West Virginia Code of State Rules
Agency 110 - Tax
Title 110 - LEGISLATIVE RULE STATE TAX DEPARTMENT
Series 110-13C - Business Investment And Jobs Expansion Tax Credit, Corporation Headquarters Relocation Tax Credit, Sma
Section 110-13C-4b - Credit allowable for certified projects

Universal Citation: 110 WV Code of State Rules 110-13C-4b

Current through Register Vol. XLI, No. 38, September 20, 2024

W. Va. Code '11-13C-4b provides for the creation of multiple party and multiple year business investment and jobs expansion tax credit projects. A multiple party business investment and jobs expansion tax credit project is one where two (2) or more business entities engage in a business enterprise to which the project participants contribute property or jobs or both. A multiple year project is one where the qualified investment is placed in service or use over a period of more than one (1) year, up to three (3) tax years. It is possible to have a project which is both a multiple party project and a multiple year project.

4b.1. In general. - A project certified by the Tax Commissioner shall be eligible for the credit allowable by W. Va. Code '11-13C et seq. A project eligible for certification under W. Va. Code '11-13C-4b is one where:

4b.1.1. The qualified investment under W. Va. Code '11-13C et seq. creates at least fifty (50) new jobs but such qualified investment is placed in service or use over a period of three (3) successive tax years: Provided, That such qualified investment is made pursuant to a written business facility development plan of the taxpayer providing for an integrated project for investment at one or more new or expanded business facilities, a copy of which must be attached to the taxpayer's application for project certification and approved by the Tax Commissioner, and the qualified investment placed in service or use during the first year would not have been made without the expectation of making the qualified investment placed in service or use during the next two (2) succeeding tax years;
4b.1.1.1. Business investment and jobs expansion tax credit allowable for qualified investment in a multi-year project (or a multi-year, multiparticipant project) placed in service or use after March 9,1990 may not be used to offset severance tax, as provided in W. Va. Code '11-13C-5(e), unless one of the transition rules set forth in W. Va. Code '11-13C-14(c)(s)(B) or (C) applies.

4b.1.1.2. The term "project" as used in W. Va. Code '11-13C-14(c)(B)(ii) and (iv) means and is limited to a multi-year project) (or a multi-year, multiple participant project in which qualified investment property is placed in service over a period of two or three successive tax years; and which is certified by the Tax Commissioner as a multi-year project (or as a multi-year, multiple participant project) under W. Va. Code '11-13C-4b(b).

4b.1.1.3. The term "plan for an integrated project" as used in W. Va. Code '11-13C-14(c)(2)(C)(ii) includes no more than two Section 11-13C-14b(a) multi-year (or multi-year, multiple participant projects) each of which is certified by the Tax Commissioner under W. Va. Code '11-13C-4b(b), if the integrated project plan satisfies the requirements set froth in Section 14.3.2.3 of these regulations.

4b.2. Application for certification. - The application for certification of a project under W. Va. Code '11-13C-4b shall be filed with and approved by the Tax Commissioner prior to any credit being claimed or allowed for the project's qualified investment and new jobs created as a direct result of the qualified investment. This application shall be approved in writing by all the participants in the project and shall contain such information as the Tax Commissioner may require to determine whether the project should be certified as eligible for credit under W. Va. Code '11-13C-4b.

4b.2.1. Projects may be certified under W. Va. Code '11-13C-4b subsequent to the placement of project investment into service or use and prior to the taking of project credit on tax returns. If project credit is taken on any tax return prior to project certification the taxpayer filing such returns shall be subject to audit and assessment of tax not paid due to offset by such credit and shall be liable for payment of tax, penalties, interest and additions to tax, notwithstanding the fact that project certification may be subsequently issued. Only when project certification is ultimately issued shall the taxpayer be entitled to credit. However, any penalties, interest and additions to tax due on tax not paid as a result of the premature application of the credit shall not be discharged by reason of the issuance of such certification. The taxpayer, upon receiving certification, may file amended tax returns only for open tax periods within the (generally) ten (10) year credit period not foreclosed by the limitations period set forth in W. Va. Code '11-10 et seq., and may take the credit against tax on such amended returns. The filing of such amended returns shall not result in the discharge of interest, penalties or additions to tax due as a result of the premature taking of credit by the taxpayer. Credit which would have been available had timely Certification been sought and issue for any tax year of the (generally) ten (10) year credit period which is foreclosed by the limitations period set forth in W. Va. Code '11-10 et seq. shall be forfeited.

4b.3. Taking of credit.

4b.3.1. If the certified project for which qualified investment is made involves one (1) or more persons making the capital investment and one (1) or more persons, or a combination thereof, creating at least fifty (50) new jobs at the site of the new or expanded business facility or facilities, then credit shall be allowed for the certified project based upon the qualified investment in the certified project (as determined under W. Va. Code '11-13C-6 and these regulations) multiplied by the project's new-jobs percentage (determined under W. Va. Code '11-13C-7 and these regulations).

