West Virginia Code of State Rules › Agency 110 - Tax › Title 110 - LEGISLATIVE RULE STATE TAX DEPARTMENT › Series 110-13C - Business Investment And Jobs Expansion Tax Credit, Corporation Headquarters Relocation Tax Credit, Sma › Section 110-13C-14 - Restrictions and limitations on credits allowed by W. Va. Code '11-13C et seq

Current through Register Vol. XLI, No. 28, July 12, 2024
14.1. By
				legislation passed on March 10, 1990 the West Virginia Legislature made the
				following finding:
The Legislature finds that the tax credits allowed under
				  provisions of this article (W. Va. Code '11-13C et seq.) heretofore enacted
				  have not effectively and efficiently increased employment through investment in
				  a certain industry segments; that while there has been a significant net
				  decrease in employment in the coal industry in recent years the amount of
				  credit being claimed by producers of coal has significantly increased; that the
				  increasing cost of the credits allowed by this article to coal producers is
				  eroding the State's ability to reasonably fund essential State services such as
				  public education, public safety and basic human services; and that this erosion
				  will continue unless remedial legislation is enacted.
14.2. Construction. - The rule of statutory
				construction codified in W. Va. Code '11-13C-12b is replaced by statutory
				mandate effective March 10, 1990 with a rule of reasonable construction in
				which 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 W.
				Va. Code '11-13C et seq.
14.3.
				Credit not to be applied against severance taxes.
14.3.1. Notwithstanding any provision in W.
				Va. Code '11-13C et seq. to the contrary, no credit shall be allowed against
				the taxes imposed by W. Va. Code '11-13A et seq. (the severance tax) for
				taxable years ending on or after March 10, 1990 unless one of the transition
				rules in W. Va. Code '11-13C-14(c)(2)
				applies.
14.3.2. Transition rules.
				- The general rule stated in W. Va. Code '11-13C-14(c)(1)
				and Section 14.3.1 of these regulations shall not apply:
14.3.2.1. To qualified investment property
				placed in service or use prior to March 10, 1990.
14.3.2.2. To property purchased or leased for
				business expansion that is placed in service or use on or after March 10, 1990
				if at least one of the following clauses applies to such property:
14.3.2.2.a. The new or expanded business
				facility was constructed, reconstructed or erected, pursuant to a written
				construction contract executed prior to March 10, 1990, as limited to the
				provisions of such contract as of such date then binding on the taxpayer, but
				only to the extent such new or expanded business facility is placed in service
				or use prior to January 1, 1992.
14.3.2.2.b. The new or expanded business
				facility which is part of a project described in W. Va. Code '11-13C-4b(a)(1)
				was constructed, reconstructed or erected, pursuant to a written construction
				contract executed prior to March 10, 1990 as limited to the provisions of such
				contract as of such date then binding on the taxpayer: Provided, That only that
				portion of the contract price attributable to that percentage of the
				construction contract completed prior to January 1, 1992 (determined under
				principles set forth in Section 460(b) of the Internal Revenue Code of 1986, as
				in effect before March 10, 1990) which is placed in service or use prior to
				January 1, 1992 may be treated as property purchased for business expansion
				under W. Va. Code '11-13C-6.
14.3.2.2.c. The new or expanded business
				facility was purchased or leased pursuant to a written contract executed prior
				to March 10, 1990 as limited to the provisions then binding on the taxpayer as
				of such date, but only to the extent such new or expanded business facility is
				placed in service or use prior to January 1, 1992.
14.3.2.2.d. The machinery or equipment or
				other tangible personal property purchased or leased for business expansion at
				a new or expanded business facility was purchased or leased by the taxpayer
				pursuant to a written contract to purchase or lease identifiable tangible
				personal property executed before March 10, 1990, as limited to the provisions
				of such written contract then binding on the taxpayer, but only to the extent
				the tangible personal property purchased or leased under such contract is
				placed in service or use before January 1, 1992: Provided, That when such
				tangible personal property is purchased or leased as aforesaid as part of a
				project described in subsection 14.3.2.2.b of these regulations, such tangible
				personal property must be placed in service or use prior to January 1, 1994, to
				be treated as property purchased or leased for business expansion under W. Va.
