West Virginia Code of State Rules
Agency 110 - Tax
Title 110 - LEGISLATIVE RULE STATE TAX DEPARTMENT
Series 110-13KK - West Virginia Tax Credit for Federal Excise Tax Imposed Upon Small Arms and Ammunition Manufacturers
Section 110-13KK-2 - Definitions

Universal Citation: 110 WV Code of State Rules 110-13KK-2

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

2.1. General Rule. -- Unless a specific definition is provided in section 2.2 of this section heading, or the context in which the term is used clearly requires a different meaning, the terms used in this rule have the definitions provided under W. Va. Code § 11-13KK-1, et seq., § 11-10-1, et seq., § 11-21-1, et seq., and § 11-24-1, et seq.

2.2. Terms defined.

2.2.1. "Affiliated group" means any affiliated group within the meaning of section 1504(a) of the Internal Revenue Code, or any similar group defined under a similar provision of state, local, or foreign law, except that section 1504 of the Internal Revenue Code shall be applied by substituting "more than 50 percent" for "at least 80 percent" each place it appears in that section.

2.2.2. "Business" means small arms or ammunition manufacturing business activity, which is or may be classified under the North American Industry Classification System with a six-digit code for a product produced at a facility under code numbers 332992 or 332994 as they are defined on January 1, 2021, which is engaged in by any person in this state that is taxable under W. Va. Code § 11-21-1, et seq., or § 11-24-1, et seq.

2.2.3. "Business expansion" means capital investment in a new or expanded small arms or ammunition manufacturing facility in this state, which is or may be classified under the North American Industry Classification System with a six-digit code for a product produced at a facility under code numbers 332992 or 332994 as they are defined on January 1, 2021.

2.2.4. "Commissioner" or "Tax Commissioner" are used interchangeably in this rule and mean the Tax Commissioner of the State of West Virginia, or his or her designee.

2.2.5. "Controlled group of corporations" means a controlled group of corporations as defined in section 1563(a) of the Internal Revenue Code.

2.2.6. "Corporation" means any corporation, joint-stock company, association, or other entity treated as a corporation for federal income tax purposes, 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.

2.2.7. "Designee" in the phrase "his or her designee," when used in reference to the Tax Commissioner, means any officer or employee of the State Tax Department duly authorized by the Commissioner directly, or indirectly by one or more redelegations of authority, to perform the functions mentioned or described in this rule.

2.2.8. "Eligible taxpayer" means any person who makes a qualified investment in a new or expanded small arms and ammunition manufacturing facility located in this state and who is subject to any of the taxes imposed by W. Va. Code § 11-21-1, et seq. or § 11-24-1, et seq.

2.2.9. "Expanded facility" means any small arms and ammunition manufacturing facility, other than a new or replacement business facility, resulting from the acquisition, construction, reconstruction, installation, or erection of improvements or additions to existing property if the improvements or additions are purchased on or after July 1, 2021, but only to the extent of the taxpayer's qualified investment in the improvements or additions.

2.2.10. "Federal excise tax" means all excise taxes paid to the government of the United States under section 4181 of Title 26 of the Internal Revenue Code imposed upon manufacturers, producers, or importers for the sale of pistols, revolvers, firearms (other than pistols and revolvers), shells and cartridges.

2.2.11. "Includes" and "including," when used in a definition contained in this rule, shall not be considered to exclude other things otherwise within the meaning of the term defined.

2.2.12. "Leased property" does not include property that the taxpayer is required to show on its books and records as an asset under generally accepted 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 under this section.

2.2.13. "New small arms and ammunition manufacturing facility" means a business facility which satisfies all the following requirements:
2.2.13.a. The facility is employed by the taxpayer in the conduct of a small arms and ammunition manufacturing activity, the net income of which is or would be taxable under W. Va. Code §§ 11-21-1, et seq., or 11-24-1, et seq. The facility is not considered a new small arms and ammunition manufacturing facility in the hands of the taxpayer if the taxpayer's only activity with respect to the facility is to lease it to another person or persons; and

2.2.13.b. The facility is purchased by, or leased to, the taxpayer on or after July 1, 2021; and

2.2.13.c. The facility was not purchased or leased by the taxpayer from a related person. The Commissioner may waive this requirement if the facility was acquired from a related party for its fair market value and the acquisition was not tax motivated; and

2.2.13.d. The facility was not in service or use during the 90 days immediately prior to transfer of the title to the facility or prior to the commencement of the term of the lease of the facility.

