Source: http://wvlegislature.gov/Bill_Status/bills_text.cfm?billdoc=HB3144%20ENG.htm&yr=2019&sesstype=RS&billtype=B&houseorig=H&i=3144
Timestamp: 2020-08-08 15:31:14
Document Index: 158470807

Matched Legal Cases: ['§11', '§11', '§11', '§11', '§11', '§11', '§11', '§11', '§11', '§11', '§11', '§11', '§11', '§11', '§11', '§11', '§11', '§11', '§11', '§11', '§11', '§11', '§11', '§11', '§11', '§11', '§11', '§11', '§11', '§11', '§11', '§11', '§11', '§11', '§11', '§11', '§11', '§11', '§11', '§11', '§11', '§11', '§11', '§11', '§11', '§11', '§11', '§11', '§29', '§11']

Engrossed Version House Bill 3144 History
A BILL to amend the Code of West Virginia, 1931, as amended, by adding thereto a new article, designated §11-13EE-1, §11-13EE-2, §11-13EE-3, §11-13EE-4, §11-13EE-5, §11-13EE-6, §11-13EE-7, §11-13EE-8, §11-13EE-9, §11-13EE-10, §11-13EE-11, §11-13EE-12, §11-13EE-13, §11-13EE-14, §11-13EE-15, §11-13EE-16 and §11-13EE-17, all relating generally to North Central Appalachian Coal Severance Tax Rebate; providing short title, findings and purpose; defining terms; providing for rebate of severance tax when capital investment made in new machinery and equipment directly used in severance of coal, or in coal preparation and processing plants; providing rules and procedures for claiming rebate and transfer to successors; imposing recapture tax in certain circumstance; providing rules for interpretation and construction; requiring periodic rebate reports; authorizing rulemaking; and providing for severability and effective date.
ARTICLE 13EE. NORTH CENTRAL APPALACHIAN COAL SEVERANCE TAX REBATE.
This article may be cited as the "North Central Appalachian Coal Severance Tax Rebate Act.”
§11-13EE-2. Findings and purpose.
(3) “Capital investment in new machinery and equipment” means:
(A) Tangible personal property in the form of machinery and equipment that is purchased on or after the effective date of this article and placed in service for direct use in the production of coal, when the original or first use of the machinery or equipment commences in this State on or after the effective date of this article; and
(B) Tangible personal property in the form of machinery and equipment that is leased by the taxpayer and placed in service for direct use in the production of coal by the taxpayer on or after the effective date of this article, if the original or first use of the machinery or equipment commences in this State, with the taxpayer, on or after the effective date of this article and the machinery or equipment is depreciable, or amortizable, for federal income tax purposes and has a useful life of 5 or more years for federal income tax purposes.
(i) Activities conducted on the surface of lands for the removal of coal, or, subject to the requirements of section fourteen of this article, surface operations and surface impacts incident to an underground coal mine, including the drainage and discharge from the mine. The activities include: Excavation for the purpose of obtaining coal, including, but not limited to, common methods as contour, strip, auger, mountaintop removal, box cut, open pit and area mining; the uses of explosives and blasting; reclamation; in situ distillation or retorting, leaching or other chemical or physical processing; the cleaning, concentrating or other processing or preparation and loading of coal for commercial purposes at or near the mine site; and
(ii) The areas upon which the above activities occur or where the activities disturb the natural land surface. The areas also include any adjacent land, the use of which is incidental to the activities; all lands affected by the construction of new roads or the improvement or use of existing roads to gain access to the site of the activities and for haulage; and excavations, workings, impoundments, dams, ventilation shafts, entryways, refuse banks, dumps, stockpiles, overburden piles, spoil banks, culm banks, tailings, holes or depressions, repair areas, storage areas, processing areas, shipping areas and other areas upon which are sited structures, facilities, or other property or materials on the surface, resulting from or incident to the activities: Provided, That the activities do not include the extraction of coal incidental to the extraction of other minerals where coal does not exceed sixteen and two-thirds percent of the tonnage of minerals removed for purposes of commercial use or sale, or coal prospecting. Surface mining does not include any of the following:
(B) For a partnership, association, trust or other entity other than a limited liability company, more than 50 percent, ownership, directly or indirectly, of the capital, profits, or beneficial interest in the partnership, association, trust, or other entity;
(12) “Delegate” used in the phrase "or his 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.