				Code '11-13C-6.
14.3.2.3. Transition Rule 3. - The
				general rule provided in paragraph 14.3.1 shall not apply to property purchased
				or leased for business expansion that is placed in service or use after March
				9, 1990 as a component part of a plan for an integrated project which is
				otherwise eligible for super tax credit under W. Va. Code '11-13C-4b,
				provided all of the following requirements are satisfied:
14.3.2.3.a. Investment Threshold. - The
				taxpayer and other participants in the project, if any, have made investments
				aggregating more than ten million ($10,000,000) dollars in property purchased
				or leased for business expansion (as defined in W. Va. Code '11-13C-3(b)(19)
				prior to enactment of '11-13C-14), prior to March 10, 1990.
14.3.2.3.a.1. This requirement that the
				taxpayer and other participants in the project, if any, have made investments
				aggregating more than ten million ($10,000,000) dollars prior to March 10,
				1990, in "property purchased or leased for business expansion," as defined in
				W. Va. Code '11-13C-3(b)(19),
				is satisfied if property purchased or leased for business expansion, as defined
				in W. Va. Code '11-13C-3(b)(19),
				is purchased, or leased, prior to March 10, 1990 and the contract to purchase,
				or lease, irrevocably obligates the taxpayer or any other participant in the
				project, if any, to purchase, or lease, identifiable property for a sum certain
				amount.
14.3.2.3.a.2. Property is
				deemed to have been purchased before March 10, 1990 if:
(i) the physical construction, reconstruction
				or erection of the property was begun prior to March 10, 1990, or the property
				was constructed, reconstructed, erected or acquired pursuant to a written
				contract in existence and binding on the purchaser before March 10, 1990; or
(ii) the machinery, equipment or
				other tangible personal property was owned by the taxpayer or another
				participant in the project, if any, prior to March 10, 1990, or was acquired by
				the taxpayer or another participant in the project, if any, pursuant to a
				binding purchase contract executed prior to March 10, 1990.
14.3.2.3.a.3. Property is deemed
				to have been leased before March 10, 1990 only if the taxpayer or another
				participant in the project, if any, took physical possession of the leased
				property prior to March 10, 1990, or there was a binding written lease or
				contract to lease identifiable tangible personal property in effect prior to
				March 10, 1990 for a specified term for specified periodic
				consideration.
14.3.2.3.b. Integrated Project Rule. -
				Investment aggregating more than ten million ($10,000,000) dollars must have
				been made pursuant to a written plan for development of an integrated corporate
				project, in one or two phases, over a period of one or more years, which
				otherwise qualifies for credit under W. Va. Code '11-13C-4b.
				This written plan must have been in existence prior to March 10, 1990 and
				provide for the making of additional investments after March 9, 1990, in
				furtherance of the plan for an integrated corporate project. The existence of
				such a plan is a matter of fact to be determined on a case-by-case basis, the
				burden of proof is on the taxpayer to show the interrelationship between the
				several phases or parts of the project and the dependency of any subsequent
				investment on the qualifying investment of more than ten million ($10,000,000)
				dollars.
14.3.2.3.b.1. Existence of a written
				plan for development of an integrated corporate project is demonstrated by the
				written plan itself. Proof that the written plan existed prior to March 10,
				1990 may be demonstrated by corporate minutes of meetings of boards of
				directors or shareholders held prior to March 10, 1990 which discuss the plan,
				or which authorize the expenditure of more than ten million ($10,000,000)
				dollars in "property purchased or leased for business expansion," as defined in
				W. Va. Code '11-13C-3(b)(19),
				to implement the plan or any integrated phrase or part thereof. The plan's
				existence may also be proved from submissions to federal or State regulatory
				authorities including, but not limited to, the Federal Energy Regulatory
				Commission and the Securities and Exchange Commission, which refer to the
				integrated corporate project in sufficient detail or by applications for
				financing of the integrated project which describe the project in sufficient
				detail.