2.2.14. "New property" means:
2.2.14.a. Property, the construction, reconstruction, or erection of which is completed on or after July 1, 2021, and placed in service or use after that date; and

2.2.14.b. Property leased or acquired by the taxpayer that is placed in service or use in this State on or after July 1, 2021, if the original use of the property commences with the taxpayer and commences after that date.

2.2.15. "Original use" means the first use to which the property is put, whether or not the use corresponds to the use of the property by the taxpayer.

2.2.16. "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, which is treated as a partnership for federal income tax purposes, and that is not a trust or estate, a corporation, or a sole proprietorship.

2.2.17. "Partner" includes a member of a partnership as defined in this rule.

2.2.18. "Person" includes any natural person, corporation, or partnership.

2.2.19. "Property purchased or leased for business expansion" shall be treated as follows for purposes of this credit.
2.2.19.a. Included property. -- Except as provided in subdivision b of this subsection, the term "property purchased or leased for business expansion" means real property and improvements thereto, and tangible personal property, but only if the real or personal property was constructed, purchased, or leased and placed in service or use by the taxpayer for use as a component part of a new or expanded small arms and ammunition manufacturing facility as defined in this section heading, which is located within the State of West Virginia. This term includes only:
2.2.19.a.1. Real property and improvements thereto having a useful life of four or more years, placed in service or use on or after July 1, 2021, by the taxpayer.

2.2.19.a.2. Real property and improvements thereto acquired by written lease having a primary term of 10 or more years and placed in service or use by the taxpayer on or after July 1, 2021.

2.2.19.a.3. Tangible personal property placed in service or use by the taxpayer on or after July 1, 2021, with respect to which depreciation, or amortization in lieu of depreciation, is allowable in determining the personal or corporation net income tax liability of the business taxpayer under W. Va. Code §11-21-1, et seq., or § 11-24-1, et seq., and which has a useful life, at the time the property is placed in service or use in this state, of four or more years.

2.2.19.a.4. Tangible personal property acquired by written lease having a primary term of 4 (four) years or longer, that commenced and was executed by the parties thereto on or after July 1, 2021, if used as a component part of a new or expanded small arms and ammunition manufacturing business facility, shall be included within this definition.

2.2.19.a.5. Tangible personal property owned or leased and used by the taxpayer at a business location outside this state that is moved into the State of West Virginia on or after July 1, 2021, for use as a component part of a new or expanded small arms and ammunition manufacturing facility located in this state.
2.2.19.a.5.A. If the property is owned, it must be depreciable or amortizable personal property for income tax purposes and have a useful life of four or more years remaining at the time it is placed in service or use in this state.

2.2.19.a.5.B. If the property is leased, the primary term of the lease remaining at the time the leased property is placed in service or use in this state, must be four or more years.

2.2.19.b. Excluded property. -- The term "property purchased or leased for business expansion" does not include:
2.2.19.b.1. Repair costs, including the cost of materials used in the repair, unless for federal income tax purposes the cost of the repair must be capitalized and not expensed.

2.2.19.b.2. Airplanes and helicopters.

2.2.19.b.3. Property that is primarily used outside this state, with use being determined based upon the amount of time the property is actually used both within and outside this state.

2.2.19.b.4. Property which is acquired incident to the purchase of the stock or assets of the seller, unless for good cause shown, the Tax Commissioner consents to waiving this requirement.

2.2.19.b.5. Purchased or leased property, the cost or consideration for which cannot be quantified with any reasonable degree of accuracy at the time the property is placed in service or use.
2.2.19.b.5.A. If the contract of purchase specifies a minimum purchase price or minimum annual rent, the amount thereof shall be used to determine the qualified investment in the property under W. Va. Code § 11-13KK-6 and this rule, if the property otherwise qualifies as property purchased or leased for expansion of a small arms and ammunition manufacturing facility.

2.2.19.b.5.B. If the contract of lease specifies a minimum purchase price or minimum annual rent, the amount thereof shall be used to determine the qualified investment in the property under W. Va. Code § 11-13KK-6 and this rule, if the property otherwise qualifies as property purchased or leased for expansion of a small arms and ammunition manufacturing facility.