4b.3.2. If the certified project for which qualified investment is made involves one or more persons making the capital investment and one (1) or more persons, or a combination thereof, creating at least fifty (50) new jobs located within a fifty (50) mile radius of each new or expanded business facility in which the qualified investment is made, then credit shall be allowed under this article for the certified project based upon the qualified investment in the certified project (as determined under W. Va. Code '11-13C-6) multiplied by fifty percent (50%).
4b.3.2.1. W. Va. Code '11-13C-4b(a)(3) permits the certification of a business investment and jobs expansion tax credit project creating at least fifty (50) new jobs located within a fifty (50) mile radius of each new or expanded business facility. This section addresses the very limited situation where investment is made in a business facility, and jobs having no permanent and fixed situs are created by that investment. The section does not apply to a situation where investment is made and jobs are created at two (2) or more facilities. It does not require that facilities be located within fifty (50) miles of each other. It merely requires that jobs be created within fifty (50) miles of any facility.

The fact that two (2) or more facilities in which qualified investment is made are more than fifty (50) miles apart will be irrelevant in determining whether or not the business investment and jobs expansion tax credit will apply. For purposes of the credit, investment in two (2) or more facilities would be treated in the same way as investment in one (1) business facility if the business engaged in appears to be a single unified enterprise, and the number of jobs created at or within fifty (50) miles of each facility would count toward the determination of the amount of business investment and jobs expansion tax credit available to the taxpayer.

4b.3.3. The amount of credit allowable, as determined under subdivision 4b.3.1 or 4b.3.2, above, shall be applied as provided in W. Va. Code '11-13C-5, and shall be claimed in the manner specified in the project's application to the Tax Commissioner for certification under this Section, by one (1) participant in the project or divided among the several participants in the project, and for this purpose the numerator of the payroll factor shall be the total compensation paid in this State during the taxable year by all project participants to all new employees filling the new jobs created and the denominator shall be the total compensation paid in this State, during the taxable year by all project participants to their employees. Such allocation, if approved by the Tax Commissioner, shall constitute a binding election by the participants in the project for the entire term during which the credit attributable to the qualified investment in the certified project may be applied to reduce tax liabilities.
4b.3.3.1. The three (3) tax year project investment period will begin with the first tax year during which project investment is first placed into service or use. IT will end with the end of the second fiscal or calendar tax year subsequent to the end of the first tax year during which project investment was placed into service or use. See Section 4.3 of these regulations for determination of the time over which investment may be placed in service or use.
4b.3.3.1.a. Investment placed in service or use over successive years, up to the three (3) tax year maximum for multiple year projects, may typically be added to the credit base when placed in service or use. However, disregarding any rebate credit carryover, the number of years over which the credit can be taken is ten (10) years, beginning in each year when the investment is placed in service or use. Thus, for example, disregarding a possible election to delay the beginning of the credit period for one (1) year, investment placed in service or use in year one (1) would create credit to be applied from year one (1) to year ten (10), and investment placed in service or use in year two (2) would create credit to be used from year (2) to year eleven (11), etc. The multiple year investment does not create a revised credit; rather, it adds new credit and new credit years to the credit already in place, and each discrete credit layer is applied over a ten (10) year period.

4b.3.3.1.b. A taxpayer having multiple year project credit available may, pursuant to W. Va. Code '11-13C-4 and Section 4.2 of these regulations, elect to delay the beginning of the (typically) ten (10) year period over which credit may be taken by one (1) year for any or all of the three (3) tax years during which project investment may be placed in service or use. Thus, for example, credit arising from year one (1) investment may be taken beginning in either year one (1) or two (2). Credit arising from year two (2) investment may be taken beginning in year two (2) or year three (3), and credit arising from year three (3) investment may be taken beginning in year three (3) or year four (4). This will permit the taxpayer to aggregate any two (2) successive year's credit for purposes of determining the beginning of the (typically) ten (10) year period for taking the credit against taxes. Credit for investment placed in service or use in years one (1) and two (2) can thus be taken beginning in year two (2) or credit for years two (2) and three (3) can be taken beginning in year three (3).

4b.3.3.2. The participant or participants claiming the credit for qualified investments in a certified project shall annually file with their income tax returns filed under this chapter:
4b.3.3.2.a. Certification that the participant's qualified investment property continues to be used in the project and if disposed of during the tax year, was not disposed of prior to expiration of its useful life;

4b.3.3.2.b. certification that the new jobs created by the project's qualified investment continue to exist and are filled by persons who are residents of this State; and

4b.3.3.2.c. such other information as the Tax Commissioner requires to determine continuing eligibility to claim the annual credit allowance for the project's qualified investment.