(A) Uses of tangible personal property which constitute direct use or consumption in the production of coal include only:
(i) New machinery and equipment that is depreciable, or amortizable, for federal income tax purposes, that has a useful life of 5 or more years for federal income tax, and that is directly used in the production of coal in this state;
(iv) Safety equipment and apparatus directly used the production of coal, or to secure the safety of mine personnel is direct use in the production of coal;
(B) Uses of tangible personal property which do not constitute direct use or consumption in the production of coal include, but are not limited to:
(iii) Personal comfort of personnel: Provided, That safety equipment and apparatus directly used in the production of coal or to secure the safety of mine personnel is direct use in the production of coal when the tangible personal property is depreciable, or amortizable, for federal income tax purposes and has a useful life of 5 or more years for federal income tax purposes when it is placed in service or use;
(vi) Measuring or determining weight, and ash content, water content and other physical and, chemical characteristics of the coal after production;
(A) Any person who pays the tax imposed by §11-13A-3 of this code on the privilege of producing coal for sale, profit or commercial use for at least 2 years before the capital investment in machinery and equipment is placed in service or use in this state; or
(B) A taxpayer that has experienced a change in business composition through merger, acquisition, split-up, spin-off or other ownership changes or changes in the form of the business organization from limited liability company to C corporation, or partnership, or from one form of business organization to a different form of business organization, may constitute an eligible taxpayer if the entity currently operating in this state was operating in a different form of business organization in this state at least 2 years before the capital investment in new machinery and equipment is placed in service or use in this state. In the case of business composition change through merger, acquisition, split-up, spin-off or other ownership changes the current business may constitute an eligible taxpayer if at least 50 percent of the business assets of such component were actively and directly used in coal production activity in this state for such two-year period. If less than 50 percent of the assets of the current entity were not actively and directly used in coal production activity in this state for such two-year period, then the current entity resulting from a business composition change through merger, acquisition, split-up, spin-off or other ownership, shall not constitute an eligible taxpayer.
(19) “Production of coal” means privilege of severing, extracting, reducing to possession and producing coal for sale, profit or commercial use and includes the processing of coal at the coal preparation and processing plant.
(20) “Property” means tangible personal property and is limited to new machinery and equipment that is depreciable or amortizable for federal income tax purposes and that has a useful life of 5 or more years for federal income tax purposes.
(A) Included property. -- Except as provided in subparagraph (B), the term "property purchased or leased for business expansion" means tangible personal property, but only if the tangible personal property was purchased, or leased and placed in service or use by the taxpayer, for use in West Virginia. This term includes only:
(i) Tangible personal property placed in service or use by the taxpayer on or after the effective date of this article, 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, or its equity owners, under §11-21-1 et seq. or §11-24-1 et seq. of this code, and which has a useful economic life at the time the property is placed in service or use in this state, of 5 or more years.
(ii) Tangible personal property acquired by written lease having a primary term of 5 years or more, that is depreciable or amortizable by the lessor, or lessee, for federal income tax purposes and that has a useful life of 5 or more years for federal income purposes when it is placed in service or use, and when the lease commences and was executed by the parties thereto on or after the effective date of this article, if used as a component part of a new or expanded coal mining operation in this state shall be included within this definition.
(i) Machinery and equipment owned or leased by the taxpayer and for which credit was taken or is claimed under any other article of this chapter for capital investment in the new machinery and equipment;
(ii) 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;
(vi) Machinery and equipment that is primarily used outside this state;
(vii) Machinery and equipment that is acquired incident to the purchase of the stock or assets of the seller; and
(viii) Used machinery and equipment.
