West Virginia Code of State Rules › Agency 110 - Tax › Title 110 - LEGISLATIVE RULE STATE TAX DEPARTMENT › Series 110-13KK - West Virginia Tax Credit for Federal Excise Tax Imposed Upon Small Arms and Ammunition Manufacturers › Section 110-13KK-2 - Definitions

Current through Register Vol. XLI, No. 28, July 12, 2024
2.1. General Rule.
				-- Unless a specific definition is provided in section 2.2 of this section
				heading, or the context in which the term is used clearly requires a different
				meaning, the terms used in this rule have the definitions provided under W. Va.
				Code §
									11-13KK-1,
et seq
., §
									11-10-1,
et seq
., §
									11-21-1,
et seq
., and § 11-24-1,
et
				seq
.
2.2. Terms defined.
2.2.1. "Affiliated group" means any
				affiliated group within the meaning of section 1504(a) of the Internal Revenue
				Code, or any similar group defined under a similar provision of state, local,
				or foreign law, except that section 1504 of the Internal Revenue Code shall be
				applied by substituting "more than 50 percent" for "at least 80 percent" each
				place it appears in that section.
2.2.2. "Business" means small arms or
				ammunition manufacturing business activity, which is or may be classified under
				the North American Industry Classification System with a six-digit code for a
				product produced at a facility under code numbers 332992 or 332994 as they are
				defined on January 1, 2021, which is engaged in by any person in this state
				that is taxable under W. Va. Code §
										11-21-1,
et seq
., or § 11-24-1,
et seq
.
2.2.3. "Business expansion" means capital
				investment in a new or expanded small arms or ammunition manufacturing facility
				in this state, which is or may be classified under the North American Industry
				Classification System with a six-digit code for a product produced at a
				facility under code numbers 332992 or 332994 as they are defined on January 1,
				2021.
2.2.4. "Commissioner" or "Tax
				Commissioner" are used interchangeably in this rule and mean the Tax
				Commissioner of the State of West Virginia, or his or her designee.
2.2.5. "Controlled group of corporations"
				means a controlled group of corporations as defined in section 1563(a) of the
				Internal Revenue Code.
2.2.6.
				"Corporation" means any corporation, joint-stock company, association, or other
				entity treated as a corporation for federal income tax purposes, 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.
2.2.7. "Designee" in
				the phrase "his or her designee," when used in reference to the Tax
				Commissioner, means any officer or employee of the State Tax Department duly
				authorized by the Commissioner directly, or indirectly by one or more
				redelegations of authority, to perform the functions mentioned or described in
				this rule.
2.2.8. "Eligible
				taxpayer" means any person who makes a qualified investment in a new or
				expanded small arms and ammunition manufacturing facility located in this state
				and who is subject to any of the taxes imposed by W. Va. Code §
										11-21-1,
et seq
. or § 11-24-1,
et seq
.
2.2.9. "Expanded facility" means any small
				arms and ammunition manufacturing 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, 2021, but only to the extent of the taxpayer's qualified investment in
				the improvements or additions.
2.2.10. "Federal excise tax" means all excise
				taxes paid to the government of the United States under section 4181 of Title
				26 of the Internal Revenue Code imposed upon manufacturers, producers, or
				importers for the sale of pistols, revolvers, firearms (other than pistols and
				revolvers), shells and cartridges.
2.2.11. "Includes" and "including," when used
				in a definition contained in this rule, shall not be considered to exclude
				other things otherwise within the meaning of the term defined.
2.2.12. "Leased property" does not include
				property that 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.
2.2.13. "New small arms
				and ammunition manufacturing facility" means a business facility which
				satisfies all the following requirements:
2.2.13.a. The facility is employed by the
				taxpayer in the conduct of a small arms and ammunition manufacturing activity,
				the net income of which is or would be taxable under W. Va. Code §§
											11-21-1,
et seq
., or 11-24-1,
et seq
. The facility is
				not considered a new small arms and ammunition manufacturing 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; and
2.2.13.b. The facility is purchased by, or
				leased to, the taxpayer on or after July 1, 2021; and
2.2.13.c. The facility was not purchased or
				leased by the taxpayer from a related person. The 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; and
2.2.13.d. The facility was not in service or
				use during the 90 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.
