SB 131 — Creating credit against severance tax for certain infrastructure improvements

(ii) An(12) individual,"Transportation corporation,Secretary" partnership,means association,the orCabinet trustSecretary thatof isthe inWest controlVirginia Department of theTransportation. taxpayer;

(iii) A corporation, partnership, association, or trust controlled by an individual, corporation, partnership, association, or trust that is in control of the taxpayer;

or (iv) A member of the same controlled group as the taxpayer.

For purposes of this subdivision, "control", with respect to a corporation, means ownership, directly or indirectly, of stock possessing 50% 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% 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 shall be determined in accordance with the rules for constructive ownership of stock provided in section 267(c) of the United States Internal Revenue Code of 1986, as amended, other than paragraph (3) of that section.

(c) Includes and including.

-- The terms "includes" and "including", when used in a definition contained in this article, shall not be deemed to exclude other things otherwise within the Intr SB 131 2026R1367 meaning of the term defined.

(d) Partnership and partner.

-- The term "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, and which is not a trust or estate, a corporation or a sole proprietorship.

The term "partner" includes a member in such a syndicate, group, pool, joint venture, or organization.

(e) Person.

-- The term "person" includes any natural person, corporation, or partnership.

(f) Road or highway.

-- The terms "road" and "highway" are used interchangeably herein and for purposes of this article shall have the same meaning as the terms "road", "public road", and "highway", as defined in §17-1-3.

(g) Road or highway infrastructure improvement.

-- The term "road or highway infrastructure improvement" means the construction, improvement, repair, upgrade, and modernization of roads, public roads and highways in this state for the purpose of widening, increasing weight limits, enhancing safety, improving traffic flow, or otherwise facilitating the commercial transportation of goods or passengers within this state or the ingress and egress of vehicles to commercial and industrial sites, consistent with the purposes for which this article was enacted.

(h) Tax Commissioner.

-- The term "Tax Commissioner" means the Commissioner of the West Virginia State Tax Department.

(i) Taxpayer.

--The term "taxpayer" means any person subject to the tax imposed by section three, article thirteen-a of this chapter.

(j) Transportation Secretary or Secretary of Transportation.

-- The terms "Transportation Secretary" and "Secretary of Transportation" are used interchangeably herein and mean the Secretary of the Department of Transportation of the state of West Virginia.

CreditExpenditures allowed;qualifying for tax credit.

(a) The following expenditures for road or highway infrastructure improvement projects qualify for the tax credit provided by this article when provided in furtherance of a road or highway infrastructure improvement project:

(1) Payments made by an eligible taxpayer for labor performed or tangible personal property, materials, services, or supplies furnished;

(2) The cost of real property and improvements thereto, purchased by an eligible taxpayer and donated to the state;

and (3) The fair market value of real property, and improvements thereto, owned by an eligible taxpayer and donated to the state.

(b) The following expenditures for coal or natural gas production and processing facilities qualify for the tax credit provided by this article:

(1) Payments made by an eligible taxpayer for labor performed or tangible personal property, materials, services, or supplies furnished in furtherance of construction, installation, or fabrication of haul roads, ventilation structures, mine shafts, slopes, boreholes, dewatering structures, preparation plants, or loadouts, including associated facilities and apparatus, by the producer or others, including contractors and subcontractors at a coal mine or coal or natural gas production or processing facility;

and (2) The cost of any real property, improvements thereto, and machinery and equipment.

This includes the cost of repairs, upgrades, or refurbishments to machinery and equipment 4 CS for SB 131 purchased or leased by an eligible taxpayer and directly used as part of a coal or natural gas production or processing facility.

Examples of such include, but are not limited to, the cost to purchase, lease, or repair items such as longwall miners, including repair, refurbishment, or replacement of associated shears, shields, or hydraulics;

continuous miners;

highwall miners;

augers;

roof bolters;

excavators;

dozers;

haulage vehicles;

equipment used in blasting related to surface mining;

conveyor belts;

car-dumps;

chain conveyors;

ventilation fans;

man trips;

roof trusses;

and shuttle cars.

(c) Property and services do not qualify as expenditures for road or highway infrastructure improvement projects nor for expenditures for coal or natural gas production and processing facilities if acquired:

(1)  From a person whose relationship to the person making the expenditure would result in the disallowance of deductions under section 267 or 707(b) of the United States Internal Revenue Code of 1986, as amended, and in effect on the first day of January 2004;

or (2) By one component member of a controlled group from another component member of the same controlled group, except that the Tax Commissioner may waive this disqualification if the expenditure is for property or services acquired from a related person for fair market value.

§11-13NN-5.

Tax credit allowed;

Intr(a) Tax SBcredit 131 2026R1367 (a) Credit allowed.

