Current through Register Vol. XLI, No. 38, September 20, 2024
3.1. General. --
When used in these regulations, terms defined in this Section shall have the
meanings ascribed to them herein unless a different meaning is clearly required
by either the context in which the term is used, or by specific
definition.
3.2. Business franchise
tax act. -- The term "Business Franchise Tax Act" means W. Va. Code
'11-23-1 et
seq.
3.3. Business income. -- The
term "business income" means income arising from transactions and activity in
the regular course of the taxpayer's trade or business and includes income from
tangible and intangible property if the acquisition, management and disposition
of the property or the rendering of services in connection therewith constitute
integral parts of the taxpayer's regular trade or business
operations.
3.4. Capital. -- The
term "capital" of a taxpayer means:
3.4.1. In
the case of corporations, except an electing small business corporation, the
average of the beginning and ending year balances of the sum of the following
entries from Schedule L of the "Federal Form 1120," prepared following
generally accepted accounting principles, and as filed by the taxpayer with the
Internal Revenue Service for the taxable year:
3.4.1.1. The amount or value of all common
and preferred stock of the taxpayer;
3.4.1.2. The amount of paid-in or capital
surplus;
3.4.1.3. The amount of
retained earnings, appropriated and unappropriated;
3.4.1.4. Less the cost of treasury
stock.
3.4.2. S
Corporations. -- In the case of an electing small business corporation, the
average of the beginning and ending year balances of the sum of the following
entries from Schedule L of the Federal Form 1120S, prepared following generally
accepted accounting principles, and as filed by the taxpayer with the Internal
Revenue Service for the taxable year:
3.4.2.1. The amount or value of all common
and preferred stock of the taxpayer;
3.4.2.2. The amount of paid-in or capital
surplus;
3.4.2.3. The amount of
retained earnings, appropriated and unappropriated;
3.4.2.4. The amount of shareholders'
undistributed taxable income;
3.4.2.5. The amount of the accumulated
adjustments accounts;
3.4.2.6. The
amount of the other adjustments account;
3.4.2.7. Less the cost of treasury
stock.
3.4.3.
Partnerships. -- In the case of a partnership, the average of the beginning and
ending year balances of the amount or value of partners' capital accounts from
Schedule L of Federal Form 1065, prepared following accepted accounting
principles, and as filed by the taxpayer with the Internal Revenue Service for
the taxable year.
3.4.4. In
circumstances where the Schedule L of Federal Form 1120, 1120S or 1065, as
filed with the United States Internal Revenue Service, has not been prepared in
accordance with generally accepted accounting principles, the taxpayer shall
file a copy of such Schedule L with the State Tax Department, adjusted in
accordance with the requirements of the Tax Commissioner under W. Va. Code
'11-23-3(b)(2)(D),
and Section 3.4.5 of these regulations, if such adjustment is required. The
taxpayer shall not be required to file with the West Virginia Tax Department a
Schedule L of Federal Form 1120, 1120S or 1065 prepared in accordance with
generally accepted accounting principles, except for the adjustments specified
under W. Va. Code '11-23-3(b)(2)(D),
and Section 3.4.5 of these regulations, if any, for purposes of the West
Virginia Business Franchise Tax, unless the taxpayer has filed such Schedule L,
prepared in accordance with generally accepted accounting principles, for
federal income tax purposes with the United States Internal Revenue Service for
the taxable year.
3.4.5. Additional
Items in Capital. -- The term "capital" for purposes of the business franchise
tax includes such adjustments as the Tax Commissioner deems necessary to
properly reflect capital and such additional items from the accounts of the
taxpayer as the Tax Commissioner may by regulation prescribe, which fairly
represent the net equity of the taxpayer as defined in accordance with
generally accepted accounting principles.
3.4.6. Allowance for Certain Government
Obligations and Obligations Secured by Residential Property. -- As to both
corporations and partnerships, capital must be multiplied by a fraction equal
to one minus a fraction:
3.4.6.1. The
numerator of which is the average of the monthly beginning and ending account
balances during the taxable year (account balances to be determined at cost in
the same manner as obligations, investments and loans are reported on Schedule
L of the "Federal Form 1120" or Federal Form 1065) of the following:
3.4.6.1.a. Obligations and securities of the
United States, or of any agency, authority, commission or instrumentality of
the United States and any other corporation or entity created under the
authority of the United States Congress for the purpose of implementing or
furthering an objective of national policy;
3.4.6.1.a.1. The term "obligation," for
purposes of subsection 3.4.6.1.a, means a direct obligation of one of the
enumerated entities issued under law for valuable consideration, and includes
bonds, notes, certificates of indebtedness, Treasury bills, and interim
certificates issued for an obligation. It does not include, for example, an
overpayment of federal income tax.