4b.3.4. Payroll factor. - For multiple party projects or multiple year, multiple party projects where all project participants have only credit arising from one project available to them, the payroll factor apportionment fraction described in W. Va. Code '11-13C-4b(c)(3) should be used by project participants in determining the amount of tax against which the project business investment and jobs expansion tax credit may apply.
4b.3.4.1. The statutory scheme set forth in W. Va. Code '11-13C-5 for determining the amount of a given tax against which the business investment and jobs expansion tax credit can apply is to set up a fraction, the numerator of which is all wages, salaries and other compensation paid during the taxable year to all employees of the taxpayer employed in West Virginia holding positions directly attributable to qualified investment, and the denominator of which is all wages, salaries and other compensation paid during the taxable year to all employees of the taxpayer employed in West Virginia. This fraction is then used as a multiplier for determining the portion of each business tax due (which is solely attributed to and the direct result of the taxpayer's qualified investment) against which the business investment and jobs expansion tax credit can be taken.

W. Va. Code '11-13C-5 uses the term "all employees of the taxpayer employed in this state" for determining both the numerator and denominator of the multiplier fraction. This term must be interpreted to mean all employees employed in West Virginia without regard to domicile or residence. To interpret the term otherwise might encourage taxpayers to hire non-West Virginia domiciliaries or nonresidents for jobs not attributable to qualified investment. If only West Virginia domiciled residents were counted in the numerator and denominator, the hiring of non-West Virginians for all jobs except those attributable to qualified investment would decrease the denominator and would result in an increase in the amount of tax against which the credit would be available.

For example: If only jobs held by West Virginia domiciliaries or residents were counted in determining the numerator and denominator of the multiplier fraction, and if the taxpayer had one thousand (1,000) numerator category jobs and four thousand five hundred (4,500) denominator category jobs, the taxpayer could increase the multiplier by firing three thousand five hundred (3,500) West Virginians in jobs not related to the investment and hiring three thousand five hundred (3,500) out-of-state domiciliaries to replace the West Virginia domiciled or resident employees. The multiplier would then go from one thousand/four thousand five hundred (1,000/4,500), or twenty-two percent (22%) to one thousand/one thousand (1,000/1,000), or one hundred percent (100%), despite the loss of three thousand five hundred (3,500) jobs formerly held by West Virginia citizens.

The policy of recognizing only jobs held by West Virginia domiciled West Virginia residents in the numerator and denominator would thus have an effect contrary to the purpose of the business investment and jobs expansion tax credit. It would encourage employment of non-West Virginia employees in denominator category jobs not attributable to qualified investment. Since the number of denominator category jobs not attributable to qualified investment is often greater than numerator category jobs, the effect would be to discourage the hiring of West Virginia domiciliaries or residents.

4b.3.4.2. W. Va. Code '11-13C-4b(c)(3) (for multiple party projects) requires that the numerator of the payroll factor be the total compensation paid in the State of West Virginia during the taxable year by all project participants to all "new employees" filling the "new jobs" created, and the denominator be the total compensation paid in West Virginia during the taxable year by all project participants to their employees.

The term "new job" is defined in W. Va. Code '11-13C-4b(d)(1) as a job which did not exist in West Virginia prior to the qualified investment being made, and which is filled by a new employee. The term "new employee" is defined in W. Va. Code '11-13C-4b(d)(1) as a person residing and domiciled in West Virginia, hired by a participant to fill a position for a job in West Virginia which did not exist in West Virginia prior to the date on which the qualified investment is placed in service or use in West Virginia.

4b.3.4.3. W. Va. Code '11-13C-5 prescribes the numerator and the denominator for the payroll factor based upon payroll of "all employees of the taxpayer employed in this state," and this term encompasses jobs held by West Virginia domiciliaries and residents as well as employees employed in West Virginia who are not West Virginia domiciliaries or residents. However, the payroll factor for multiple party projects is more limited. Unlike the payroll factor specified under W. Va. Code '11-13C-5, the payroll factor for business investment and jobs expansion tax credit projects, where all participants in a multiple party project have such credit available to them from one or more multiple party or multiple year, multiple party projects, must have a numerator based upon payroll of all "new employees" of all participants filling "new jobs." Because the term "new employee" is defined to include only West Virginia domiciled, West Virginia residents, only payroll of West Virginia domiciled West Virginia residents, including (unlike other payroll factor determinations under W. Va. Code '11-13C-5) payroll attributable to part-time employees, will be included in the numerator.
4b.3.4.3.a. W. Va. Code '11-13C-7(e) reads as follows:

Equivalency of permanent employees. - The hours of part-time employees shall be aggregated to determine the number of equivalent full-time employees for the purpose of subsection (b) hereof but not for the purposes of subsection (c) hereof.

This provision excludes part-time employees from qualifying as employees holding jobs "directly attributable to the qualified investment" under W. Va. Code '11-13C-7(c).

