Bill Summary – FastDemocracy

WEST VIRGINIA LEGISLATURE
REGULAR SESSION
          Committee Substitute for Senate Bill 424
    By Senators Blair (Mr. President) and Woelfel
            (By Request of the Executive)
  [Originating in the Committee on Finance; reported on February 8, 2023]
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  A BILL to amend the Code of West Virginia, 1931, as amended, by adding thereto a new article,
         designated §11-13MM-101, §11-13MM-201, §11-13MM-202, §11-13MM-301, §11-13MM-
         302, §11-13MM-303, §11-13MM-401, §11-13MM-402, §11-13MM-403, §11-13MM-501,
         §11-13MM-502, §11-13MM-503, §11-13MM-601, §11-13MM-602, §11-13MM-603, §11-
         13MM-701, §11-13MM-702, §11-13MM-703, §11-13MM-801, §11-13MM-802, §11-13MM-
         803, §11-13MM-901, §11-13MM-902, §11-13MM-903, §11-13MM-1001, §11-13MM-1002,
         and §11-13MM-1101; and to amend said code by adding thereto two new sections,
         designated §11-21-4g and §11-21-4h, all relating to taxation; creating refundable tax
         credits on certain species of personal property tax; allowing tax credit to be applied against
        personal income tax during a taxable year; providing findings and purpose; defining terms;
        providing for application of tax credit; specifying credit is refundable; specifying effective
        date; providing for treatment of credit upon sale or transfer of eligible taxable personal
        property; providing a refundable tax credit on real property for disabled veterans; providing
        for an annual report; providing for an annual audit; allowing rulemaking; relating to
        reducing the personal income tax; providing for a reduction in the rate of personal income
        tax; reducing the rate of tax on composite returns; reducing the rate of withholding tax on
        nonresident income; providing for an increase in the consumer sales and service tax and
        service tax and use tax upon the occurrence of certain contingencies; providing that
        further action of the Legislature is necessary to raise the personal income tax following a
        reduction; providing findings; requiring notification to taxpayers of changes to sales and
        service tax and use tax; requiring annual certification to the Governor and legislative
        leaders of changes to sales and service tax and use tax; requiring reporting to the
        legislature; providing for rulemaking; and to provide for tax liabilities that existed prior to
        elimination of personal income tax.
     Be it enacted by the Legislature of West Virginia:
     ARTICLE 13MM. PERSONAL AND REAL PROPERTY TAX CREDITS.
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                                   PART I. FINDINGS AND PURPOSE.
     §11-13MM-101. Findings and purpose.
          The Legislature finds that the encouragement of economic growth and development in this
  state is in the public interest and promotes the general welfare of the people of this state. In order
  to encourage capital investment in business and industry in this state and thereby increase
  economic development, there is hereby provided a personal property tax credit on certain qualified
  personal property subject to ad valorem taxation.
                                               Part II. Definitions.
  §11-13MM-201. Applicability of definitions.
          Unless a different meaning is clearly required by either the context in which the term is
  used, or by specific definition, when used in this article, or in the administration of this article, terms
  shall have the meanings ascribed to them in this article.
  §11-13MM.202. Defined terms.
          "Business" means any entity through which business for-profit is conducted including a
  corporation, partnership, proprietorship, franchise, association, organization, or self-employed
  individual.
          "Commissioner" or "Tax Commissioner" are used interchangeably herein and mean the
 Tax Commissioner of the State of West Virginia, or his or her delegate.
         "Computer equipment" means all computers, servers, printers, computer hardware, on-
 site process control and automation systems, telecommunication assets, and other information
 technology-related equipment used by a person in the day-to-day operation of a business with the
 purpose of making a profit. This shall include but is not limited to electronic computer or other data
 processing equipment, peripherals used in conjunction with such equipment, and electronic media
 and records. This includes original or replacement servers, routers, switches, power units,
 network devices, hard drives, processors, memory modules, motherboards, racks, other computer
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 hardware and components, cabling, cooling apparatus, and related or ancillary equipment,
 machinery, and components, the primary purpose of which is to store, retrieve, aggregate, search,
 organize, process, analyze, or transfer data or any combination of these, or to support related
 computer engineering or computer science research.
            "Credit" or "rebate" means the amount of credit allowable pursuant to the provisions of this
 article.
            "Disabled veteran eligible taxpayer" means a person honorable discharged from any
 branch of the armed services of the United States who is considered ninety percent totally and
 permanently disabled due solely to service connected disabilities by the Department of Veterans
 Affairs.
            "Eligible motor vehicle" means a motor vehicle on which the ad valorem property tax has
 been paid for the taxable year by the eligible taxpayer, and which is a motor vehicle as defined in
 this article.