2.2.14. "New
				property" means:
2.2.14.a. Property, the
				construction, reconstruction, or erection of which is completed on or after
				July 1, 2021, and placed in service or use after that date; and
2.2.14.b. Property leased or acquired by the
				taxpayer that is placed in service or use in this State on or after July 1,
				2021, if the original use of the property commences with the taxpayer and
				commences after that date.
2.2.15. "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.
2.2.16.
				"Partnership" includes a syndicate, group, pool, joint venture, or other
				unincorporated organization through or by means of which any business,
				financial operation, or venture is carried on, which is treated as a
				partnership for federal income tax purposes, and that is not a trust or estate,
				a corporation, or a sole proprietorship.
2.2.17. "Partner" includes a member of a
				partnership as defined in this rule.
2.2.18. "Person" includes any natural person,
				corporation, or partnership.
2.2.19. "Property purchased or leased for
				business expansion" shall be treated as follows for purposes of this credit.
2.2.19.a. Included property. -- Except as
				provided in subdivision b of this subsection, 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 or expanded small arms and ammunition
				manufacturing facility as defined in this section heading, which is located
				within the State of West Virginia. This term includes only:
2.2.19.a.1. Real property and improvements
				thereto having a useful life of four or more years, placed in service or use on
				or after July 1, 2021, by the taxpayer.
2.2.19.a.2. Real property and improvements
				thereto acquired by written lease having a primary term of 10 or more years and
				placed in service or use by the taxpayer on or after July 1, 2021.
2.2.19.a.3. Tangible personal property placed
				in service or use by the taxpayer on or after July 1, 2021, 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 W. Va. Code §11-21-1,
et seq
., or
				§ 11-24-1,
et seq
., and which has a useful life, at the
				time the property is placed in service or use in this state, of four or more
				years.
2.2.19.a.4. Tangible
				personal property acquired by written lease having a primary term of 4 (four)
				years or longer, that commenced and was executed by the parties thereto on or
				after July 1, 2021, if used as a component part of a new or expanded small arms
				and ammunition manufacturing business facility, shall be included within this
				definition.
2.2.19.a.5. Tangible
				personal property owned or leased and used by the taxpayer at a business
				location outside this state that is moved into the State of West Virginia on or
				after July 1, 2021, for use as a component part of a new or expanded small arms
				and ammunition manufacturing facility located in this state.
2.2.19.a.5.A. 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 this state.
2.2.19.a.5.B. 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 this state, must be four or more years.
2.2.19.b. Excluded
				property. -- The term "property purchased or leased for business expansion"
				does not include:
2.2.19.b.1. Repair costs,
				including the cost of materials used in the repair, unless for federal income
				tax purposes the cost of the repair must be capitalized and not
				expensed.
2.2.19.b.2. Airplanes and
				helicopters.
2.2.19.b.3. Property
				that is primarily used outside this state, with use being determined based upon
				the amount of time the property is actually used both within and outside this
				state.
2.2.19.b.4. Property which
				is acquired incident to the purchase of the stock or assets of the seller,
				unless for good cause shown, the Tax Commissioner consents to waiving this
				requirement.
2.2.19.b.5. 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.
2.2.19.b.5.A. If the contract
				of purchase specifies a minimum purchase price or minimum annual rent, the
				amount thereof shall be used to determine the qualified investment in the
				property under W. Va. Code §
													11-13KK-6
				and this rule, if the property otherwise qualifies as property purchased or
				leased for expansion of a small arms and ammunition manufacturing
				facility.
2.2.19.b.5.B. If the
				contract of 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 W. Va. Code §
													11-13KK-6
				and this rule, if the property otherwise qualifies as property purchased or
				leased for expansion of a small arms and ammunition manufacturing
				facility.
2.2.20. "Purchase" means any acquisition of
				property, but only if:
2.2.20.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.