14.3.2.3.b.1.a. There must be clear,
				convincing evidence of an approved corporate plan or other action of the
				taxpayer showing positive commitment to the full development of the plan for an
				integrated corporate project prior to March 10, 1990.
14.3.2.3.b.1.b. There must be clear,
				convincing evidence that development, design or engineering had begun prior to
				March 10, 1990 on any Section 11-13C-4b(a)(1) project that encompasses any
				thirty-six (36) consecutive month period that begins after March 9, 1990, when
				it is claimed that such Section 11-12C-4 b(a)(1) project is an integrated part
				or phase of an plan for an integrated corporate project that spans more than
				three (3) years.
14.3.2.3.b.2. A plan consists of two
				integrated phases or parts when there is clear, convincing evidence that but
				for phase one, phase two of the plan would not have been started and completed.
				Additionally, a plan is not an integrated plan unless each subsequent phase is
				directly in furtherance of and contributes to the primary objective of the
				plan. The following criteria is indicative of the existence of an integrated
				corporate project:
14.3.2.3.b.2.a. The
				investment made prior to March 10, 1990, was made with the expectation of
				making additional investment after March 9, 1990 which qualifies a second
				Section 11-13C-4 b(a)(1) project under the super tax credit law and that
				project is directly related to the pre-March 10, 1990 investment.
14.3.2.3.b.2.b. The two (2) super tax credit
				section 11-13C-4 b(a)(1) projects are dependent on or contribute to each
				other.
14.3.2.3.b.2.c. The
				corporate project is limited to a single "business facility" as defined in W.
				Va. Code '11-13C-3(b);
				and the "mining operations," as defined in Section 11-13C-3(b) are contained on
				contiguous property and are part of a single operating unit. Factors which
				indicate that the mining operations are part of a single operating unit are:
14.3.2.3.b.2.c.1. common processing or
				treatment plant,
14.3.2.3.b.2.c.2.
				common storage and loading facility,
14.3.2.3.b.2.c.3. other common support
				facilities, and
14.3.2.3.b.2.c.4.
				common supervisory personnel.
14.3.2.3.b.2.d. Notification was given to the
				Tax Commissioner, prior to March 10, 1990, that a corporate project consists of
				two (2) Section
				11-13C-4b(a)(1)
				projects.
Business strategy and planning is generally limited to five
				  (5) year increments. A taxpayer who applies for super tax credit under this
				  third transition rule for more than one Section
				  11-13C-4b(a)(1)
				  project that begins after March 9, 1990, must present clear and convincing
				  evidence of significant economic loss should taxpayer's investment in such
				  project not be eligible for super tax credit that offsets the severance tax
				  imposed by W. Va. Code '11-13A et seq.
The following example demonstrates the intent of this
				  paragraph 14.3.2.3.b.2.
Example: XYZ Coal Company has written plan to develop its
				  Rocky Mountain Coal Project. Phase I consists of assembling (by purchase or
				  lease) the coal lands necessary to economically sustain coal production once
				  all phases of the project are completed; obtaining necessary State and federal
				  permits; obtaining necessary financing and doing anything else that may be
				  necessary to move into phase II. Phase II consists of developing and operating
				  one or more strip mines on the project site. This includes development of
				  access roads and a coal loading facility. During this phase anything else
				  necessary to move into phase III is done. Phase III consists of construction,
				  or development, and operation of the following on project land previously
				  stripped:
(1) a coal preparation plant
				incorporating the most current coal preparation technology;
(2) unitrain coal loading
				facilities;
(3) three deep mines;
				and
(4) all related facilities.
Under these facts, this is an integrated multiphase
				  project.
14.3.2.3.b.3. An integrated project is
				otherwise eligible for super tax credit, under W. Va. Code '11-13C-4b, to the
				extent the entire project, or any phase thereof, qualifies for credit under W.