W. Va. Code ''11-13C-4b(d) and '11-13C-3(b)(13) define a part-time basis job as one being performed at least twenty (20) hours per week for at least six (6) months during the taxable year. For temporary or seasonal jobs, unlike part-time jobs, as defined above, the hours cannot be aggregated to determine equivalent full-time employees. Indeed, temporary or seasonal employees are specifically excluded from the definition of "permanent employees" as defined in W. Va. Code ''11-13C-4b(d) and 11-13C-3(b)(13), and payroll of seasonal and temporary employees cannot be included in the apportionment fraction numerator for multiple party project participants or any other project or nonproject credit taker.

The denominator of the factor will be based upon payroll of all employees employed in West Virginia without regard to domicile or residence.

4b.3.4.4. The payroll factor under both W. Va. Code '11-13C-5 (for credit takers generally) and W. Va. Code '11-13C-4b(c)(3) (for multiple party projects) should be calculated for each year of the ten (10) year (or sometimes longer) credit period and neither the numerator nor the denominator should be limited by the number of jobs created during the three (3) year new jobs redetermination period set forth in W. Va. Code '11-13C-6.

4b.3.4.5. The payroll factor for nonproject business investment and jobs expansion tax credit takers, multiple year, non-multiple party project tax credit takers and taxpayers involved in multiple party projects or multiple year, multiple party projects where one or more project participants is entitled to a nonproject business investment and jobs expansion tax credit or a multiple year nonmultiple party project credit in addition to and separate from the multiple party or multiple year, multiple party project credit, the numerator of the payroll factor should be based upon "employees of the taxpayer employed in this state whose positions are directly attributable to the qualified investment, without regard to residence or domicile; rather than upon only West virginia domiciled West Virginia residents holding "new jobs." The denominator of the factor will be based upon payroll of all employees employed in West virginia without regard to domicile or residence.

4b.3.4.6. This subsection prescribes a mathematical procedure to be used in business investment and jobs expansion tax credit computations for determining the W. Va. Code ''11-13C-4b(c)(3) and 11-13C-5(c)(2), (d)(2), (e)(2), (f)(2), (g)(2), (h)(2) and (i)(3) payroll based tax liability apportionment fraction for multiple project project participants or multiple business investment and jobs expansion tax credit taxpayers and entities participating in projects where one or more participants are multiple project project participants or multiple business investment and jobs expansion tax credit taxpayers.
4b.3.4.6.a. Certain taxpayers have implemented more than one investment program subject to business investment and jobs expansion tax credit or are participants in more than one business investment and jobs expansion tax credit project.

This presents a problem in calculating what the tax liability apportionment fraction should be. The business investment and jobs expansion tax credit statute requires that a taxpayer determine what portion of its tax liability is attributable to qualified investment, and therefore subject to the business investment and jobs expansion tax credit, by multiplying the total tax liability for each tax against which the credit can be taken, except for sales tax and the payroll and property taxes, by a fraction consisting of payroll attributable to qualified investment over total West Virginia payroll. For project participants, the statute requires that the fraction be total payroll of all project participants attributable to new investment over total West Virginia payroll of all participants.

The statutory formulas are adequate in the situation where taxpayers have only one nonproject business investment and jobs expansion tax credit available to them or where all participants in a project have only that project business investment and jobs expansion tax credit available to them. However, when the taxpayer has more than one nonproject or project business investment and jobs expansion tax credit available, there is no statutory prescription as to how the payroll fraction is to be computed, and the computation and simple addition of two or more statutory fractions may result in a fraction which is more than one hundred percent (100%). It was not the intention of the Legislature to allow taxpayers to take the business investment and jobs expansion tax credit against more than one hundred percent (100%) of business taxes in any given year. In the case of a project where one project participant is a participant in other projects, or has a nonproject business investment and jobs expansion tax credit available in addition to the project business investment and jobs expansion tax credit, use of such a computation could result in a decrease of the fraction used by the other project participants and could unfairly deprive them of credit to which they should be entitled.

4b.3.4.6.b. For taxpayers which are multiple project participants, or which have any combination of multiple project and nonproject business investment and jobs expansion tax credits available, the numerator of the payroll fraction should be all payroll attributable to qualified investment of all participants in all projects in which the taxpayer is a participant, plus any payroll attributable to qualified investment for any nonproject business investment and jobs expansion tax credit available to the taxpayer. It should not include any payroll attributable to nonproject business investment and jobs expansion tax credit qualified investment for other project participants, and it should not include any payroll attributable to project business investment and jobs expansion tax credit qualified investment for other project participants in projects other than the projects in which the taxpayer is a project participant.
4b.3.4.6.b.1. The denominator should be total payroll of all West Virginia jobs, without regard to domicile on residence of job holders, of all participants in all projects in which the taxpayer is a participant. It should not include West Virginia payroll of other participants attributable to nonproject business investment and jobs expansion tax credit qualified investment, and it should not include any payroll attributable to project business investment and jobs expansion tax credit qualified investment for other project participants in projects other than the projects in which the taxpayer is a project participant.