3.4.6.1.a.2. The term "obligations and
securities of the United States or any agency, authority, commission or
instrumentality of the United States and any other corporation or entity
created under the authority of the United States Congress for the purpose of
implementing or furthering an objective of national policy" means securities of
any such agency, authority, commission, instrumentality, corporation or entity;
or direct obligations of the United States government or any such agency,
authority, commission, instrumentality, corporation or entity whereby any such
entity is the obligor. Obligations or securities for which the federal
government or any such agency, authority, commission, instrumentality,
corporation or entity acts as a mere guarantor, rather than the direct obligor,
shall not constitute obligations or securities of the United States or any such
agency, authority, commission, instrumentality, corporation or entity for
purposes of the West Virginia business franchise tax and these
regulations.
3.4.6.1.a.3. Example:
Financial instruments issued by private institutions obliged to make timely
payment of principal and interest which are guaranteed by a federal agency that
pledges the full faith and credit of the United States to guarantee the timely
payment of interest and principal if the issuer defaults are not obligations of
the United States or any agency, authority, commission or instrumentality of
the United States or any corporation or entity created under the authority of
the United States Congress. The federal agency bears only a secondary and
contingent obligation to pay, and thus is a guarantor rather than an
obligor.
3.4.6.1.b.
Obligations of the State of West Virginia or any political subdivision of the
State of West Virginia;
3.4.6.1.c.
Investments or loans primarily secured by mortgages, or deeds of trust, on
residential property located in the State of West Virginia and occupied by
nontransients;
3.4.6.1.c.1. The term
"residential property" means an abode and dwelling for human habitation
intended to be inhabited for a permanent or indeterminate and lengthy period of
time. The term does not include hotels, motels, inns, motor inns, lodges and
similar short-term lodging accommodations, but does include apartments,
condominiums, single family dwellings, multiple family dwellings, apartment
complexes, nursing homes and housing developments. This term shall include
property primarily used as such an abode and dwelling without regard to whether
the property is also used for commercial purposes, so long as it is primarily
used as a residence.
3.4.6.1.c.2.
The term "nontransient" means natural persons, rather than corporations, who
own their residence or who have a lease for their residence which has a primary
term of not less than ninety (90) days or such persons who hold a weekly or
monthly periodic tenancy or a tenancy at will in their residence but who have
resided at the residence for a period of more than eighty-nine (89)
days.
3.4.6.1.d. And
loans primarily secured by a lien or security agreement on residential property
in the form of a mobile home, modular home or double-wide, located in the State
of West Virginia and occupied by nontransients.
3.4.6.1.d.1. For purposes of this subsection,
the term "lien or security agreement" shall include a uniform commercial code
security interest agreement.
3.4.6.1.e. The term "investments or loans
primarily secured by mortgages or deeds of trust, on residential property"
shall include construction loans for the construction of residential property
so secured.
3.4.6.2. The
denominator of which is the average of the monthly beginning and ending account
balances of the total assets of the taxpayer which are shown on Schedule L of
the "Federal Form 1120," as filed by the taxpayer with the Internal Revenue
Service or, in the case of partnerships, Schedule L of Federal Form 1065, as
filed by the taxpayer with the Internal Revenue Service, or in the case of
taxpayers not required to file such schedules or forms with the Internal
Revenue Service, the pro forma version thereof.
3.4.6.3. For purposes of this regulation, the
average of the monthly beginning and ending account balances shall be
determined for any given account by adding the account balance on the first day
of the month to the account balance on the last day of the month and dividing
the resulting sum by two. The averages resulting from this procedure shall, for
each of the twelve (12) months of the taxable year, or, in the case of short
taxable years for the number of months in the taxable year, be added together,
and the sum shall then be divided by twelve (12) in the case of taxable years
having twelve (12) months, or shall be divided by the number of months in the
taxable year for short taxable years. The resulting figure shall be the average
of the monthly beginning and ending balance for any account described under
this Section 3 of the these regulations.