            "Eligible taxpayer" means any person who pays ad valorem property taxes in this state on
 qualified tangible personal property as listed in this article pursuant this chapter, and pursuant to
 article X of the Constitution of this state. Specifically, an eligible taxpayer shall mean:
            (1) "Eligible taxpayer" – Computer Equipment – "Eligible taxpayer" also means a person
 who owns computer equipment as that term is defined in this article, who has paid the ad valorem
 property tax during the personal income tax taxable year and who uses the computer equipment
 for use in the operation of a business for profit.
            (2) "Eligible taxpayer" – Furniture, fixtures, and equipment – "Eligible taxpayer" also means
 a person who owns furniture, fixtures, and equipment as that term is defined in this article, who has
 paid the ad valorem property tax during the personal income tax taxable year and who uses the
 furniture, fixtures, and equipment for use in the operation of a business for profit. Furniture,
 fixtures, and equipment does not include computer equipment as that term is defined in this article.
            (3) “Eligible taxpayer” – Leased motor vehicles -- “Eligible taxpayer” also means and
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 includes any lessor of a motor vehicle, as herein defined, who owns a motor vehicle for which the
 ad valorem property tax has been paid during the personal income tax taxable year: Provided,
 That, the lessor shall pass on to the lessee the value of the tax credit asserted by the lessor by
 causing a decreasing in the amount of rent or lease payment payable by the lessee on the leased
 motor vehicle.
        (4) "Eligible taxpayer” – Leasehold investment – “Eligible taxpayer” also means a person
 who has paid the ad valorem property tax during the personal income tax taxable year on a
 commercial investment or investments during the personal income tax taxable year by making
 improvements and/or modifications to space rented from a third party pursuant to an agreement to
 the make the space the suitable for his or her business.
        (5) "Eligible taxpayer" – Manufacturing, machinery, equipment, and inventory means a
 person who pays ad valorem personal property taxes on machinery, equipment and inventory
 pursuant this chapter and pursuant to article X of the Constitution of this state. A qualified West
 Virginia manufacturer must be principally engaged in manufacturing as defined in this article
 during the tax year that either has all of its real and personal property in West Virginia and who has
 paid ad valorem property tax during the personal income tax taxable year. An eligible taxpayer
 may include a pass-through entity which shall include any includes any owner, interest holder,
 partner or S corporation shareholder that derives conduit income from a pass-through entity.
        (6) "Eligible taxpayer" – Owned motor vehicles – "Eligible taxpayer" means any person
 who owns a motor vehicle for which the ad valorem property tax has been paid during the personal
 income tax taxable year. For purposes of this definition, ownership of a motor vehicle includes
 ownership and possession of a motor vehicle for which a title has been issued by the Division of
 Motor Vehicles to the eligible taxpayer. For purposes of this definition, ownership of a motor
 vehicle also includes ownership and possession of a motor vehicle, subject to a purchase
 financing arrangement whereby a financial institution holds a lien on the motor vehicle, or for which
 ultimate issuance of title by the Division of Motor Vehicles to the taxpayer, as owner of the motor
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 vehicle, is contingent upon payment in full of the purchase price of the motor vehicle pursuant to
 an installment payment financing arrangement.
         (7) "Eligible taxpayer" – Pass through entities – "Eligible taxpayer" also means and
 includes any owner, interest holder, partner or S corporation shareholder that derives conduit
 income from a pass-through entity.
         (8) "Eligible taxpayer" – Retail inventory – "Eligible taxpayer" also means a person who has
 paid the ad valorem property tax during the personal income tax taxable year and who holds goods
 for the commercial purpose of sale to a final purchaser but not for the purchasers’’ regular resale.
 uses the computer equipment for use in the operation of a business for profit.
         (9) "Eligible taxpayer" – Prohibition for motor vehicle dealers – "Eligible taxpayer" does not
 mean or include any motor vehicle dealer, motor vehicle dealership, retailer or any business that
 sells now or used motor vehicles at the retail level, other than a lessor of motor vehicles. In
 circumstances where any such motor vehicle dealer, motor vehicle dealership, retailer or business
 that sells new or used motor vehicles as lessor, the tax credit authorized by this article may only be
 asserted by such business based upon the ad valorem property tax paid on leased motor vehicles,
 and only to the extent that the lessor has passed on, to the lessee, the value of the tax credit
 asserted by the lessor by causing a decreasing in the amount of rent or lease payment payable by
 the lessee on the leased motor vehicle. No credit may be asserted or applied by the business
 based upon ad valorem property tax paid on motor vehicle retail inventories not actively leased to
 lessees except as provided in article §11-13MM-1 et seq. of this code. To the extent that motor
 vehicles retail inventories may be held as both motor vehicle retail inventories, and as motor
 vehicles potentially subject to lease during the taxable year, ad valorem property tax paid on such
 motor vehicle is excluded from eligibility for the tax credit authorized by this article.