4b.3.4.6.c. For taxpayers who are participants in only one project where one or more of the other participants in that project is also a participant in one or more other projects or has business investment and jobs expansion tax credit available from one or more other project or nonproject business investment and jobs expansion tax credit investments:
4b.3.4.6.c.1. The numerator should be all payroll attributable to qualified investment of all project participants in the particular project in which the taxpayer is involved plus payroll attributable to any nonproject business investment and jobs expansion tax credit investment available to the taxpayer. It should not include payroll attributable to any nonproject business investment and jobs expansion tax credit investment of any project participants other than the taxpayer or attributable to project business investment and jobs expansion tax credit qualified investment, other than investment in the project in which the taxpayer is a participant, of any project participants other than the taxpayer.

4b.3.4.6.c.2. The denominator should be all West Virginia payroll without regard to domicile on residence of job holders of all participants in the particular project in which the taxpayer is a participant, less the West Virginia payroll of participants in that project, other than the taxpayer, attributable to nonproject business investment and jobs expansion tax credit qualified investment, and less West Virginia payroll of participants other than the taxpayer attributable to project business investment and jobs expansion tax credit qualified investment other than qualified investment in the project in which the taxpayer is a participant.

4b.3.4.6.d. Numerator of the fraction.
4b.3.4.6.d.1. In accordance with Section 4b.3.4.5 of these regulations, "payroll attributable to qualified investment" for purposes of calculating the payroll factor numerator for a "purely" multiple party project taxpayer which is a participant in a multiple party or multiple year, multiple party project and where neither the taxpayer nor any other participant in the project in which the taxpayer is a participant is entitled to a nonproject credit or a multiple year non-multiple party project credit, the "payroll attributable to qualified investment" for the numerator of the payroll factor should be based upon West Virginia domiciled, West Virginia residents holding "new jobs" directly attributable to qualified investment and should include payroll of part-time West Virginia domiciled, West Virginia resident employees who meet the statutory definition of part-time employees.

4b.3.4.6.d.2. In accordance with Section 4b.3.4.5 of these regulations, "payroll attributable to qualified investment" for purposes of calculating the payroll factor numerator for a taxpayer which has more than one nonproject business investment and jobs expansion tax credit available or more than one (1) multiple year nonmultiple party project credits available or which is a participant in a multiple party or multiple year, multiple party project, where the taxpayer or any other project participant in the same project in which the taxpayer is a participant has one or more nonproject credits or multiple year, nonmultiple party project credits, the "payroll attributable to qualified investment" for the numerator of the payroll factor should be based upon all full-time employees (excluding part-time employees) holding jobs directly attributable to qualified investment without regard to residency or domicile and not upon "new jobs."

4b.4. Terms defined. - For purposes of this Section:

4b.4.1. New employee. - The term "new employee" means a person residing and domiciled in this State, hired by a participant to fill a position for a job which previously did not exist in this State prior to the date on which the project's qualified investment is placed in service or use in this State. In no case shall the new employees allowed for purposes of this credit exceed the total increases in the number of persons employed by the project's participants (considered as a group) in this State. A person shall be deemed to be a "new employee" if such person's duties in connection with the operation of the certified project are on:
4b.4.1.1. A regular, full-time and permanent basis.
4b.4.1.1.a. For projects for which the application for certification was filed prior to March 10, 1990, "full-time employment" means employment for at least one hundred twenty (120) hours per month at a wage not less than the prevailing state or federal minimum wage, depending on which minimum wage provision is applicable to the business.

4b.4.1.1.b. For projects for which the application for certification was filed after March 9, 1990, "full-time employment" means employment for at least one hundred forty (140) hours per month at a wage not less than the prevailing state or federal minimum wage, depending on which minimum wage provision is applicable to the business.

4b.4.1.1.c. "Permanent employment" does not include employment that is temporary or seasonal.

4b.4.1.2. A part-time basis, provided such person is customarily performing such duties at least twenty (20) hours per week for at least six (6) months during the taxable year.

4b.4.2. Participant. - The term "participant" means any person who directly makes a qualified investment in a certified project, or who employs persons filling the jobs certified by the Tax Commissioner as being new jobs created as a direct result of the project's qualified investment.

4b.5. Effective date.

4b.5.1. W. Va. Code '11-13C-4b shall apply to a project having qualified investment of at least fifty million dollars ($50,000,000) placed in service or use between March 1, 1985 and February 1, 1986, and shall also apply to qualified investment made on or after February 1, 1986.