3.4.6.3.a. When a taxpayer maintains records
insufficient to clearly establish the monthly beginning and ending account
balances, the average of the monthly beginning and ending account balances
shall be deemed to be zero unless the taxpayer can otherwise affirmatively
establish to the satisfaction of the Tax Commissioner the amount of the average
monthly beginning and ending account balances.
3.5. Commercial domicile. -- The
term "commercial domicile" means the principal place from which the trade or
business of the taxpayer is directed or managed: Provided, That the commercial
domicile of a financial organization, which is subject to regulation as such,
shall be at the place designated as its principal office with its regulating
authority.
3.5.1. The term "directed or
managed" for purposes of these regulations shall mean the guidance and control
exerted by the executive officers or managerial authorities of a corporation
over the business affairs of the corporation. In the case of parent and
subsidiary corporations or other related or affiliated corporations, any
direction, management, guidance or control exerted by the executive officers or
managerial authorities of parent corporations over or upon subsidiary
corporations or the management thereof, or by the executive officers or
managerial authorities of related or affiliated corporations over or upon other
related or affiliated corporations or the management thereof, shall not
constitute the direction or management of the corporation for purposes of the
West Virginia business franchise tax or these regulations.
3.6. Commissioner or Tax Commissioner. -- The
terms "Commissioner" or "Tax Commissioner" are used interchangeably in these
regulations, and mean the Tax Commissioner of the State of West Virginia, or
his delegate.
3.7. Compensation. --
The term "compensation" means wages, salaries, commissions and any other form
of remuneration paid to employees for personal services.
3.8. Corporation. -- The term "corporation"
includes any corporation, S corporation, joint-stock company and any
association or other organization which is taxable as a corporation under
federal income tax laws or the income tax laws of West Virginia, or which is
treated as an S corporation under federal income tax law.
3.9. Delegate. -- The term "delegate" 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 W. Va. Code '11-23-1 et
seq. or these regulations.
3.10.
Doing business. -- The term "doing business" means any activity of a
corporation or partnership which enjoys the benefits and protection of the
government and laws of the State of West Virginia, except the activities of
agriculture and farming.
3.10.1. For purposes
of these regulations, the terms "agriculture" and "farming" shall mean the
production of food, fiber, and woodland products (but not timbering activity)
by means of cultivation, tillage of the soil and by the conduct of animal,
livestock, dairy, apiary, equine or poultry husbandry, horticultural, or any
other plant or animal production activity and all farm practices related, usual
or incidental thereto, including the storage, packing, shipping and marketing
of agricultural or farm products, but not including any manufacturing, milling
or processing of such products by persons other than the producer
thereof.
3.10.2. The activities of
agriculture and farming shall mean such activities, as defined herein,
occurring on not less than five (5) acres of land and the improvements thereon,
used in the aforementioned activities, and shall mean only such agriculture and
farming activities resulting in the production of at least one thousand dollars
($1,000.00) of agriculture or farming products per annum through the conduct of
the business of farming as the principal activity of the corporation or
partnership in the manner described in W. Va. Code '11-1A- 10 et seq. and the
regulations related thereto.
3.11. Domestic corporation. -- The term
"domestic corporation" means a corporation organized under the laws of the
State of West Virginia, and certain corporations organized under the laws of
the State of Virginia before the twentieth day of June, 1863. Every other
corporation is a foreign corporation.
3.12. Federal Form 1120. -- The term "Federal
Form 1120" means the annual federal income tax return of any corporation made
pursuant to the United States Internal Revenue Code of 1986, as amended, or in
successor provisions of the laws of the United States in respect to the taxable
income of a corporation, and filed with the Federal Internal Revenue Service.
In the case of a corporation that elects to file a federal income tax return as
part of an affiliated group, but files as a separate corporation under the
Business Franchise Tax Act, then as to such corporation, the term "Federal Form
1120" means the pro forma Federal Form 1120. In the case of S corporations, the
term "Federal Form 1120" means Federal Form 1120S.
3.12.1. For purposes of the West Virginia
business franchise tax and these regulations, the term "Federal Form 1120"
shall mean a pro forma Federal Form 1120 for those corporations not required by
federal law to file a Federal Form 1120.