(C) Purchase date. – New machinery and equipment shall be deemed to have been purchased prior to a specified date only if:
(i) The machinery or equipment was owned by the taxpayer prior to the effective date of this article or was acquired by the taxpayer pursuant to a binding purchase contract which was in effect prior to the effective date of this article; or
(22) “Purchase” means any acquisition of new machinery or equipment, but only if:
(A) The machinery or equipment 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, as defined in §11-24-3 of this code;
(B) The machinery or equipment is not acquired by one component member of a controlled group from another component member of the same controlled group; and
(C) The basis of the machinery or equipment 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 machinery or equipment in the hands of the person from whom it was acquired; or
(24) “Qualified investment” means capital investment in new machinery and equipment directly used in the production of coal in this state that is depreciable, or amortizable, for federal income tax purposes and has a useful life for federal income tax purposes of 5 or more years when it is placed in service or use in this state.
(25) “Rebate” means the amount of rebate allowable under §11-13EE-4 of this article.
For purposes of this subdivision, the term "control," with respect to a corporation, means ownership, directly or indirectly, of stock possessing 50 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 50 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, other than paragraph (3) of that section.
(28) “Tangible personal property” means and is limited to new machinery and equipment that is depreciable, or amortizable, for federal income tax purposes and that has a useful life of 5 or more years for federal income tax purposes when it is placed in service or use in this state.
(29) “Taxpayer” means any person exercising the privilege of severing, extracting, reducing to possession and producing coal for sale, profit or commercial use coal, which privilege is taxable under §11-13A-3 of this code.
§11-13EE-4. Rebate allowable.
(a) Rebate allowable. -- Eligible taxpayers shall be allowed a rebate for a portion of state severance taxes imposed by §11-13A-3 of this code on the privilege of severing, extracting, reducing to possession and producing coal for sale, profit or commercial use that is attributable to the increase in the production of coal that is attributable to and the consequence of the taxpayer's capital investment in new machinery and equipment used at the coal mine, or coal preparation and processing facility. The amount of this rebate shall be determined and applied as hereinafter provided in this article.
(b) Amount of rebate. -- The amount of rebate allowable is determined by multiplying the amount of the taxpayer's capital investment in new machinery and equipment directly used in the production of coal at a coal mining operation in this state by 35 percent. The product of this computation establishes the maximum amount of rebate allowable under this article for the capital investment in new machinery and equipment.
(c) Application of rebate amount. -- The amount of rebate allowable is determined by applying the rebate amount determined in subsection (b) of this section against 80 percent of the state portion of the severance tax paid on the privilege of severing, extracting, reducing to possession and producing coal for sale, profit or commercial use that is directly attributable to the increased production of coal at the mine due to taxpayer’s capital investment in new machinery and equipment at the mine or coal processing and preparation plant.
(d) The amount of severance tax attributable to the increase in coal production at a mine due to the capital investment in new machinery and equipment shall be determined by comparing (1) the state portion of the severance tax due under §11-13A-3 of this code on coal produced from the mine during calendar year 2018, before allowance of any tax credits, except as provided in subsection (e) of this section (d), (2) with the state severance tax due on coal produced at the mine during the then current calendar year in which the capital investment in new mining machinery and equipment is placed in service or use, before allowance for any tax credits. When the amount in (2) is greater than the amount in (1), the difference is the amount of state severance tax due to the increase in coal production at the mine that is attributable to the capital investment in new machinery and equipment: Provided, That when the producer of the coal operates more than one mine in this state, or is a member of a controlled or affiliated group that operates one or more coal mines in this state, no credit shall be allowed unless the total coal production from all mines operated by the taxpayer or by members of the affiliated or controlled group in this state has increased by at least the increase in production at the mine at which the capital investment in new machinery and equipment was made: Provided, however, That in no case shall the severance tax attributable to any mine other than the specific mine at which capital investment in new machinery and equipment is directly used in a coal mining operation has been placed in service or use be offset by this rebate.