4b.5.2. Special requirements for fifty million dollar ($50,000,000) projects placed in service or use between March 1, 1985 and February 1, 1986.
4b.5.2.1. The application for project certification for a project having qualified investment of at least fifty million dollars ($50,000,000) placed in service or use between March 1, 1985 and February 1, 1986, shall be deemed timely filed under W. Va. Code '11-13C-4b only if such application is filed with the Tax Commissioner prior to December 31, 1986: Provided, That the Tax Commissioner shall not certify such project until the project participants certify that at least fifty (50) new jobs were created by them prior to January 1, 1988, as a direct result of their qualified investment in the project, and that such jobs did not previously exist in this State, determined as of January 31, 1986; that the inclusion of such property shall not give rise to a refund or credit of any taxes administered under W. Va. Code '11 for taxable years ending before January 1, 1987, and that the ten (10) year credit period for such certified project shall begin with the current taxable year of the project participant or participants who will be claiming the allowable credit.

4b.4.2.2. W. Va. Code '11-13C-4b(e)(1) reads as follows:

This Section shall apply to a project having qualified investment of at least fifty million dollars placed in service or use between the first day of March, one thousand nine hundred eighty-five and the first day of February, one thousand nine hundred eighty-six, and shall also apply to qualified investment made on or after the first day of February, one thousand nine hundred eighty-six.

This language cannot be interpreted as allowing totally unrestricted availability of the business investment and jobs expansion tax credit for future investment without regard to how far into the future that investment might occur after the initial investment which created the new jobs required for qualification under the section. Such an interpretation would be inconsistent with the legislative purpose underlying the Business Investment and Jobs Expansion Tax Credit Act.

W. Va. Code '11-13C-4b(a)(1) sets forth the maximum time period to be found under the provisions of the business investment and jobs expansion tax credit statute over which investment may be placed in service or use in a business investment and jobs expansion tax credit project. This maximum time period is three (3) years.

W. Va. Code '11-13C-4b(e)(1) expressly mandates that the section shall apply to investment placed in service or use between March 1, 1985 and February 1, 1986, and after February 1, 1986. W. Va. Code '11-13C-4b(a)(1) sets forth the maximum time period provided in the statute for placing investment in service or use. These subsections can be read in pari materia to limit the time over which investment qualified for credit under W. Va. Code '11-13C-4b(e)(1) can be placed in service or use after February 1, 1986 to include only that investment placed in service or use after February 1, 1986 through the end of the second taxable year subsequent to the end of the tax year during which February 1, 1986 occurred.

Thus, the three (3) year maximum time limitation set forth in W. Va. Code '11-13C-4b(a)(1) would apply to investment made subsequent to February 1, 1986 for W. Va. Code '11-13C-4b(e)(1) fifty million dollar ($50,000,000) projects in service or use between March 1, 1985 and February 1, 1986.

4b.6. Project participants.

4b.6.1. The business investment and jobs expansion tax credit is not adversely affected if a project participant is dropped and a substitute participant or the remaining participants take the place of the dropped participant so that the number of jobs and investment property in service or use remains substantially unchanged. If a participant is dropped or a substitute participant is added, the project participants must file an amendment to the application for project certification and written business facility development plan reflecting the change, and must obtain approval of the amendment from the Tax Commissioner.

4b.6.2. Ordinarily where a new project participant is to be added or a new project participant is to be substituted for a former project participant, the Tax Commissioner will require the project participants to obtain approval from the Tax Commissioner for such a substitution and to amend the application for project certification prior to the addition or substitution of the new project participant. Failure to submit an amendment for participant addition or substitution prior to such addition or substitution shall result in an invalid and unrecognized addition or substitution until such amendment is submitted to the Tax Commissioner and approved by the Tax Commissioner.

If project credit is taken on any tax return prior to such approval, based in whole or in part upon the participation of a new or substitute proposed project participant not yet approved by the Tax Commissioner, the taxpayer filing such returns shall be subject to the same treatment specified under Section 4b.2.1 of these regulations as a taxpayer who takes project credit for a proposed certified project prior to, or in the absence of, the issuance of project certification under W. Va. Code '11-13C-4b.

4b.6.3. For a single year, multiple party project, an added project participant whose investment is place in service or use in the one (1) year project investment period and whose new jobs are in place within the three (3) year new jobs redetermination period set forth in W. Va. Code '11-13C-7(f) will have such investment and jobs counted toward the determination of the amount of the project credit. Any investment placed in service or use or jobs created by a project participant after the relevant one (1) year project investment period or three (3) year new jobs redetermination period have expired would not count toward the credit.
4b.6.3.1. New project participants may not be added to a single year, multiple party project subsequent to expiration of the three hundred sixty-five (365) day project investment period. Although other entities could engage in the project enterprise after the above described three hundred sixty-five (365) day investment period has expired, such entities could not be added as new project participants. However, substitute project participants acting as successors to already participating participants could be substituted subsequent to the end of the above-described three hundred sixty-five (365) day period so long as the total number of jobs is substantially unchanged and qualified investment property in service or use is substantially unchanged.

