Bill Summary – FastDemocracy

WEST VIRGINIA LEGISLATURE
REGULAR SESSION
                 ENROLLED
         Committee Substitute for House Bill 5024
           BY DELEGATES CRISS AND HOTT
  [Passed March 9, 2024; in effect ninety days from passage.]
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  AN ACT to amend and reenact §11-21-3, §11-21-4g, §11-21-18, §11-21-30, §11-21-40, §11-21-
          51, and §11-21-71a of the Code of West Virginia, 1931, as amended, all relating to the
          personal income tax by exempting non-grantor trusts administered by licensed private
          trust companies in this state from the personal income tax.
     Be it enacted by the Legislature of West Virginia:
     ARTICLE 21. PERSONAL INCOME TAX.
     §11-21-3. Imposition of tax; persons subject to tax.
          (a) Imposition of tax. — A tax determined in accordance with the rates hereinafter set forth
  in this article is hereby imposed for each taxable year on the West Virginia taxable income of
  every individual, estate, electing pass-through entity, and trust: Provided, That, for tax years
  beginning on or after January 1, 2024, the income of a non-grantor trust administered by a
  licensed private trust company created pursuant to the provisions of §31I-1-1 et seq. of this code
  shall have no tax imposed upon it by this section.
          (b) Partners and partnerships. — A partnership or other pass-through entity as such shall
  not be subject to tax under this article, unless the partnership or other pass-through entity elects
  to be subject to the tax levied under this section for a taxable year pursuant to §11-21-3a of this
 code. Persons carrying on business as partners or owners of a pass-through entity shall be liable
 for tax under this article only in their separate or individual capacities, unless the partnership or
 other pass-through entity elects to be subject to the tax levied under this section for a taxable year
 pursuant to §11-21-3a of this code. However, partnerships and other pass-through entities are
 subject to the tax imposed by this article to the extent they elect to pay additional West Virginia
 income taxes owed that are attributable to final federal partnership audit adjustments under §11-
 21A-3 of this code.
         (c) Associations taxable as corporations. — An association, trust, or other unincorporated
 organization which is taxable as a corporation for federal income tax purposes, shall not be
 subject to tax under this article.
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         (d) Exempt trusts and organizations. — A trust or other unincorporated organization which
 by reason of its purposes or activities is exempt from federal income tax shall be exempt from tax
 under this article (regardless of whether subject to federal income tax on unrelated business
 taxable income).
         (e) Cross references. — For definitions of West Virginia taxable income of:
         (1) Resident individual, see §11-21-11 of this code.
         (2) Resident estate or trust, see §11-21-18 of this code.
         (3) Nonresident individual, see §11-21-30 of this code.
         (4) Nonresident estate or trust, see §11-21-38 of this code.
         (f) Effective date. — This section as amended in 2023 shall apply to taxable years
 beginning on and after January 1, 2022.
     §11-21-4g Rate of tax — Taxable years beginning on and after January 1, 2023.
          (a) Rate of tax on individuals (except married individuals filing separate returns),
  individuals filing joint returns, heads of households, and estates and trusts. — The tax imposed
  by §11-21-3 of this code on the West Virginia taxable income of every individual (except married
  individuals filing separate returns); every individual who is a head of a household in the
  determination of his or her federal income tax for the taxable year; every husband and wife who
  file a joint return under this article; every individual who is entitled to file his or her federal income
  tax return for the taxable year as a surviving spouse; and every estate and trust (except non-
  grantor trusts administered by licensed private trust companies created pursuant to the provisions
  of §31I-1-1 et seq. of this code) shall be determined in accordance with the following table:
         If the West Virginia taxable
         income is:                                       The tax is:
         Not over $10,000                                 2.36% of the taxable income
         Over $10,000 but not over $25,000                $236 plus 3.15% of excess over $10,000
         Over $25,000 but not over $40,000                $708.50 plus 3.54% of excess over $25,000
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        Over $40,000 but not over $60,000              $1,239.50 plus 4.72% of excess over
                                                       $40,000
        Over $60,000                                   $2,183.50 plus 5.12% of excess over
                                                       $60,000
        (b) Rate of tax on married individuals filing separate returns. — In the case of husband
 and wife filing separate returns under this article for the taxable year, the tax imposed by §11-21-
 3 of this code on the West Virginia taxable income of each spouse shall be determined in
 accordance with the following table:
        If the West Virginia taxable
        income is:                                     The tax is:
        Not over $5,000                                2.36% of the taxable income
        Over $5,000 but not over $12,500               $118 plus 3.15% of excess over $5,000
        Over $12,500 but not over $20,000              $354.25 plus 3.54% of excess over $12,500
        Over $20,000 but not over $30,000              $619.75 plus 4.72% of excess over $20,000
        Over $30,000                                   $1,091.75 plus 5.12% of excess over
                                                       $30,000
        (c) Rate of tax on non-grantor trusts administered by licensed private trust companies. –
 In the case of non-grantor trusts administered by licensed private trust companies created
 pursuant to §31I-1-1 et seq. of this code, there is no tax imposed by §11-21-3 of this code.