3.12.2. The term "Schedule L of Federal Form
1120" shall mean the balance sheet required to be filed with the federal income
tax return, whether designated Schedule L or otherwise. For those corporations
not required by federal law to file a "Federal Form 1120" or a balance sheet,
whether designated Schedule L or otherwise, with their federal income tax
return, the term "Schedule L of Federal Form 1120" shall mean the pro forma
Schedule L of Federal Form 1120.
3.13. Federal Form 1065. -- The term "Federal
Form 1065" means the annual federal income tax return or filing of a
partnership made pursuant to Section 6031 of the United States Internal Revenue
Code of 1986, as amended, or renumbered, or in successor provisions of the laws
of the United States in respect to the income of a partnership, and filed with
the Internal Revenue Service.
3.13.1. For
purposes of the West Virginia business franchise tax and these regulations, the
term "Federal Form 1065" shall mean a pro forma Federal Form 1065 for those
partnerships not required by federal law to file a Federal Form 1065.
3.13.2. The term "Schedule L of Federal Form
1065" shall mean the balance sheet required to be filed with the federal
partnership tax return or filing, whether designated Schedule L or otherwise.
For those partnerships not required by federal law to file a Federal Form 1065
or a balance sheet, whether designated Schedule L or otherwise, with their
federal partnership return, the term "Schedule L of Federal Form 1065" shall
mean the pro forma Schedule L of Federal Form 1065.
3.14. Fiduciary. -- The term "fiduciary"
means, and includes, a guardian, trustee, executor, administrator, receiver,
conservator or any person acting in any fiduciary capacity for any
person.
3.15. Financial
organization. -- The term "financial organization" means:
3.15.1. A holding company or a subsidiary
thereof. As used in this section "holding company" means a corporation
registered under the federal bank holding company act of 1956 or registered as
a savings and loan holding company other than a diversified savings and loan
holding company (as defined in section 408(a)(1)(F) of the Federal National
Housing Act ( 12 U.S.C. 1730(a)(1)(F));
3.15.2. A regulated financial corporation or
a subsidiary thereof. As used in this section "regulated financial corporation"
means:
3.15.2.1. An institution, the
deposits, shares or accounts of which are insured under the Federal Deposit
Insurance Act, or by the Federal Savings and Loan Insurance
Corporation;
3.15.2.2. An
institution that is a member of a federal home loan bank;
3.15.2.3. Any other bank or thrift
institution incorporated or organized under the laws of a state that is engaged
in the business of receiving deposits;
3.15.2.4. A credit union incorporated and
organized under the laws of this state;
3.15.2.5. A production credit association
organized under
12 U.S.C.
2071;
3.15.2.6. A corporation organized under
12
U.S.C. 611 through
631
(an Edge Act corporation); or
3.15.2.7. A federal or state agency or branch
of foreign bank (as defined in
12
U.S.C. 3101); or
3.15.3. A corporation which derives more than
fifty percent of its gross business income from one or more of the following
activities:
3.15.3.1. Making, acquiring,
selling or servicing loans or extensions of credit. Loans and extensions of
credit include:
3.15.3.1.a. Secured or
unsecured consumer loans;
3.15.3.1.b. Installment
obligations;
3.15.3.1.c. Mortgages
or other loans secured by real estate or tangible personal property;
3.15.3.1.d. Credit card loans;
3.15.3.1.e. Secured and unsecured commercial
loans of any type; and
3.15.3.1.f.
Loans arising in factoring.
3.15.3.2. Leasing or acting as an agent,
broker or advisor in connection with leasing real and personal property that is
the economic equivalent of an extension of credit (as defined by the Federal
Reserve Board in
12 C.F.R.
225.25(b)(5)) .
3.15.3.3. Operating a credit card
business.
3.15.3.4. Rendering
estate or trust services.
3.15.3.5.
Receiving, maintaining or otherwise handling deposits.
3.15.3.6. Engaging in any other activity with
an economic effect comparable to those activities described in Section
3.15.3.1, 3.15.3.2, 3.15.3.3, 3.15.3.4 or 3.15.3.5 of the
regulations.