(e) When the eligible taxpayer is a new business that has produced coal in this state for 2 years before making the capital investment in new machinery and equipment, then, for purposes of item (1) in subsection (d), the base shall be the amount of state severance tax due under §11-13A-3 of this code on coal produced in this state during the second year of this two-year period.
(f) When the operator of the coal mine at which capital investment in new machinery and equipment was made operates one or more other coal mines in this state, the operator may not cease production of coal, or reduce the production of coal, at one or more of those mines during the tax years for which rebate is allowed under this article. The Tax Commissioner shall promulgate a legislative rule providing exceptions to this subsection.
(g) When the operator of the coal mine at which capital investment in new machinery and equipment was made is a member of a controlled or affiliated group that operates one or more other coal mines in this state, then the controlled or affiliated group, as the case may be, may not cease production of coal, or reduce the production of coal, at one or more of those mines during the tax years for which rebate is allowed under this article. The Tax Commissioner shall promulgate a legislative rule providing exceptions to this subsection.
(h) No rebate shall be allowed under this article when credit is claimed under any other article of this chapter for capital investment in the new machinery and equipment. No credit shall be allowed under any other article of this chapter when rebate is allowed under this article for the capital investment in new machinery and equipment.
§11-13EE-5. Information required to determine amount of rebate allowable.
§11-13EE-6. Claim for rebate.
(a) After the severance taxes due for the taxable year are paid, a taxpayer may file a claim under this article for rebate of up to 80 percent of the state portion of the additional severance taxes paid under §11-13A-3 of this code that are directly attributable to taxpayer’s capital investment in new machinery and equipment placed in service or use during that taxable year as set forth in §11-13EE-4.
(b) When the amount of rebate claimed exceeds 80 percent of the additional state severance tax paid as provided in subsection (a) of this section, the unused portion of the rebate amount may be carried forward and refunded by the Tax Commissioner after severance taxes due in subsequent years are paid: Provided, That the carryforward period may not exceed 10 years from the date the capital investment in new machinery and equipment is placed in service or use in this state.
§11-13EE-7. Suspension of payment of rebate.
(a) No rebate may be paid under this article when the taxpayer, or any member of the taxpayer’s combined or affiliated group, as the case may be, is delinquent in the payment of severance taxes imposed pursuant to §11-13A-3 of this code, and any local, state or federal tax or fee, until such time as the delinquency is cured.
(b) For purposes of this section, a taxpayer is not delinquent if the taxpayer is contesting an assessment in the Office of Tax Appeals or in any court of this state, or of the appropriate federal agency or court, or is complying with the terms of any payment plan agreement.
§11-13EE-8. Burden of proof; application required; failure to make timely application.
(a) Burden of proof. -- 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.
(1) Notwithstanding any provision of this article to the contrary, no rebate shall be paid under this article for any capital investment in new machinery and equipment placed in service or use until the person asserting a claim for the allowance of rebate under this article makes written application to the Tax Commissioner for allowance of rebate as provided in this section.
(2) An application for rebate shall be filed, in the form prescribed by the Tax Commissioner, no later than the last day for filing the severance tax return, determined by including any authorized extension of time for filing the return, for the taxable year in which the machinery and equipment to which the rebate relates is placed in service or use and all information required by the form is provided.
(3) A separate application for rebate is required for each taxable year during which the taxpayer places new machinery and equipment in service or use in a mine or coal preparation and processing facility in this state.
§11-13EE-9. 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 investment property:
(6) The date it was disposed of or otherwise ceased to be qualified investment property.
§11-13EE-10. Failure to keep records of investment credit property.
(1) A taxpayer is treated as having disposed of, during the taxable year, any machinery and equipment that the taxpayer cannot establish was still on hand, in this state, at the end of that year.