        (c) (d) Effect of rates on Nonresident Composite and Withholding Obligations —
 Notwithstanding any provision of this article to the contrary, for taxable years beginning on and
 after the retroactive date specific in §11-21-4g(d) of this code subsection (e) of this section,
 whenever the words "six and one-half percent" appear in §11-21-51a, §11-21-71a, §11-21-71b,
 or §11-21-77, of this article, with relation to a tax return of, or the tax rate imposed on income of
 individuals, individuals filing joint returns, heads of households, and estates and trusts (except
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 non-grantor trusts administered by licensed private trust companies created pursuant to the
 provisions of §31I-1-1 et seq. of this code), the stated percentage shall be changed to 5.12%.
        (d) (e) Applicability of this section. — The provisions of this section shall be applicable in
 determining the rates of tax imposed by this article and shall apply retroactively for all taxable
 years beginning on and after January 1, 2023, and shall be in lieu of the rates of tax specified in
 §11-21-4e of this code.
     §11-21-18. West Virginia taxable income of resident estate or trust.
         The West Virginia taxable income of a resident estate or trust (except non-grantor trusts
  administered by licensed private trust companies created pursuant to the provisions of §31I-1-1
  et seq. of this code) means its federal taxable income for the taxable year as defined in the laws
  of the United States and section nine of this article §11-21-9 of this code for the taxable year, with
  the following modifications:
         (1) There shall be subtracted $600 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
 §11-21-19 of this code.
        (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 December 31, 1990.
        (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
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 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 2005 regular session of the Legislature
 are effective for tax years beginning on or after January 1, 2005.
                        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 December 31, 1991, the tax
  due under this article on taxable income derived from sources in this state by a nonresident
  individual, estate, or trust (except non-grantor trusts administered by licensed private trust
  companies created pursuant to the provisions of §31I-1-1 et seq. of this code) 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 §11-21-20 of this code.
        (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 §11-21-9 of this code: 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.
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         (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 (except non-grantor trusts
 administered by licensed private trust companies created pursuant to the provisions of §31I-1-1
 et seq. of this code) shall be determined as if such estate or trust were an individual; and
         (2) In the case of a trust (except non-grantor trusts administered by licensed private trust
 companies created pursuant to the provisions of §31I-1-1 et seq. of this code), "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 the Internal Revenue Code of 1986 shall be included in West Virginia taxable
 income of the trust (except non-grantor trusts administered by licensed private trust companies
 created pursuant to the provisions of §31I-1-1 et seq. of this code).
         (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 §11-21-9 of this code, increased or
 decreased, as the case may be, by the items accrued under subdivision (1), subsection (b),
 section forty-four of this article §11-21-44(b)(1) of this code, 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 §11-
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 21-44(b)(2) of this code, 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
 §11-21-44 of this code.
         (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 §11-21-7 of this code.
         (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 December 31, 1991. 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 2005 regular session of the Legislature
 are effective for tax years beginning on or after January 1, 2005.
     §11-21-40. Credit for income tax of state of residence.
          (a) General. — A nonresident shall be allowed a credit against the tax otherwise due under
  this article for any income tax imposed for the taxable year by another state of the United States
  or by the District of Columbia, of which the taxpayer is a resident.
          (b) Limitation. — The credit under this section shall not exceed either:
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         (1) The percentage of the other tax determined by dividing the portion of the taxpayer's
  West Virginia income which is also subject to the other tax by the total amount of his or her income
  subject to such other tax, or
         (2) The percentage of the tax otherwise due under this article, determined by dividing the
  portion of the taxpayer's West Virginia income which is also subject to the other tax by the total
 amount of the taxpayer's West Virginia income.
        (c) Exceptions. — No credit may be allowed under this section for a taxable year beginning
 after December 31, 1987, except pursuant to a written agreement between this state and the
 nonresident individual's state of residence. The State Tax Commissioner is hereby authorized to
 enter into such agreements necessary to effectuate the purpose of this section when he or she
 determines that such agreements are in the best interest of this state and its residents.
        (d) Definition. — For purposes of this section West Virginia income means:
        (1) The West Virginia adjusted gross income of an individual, or
        (2) The income derived from West Virginia sources by an estate or trust (except non-
 grantor trusts administered by licensed private trust companies created pursuant to the provisions
 of §31I-1-1 et seq. of this code), determined in accordance with the applicable rules of section
 thirty-two §11-21-32 of this code as in the case of a nonresident individual.
     §11-21-51. Returns and liabilities.
         (a) General. — On or before the fifteenth day of the fourth month following the close of a
  taxable year, an income tax return under this article shall be made and filed by or for:
         (1) Every resident individual required to file a federal income tax return for the taxable
  year, or having West Virginia adjusted gross income for the taxable year, determined under
  section twelve of this article §11-21-12 of this code in excess of the sum of his or her West Virginia
  personal exemptions: Provided, That the Tax Commiss