2.2.20. "Purchase" means any acquisition of property, but only if:
2.2.20.a. The property is not acquired from a person whose relationship to the person acquiring it would result in the disallowance of deductions under section 267 or 707 (b) of the United States Internal Revenue Code.

2.2.20.b. The property is not acquired by one component member of an affiliated or controlled group from another component member of the same affiliated or controlled group, as applicable. The Tax Commissioner may waive this requirement if the property was acquired from a related party for its then fair market value; and

2.2.20.c. The basis of the property for federal income tax purposes, in the hands of the person acquiring it, is not determined:
2.2.20.c.1. In whole or in part, by reference to the federal adjusted basis of the property in the hands of the person from whom it was acquired; or

2.2.20.c.2. Under Section 1014(e) of the United States Internal Revenue Code.

2.2.21. "Qualified activity" means any small arms and ammunition manufacturing business activity subject to any of the taxes imposed by W. Va. Code § 11-21-1, et seq., or § 11-24-1, et seq., which is or may be classified under the North American Industry Classification System with a six-digit North American Industry Classification System code for a product produced at a facility with code numbers 332992 or 332994 as they are defined on January 1, 2021.

2.2.22. "Related person" means:
2.2.22.a. A corporation, partnership, association, or trust controlled by the taxpayer;

2.2.22.b. An individual, corporation, partnership, association, or trust that is in control of the taxpayer;

2.2.22.c. A corporation, partnership, association, or trust controlled by an individual, corporation, partnership, association, or trust that is in control of the taxpayer; or

2.2.22.d. A member of the same affiliated or controlled group as the taxpayer.

2.2.22.e. The term "control" means the following.
2.2.22.e.1. For purposes of this subsection, "control," with respect to a corporation, means ownership, directly or indirectly, of stock possessing 50 percent or more of the total combined voting power of all classes of the stock of the corporation entitled to vote.

2.2.22.e.2. "Control," with respect to a trust, means ownership, directly or indirectly, of 50 percent 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 is determined in accordance with the rules for constructive ownership of stock provided in section 267(c) of the United States Internal Revenue Code, other than paragraph (3) of that section.

2.2.23. "Replacement small arms and ammunition manufacturing facility" means any property (other than an expanded small arms and ammunition manufacturing facility) that replaces or supersedes any other property located within this state that:
2.2.23.a. The taxpayer or a related person used in or in connection with any small arms and ammunition manufacturing facility for more than 2 (two) years during the period of 5 consecutive years ending on the date the replacement or superseding property is placed in service by the taxpayer; or

2.2.23.b. Is not used by the taxpayer or a related person in or in connection with any small arms and ammunition manufacturing facility for a continuous period of 1 (one) year or more commencing with the date the replacement or superseding property is placed in service by the taxpayer.

2.2.24. "Small arms and ammunition manufacturing" refers to a facility that is or may be classified under the North American Industry Classification System with a six-digit North American Industry Classification System code for a product produced at a facility with code numbers 332992 or 332994 as they are defined on January 1, 2021.

2.2.25. "Small arms and ammunition manufacturing business" means a business primarily engaged in this state in small arms or ammunition manufacturing that is or may be classified under the North American Industry Classification System with a six-digit North American Industry Classification System code for a product produced at a facility with code numbers 332992 or 332994 as they are defined on January 1, 2021.

2.2.26. "Small arms and ammunition manufacturing facility" means any factory, mill, plant, warehouse, building, or complex of buildings located within this state, including the land on which it is located, and all machinery, equipment, and other real and personal property located at or within the facility, used in connection with the operation of the facility, and all site preparation and start-up costs of the taxpayer for the small arms and ammunition manufacturing facility, which is or may be classified under the North American Industry Classification System with a six-digit North American Industry Classification System code for a product produced at a facility with code numbers 332992 or 332994 as they are defined on January 1, 2021, and that it capitalizes for federal income tax purposes in a business that is taxable in this state.

2.2.27. "Taxpayer" means any person subject to any of the taxes imposed by W. Va. Code § 11-21-1, et seq., or § 11-24-1, et seq.

2.2.28. "The code" means the Code of West Virginia, 1931, as amended.

2.2.29. "This state" means the State of West Virginia.

2.2.30. "United States Internal Revenue Code" or "I.R.C." means the Internal Revenue Code 182 as defined in W. Va. Code § 11-21-1, et seq. or § 11-24-1, et seq.

2.2.31. "Used property" means property acquired after June 30, 2021, that is not "new property."

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