         "Flow-through entity", "conduit entity", or "pass through entity" means an S Corporation,
 partnership, limited partnership, limited liability partnership, or limited liability company. The term
 "flow-through entity", "conduit entity", or "pass through entity" includes a publicly traded
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  partnership as that term is defined in section 7704 of the Internal Revenue Code that has equity
  securities registered with the Securities and Exchange Commission under section 12 of Title I of
  the Securities Exchange Act of 1934, 15 U.S.C. § 78l: Provided, That a publicly traded partnership
  as defined in Section 7704 of the Internal Revenue Code having equity securities registered with
 the Securities and Exchange Commission under Section 12 of Title I of the Securities Exchange
 Act of 1934, 15 U.S.C. § 78l, and any other person or entity that is treated as a C corporation for
 federal income tax purposes, shall be treated as a corporation taxable under §11-24-1 et seq. of
 this code for purposes of this article.
         "Furniture, fixtures, and equipment" shall mean all furniture and fixtures, equipment and
 appliances used by a person in the day-to-day operation of the business traditionally used to
 furnish an office, that are used by the business to generate profits, and are moveable and not
 attached to the structure or building. Furniture and fixtures shall not include computer equipment
 as that term is defined in this section.
         "Leasehold investment" means a commercial investment during the personal income tax
 taxable year by making improvements and/or modifications to property that is not owned by the
 person making the improvements but is leased from a third party under a lease agreement.
         "Manufacturing" means a systematic operation or integrated series of systematic
 operations engaged in as a business or segment of a business which transforms or converts
 tangible personal property by physical, chemical or other means into a different form, composition
 or character from that in which it originally existed. In no case shall the term "manufacturing"
 include the activities of building construction, construction of other structures or facilities affixed to
 or on realty, retailing or agriculture, food processing or food manufacturing, the operation of any
 restaurant or retail food preparation or sales operation, the production of any natural resource,
 contract mining or any other activity of severing, producing, processing or extracting any natural
 resource. Manufacturing production begins with the arrival of raw materials and ends when the
 property has reached that point where no further chemical, physical or other changes are to be
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 made to the resultant property in the production process.
        "Machinery and equipment" shall mean machinery and equipment, including motor
 vehicles, owned by the taxpayer that is directly used or consumed for business in West Virginia,
 except for the tangible machinery and equipment personal property of public service companies
 and railroads pursuant to the provisions of the Railroad Revitalization Reform Act of 1976 codified
 at 45 U.S.C. § 801. Tangible machinery and equipment personal property does not include:
        (A) Barges;
        (B) Ships; and
        (C) Any other tangible personal property:
        (i) Not directly used in business activity;
        (ii) Assessed as part of the working interest in an oil or gas well;
        (iii) Operating property of public service business as defined in §11-6-1 et seq. of this code;
 or
        (iv) Property of railroads pursuant to the provisions of the Railroad Revitalization Reform
 Act of 1976 codified at 45 U.S.C. § 801.
        "Manufacturing service provider" means a person engaged in a manufacturing activity who
 does not have legal title to or any economic interest in the tangible personal property transformed
 or converted by the manufacturing process, and who engages in the manufacturing activity as a
 service to another person.
        "Motor Vehicle" means the following class of vehicles defined in §17A-10-1 of this code:
 Class A, Class B, Class G, Class H, Class T, Class V, Class X, and all-terrain vehicles and utility
 terrain vehicles as defined in §20-15-2 of this code.
        "Partnership" includes a syndicate, group, pool, joint venture or other unincorporated
 organization through or by means of which any business, operation or venture is carried on, which
 is taxed under Subchapter K of the Internal Revenue Code, as defined in §11-24-3 of this code,
 and which is not a trust or estate, a corporation or a sole proprietorship. The term “partner”
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 includes a member in such a syndicate, group, pool, joint venture or other unincorporated
 organization taxed under Subchapter K of the Internal Revenue Code.
         "Person" means and includes an individual, a trust, estate, partnership, pass through
 entity, or association.
         "Public service company" means a corporation or other business entity which delivers
 services considered essential to the public interest that are regulated by the applicable federal or
 state regulatory body, including, but not limited to, businesses furnishing electricity, natural gas,
 telecommunications, and water, and those transporting personal property or passengers,
 including, but not limited to, airlines, railroads, trucking, and bus companies, and which are
 centrally assessed by the state for property tax purposes.
         "Real property" means the same as that term is used in §11-4-1 et seq. of this code.
         "Retail inventory" means all tangible property of a business operating for profit consisting
 of movable personal chattels of value, which a person holds for the commercial purpose of sale to
 final purchasers thereof for the purchasers’ use or consumption, but not for the purchasers’ regular
 resale of the same.
         "Tangible personal property"