4b.6.4. For a multiple year, multiple party project, an added project participant whose investment is placed in service or use in the three-year multiple year project investment period set forth in W. Va. Code '11-13C-4b(a)(1), and whose new jobs are in place in the final year of the three (3) year new jobs redetermination period set forth in W. Va. Code '11-13C-7(f), will have such investment and jobs counted toward the determination of the amount of the project credit. Any investment placed in service or use or jobs created by a project participant after the relevant three (3) year periods have expired would not county toward the credit. These periods are coterminous in the case of multiple year or multiple party, multiple year projects.
4b.6.4.1. New project participants may not be added, except as successors to ongoing participants, after expiration of the three (3) year new jobs redetermination period or the three (3) year project investment period set forth in W. Va. Code ''11-13C-7(f) and 11-13C-4b(a)(1), respectively. These periods would typically end simultaneously with the end of the second tax year subsequent to the end of the tax year during which project investment was first placed in service or use. Refer to Section 4.3 of these regulations for discussion of investment periods.

4b.6.4.2. Although other entities could engage in the project enterprise after the above-described three (3) year periods have expired, such entities could not be added as new project participants. However, substitute project participants acting as successors to already participating participants could be substituted subsequent to the end of the above-described three (3) year periods so long as the total number of jobs and qualified investment in service or use remained substantially unchanged.

4b.6.4.3. Addition or substitution of a project participant will require submission of an amendment to the application for project certification. Such amendment can consist of a letter identifying the new or substitute participants and describing the change sought. The letter should contain or be accompanied by a properly executed statement of participation from each new or substitute participant, and an agreement executed by the new or substitute participants to the plan of credit allocation among project participants in effect for the project.

4b.6.4.4. Addition or substitution of project participants must be approved by the Tax Commissioner prior to the addition or substitution.

4b.6.4.5. Nothing herein shall be construed to preclude the transfer or sale of qualified investment to a successor in business as set forth in W. Va. Code '11-13C-9 at any time during the life of the credit. The employees of a successor will be considered new employees to the extent they replace or succeed jobs held by employees filling new jobs of the business transferred, provided that such replacement or successor employees are West Virginia domiciled, West Virginia residents and otherwise fulfill the requirements, as appropriate, of new employees filling new jobs in accordance with W. Va. Code '11-13C et seq.

4b.7. Information disclosure. - A taxpayer which is a project participant in a duly certified multiple party project under W. Va. Code '11-13C-4b shall be considered an interested party under W. Va. Code '11-13C-5d(f) with relation to all other taxpayers shown by Department of Tax and Revenue records or certification letters, applications for project certification, rulings of the Department, requests for rulings, or background file documents relating to the business investment and jobs expansion tax credit to be participants in the same certified project as such taxpayer. All communications between the Department of Tax and Revenue and any participant in the same project as the taxpayer relating to the credit, except for tax returns, audits, assessments and communications not deemed appropriate for disclosure by the Tax Commissioner or not subject to disclosure by the Tax Commissioner, shall be disclosable to such taxpayer under W. Va. Code '11-10-5d(f). The Tax Commissioner shall have absolute discretion to grant or refuse disclosure of information under this Section.

4b.8a. Application of recapture tax under W. Va. Code '11-13C-8a to multiple party projects and multiple year projects -

4b.8a.1. Recapture tax for multiple party projects. - In the case of multiple party projects, the tax imposed by W. Va. Code '11-13C-8a shall be the joint and several liability of all project participants in a multiple party business investment and jobs expansion tax credit project certified under W. Va. Code '11-13C-4b, notwithstanding the fact that one or more of the participants has never taken the credit or been entitled to take the credit against tax under the plan for allocation of project credit among project participants. The amount of the tax credit upon which the recapture tax is to be calculated for multiple party projects shall be the amount of the sum of tax credit claimed by all project participants in total. The qualified investment property, the premature removal of which from service will result in a recapture tax liability is any item of qualified investment property in place with any project participant in a project.
4b.8a.1.1. For purposes of the determination of whether a recapture tax liability is due, in no case shall the new employees allowed for purposes of this credit exceed the total increases in the number of persons employed by the project's participants (considered as a group) in this State pursuant to the requirements of W. Va. Code ''11-13C-3(b)(13), 11-13C-4b(d)(1) and 11-13C-14(e)(4)(A).

Example 1:

(1) Company A has a manufacturing facility in West Virginia which employs 80 persons. That facility has been in operation for several years, and investment in the facility, and jobs in place in the facility have never resulted in the availability of the business investment and jobs expansion tax credit.

(2) Company A, Company B and Company C agree to engage in a business enterprise which will qualify for the business investment and jobs expansion tax credit, and they seek and obtain certification of the project as a multiple party business investment and jobs expansion tax credit project.

