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ENROLLED
Senate Bill No. 643
(By Senators Helmick, Plymale and Minard)
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[Passed April 9, 2005; in effect ninety days from passage.]
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AN ACT to amend and reenact §11-21-18 and §11-21-30 of the Code of
West Virginia, 1931, as amended, all relating generally to
personal income tax; providing that in determining West
Virginia taxable income of electing small business trusts,
income attributable to S corporation stock held by trust shall
be included; authorizing equitable relief when statutory
computation of tax for nonresident individuals, estates and
trusts and part-year resident individuals produces result that
is out of all proportion to amount of taxpayer's West Virginia
source income; correcting erroneous cross-reference to code
section concerning part-year residents; and providing for
effective date.
Be it enacted by the Legislature of West Virginia:
That §11-21-18 and §11-21-30 of the Code of West Virginia,
1931, as amended, be amended and reenacted, all to read as follows:
ARTICLE 21. PERSONAL INCOME TAX.
§11-21-18. West Virginia taxable income of resident estate or
trust.
The West Virginia taxable income of a resident estate or trust
means its federal taxable income for the taxable year as defined in
the laws of the United States and section nine of this article for
the taxable year, with the following modifications:
(1) There shall be subtracted six hundred dollars as the West
Virginia personal exemption of the estate or trust, and there shall
be added the amount of its federal deduction for a personal
exemption.
(2) There shall be added or subtracted, as the case may be,
the share of the estate or trust in the West Virginia fiduciary
adjustment determined under section nineteen of this article.
(3) There shall be added to federal adjusted gross income,
unless already included therein, the amount of a lump sum
distribution for which the taxpayer has elected under Section
402(e) of the Internal Revenue Code of 1986, as amended, to be
separately taxed for federal income tax purposes: Provided, That
the provisions of this subdivision shall first be effective for
taxable years beginning after the thirty-first day of December, one
thousand nine hundred ninety.
(4) There shall be added by an electing small business trust
as defined in Section 1361(e) of the Internal Revenue Code of 1986, as amended, which is a shareholder in one or more electing small
business corporations, the portion of the trust's income
attributable to electing small business corporation stock held by
the trust that is not included in the trust's federal taxable
income pursuant to Section 641 of the Internal Revenue Code of
1986, as amended.
(b) The amendments to this section enacted in the regular
session of the Legislature in two thousand five are effective for
tax years beginning on or after the first day of January, two
thousand five.
PART III. NONRESIDENT AND PART-YEAR RESIDENTS.
§11-21-30. Computation of tax on income of nonresidents and
part-year residents.
(a) Computation of tax
. -- For taxable years beginning after
the thirty-first day of December, one thousand nine hundred
ninety-one, the tax due under this article on taxable income
derived from sources in this state by a nonresident individual,
estate, or trust or by a part-year resident individual shall be
calculated as provided in this section.
(1) Taxpayer shall first calculate tax liability under this
article as if taxpayer, whether an individual, estate or trust,
were a resident of this state for the entire taxable year. When
determining tentative tax liability under this subdivision, a
nonresident shall be allowed the same deductions, exemptions and credits that would be allowable if taxpayer were a resident
individual, estate or trust, as the case may be, for the entire
taxable year, except that no credit shall be allowed under section
twenty of this article.
(2) The amount of tentative tax determined under subdivision
(1) of this subsection shall then be multiplied by a fraction the
numerator of which is the taxpayer's West Virginia source income,
determined in accordance with Part III of this article for the
taxable year, and the denominator of which is such taxpayer's
"federal adjusted gross income" for the taxable year as defined in
section nine of this article: Provided, That if this computation
produces a result that is out of all appropriate proportion to the
amount of taxpayer's West Virginia source income, the tax
commissioner may provide such equitable relief as the tax
commissioner, in his or her discretion, considers to be appropriate
under the circumstances.
(b) Special rules for estates and trusts
. -- For purposes of
subdivision (1), subsection (a) of this section:
(1) The "federal adjusted gross income" of an estate or trust
shall be determined as if such estate or trust were an individual;
and
(2) In the case of a trust, "federal adjusted gross income"
shall be its "federal adjusted gross income" for the taxable year
increased by the amount of any includable gain, reduced by any deductions properly allocable thereto, upon which the tax is
imposed for the taxable year pursuant to Section 644 of the
Internal Revenue Code.
(3) When an electing small business trust as defined in
Section 1361(e)(1) of the Internal Revenue Code of 1986, as
amended, is a shareholder in one or more electing small business
corporations, the portion of the trust's income attributable to
electing small business corporation stock held by the trust that is
not included in the trust's federal taxable income pursuant to
Section 641(c) of that code shall be included in West Virginia
taxable income of the trust.
(c) Special rules for part-year residents
. --
(1) For purposes of subdivision (1), subsection (a) of this
section, the "federal adjusted gross income" of a part-year
resident individual shall be taxpayer's federal adjusted gross
income for the taxable year, as defined in section nine of this
article, increased or decreased, as the case may be, by the items
accrued under subdivision (1), subsection (b), section forty-four
of this article, to the extent such items are not otherwise
included in federal adjusted gross income for the taxable year, and
decreased or increased, as the case may be by the items accrued
under subdivision (2) of said subsection, to the extent such items
are included in federal adjusted gross income for the taxable year;
and
(2) In computing the tax due as if taxpayer were a resident of
this state for the entire tax year, West Virginia adjusted gross
income shall include the accruals specified in subdivision (1) of
this subsection, with the applicable modifications described in
section forty-four of this article.
(d) Definitions
. --
(1) "Nonresident estate" means an estate of a decedent who was
not a resident of this state at the time of his or her death.
(2) "Nonresident trust" means a trust which is not a resident
trust, as defined in section seven of this article.
(3) "Part-year resident individual" means an individual who is
not a resident or nonresident of this state for the entire taxable
year.
(e) Effective date
. -- (1) The provisions of this section
shall apply to taxable years beginning after the thirty-first day
of December, one thousand nine hundred ninety-one . As to taxable
years beginning prior to that date, the provisions of this article
as then in effect shall apply and be controlling, and for that
purpose, prior law is fully and completely preserved.
(2) The amendments to this section enacted in the regular
session of the Legislature in two thousand five are effective for
tax years beginning on or after the first day of January, two
thousand five.