SB 718 — Relating generally to Coal Severance Tax Rebate

NEWS RELEASES HELPFUL LINKS IntroducedEnrolled Version - OriginatingFinal inVersion Committee « Senate Bill 718 History OTHER VERSIONS  —  EnrolledIntroduced Version - FinalOriginating Versionin Committee  |   |  Email Key:

Red = new code to be enacted WEST virginia legislature regular session OriginatingEnrolled Senate Bill 718 By Senators Tarr, Sypolt, Swope, Hamilton, Clements, Roberts, Nelson, and Martin [Originating[Passed inApril the10, Committee2021; on Finance;

reportedin oneffect Marchfrom 29,passage] 2021]AN AACT BILL to amend and reenact §11-13EE-2, §11-13EE-3, §11-13EE-5, and §11-13EE-16 the Code of West Virginia, 1931, as amended, all relating generally to the Coal Severance Tax Rebate;

(3) “Base period annual average severance taxes” means the annual average of the State portion of severance taxes paid under §11-13A-3 of this code during the five-year period directly preceding the year the qualifying capital investment in new machinery and equipment was placed into service.  The annual average of the state portion of severance taxes is found by taking the cumulative total of the Statestate portion of severance taxes paid from all mines operated within the State by the eligible taxpayer and dividing the aggregate cumulative total of the Statestate portion of severance taxes by five.

 (2)(4) “Business”“Capital meansinvestment andin isnew limitedmachinery to the activity of producing coal for sale, profit or commercial use including coal preparation and processing.equipment” means:

(3)(A) (4)Tangible “Capitalpersonal investmentproperty in newthe form of machinery and equipment”equipment means:that is purchased on or after the effective date of this article and placed in service for direct use in the production of coal, when the original or first use of the machinery or equipment in this state commences on or after the effective date of this article;

(A)(B) Tangible personal property in the form of machinery and equipment that is purchasedleased onby or after the effectivetaxpayer date of this article and placed in service for direct use in the production of coal,coal whenby the taxpayer on or after the effective date of this article, if the original or first use of the machinery or equipment commences in this Statestate, commenceswith inthe thistaxpayer, State on or after the effective date of this article;article and the machinery or equipment is depreciable, or amortizable, for federal income tax purposes and has a useful life of five or more years for federal income tax purposes.

and(C) (B) Tangible personal property in the form of machinerymaterials andused equipmentfor thatinfrastructure isimprovements leasedto byreal property on or after the taxpayereffective date of this article and placed in service for direct use in the production of coalcoal, bywhen the taxpayeroriginal on or afterfirst theuse effective date of this article, if the originalmaterials orused firstfor use of the machineryinfrastructure orupgrades equipment commences in this State,state with the taxpayer, on or after the effective date of this articlearticle.  andSuch theinfrastructure machineryupgrades orinclude, equipmentbut isare depreciable,not orlimited amortizable,to, formaterials federalused incomefor taxconstruction purposes and has a useful life of 5haul roads or moreaccess yearsroads, forculverts, federalbelt incomelines, taxand purposes.ventilation fans;

(C) Tangible personal property in the form of materials used for infrastructure improvements to real property on or after the effective date of this article and placed in service for direct use in the production of coal, when the original or first use of the materials used for the infrastructure upgrades commences in this State on or after the effective date of this article.  Such infrastructure upgrades include, but are not limited to, materials used for construction of haul roads or access roads, culverts, belt lines, and ventilation fans;

(4) (5) “Coal mine” or “mine” includes:

(5) (6) “Coal mining operation” includes the mine and the coal preparation and processing plant.

(6) (7) (7) “Coal preparation and processing plant” means any facility (excluding underground mining operations) which prepares coal by one or more of the following processes:

(7) (8) “Coal production” means the privilege of severing, extracting, reducing to possession and producing coal for sale, profit or commercial use and includes the processing of coal at a coal preparation and processing plant.

(8) (9) “Commissioner” or “Tax Commissioner” are used interchangeably herein and mean the Tax Commissioner of the State of West Virginia, or his or her delegate.

(9) (10) “Controlled group” means one or more chains of corporations connected through stock ownership with a common parent corporation if stock possessing at least 50 percent of the voting power of all classes of stock of each of the corporations is owned, directly or indirectly, by one or more of the corporations;

(10)(11)  (11) “Controlling interest” means:

(11) (12) “Corporation” means any corporation, joint-stock company or association, 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.

(12) (13) “Delegate” used in the phrase “or his delegate,” when used in reference to the Tax Commissioner, means any officer or employee of the State Tax Department duly authorized by the Tax Commissioner directly, or indirectly by one or more redelegations of authority, to perform the functions mentioned or described in this article.