-- An– An eligible taxpayer shallis be allowed a credit against a portion of its annual severance tax liability.liability as provided by this article.

The amount of this credit shall be determined and applied as hereinafter provided in this article.

-- The– The amount of credit allowable is determined by multiplyingadding the amount of the eligible taxpayer's expenditures for road or highway infrastructure improvement projectsprojects, (asas determined and certified by the SecretaryTransportation ofSecretary, Transportation), plus the amount of the eligible taxpayer's qualified investment in coal or natural gas production and processing facilities, and multiplying that sum by 50%.50 percent.

The product of this calculation establishesis the maximum amount of credit allowable under this article.

5 CS for SB 131 (c) Application of credit.

-- The– The amount of credit allowable may be taken against up to 20%20 percent of the eligible taxpayer's annual severance tax liability imposed by section§11-13A-3 three,or article§11-13A- thirteen-a3a of this chapter.code.

Where the eligible taxpayer's expenditure involves a road or highway infrastructure improvementimprovement, the credit may be taken in the year the improvement is completed, as certified by the Transportation Secretary.

Where the expenditure involves coal or natural gas production and processing facilities, the credit may be taken in the year the property is first placed into service or use by the eligible taxpayer.

The annual credit allowance shall be taken in the manner prescribed in section§11-13NN-7 six of this article.

The aggregate annual credit allowance may be claimed by the eligible taxpayer against its severance tax liability shown on its monthly tax returns at the rate of one-twelfth of the annual credit allowance per month.

-- If– If any credit remains after application of subsection (c) of this section, the remaining amount thereof may be carried forward to each ensuing tax year until used or until the expiration of the ninth taxable year subsequent to the year in which the credit was first available.

IfAny any unused credit remainsremaining after the 10th year,year the amount thereof is forfeited.

NoCarryback carryback to a prior taxable year is not allowed for the amount of any unused portion of anyan annual credit allowance.

(e)  Placed(e) Placed in service or use.

-- For– purposesProperty of the credit allowed by this section, property is considered placed in service or use in the earlier of the following taxable years:

(1) The taxable year in which, under the eligible taxpayer's depreciation practice, the period for Intr SB 131 2026R1367 depreciation withregarding respect to the property begins;

§11-13NN-5.§11-13NN-6.

-- Notwithstanding– anyPrior provisionto ofasserting thisa articleclaim tofor the contrary, no credit shall be allowed orby applied under this article for any expenditure for road or highway infrastructure improvementsimprovement untilproject, the person assertingfirst a6 claimCS for theSB allowance131 ofshall creditapply receivesto certification of the project from the Transportation Secretary,Secretary asfor providedcertification inof thisthe section.project.

ApplicationsAn application for the certification of a road or highway infrastructure improvement project shall be filed with and approved by the Transportation Secretary and approved prior to thecommencing commencement of any project construction.

-- Applications for– An application for certification of a road or highway infrastructure improvement project shall containcontain: a detailed description of the project, all engineering drawings required to construct the infrastructure improvements contemplated by the project application, a list of contractors who will work on the project, a description of the work each contractor will perform, the project timetable, a detailed breakdown of the cost of the project, the amount of credit requested and any other information which the Transportation Secretary or his or her designee require.

(1) A detailed description of the project;

(2) Any engineering drawing required to construct the infrastructure improvements included in the application;

(3) A list of any contractors who will work on the project;

(4) A description of the work each contractor will perform;

(5) The project timetable;

(6) A detailed itemization of the total project cost;

(7) The amount of credit requested;

and (8) Any other information the Transportation Secretary may require.

-- Once– Once a project application is filed, the Transportation Secretary shall work with the taxpayer to ensure that the application contains all of the information required byinformation. this section.

ApplicationsAn application for creditcertification may be supplemented or amended at any time after filing until all of the information required byinformation subsection (b) has been provided.

Once a complete application has been filed, the Transportation Secretary shall review it toand determine whether the project shouldis be certified as eligible for a tax credit under this article.

Intr SB 131 2026R1367 (d) Limitation on totalcredit creditsamount. authorized.

-- The– SecretaryThe istax authorizedcredit toavailable certifyfor noany morecertified than $100,000 of expenditures for road or highway infrastructure improvementsimprovement asproject eligiblemay fornot theexceed credit$100,000, providedregardless inof thisthe article.total project cost.

The Secretary shall keepmaintain tracka record of theeach taxpayer’s total expenditurescertified approvedexpenditures. and will cease accepting applications once the expenditure limit has been reached.

-- The– An eligible taxpayer claiming thea credit for certified expenditures for any road or highway infrastructure improvementsimprovement shall include with its severance tax returns any information supporting the computation of the credit and any other information the Transportation Secretary7 requiresCS withfor itsSB severance131 taxSecretary returnsrequires. filed under this chapter.