				Va. Code '11-13C-4b. In order to qualify for super tax credit, there must be
				both investment in property purchased or leased for business expansion and the
				creation of at least fifty (50) new jobs by the taxpayer or any other
				participant in the project as a direct result of that investment. Because a
				Section 11-13C-4b(a)(1) multi-year project is limited to qualified investment
				property placed in service or use during any three (3) successive tax years
				that directly results in the creation of at least fifty (50) new jobs filled by
				new employees, a multi-year integrated corporate project is only eligible for
				super tax credit benefits to the extent that one or more portions of the
				integrated project satisfies the Section 11-13C-4b(a)(1) requirements. The
				following examples illustrate the meaning of this rule.
Example 1. Prior to March 10, 1990, XYZ Coal Company
				  (Taxpayer) made investment in property purchased or leased for its Rocky
				  Mountain Coal Project aggregating more than ten million ($10,000,000) dollars.
				  All of that property was placed in service during calendar years 1987, 1988 and
				  1989. As a direct result of that investment hundred (100) new jobs were created
				  and filled by new employees during that period. XYZ Coal Company timely applied
				  to the Tax Commissioner for certification of this phase of its integrated
				  project. Certification was granted and XYZ Coal Company began taking the super
				  tax credit. During calendar year 1990, XYZ Coal Company timely filed with the
				  Tax Commissioner notice of claim to super tax credit under the Section
				  11-13C-14(c) transition rules. In 1991, Taxpayer placed in service project
				  property valued at two hundred fifty thousand ($250,000) dollars and created
				  five new jobs. During calendar years 1992, 1992 and 1994. The property placed
				  in service during 1990 is not eligible for super tax credit because it did not
				  result in the creation of at least fifty (50) new jobs. While Taxpayer could
				  have grouped the years 1991, 1992 and 1993 together as a Section 11-13C-14
				  b(a)(1) project, it would not have been allowed to claim super tax credit for
				  the five million ($5,000,000) dollars of project property placed in service in
				  calendar year 1994 which resulted in the creation of twenty-five (25) new jobs.
				  For this reason, Taxpayer elected to treat the years 1992-1994 as a section
				  11-13C-4 b(a)(1) project rather than the years 1991-1993. During calendar year
				  1995, Taxpayer placed in service additional Rocky Mountain Coal project
				  property valued one million ($1,000,000) dollars which created ten (10) new
				  jobs. No super tax credit benefits are allowable with respect to the investment
				  placed in service during 1995.
Example 2: Same facts as in Example 1, except that during
				  1991 XYZ Coal Company placed in service a new strip mine that is not part of
				  its Rocky Mountain Coal Project. Property placed in service is valued at seven
				  hundred fifty thousand ($750,000) dollars and fifty-five (55) new jobs were
				  created. Because the new mine is not a part of the Rocky Mountain Coal Project,
				  super tax credit for that investment may not be used to offset severance taxes
				  on coal produced from that strip mine. Super tax credit may be applied against
				  other taxes directly attributable to that mine, in accordance with the
				  remaining provisions of W. Va. Code '11-13C-5.
14.3.2.3.c. New
				Business Facility Rule. - The portion of the integrated project constructed,
				purchased, or leased, after March 9, 1990 must satisfy the definition "new
				business facility" codified in W. Va. Code '11-13C-14(e)(3).
14.3.2.3.d. New Jobs Rule. - The new jobs
				created by the project after March 9, 1990 must be filled by "new employees" as
				defined in W. Va. Code '11-13C-14(e)(4).
14.3.3. Notice of claim
				under transition rules.
14.3.3.1. Notice
				required. - Any person intending to assert a claim for credit based in whole or
				in part on application of the transition rules in W. Va. Code '11-13C-14(c)(2)(B)
				or (C) must have filed written notice of such
				intention with the Tax Commissioner on or before July 1, 1990. In the case of a
				multiparticipant project, this notice may have been filed by the managing
				project participant on behalf of all participants in such project. Such notice
				shall have been in a form prescribed by the Tax Commissioner and all
				information required by such form shall have been provided.
14.3.3.2. Failure to file notice. - If any
				person fails to timely file the notice required by W. Va. Code '11-13C-14(c)(3),
				such person shall be precluded from claiming credit under W. Va. Code '11-13C
				et seq. for such investment.