(13) (14) “Directly used or consumed in the production of coal” means used or consumed in those activities or operations which constitute an integral and essential part of the production of coal, as contrasted with and distinguished from those activities or operations which are simply incidental, convenient or remote to the production of coal.

(i) New machinery and equipment that is depreciable, or amortizable, for federal income tax purposes, that has a useful life of 5five or more years for federal income tax purposes, and that are directly used in the production of coal in this state;

Provided, That safety equipment and apparatus directly used in the production of coal or to secure the safety of mine personnel is direct use in the production of coal when the tangible personal property is depreciable, or amortizable, for federal income tax purposes and has a useful life of 5five or more years for federal income tax purposes when it is placed in service or use;

(14) (15) “Eligible taxpayer” means:

(A) Any person who pays the tax imposed by §11-13A-3 of this code on the privilege of producing coal for sale, profit or commercial use for at least 2two years before the capital investment in machinery and equipment is placed in service or use in this state;

or (B) A taxpayer that has experienced a change in business composition through merger, acquisition, split-up, spin-off or other ownership changes or changes in the form of the business organization from limited liability company to C corporation, or partnership, or from one form of business organization to a different form of business organization, may constitute an eligible taxpayer if the entity currently operating in this state was operating in a different form of business organization in this state at least 2two years before the capital investment in new machinery and equipment is placed in service or use in this state.

(C)   When the rebate applicant is part of a controlled or affiliated group, for purposes of determining the increase in the Statestate portion of severance taxes paid, the increase in coal production tonnage, and the increase in full-time and full-time equivalent employment, the term, “eligible taxpayer” includes all members of the rebate applicant’s controlled or affiliated group.

Thus, the increase in the Statestate portion of severance taxes is determined by subtracting the base period annual average severance taxes paid by the eligible taxpayer’s controlled or affiliated group for all coal mined in this Statestate from the Statestate portion of severance taxes paid by the eligible taxpayer’s controlled or affiliated group for all coal mined in this Statestate during the tax year for which the rebate is claimed.  Likewise, the “eligible taxpayer’s” total aggregate production tonnage and total employment figures referenced in §11-13EE-3(c)(1) &and (2) are determined by reference to the controlled group or affiliated group’s total aggregate production tonnage and total employment numbers across all mines operated by the controlled or affiliated group with in the State.state.

(15)(18) “Includes”“Original anduse” “including”means whenthe usedfirst inuse a definition contained in this article, shall not be deemed to excludewhich other things otherwise within the generallyproperty understoodis meaningput ofby theanyone termin defined.this state.

(16)(19) (18)“Partnership” “Originalincludes use”a syndicate, group, pool, joint venture or other unincorporated organization through or by means theof firstwhich useany tobusiness, operation or venture is carried on, which is taxed under Subchapter K of the propertyInternal isRevenue putCode, byas anyonedefined in §11-24-3 of this State.code, and which is not a trust or estate, a corporation or a sole proprietorship.

(17) (19) “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.

(18) (20) “Person” includes any natural person, corporation, partnership, limited liability company or other business entity.

(19) (21) “Production of coal” means privilege of severing, extracting, reducing to possession and producing coal for sale, profit or commercial use and includes the processing of coal at the coal preparation and processing plant.

(20) (22) “Property” means tangible personal property and is limited to new machinery and equipment that is depreciable or amortizable for federal income tax purposes and that has a useful life of 5five or more years for federal income tax purposes.

(21) (23) “Property purchased or leased for business expansion” means:

of this code, and which has a useful economic life at the time the property is placed in service or use in this state, of 5five or more years.

(ii) Tangible personal property acquired by written lease having a primary term of 5five years or more, that is depreciable or amortizable by the lessor, or lessee, for federal income tax purposes and that has a useful life of 5five or more years for federal income purposes when it is placed in service or use, and when the lease commences and was executed by the parties thereto on or after the effective date of this article, if used as a component part of a new or expanded coal mining operation in this state shall be included within this definition.

(22) (24) “Purchase” means any acquisition of new machinery or equipment, but only if:

(23) (25) “Qualified coal mining activity” means any business or other activity subject to the tax imposed by §11-13A-3 of this code on the privilege of severing, extracting, reducing to possession and producing coal for sale, profit or commercial use including the treatment process described as mining in §11-13A-4(a)(1) of this code.

(24) (26) “Qualified investment” means capital investment in new machinery and equipment directly used in the production of coal in this state that is depreciable, or amortizable, for federal income tax purposes and has a useful life for federal income tax purposes of 5five or more years when it is placed in service or use in this state.

(25) (27) “Rebate” means the amount of rebate allowable under §11-13EE-4 of this article.

(26) (28) “Related person” means: