Current through Register Vol. XLI, No. 38, September 20, 2024
6.1.
General. - The qualified investment in property purchased or leased for
business expansion shall be the applicable percentage of the cost of each
property purchased or leased for the purpose of business expansion which is
placed in service or use in this State by the taxpayer during the taxable year.
6.1.1. The cost of property purchased prior
to March 1, 1985, but placed in service or use in a new or expanded business
facility on or after that date and prior to March 10, 1990 can constitute a
base for qualified investment. The cost of other property meeting the
definition of property purchased or leased for business expansion as set forth
in Section 3 of these regulations can constitute a base for qualified
investment.
6.2.
Applicable percentage. - For the purpose of Section 6.1 of these regulations,
the applicable percentage of any property shall be determined under the
following table:
|
THE APPLICABLE |
|
IF USEFUL LIFE
IS: |
PERCENTAGE IS: |
|
4 years or more but less than |
33-1/3 |
|
6 years or more but less than |
66-2/3 |
|
8 years or more |
100 |
The useful life of any property, for purposes of this
Section, shall be determined as of the date such property is first placed in
service or use in this State by the taxpayer, determined in accordance with
federal income tax law.
6.2.1. Without
regard to the depreciation practice of the taxpayer, the life of an asset for
purposes of the business investment and jobs expansion tax credit should be the
actual economic life of the particular asset. The Department of Tax and Revenue
will accept the so-called facts and circumstances doctrine formerly prevalent
under federal income tax law. A taxpayer may use the federal income tax asset
depreciation range midpoint useful life for purposes of the business investment
and jobs expansion tax credit, but should increase or decrease that useful life
if particular facts and circumstances applicable to the particular asset
reasonably warrant such an adjustment.
The taxpayer may use another reasonable method of determining
actual useful life. However, the Accelerated Cost Recovery System (ACRS) or
Modified Accelerated Cost Recovery System (MACRS) depreciation periods may not
be used to determine useful life for purposes of the business investment and
jobs expansion tax credit.
6.3. Cost. - For purposes of Section 6.1 of
these regulations, the cost of each property purchased for business expansion
shall be determined under the following rules:
6.3.1. Trade-ins. - Cost shall not include
the value of property given in trade or exchange for the property purchased for
business expansion.
6.3.2. Damaged,
destroyed or stolen property. - If property is damaged or destroyed by fire,
flood, storm or other casualty, or is stolen, the cost of replacement property
shall not include any insurance proceeds received in compensation for the
loss.
6.3.3. Rental property.
6.3.3.1. the cost of real property acquired
by written lease for a primary term of ten (10) years, or longer, shall be one
hundred percent (100%) of the rent reserved for the primary term of the lease,
not to exceed twenty (20) years.
6.3.3.1.a. A
lease of realty must have a primary term of at least ten (10) years in order to
qualify for the business investment and jobs expansion tax credit. The fact
that a lease having a shorter primary term is renewable will not satisfy the
ten (10) year primary term requirement. The right of a lessee to terminate a
lease of real property with a stated term of ten (10) years or longer prior to
the expiration of that term does not preclude such property from qualifying as
qualified investment property as defined by the Business Investment and Jobs
Expansion Tax Credit Act.
6.3.3.2. The cost of tangible personal
property acquired by written lease for a primary term of:
6.3.3.2.a. Four (4) years, or longer, shall
be one-third of the rent reserved for the primary term of the lease;
6.3.3.2.b. Six (6) years, or longer, shall be
two-thirds of the rent reserved for the primary term of the lease; or
6.3.3.2.c. Eight (8) years, or longer, shall
be one hundred percent (100%) of the rent reserved for the primary term of the
lease, not to exceed twenty (20) years: Provided, That in no event shall 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.
6.3.3.3.
Where one (1) multiple party certified project participant leases project
investment property as lessor to a project participant lessee, the measure of
investment for the purposes of the business investment and jobs expansion tax
credit is the cost of the property to the lessor rather than the rent reserved
for the primary term of the lease. This is because the cost of the property to
the project as an enterprise would be the amount paid to the non-participant
from whom it is acquired by any project participant. Internal payments between
project participants would not count as investments made by the project as an
enterprise.
6.3.3.4. For property
acquired or leased subsequent to March 10, 1990, property shall not be treated
as rented or leased property which the taxpayer is required to show on its
books and records as an asset under generally accepted accounting principles of
financial accounting. If the taxpayer is prohibited from expensing the lease
payments for federal income tax purposes, the property shall be treated as
purchased property for purposes of this credit. See W. Va. Code '11-13C-14(e)(5).
6.3.4. Property purchased for
multiple use. - In the case of property purchased for use as a component part
of a new or expanded business taxable under W. Va. Code '11-12a et seq. and
used as a component part of a new or expanded business taxable under W. Va.
Code '11-13 et seq., the cost thereof shall be apportioned between such
businesses. The amount apportioned to each such new or expanded business for
which credit is allowed under W. Va. Code '11-13C et seq. shall be considered
as a qualified investment subject to the conditions and limitations of W. Va.
Code '11-13C et seq.
6.3.4.1. Multiple use
property will qualify for the business investment and jobs expansion tax credit
in the amount of qualified investment apportionable to an enterprise entitled
to credit. Actual usage of the property must be the criterion for apportioning
the amount of investment attributable to the business investment and jobs
expansion tax credit enterprise and the amount not so attributable.
Apportionment of usage measured on the basis of time, units of production,
power usage, payroll, raw materials usage or other means will be considered on
a case-by-case basis.
In circumstances where the proportional usage of the multiple
use property between the qualified and nonqualified enterprises will be
relatively stable throughout the ten (10) year credit period and is known or
reasonably ascertainable, the investment apportioned to the qualified
enterprise may be treated like any other qualified investment quantifiable at
the time the qualified investment property is placed in service or use.
Credit would be available for the usual ten (10) year credit
period (with possible rebate credit carryover up to year thirteen (13) for the
amount of investment apportioned to the qualified enterprise adjusted by the
useful life percentages set forth in W. Va. Code '11-13C-6.
Where proportional usage of the multiple use property will
vary significantly from year to year between the quantified investment will be
treated as nonquantifiable investment. Such nonquantifiable investment in
property placed in service or use subsequent to March 9, 1990 will not qualify
for credit.
For multiple use property having such variable use from year
to year placed in service or use prior to March 10, 1990, the amount of
qualified investment in the property annually available and arising from that
year will be total investment in the particular multiple use property, adjusted
by the useful life percentage computation required by W. Va. Code
'11-13C-6(b),
divided by ten (10) (the number of years over which the credit is applied), and
then multiplied by the annual percentage of usage of the property in the
qualified enterprise for the year.
(Investment Annual Usage
X X
Useful Life Percentage) Percentage
(10)
This procedure will determine the amount of credit
apportionable to the qualified enterprise for that year to be taken in that
year and in each year thereafter for a total of ten (10) years.
The determination of this amount should be made for each year
of the useful life of the property, and the amount so determined will then
become an annual credit amount to be applied for a period of ten (10) years.
Each year of useful life of the property up to ten years will add a layer of
credit to be taken for ten (10) years. Thus, for example, for six (6) year
property, credit would be created in year one (1) to be applied between years
one (1) to ten (10), and in year six (6), credit would be created to be applied
in year six (6) through year fifteen (15).
6.3.5. Self-constructed property. - In the
case of self-constructed property, the cost thereof shall be the amount
properly charged to the capital amount for depreciation in accordance with
federal income tax law.
6.3.6.
Transferred property. - The cost of property used by the taxpayer out-of-state
and then brought into this State, shall be determined based on the remaining
useful life of the property at the time it is placed in service or use in this
State, and the cost shall be the original cost of the property to the taxpayer
less straight line depreciation allowable for the tax years or portions thereof
taxpayer used the property outside this State. In the case of leased tangible
personal property, cost shall be based on the period remaining in the primary
term of the lease after the property is brought into this State for use in a
new or expanded business facility of the taxpayer; and shall be the rent
reserved for the remaining period of the primary term of the lease, not to
exceed twenty (20) years, or the remaining useful life of the property
(determined as aforesaid), whichever is less.
6.3.7.1. Natural resources in place purchased
or leased prior to March 10, 1990. - In the case of natural resources in place,
the property must be capable of sustained production for a period of at least
ten (10) years. If this qualification is met, then the qualified investment is
one hundred percent (100%) of the purchase price of the natural resource in
place that is attributable to ten (10) years of production, but not more than
twenty (20) years of production. If such price is not quantifiable at the time
the mining operation is placed into production, cost shall be determined
annually and shall be the amount of royalties actually paid to the owner of the
natural resource in place during each year for a total period of ten (10)
years. The amount of such royalties multiplied by the taxpayer's new jobs
percentage (determined at the time the mining operation is placed in service or
use) divided by ten (10) establishes the credit allowable each year for ten
(10) successive years beginning with the year in which the royalties were paid.
For purposes of this subsection the new jobs percentage is determined for years
one (1) and two (2) according to the taxpayer's estimate of the number of new
jobs which will be in place in year three (3), and is determined for year three
(3) and all subsequent years in accordance with Section 7.6 of these
regulations.
6.3.7.1.a. Although for property
purchased or leased prior to March 10, 1990, lease or mineral royalty payments
which are not quantifiable at the time investment is first placed in service or
use by reason of the variability of the amount of payments to be made from
period to period may be accumulated year by year for a period of ten (10)
years, this provision merely sets out a procedure for measuring investment in
property which could not be measured by determining the amount paid for the
property at the time the property is placed in service or use. The statute does
not permit the placement of property into service or use in any year beyond the
first taxable year or in the case of multiple year certified projects, three
(3) tax years. It merely determines the amount paid for that property over the
ten (10) year use period of the property.
6.3.7.2. Natural resources in place purchased
or leased subsequent to March 9, 1990. - Natural resources in place purchased
or leased prior to March 1, 1985, or purchased or leased after March 1, 1985
pursuant to an option to purchase or lease such natural resources in place
acquired prior to March 1, 1985 but exercised in whole or in part on or after
March 10, 1990; and natural resources in place purchased or leased on or after
March 10, 1990, unless pursuant to a written contract to purchase or lease
executed prior to March 10, 1990, shall not constitute property purchased or
leased for business expansion, and investment in such property shall not
qualify for this credit.
6.3.8. Nonquantifiable investment. - Property
purchased or leased on or after March 10, 1990, unless pursuant to a written
contract to purchase or lease executed prior to March 10, 1990, the cost or
consideration for which cannot be quantified with any reasonable degree of
accuracy at the time such property is placed in service or use will not
constitute property purchased or leased for business expansion upon which
credit can be based: Provided, that when the contract of purchase or lease
specifies a minimum purchase price or minimum annual rent the amount thereof
shall be used to determine the qualified investment in such property under W.
Va. Code '11-13C-6 if
the property otherwise qualifies as property purchased or leased for business
expansion.