(2) If a taxpayer cannot establish when capital investment in new machinery and equipment property was reported for purposes of claiming this credit during the taxable year the machinery or equipment was placed in service or use, the taxpayer is treated as having placed it in service or use in the most recent prior taxable year in which similar machinery and equipment was placed in service or use, unless the taxpayer can establish that the machinery and equipment placed in service or use in the most recent taxable year is still on hand. In that event, the taxpayer will be treated as having placed the returned machinery and equipment in service or use in the next most recent taxable year.
§11-13EE-11. Transfer of qualified investment property to successors.
(a) Mere change in form of business. – Machinery and equipment may not be treated as disposed of under §11-13EE-12 of this article, by reason of a mere change in the form of conducting the business as long as the machinery and equipment 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 rebate amount of credit still available with respect to the machinery and equipment transferred, and the transferor business may not be required to redetermine the amount of rebate allowed in earlier years.
(b) Transfer or sale to successor. – Machinery and equipment is not treated as disposed of under §11-13EE-12 of this article by reason of any transfer or sale to a successor business which continues to operate machinery and equipment at the mine in this state at which the machinery and equipment was first placed in service or use. Upon transfer or sale, the successor shall acquire the amount of rebate, if any, that remains available under this article, and the transferor business is not required to redetermine the amount of rebate allowed in earlier years.
§11-13EE-12. Recapture of rebate; recapture tax imposed.
(1) Any person who places machinery and equipment in service or use for purposes of this credit and who fails to use the machinery and equipment for at least 5 years in the production of coal in this state shall pay the recapture tax imposed by subsection (b) of this section.
(2) This section does not apply when §11-13EE-11 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 machinery and equipment, are jointly and severally liable for payment of any recapture tax subsequently imposed under this section with respect to the machinery and equipment used to qualify for rebate under this article.
(b) Recapture tax imposed. -- The recapture tax imposed by this subsection is the amount determined as follows. If the taxpayer prematurely removes machinery and equipment placed in service (when considered as a class) from economic service in the taxpayer's coal production activity in this state, the taxpayer shall recapture the amount of rebate claimed under this article for the taxable year, and all preceding taxable years, attributable to the machinery and equipment which has been prematurely removed from service. The amount of tax due under this subsection is an amount equal to the amount of rebate that is recaptured under this subsection.
(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 §11-13A-1 et seq. of this code. 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 tax is imposed under this section.
§11-13EE-13. Interpretation and construction.
(b) The provisions of this article shall be reasonably construed in order to effectuate the legislative intent recited in §11-13EE-2 of this article.
§11-13EE-14. Rebate report.
(a) The Tax Commissioner shall provide to the Joint Committee on Government and Finance by July 1, 2022, and on the first day of July of each year thereafter, a report detailing the amount of rebate claimed pursuant to this article. The report is to include the amount of rebate claimed against the severance tax imposed pursuant to §11-13A-3 of this code.
(c) The Tax Commissioner shall also identify any issues the Tax Commissioner has in the administration and enforcement of this rebate and make suggestions the Commissioner may have for improving the credit or the administration of the rebate.
§11-13EE-15. Rules.
The Tax Commissioner may promulgate such interpretive, legislative and procedural rules as the Commissioner deems to be useful or necessary to carry out the purpose of this article and to implement the intent of the Legislature. The tax commissioner may promulgate emergency rules if they are filed in the West Virginia Register before January 1, 2020. All rules shall be promulgated in accordance with the provisions of §29A-3-1 et seq. of this code.
§11-13EE-16. Severability.
The rebate allowed by this article is allowed for capital investment in new machinery and equipment placed in service or use in this state on or after the effective date of this article.
NOTE: The purpose of this bill is to establish the North Central Appalachian Coal Tax Rebate, which would be allowed for capital investment in new machinery and equipment directly used in severing coal for sale, profit or commercial use and coal preparation and processing facilities placed in service or use on or after the effective date of this article. The rebate amount would be 35% of the cost of the new machinery and equipment. The rebate amount is limited to 80% of the State portion of the severance taxes attributable to the additional coal produced as a result of the new machinery and equipment. Rules are provided to protect the existing severance tax base attributable to the production of coal.