§11-13NN-6. Qualified§11-13NN-7. Qualified investment in coal or natural gas production and processing facilities.

-- The– A qualified investment in coal or natural gas production and processing facilities is the applicable percentage of the cost of each expenditure for coal or natural gas production and processing facilities whichthat isare placed in service or use in this state by the taxpayer during the taxable year.

-- For– theThe purpose of subsection (a), the applicable percentage of any property is determined underas thefollows: following table:

                               The                                      The applicable percentage is:

LessFewer than 4 years:

                                                                                                                       0            0%                 4 years or more but lessfewer than 6 years:

3333-1/3 1/3% 6 years or more but lessfewer than 8 years:                                 years:                                       66-2/3 66 2/3%    8 years or more:

                                                                                                                      100                  100%                        The useful life of anythe property,property for purposes of this section, is determined as of the date the property is first placed in service or use in this state by the taxpayer, determined in accordance with such rules and requirements as the Tax Commissioner may prescribe.

(c) Cost. --(c) Cost. For purposes of subsection (a), the cost of each property purchased for business expansion is determined under the following rules:

– The cost of any property acquired for business expansion is determined as follows:

-- Cost– Cost does not include the value of property given in trade or exchange for the property purchased for business expansion.

Intr SB 131 2026R1367 (2) Damaged, destroyed, or stolen property.

-- If– If property is stolen or is damaged or destroyed by fire, flood, storm, or other casualty, or is stolen, then the cost of replacement property does not include any insurance proceeds received in compensation for the loss.

(3) Rental of real property.

--  – (A) The cost of real property acquired by written lease for a primary term of 10 years or longer is 100 %100 percent of the rent reserved for the primary term of the 8 CS for SB 131 lease, not to exceed 20 years.

(B)(4) TheRental cost of tangible personal propertyproperty. acquired by written lease for a primary term of:

(i) Four– years,Any orrent longer,reserved isdoes onenot thirdinclude rent for any year subsequent to expiration of the rentbook reservedlife forof the primaryequipment, termdetermined ofusing the lease;straight-line method of depreciation.

(ii)The Sixcost years,of ortangible longer,personal isproperty twoacquired thirdsby ofwritten thelease rent reserved for thea primary term ofof: the lease;

or(A) Four (iii)years Eight years, or longer, is 100%one-third of the rent reserved for the primary term of the lease,lease; not to exceed 20 years: Provided, That in no event may rent reserved include rent for any year subsequent to expiration of the book life of the equipment, determined using the straight-line method of depreciation.

(4) Self-constructed(B) property.Six years or longer, is two-thirds of the rent reserved for the primary term of the lease;

-- Inand the(C) caseEight ofyears self-constructedor property,longer, theis cost100 thereofpercent isof the amountrent properlyreserved chargedfor to the capitalprimary accountterm forof depreciationthe inlease, accordancenot withto federalexceed income20 taxyears. law.

§11-13NN-7.(5) Self-constructed property.

– The cost of self-constructed property is the amount properly charged to the capital account for depreciation in accordance with federal income tax law.

§11-13NN-8.

-- The– The tax credit allowed in this article shallis not be lost bydue reasonto of a mere change in the form of conducting the business in this state,state if the transfertaxpayer or business retains a controlling interest in the successor business.

In this event, the successor business shallis be allowed to claim the amount of credit still available withfor respect to the project.

-- The– The tax credit allowed in this article shallis not be lost bydue reasonto of any transfer or sale of the stock or assets of the eligible taxpayer to a successor business whichthat continues to operate in this state.

Upon transfer or sale, the successor shall acquire the amount of credit that remains available under this article for each subsequent taxable year.

Intr§11-13NN-9. SB 131 2026R1367 §11-13NN-8.

-- If– duringThe unused portion of any taxablecredit year,for property withis respectforfeited tofor whichthe ataxable taxyear creditand hasall beenensuing allowedyears underif, thisduring article:any taxable year, the property:

(1) Is disposed of prior to the end of its useful life, as determined under section§11-13NN-9 eight of this 9 CS for SB 131 article;

or (2) Ceases to be used in an eligible business of the taxpayer in this state prior to the end of its useful life, as determined under section§11-13NN-7 six of this article,article. then the unused portion of the credit allowed for the property is forfeited for the taxable year and all ensuing years.

Additionally,(b) exceptRedetermination when the property is damaged or destroyed by fire, flood, storm, or other casualty, or is stolen, the taxpayer shall redetermine the amount of credit allowed in all earlier years by reducing the applicable percentage of cost of the property allowed under section six of this article, to correspond with the percentage of cost allowable forcredit theamount. period of time that the property was actually used in this state in the business of the taxpayer.