2.2.20.b. The property is not acquired by one
				component member of an affiliated or controlled group from another component
				member of the same affiliated or controlled group, as applicable. The Tax
				Commissioner may waive this requirement if the property was acquired from a
				related party for its then fair market value; and
2.2.20.c. The basis of the property for
				federal income tax purposes, in the hands of the person acquiring it, is not
				determined:
2.2.20.c.1. 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
2.2.20.c.2. Under Section 1014(e) of the
				United States Internal Revenue Code.
2.2.21. "Qualified activity" means any small
				arms and ammunition manufacturing business activity subject to any of the taxes
				imposed by W. Va. Code §
										11-21-1,
et seq
., or § 11-24-1,
et seq
., which is
				or may be classified under the North American Industry Classification System
				with a six-digit North American Industry Classification System code for a
				product produced at a facility with code numbers 332992 or 332994 as they are
				defined on January 1, 2021.
2.2.22.
				"Related person" means:
2.2.22.a. A
				corporation, partnership, association, or trust controlled by the
				taxpayer;
2.2.22.b. An individual,
				corporation, partnership, association, or trust that is in control of the
				taxpayer;
2.2.22.c. A corporation,
				partnership, association, or trust controlled by an individual, corporation,
				partnership, association, or trust that is in control of the taxpayer;
				or
2.2.22.d. A member of the same
				affiliated or controlled group as the taxpayer.
2.2.22.e. The term "control" means the
				following.
2.2.22.e.1. For purposes of this
				subsection, "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.
2.2.22.e.2. "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.
2.2.23. "Replacement small arms and
				ammunition manufacturing facility" means any property (other than an expanded
				small arms and ammunition manufacturing facility) that replaces or supersedes
				any other property located within this state that:
2.2.23.a. The taxpayer or a related person
				used in or in connection with any small arms and ammunition manufacturing
				facility for more than 2 (two) years during the period of 5 consecutive years
				ending on the date the replacement or superseding property is placed in service
				by the taxpayer; or
2.2.23.b. Is
				not used by the taxpayer or a related person in or in connection with any small
				arms and ammunition manufacturing facility for a continuous period of 1 (one)
				year or more commencing with the date the replacement or superseding property
				is placed in service by the taxpayer.
2.2.24. "Small arms and ammunition
				manufacturing" refers to a facility that is or may be classified under the
				North American Industry Classification System with a six-digit North American
				Industry Classification System code for a product produced at a facility with
				code numbers 332992 or 332994 as they are defined on January 1, 2021.
2.2.25. "Small arms and ammunition
				manufacturing business" means a business primarily engaged in this state in
				small arms or ammunition manufacturing that is or may be classified under the
				North American Industry Classification System with a six-digit North American
				Industry Classification System code for a product produced at a facility with
				code numbers 332992 or 332994 as they are defined on January 1, 2021.
2.2.26. "Small arms and ammunition
				manufacturing facility" means any factory, mill, plant, warehouse, building, or
				complex of buildings located within this state, including the land on which it
				is located, and all machinery, equipment, and other real and personal property
				located at or within the facility, used in connection with the operation of the
				facility, and all site preparation and start-up costs of the taxpayer for the
				small arms and ammunition manufacturing facility, which is or may be classified
				under the North American Industry Classification System with a six-digit North
				American Industry Classification System code for a product produced at a
				facility with code numbers 332992 or 332994 as they are defined on January 1,
				2021, and that it capitalizes for federal income tax purposes in a business
				that is taxable in this state.
2.2.27. "Taxpayer" means any person subject
				to any of the taxes imposed by W. Va. Code §
										11-21-1,
et seq
., or § 11-24-1,
et seq
.
2.2.28. "The code" means the Code of West
				Virginia, 1931, as amended.
2.2.29.
				"This state" means the State of West Virginia.
2.2.30. "United States Internal Revenue Code"
				or "I.R.C." means the Internal Revenue Code 182 as defined in W. Va. Code
				§
										11-21-1,
et seq
. or § 11-24-1,
et seq
.
2.2.31. "Used property" means property
				acquired after June 30, 2021, that is not "new property."