(3) The project participants place a qualified investment in service in West Virginia in year 1 (which is subsequent to March 12, 1994), and create 60 new jobs at the new project facility. The participants become entitled to the business investment and jobs expansion tax credit based upon the qualified investment and new jobs attributable to the new facility.

(4) The participants apply the business investment and jobs expansion tax credit against their tax liabilities in years 1 through 4, then in year 5, Company A shuts down the old manufacturing facility, and the 80 persons employed there lose their jobs.

The project participants are subject to the requirements of W. Va. Code '11-13C-8(c) for the reduction in the number of employees, even though the employees whose jobs are attributable to the new facility are still in place.

The number of new jobs in place is zero based upon the loss of 80 jobs which were in place at the old facility.

60 jobs at the new facility - 80 jobs lost = zero new jobs

The participants would not be subject to the recapture tax imposed under W. Va. Code '11-13C-8a because only one of the two conditions necessary for the imposition of the recapture tax has occurred. There has been a loss of new jobs, pursuant to the new jobs rule, but there has not been a premature cessation of the use of qualified investment property.

Example 2:

Given the same facts as set forth in Example 1 of this subsection, except that, in addition to the shut down of the old manufacturing facility, one of the participants incidentally removes an item of qualified investment property from service at the new facility prior to the end of its useful life, as determined under W. Va. Code '11-13C-6:

The participants, Company A, Company B, and Company C, are jointly and severally liable for the recapture tax imposed by W. Va. Code '11-13C-8a, based upon the premature cessation of use of qualified investment property and the loss of new jobs, notwithstanding the fact that all jobs attributable to the new project facility remain in place.

4b.8a.2. Recapture tax for multiple year projects. - In the case of multiple year projects, the business investment and jobs expansion tax credit or small business tax credit is available for qualified investment placed in service over a period of three tax years. The three (3) tax year project investment period begins with the first tax year during which project investment is first placed into service or use. It ends with the end of the second fiscal or calendar tax year subsequent to the end of the first tax year during which the project investment was placed into service or use. Section 4.3 of this rule sets forth the method for determining the time over which investment may be placed in service or use.
4b.8a.2.1. Investment placed in service or use over successive years, up to the three (3) tax year maximum for multiple year projects, may typically be added to the credit base when placed in service or use. However, disregarding any credit carryover, the number of years over which the credit can be taken is ten (10) years, beginning in each year when the investment is placed in service or use. Thus, for example, disregarding a possible election to delay the beginning of the credit period for one (1) year, an investment placed in service or use in year one (1) would create credit to be applied from year one (1) to year ten (10), and investment placed in service or use in year two (2) would create credit to be used from year (2) to year eleven (11), etc. The multiple year investment does not create a revised credit; rather, it adds new credit and new credit years to the credit already in place, and each discrete credit layer is applied over a ten (10) year period.

4b.8a.2.2. A taxpayer having multiple year project credit available may, pursuant to W. Va. Code '11-13C-4 and Section 4.2 of this rule, elect to delay the beginning of the (typically) ten (10) year period over which credit may be taken by one (1) year for any or all of the three (3) tax years during which project investment may be placed in service or use. Thus, for example, credit arising from year one (1) investment may be taken beginning in either year one (1) or two (2). Credit arising from year two (2) investment may be taken beginning in year two (2) or year three (3), and credit arising from year three (3) investment may be taken beginning in year three (3) or year four (4). This permits the taxpayer to aggregate any two (2) successive year's credit for purposes of determining the beginning of the (typically) ten (10) year period for taking the credit against taxes. Credit for investment placed in service or use in years one (1) and two (2) can thus be taken beginning in year two (2) or credit for years two (2) and three (3) can be taken beginning in year three (3).

4b.8a.2.3. In the case of multiple year property, the economic useful life of property for purposes of determining whether there has been a premature cessation of the use of qualified investment property shall be measured commencing with the date during the three tax year project period on which the property was placed in service as designated in W. Va. Code '11-13C-4. However, the recapture tax shall be calculated based upon the entire business investment and jobs expansion tax credit or small business tax credit taken by the taxpayer for the particular entitlement arising out of the investment, notwithstanding the fact that the disposal of property which gave rise to the recapture tax may have been placed into service in a year other than year one.

For Example:

(1) Company A undertakes a development which is certified as a multiple year business investment and jobs expansion tax credit.

(2) Company A places qualified investment property 1 into service in tax year one, and proceeds to take the credit against tax.

(3) Company A places qualified investment property 2 into service in tax year 2.

(4) Company A places qualified investment property 3 into service in year 3.

(5) In year 6 of the ten year credit period, (beginning from year 1), Company A prematurely ceases use of the qualified investment property purchased in year 3, and terminates the employment of ten workers so that the number of jobs in place on the project is now less than 50.

Company A is liable for a recapture tax calculated based upon the amount of tax credit taken from year 1 through year 6, even though the property, the cessation of use of which triggered the application of the recapture tax, was not placed into service until tax year 3.

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