The– taxpayerExcept shallwhen thenthe fileproperty is stolen or is damaged or destroyed by fire, flood, storm, or other casualty, a reconciliationtaxpayer statementwho forforfeits an unused portion of credit pursuant to this section shall redetermine the yearamount of credit allowed in whichall earlier years by reducing the forfeitureapplicable occurspercentage andof paycost anyof additionalthe taxesproperty owedallowed dueunder §11-13NN-7 of this article to reductioncorrespond ofwith the amountpercentage of creditcost allowable for the earlierperiod years,of plustime interestthat andthe anyproperty applicablewas penalties.actually used in this state in the taxpayer’s business.

The taxpayer then shall file a reconciliation statement shallfor bethe filedyear within taxpayer'swhich annualthe severanceforfeiture taxoccurs return.and pay any additional taxes owed due to reduction of the amount of credit allowable for the earlier years, plus interest and any applicable penalties.

(b) CessationThe ofreconciliation operationstatement ofshall coalbe productionfiled orwith processingthe facility.taxpayer's annual severance tax return.

-- If(c) Cessation duringof any taxable year the taxpayer ceases operation of a coal production or processingnatural facilitygas inproduction thisor stateprocessing forfacility. which credit was allowed under this article, before expiration of the useful life of property with respect to which tax credit has been allowed under this article, then the unused portion of the credit is forfeited.

Additionally,– exceptIf whenduring theany cessationtaxable isyear due to fire, flood, storm, or other casualty, the taxpayer shallceases redetermineoperation the amount of credita allowedcoal byor reducingnatural thegas applicableproduction percentageor ofprocessing costfacility ofin thethis propertystate allowedfor underwhich sectioncredit sixwas ofallowed under this article, tobefore correspondexpiration withof the percentageuseful life of costthe allowableproperty for thewhich period of time that the propertytax credit was actuallyallowed, usedthen inthe thisunused stateportion in a business of the taxpayer.credit is forfeited.

TheExcept taxpayerwhen shallthe thencessation fileis adue reconciliationto statementfire, withflood, itsstorm, annualor severanceother Intrcasualty, SBthe 131taxpayer 2026R1367shall taxredetermine return,the foramount theof yearcredit inallowed whichby reducing the forfeitureapplicable occurs,percentage andof paycost anyof additionalthe taxesproperty owedallowed dueunder to§11-13NN-7 theof reductionthis ofarticle to correspond with the amountpercentage of creditcost allowable for the earlierperiod years,of plustime interestthat andthe anyproperty applicablewas penalties.actually used in this state in the taxpayer’s business.

§11-13NN-9.The taxpayer then shall file a reconciliation statement with its annual severance tax return, for the year in which the forfeiture occurs, and pay any additional taxes owed due to the reduction of the amount of credit allowable for the earlier years, plus interest and any applicable penalties.

The reconciliation statement shall be filed with the taxpayer's annual severance tax return.

10 CS for SB 131 §11-13NN-10.

Its(1) The identity;

Its(2) The actual or reasonably determined cost;

Its(3) The straight-line depreciation life;

(4) The month and taxable year in which it was placed in service;

(5) The amount of credit taken;

and (6) The date it was disposed of or otherwise ceased to be qualified property.

§11-13NN-10.§11-13NN-11.

A taxpayer who does not keep the records required by this article for identification of qualified property is subjecttreated toas having disposed of any qualified property during the followingtaxable rules:year that the taxpayer cannot establish was still on hand in this state at the end of that year.

(a)If Athe taxpayer cannot establish when qualified property on which the credit was claimed was placed in service, the taxpayer is treated as having disposedplaced of,it duringin service in the taxablemost year,recent anyprior qualifiedyear propertyin which similar property was placed in service, unless the taxpayer cannotcan establish wasthat stillthe onproperty hand,placed in thisservice state,in at the endmost ofrecent thatyear year.is still on hand.

(b) If a taxpayer cannot establish when qualified property on which the credit was claimed was placed in service, the taxpayer is treated as having placed it in service in the most recent prior year in which similar property was placed in service, unless the taxpayer can establish that the property placed in service in the most recent year is still on hand.

§11-13NN-11. Effective§11-13NN-12. Effective date.

The credit allowed by this article shallis be allowed for tax years beginning on or after the first day of January 1, 2027.

NOTE:11

The purpose of this bill is to create a credit against the severance tax to encourage Intr SB 131 2026R1367 private companies to make infrastructure improvements to highways, roads and bridges in this state.

The bill limits the total amount of road and highway infrastructure improvement credits which can be certified by the Secretary of Transportation.

The bill seeks to encourage greater capital investment in coal production and processing facilities.

The bill will increase economic opportunity in this state.

The bill authorizes the claiming of the credits.

Finally, the bill provides for an effective date.

Strike-throughs indicate language that would be stricken from a heading or the present law, and underscoring indicates new language that would be added.

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