Current through Register Vol. XLI, No. 38, September 20, 2024
A Taxpayer is entitled to the special valuation allowed under
the Act when at least $50 million of qualified capital addition property has
been enrolled in the name of the Taxpayer. The special valuation shall be
granted for the tax year when the aggregate total value of enrolled qualified
capital addition property enrolled in the name of the Taxpayer has exceeded $50
million and for succeeding years in accordance with W. Va. Code '11-6F-3
and 4.
5.1. Qualified capital addition
property enrolled in the name of the Taxpayer before the $50 million threshold
has been exceeded shall not be treated as having been placed in service for
purposes of the Act. When the first $50 million of the qualified capital
addition property has been enrolled in the name of the Taxpayer, that $50
million threshold investment in the property is considered to be placed in
service on the date of enrollment of the property. Qualified capital addition
property in excess of $50 million that is enrolled in the name of the Taxpayer
on or after the date of enrollment of property representing the $50 million
threshold amount shall be treated as having been placed in service when
enrolled in the name of the Taxpayer.
5.2. The qualified capital addition property
as well as the initial $50 million investment in property constitutes a
"qualified capital addition to a manufacturing facility" and "certified capital
addition property," and shall be valued in accordance with W Va. Code
'11-6F-3
beginning in the tax year for which the amount of the original cost of the
investment in new qualified capital addition property in place first exceeds
$50 million on the July 1 assessment day.
5.3. Example:
Construction of a capital addition to an existing eligible
manufacturing facility begins on April 1, 1997. The construction shall be
accomplished over a period of 24 months. It shall be completed on April 1,
1999, and the capital addition shall be placed in operation on June 1,
1999.
On July1, 1997, three months of construction have been
completed. On July 1,1998, 15 months of construction have been completed, and
more that $50 million of qualified capital addition property is in
place.
Construction is completed April 1, 1999. The plant is placed
in operation on June1, 1999, and as of July 1, 1999 is assessed as
a completed qualified capital addition to a manufacturing facility for tax year
2000.
5.3.1. The addition is assessed
as follows for the tax years 1998, 1999 and 2000:
5.3.1.1. On July 1, 1997, 3 months of
construction in progress is enrolled in the name of the Taxpayer with an
appraised value equal to the fair market value of the materials in place in the
construction. The $50 million threshold has not yet been reached. Therefore,
for purposes of the Act, the property is not treated as having been placed in
service, and the construction in progress is valued and taxed for the 1998 tax
year without applying the special property tax valuation. The 1998 tax year is
the January 1 to December 31 calendar year next succeeding the July 1, 1997
assessment date.
5.3.1.2. The Act
does not yet apply because the $50 million threshold has not been reached. For
the 1998 tax year, the assessed value is 60% of the appraised value. Typically
the appraised value of construction in progress is set at the value of the
materials in place without any cost of labor component.
5.3.1.3. On July 1, 1998, fifteen months of
construction have been completed, and more than $50 million of construction
materials have been incorporated into the construction in progress and are
assessed on July 1. The $50 million threshold has now been exceeded. The
property having a cost of more than $50 million, even though it has not yet
been placed into operation, shall be treated as having been placed in service
on July 1, 1998 for purposes of the Act. This is the date when the cost of the
property enrolled in the name of the Taxpayer attributable to the project
exceeds $50 million.
5.3.1.4. The
physical placement of property into operation and the placement of property
into service for purposes of the Act are not related concepts, and these events
do not typically occur simultaneously. The term "placed in service" is defined
in Section 2 of this rule. Property is placed into service for purposes of the
Act when the criteria set forth in that definition have been satisfied. W. Va.
Code '11-6F-4
states that the certified capital addition property receives special property
tax valuation beginning at the point in time when the qualified capital
addition property is "placed in service." The Taxpayer's entitlement to special
property tax valuation accrues only when qualified capital addition property is
"placed in service."
5.3.1.5. For
the 1999 tax year (the tax year following July 1, 1998), the assessed value is
the appraised value multiplied by 5% multiplied by 60%. Again, for construction
in progress, the materials cost is counted in the appraised value, but not the
labor cost component.
5.3.1.6.
Construction is completed on April 1, 1999. The plant goes into operation on
June 1, 1999. The placement of property in service for purposes of the Act
bears no relationship to the date when property is placed into operation as a
functioning part of the manufacturing facility.
5.3.1.7. On July 1, 1999, the construction
has been completed for about 3 months. The qualified capital addition property
enrolled for the first time in the name of the Taxpayer on July 1, 1999 shall
be treated as having been placed in service immediately upon enrollment because
the $50 million threshold was reached on July 1, 1998. New
qualified capital addition property enrolled in the name of the Taxpayer after
the $50 million threshold has been exceeded is treated as having been placed in
service for purposes of the Act when enrolled in the name of the Taxpayer. The
plant's appraised value shall now include not only the cost of the materials
incorporated into the plant, but also the value of the labor for the
construction. Appraised value shall increase significantly for the 2000 tax
year (the calendar year after July 1, 1999).
5.3.2. The assessed value is original cost
multiplied by 5% multiplied by 60%.
5.3.2.1.
The cost layers created by the property enrolled in the name of the Taxpayer on
July 1, 1997 and on July 1, 1998 shall have special property tax valuation
treatment for the tax years 1999 through 2008 inclusive (ten years).
5.3.2.2. The value of property enrolled in
the name of the Taxpayer on July 1, 1997 was below the $50 million threshold.
Therefore, the qualified capital addition property enrolled in the name of the
Taxpayer in that year is not treated as having been placed in service in the
1998 tax year (the next calendar year after July 1, 1997). The $50 million
threshold is exceeded on July 1, 1998. The investment that makes up the $50
million amount is composed of the investment in the property enrolled in the
name of the Taxpayer on July 1, 1997, as well as the investment in property
enrolled in the name of the Taxpayer on July 1, 1998. Thus, the property
enrolled in the name of the Taxpayer as of July 1, 1997 is treated as having
been placed in service for purposes of the Act on July 1, 1998, along with the
remaining investment in property comprising the $50 million amount that was
enrolled in the name of the Taxpayer on July 1, 1998. This is why the property
enrolled in the name of the Taxpayer on both assessment days, July 1, 1997 and
July 1, 1998, is treated as placed in service on July 1, 1998. The July 1, 1998
assessment day is the assessment day for the tax year beginning on January 1,
1999. This is why the property enrolled in the name of the Taxpayer on July 1,
1997 and the property enrolled in the name of the Taxpayer on July 1, 1998
shall receive special property tax valuation under the Act beginning in tax
year 1999 and ending in tax year 2008.
5.3.2.3. The cost layer created by the
property enrolled in the name of the Taxpayer on July 1, 1999 shall have
special property tax valuation treatment for the tax years 2000 through 2009
(ten years). The special property tax valuation treatment for both layers shall
be concurrent for the years 2000 to 2008.
