officer or employee of the state Tax Department duly
authorized by the Tax Commissioner directly, or indirectly by one
or more redelegations of authority, to perform the functions
mentioned or described in this article or regulations promulgated
(7) Domestic corporation. -- The term "domestic corporation"
means any corporation organized under the laws of West Virginia and
certain corporations organized under the laws of the State of
Virginia before the twentieth day of June, one thousand eight
hundred sixty-three. Every other corporation is a foreign
(8) Engaging in business. -- The term "engaging in business"
or "doing business" means any activity of a corporation which
enjoys the benefits and protection of government and laws in this
(9) Federal Form 1120. -- The term "Federal Form 1120" means
the annual federal income tax return of any corporation made
pursuant to the United States Internal Revenue Code of 1986, as
amended, or in successor provisions of the laws of the United
States, in respect to the federal taxable income of a corporation,
and filed with the federal Internal Revenue Service. In the case
of a corporation that elects to file a federal income tax return as
part of an affiliated group, but files as a separate corporation
under this article, then as to such corporation Federal Form 1120
means its pro forma Federal Form 1120.
(10) Fiduciary. -- The term "fiduciary" means, and includes,
a guardian, trustee, executor, administrator, receiver, conservator
or any person acting in any fiduciary capacity for any person.
(11) Financial organization. -- The term "financial
(A) A holding company or a subsidiary thereof. -- As used in
this section "holding company" means a corporation registered under
the federal Bank Holding Company Act of 1956 or registered as a
savings and loan holding company other than a diversified savings
and loan holding company (as defined in Section 408(a)(1)(F) of the
federal National Housing Act (12 U.S.C. §1730(a)(1)(F));
(B) A regulated financial corporation or a subsidiary thereof.
-- As used in this section "regulated financial corporation" means:
(1) An institution, the deposits, shares or accounts of which are insured under the Federal Deposit Insurance Act or by the
federal Savings and Loan Insurance Corporation;
(2) An institution that is a member of a federal home loan
(3) Any other bank or thrift institution incorporated or
organized under the laws of a state that is engaged in the business
of receiving deposits;
(4) A credit union incorporated and organized under the laws
of this state;
(5) A production credit association organized under 12 U.S.C.
(6) A corporation organized under 12 U.S.C. §611 through §631
(an Edge Act corporation); or
(7) A federal or state agency or branch of a foreign bank (as
defined in 12 U.S.C. §3101); or
(C) A corporation which derives more than fifty percent of its
gross business income from one or more of the following activities:
(1) Making, acquiring, selling or servicing loans or
extensions of credit. Loans and extensions of credit include:
(I) Secured or unsecured consumer loans;
(II) Installment obligations;
(III) Mortgages or other loans secured by real estate or
tangible personal property;
(IV) Credit card loans;
(V) Secured and unsecured commercial loans of any type; and
(VI) Loans arising in factoring.
(2) Leasing or acting as an agent, broker or advisor in
connection with leasing real and personal property that is the
economic equivalent of an extension of credit (as defined by the
Federal Reserve Board in 12 C.F.R. 225.25(b)(5)).
(3) Operating a credit card business.
(4) Rendering estate or trust services.
(5) Receiving, maintaining or otherwise handling deposits.
(6) Engaging in any other activity with an economic effect
comparable to those activities described in item (1), (2), (3), (4)
or (5) of this subparagraph.
(12) Fiscal year. -- The term "fiscal year" means an
accounting period of twelve months ending on any day other than the
last day of December and on the basis of which the taxpayer is
required to report for federal income tax purposes.
(13) Includes and including. -- The terms "includes" and
"including", when used in a definition contained in this article,
shall not be deemed to exclude other things otherwise within the
meaning of the term being defined.
(14) "Internal Revenue Code" means Title 26 of the United
States Code, as amended, without regard to application of federal
treaties unless expressly made applicable to states of the United
(15) Nonbusiness income. -- The term "nonbusiness income"
means all income other than business income.
(16) "Partnership" means a general or limited partnership, or
organization of any kind treated as a partnership for tax purposes
under the laws of this state.
(17) Person. -- The term "person" is to be deemed
interchangeable with the term "corporation" in this section. The
term "person" means any individual, firm, partnership, general
partner of a partnership, limited liability company, registered
limited liability partnership, foreign limited liability
partnership, association, corporation (whether or not the
corporation is, or would be if doing business in this state,
subject to the tax imposed by this article), company, syndicate,
estate, trust, business trust, trustee, trustee in bankruptcy,
receiver, executor, administrator, assignee or organization of any
(18) Pro forma return. -- The term "pro forma return" when
used in this article means the return which the taxpayer would have
filed with the Internal Revenue Service had it not elected to file
federally as part of an affiliated group.
(19) Public utility. -- The term "public utility" means any
business activity to which the jurisdiction of the Public Service
Commission of West Virginia extends under section one, article two,
chapter twenty-four of this code.
(20) Qualified real estate investment trust. -- The term
"Qualified Real Estate Investment Trust" means any real estate
invest trust with less than fifty percent of the voting power or
value of the beneficial interests or shares of which are owned or
controlled, directly or indirectly, constructively or otherwise, by
a single entity that is:
(A) Subject to the provisions of subchapter C of chapter 1 of
subtitle A of title 26 of the United States Code, as amended;
(B) Not exempt from federal income tax pursuant to the
provisions of section 501 of the Internal Revenue Code of 1986, as
(C) Not a real estate invest trust as defined in this section
or a qualified real estate invest trust subsidiary under section
856(i) of the Internal Revenue Code of 1986, as amended.
(21) Qualified regulated investment company. -- The term
"Qualified Regulated Investment Company" means any regulated
company with less than 50 percent of the voting power or value of
the beneficial interest or shares of which are owned or controlled,
directly or indirectly, constructively or otherwise, by a single
entity that is:
(A) Subject to the provision of subchapter C of chapter 1 of
subtitle A of title 26 of the United States Code, as amended; and
(B) Not exempt from federal income tax pursuant to the
provision of section 501 of the Internal Revenue Code of 1986, as amended; and
(C) Not a regulated investment company as defined in section
3 of the Investment Company Act of 1940, as amended, 15 U.S.C.
(22) Real estate investment trusts. -- The term "Real Estate
Investment Trust" has the meaning ascribed to such term in section
856 of the Internal Revenue Code of 1986, as amended.
(23) Regulated investment company. -- The term "Regulated
Investment Company" has the same meaning as ascribed to such term
in section 851 of the Internal Revenue Code of 1986, as amended.
(20)(24) Sales. -- The term "sales" means all gross receipts
of the taxpayer that are "business income", as defined in this
(21)(25) State. -- The term "state" means any state of the
United States, the District of Columbia, the Commonwealth of Puerto
Rico, any territory or possession of the United States and any
foreign country or political subdivision thereof.
(22)(26) Taxable year, tax year. -- The term "taxable year"
or "tax year" means the taxable year for which the taxable income
of the taxpayer is computed under the federal income tax law.
(23)(27) Tax. -- The term "tax" includes, within its meaning,
interest and additions to tax, unless the intention to give it a
more limited meaning is disclosed by the context.
(24)(28) Tax Commissioner. -- The term "Tax Commissioner" means the Tax Commissioner of the State of West Virginia or his or
(25)(29) "Tax haven" means a jurisdiction that, for a
particular tax year in question: (A) Is identified by the
Organization for Economic Cooperation and Development as a tax
haven or as having a harmful preferential tax regime; or (B) a
jurisdiction that has no, or nominal, effective tax on the relevant
income and: (i) That has laws or practices that prevent effective
exchange of information for tax purposes with other governments
regarding taxpayers subject to, or benefitting from, the tax
regime; or (ii) that lacks transparency. For purposes of this
definition, a tax regime lacks transparency if the details of
legislative, legal or administrative provisions are not open to
public scrutiny and apparent, or are not consistently applied among
similarly situated taxpayers; (iii) facilitates the establishment
of foreign-owned entities without the need for a local substantive
presence or prohibits these entities from having any commercial
impact on the local economy; (iv) explicitly or implicitly excludes
the jurisdiction's resident taxpayers from taking advantage of the
tax regime's benefits or prohibits enterprises that benefit from
the regime from operating in the jurisdiction's domestic market; or
(v) has created a tax regime which is favorable for tax avoidance,
based upon an overall assessment of relevant factors, including
whether the jurisdiction has a significant untaxed offshore financial or other services sector relative to its overall economy.
For purposes of this definition, the phrase "tax regime" means a
set or system of rules, laws, regulations or practices by which
taxes are imposed on any person, corporation or entity, or on any
income, property, incident, indicia or activity pursuant to
(26)(30) Taxpayer. -- The term "taxpayer" means any person
subject to the tax imposed by this article.
(27)(31) This code. -- The term "this code" means the Code of
West Virginia, one thousand nine hundred thirty-one, as amended.
(28)(32) This State. -- The term "this state" means the State
of West Virginia.
(29)(33) "United States" means the United States of America
and includes all of the states of the United States, the District
of Columbia and United States territories and possessions.
(30)(34) "Unitary business" means a single economic
enterprise that is made up either of separate parts of a single
business entity or of a commonly controlled group of business
entities that are sufficiently interdependent, integrated and
interrelated through their activities so as to provide a synergy
and mutual benefit that produces a sharing or exchange of value
among them and a significant flow of value to the separate parts.
(31)(35) West Virginia taxable income. -- The term "West
Virginia taxable income" means the taxable income of a corporation as defined by the laws of the United States for federal income tax
purposes, adjusted, as provided in this article: Provided, That in
the case of a corporation having income from business activity
which is taxable without this state, its "West Virginia taxable
income" shall be such portion of its taxable income as so defined
and adjusted as is allocated or apportioned to this state under the
provisions of this article.
§11-24-4b. Regulated investment companies and real estate
investment trusts subject to tax.
(a) The tax imposed by this article shall be imposed upon
regulated investment companies as defined by this article, and
shall be computed only upon that part of the net income of the
regulated investment company which is subject to federal income tax
as provided in sections 852 and 4982 of the Internal Revenue Code
of 1986, as amended, except as otherwise provided in this section.
(b) The dividend paid deduction otherwise allowed by a federal
law in computing net income of a regulated investment company that
is subject to federal income tax shall be added back in computing
the tax imposed by this article unless the regulated invested
company is a qualified regulated investment company, as defined in
(c) The tax imposed by this article shall be imposed upon real
estate investment trusts and shall be computed only upon that part
of the net income of the real estate investment trust which is subject to federal income tax as provided in sections 857 and 858
of the Internal Revenue Code of 1986, as amended, except as
otherwise provided in this section.
(d) The dividend paid deduction otherwise allowed by federal
law in computing net income of real estate investment trusts that
is subject to federal income tax shall be added back in computing
the tax imposed by this article unless the real estate investment
trust is either:
(1) Publicly traded on an established securities market; or,
(2) A qualified real estate investment trust, as defined in
NOTE: The purpose of this bill is to impose corporate net
income tax on certain regulated investment companies and real
estate investment trusts used as tax sheltering vehicles.
Strike-throughs indicate language that would be stricken from
the present law, and underscoring indicates new language that would