3.16. Fiscal year. -- The term "fiscal year"
means an accounting period of twelve (12) months ending on any day other than
the last day of December, and on the basis of which the taxpayer is required to
report for federal income tax purposes.
3.17. Includes and including. -- The terms
"includes" and "including" when used in a definition contained in this article
shall not be deemed to exclude other things otherwise within the meaning of the
term being defined.
3.18. Parent
and subsidiary corporation. -- A "parent corporation" is a corporation which
owns, directly or indirectly, on average during the taxable year more than
fifty percent (50%) of the stock of all classes of another corporation. A
corporation which is so-owned by a parent corporation is defined to be a
"subsidiary corporation." The types of ownership interest which will qualify
corporations as parent and subsidiary corporations shall include direct and
indirect ownership interests among members of the same controlled group as
defined in Section 267(f)(1) of the United States Revenue Code of 1986, as
amended.
3.19. Partnership and
partner. -- The term "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, and which is not a
trust or estate, a corporation or a sole proprietorship. or an unincorporated
organization which, under Section 761 of the Internal Revenue Code of 1986, as
amended, is not treated as a partnership for the taxable year for federal
income tax purposes. The term "partner" includes a member in such a syndicate,
group, pool, joint venture or organization which is a partnership.
3.19.1. The term "partnership" and the term
"partner" shall not include any joint venture or joint venturer that has
elected under Section 761 of the United States Internal Revenue Code not to
report as a partnership for federal income tax purposes.
3.19.2. The term "partner," "corporate
partner" or the term "parent-partner" means and includes a corporation owning
an interest in a partnership as a general or limited partner.
3.20. Person. -- The term "person"
includes any corporation or partnership.
3.21. Pro forma return. -- The term "pro
forma return," when used in these regulations, means the return which a
taxpayer would have filed with the Internal Revenue Service had it not elected
to file as part of a consolidated group for federal income tax purposes.
3.21.1. Pro forma statements, forms,
schedules or documents. -- The term "pro forma" when applied to statements,
forms, schedules or documents means that statement, form, schedule or document
drawn up or drafted to conform to the applicable rules, regulations,
informational requirements and format for the statement, form, schedule or
document upon which the pro forma statement, form, schedule or document is to
be based as if the taxpayer were required to file such statement, form,
schedule or document for federal income tax purposes and in accordance with
federal income tax law.
3.22. Sales. -- The term "sales" means all
gross receipts of the taxpayer which are "business income," as defined in these
regulations.
3.23. State. -- The
term "state" means a state of the United States, the District of Columbia, the
Commonwealth of Puerto Rico, or any territory or possession of the United
States. and any foreign country or political subdivision thereof.
3.24. Stock. -- The term "stock" includes
shares in a corporation, association or joint stock company. The term does not
include nonvoting stock which is limited and preferred as to dividends, or
treasury stock. The term "stock owned by a corporation" shall include stock
owned directly by such corporation and stock which is subject to an option to
acquire stock.
3.25. Taxable year.
-- The term "taxable year" means the calendar year, or the fiscal year ending
during such calendar year, upon the basis of which the taxpayer's tax liability
is computed under the Business Franchise Tax Act. The term "taxable year"
means, in the case of a return made for a fractional part of a year (short
taxable year) under the provisions of the Business Franchise Tax Act, or under
these regulations, the period for which such return is made.
3.25.1. The term "taxable year for federal
income tax purposes" or the term "filing year for federal income tax purposes"
means the fiscal or calendar year for which the taxpayer is required to report
for federal income tax purposes in accordance with federal income tax law for
purposes of the annual federal income tax return or for purposes of federal
informational returns.
3.26. Taxable in another state. -- The term
"taxable in another state" for purposes of apportionment under Section
110-23-5
of these regulations means those circumstances where a taxpayer:
3.26.1. Is subject to a net income tax, a
franchise tax measured by net income, a franchise tax for the privilege of
doing business or a corporate stock tax in such other state; or
3.26.2. Would be subject to a net income tax
if such other state imposed such a tax.
3.27. Taxpayer. -- The term "taxpayer" means
any person as defined in these regulations subject to the tax imposed by W. Va.
Code '11-23-1 et
seq.
3.28. This Code. -- The term
"this code" means the code of West Virginia, 1931, as amended.
3.29. This State. -- The term "this State"
means the State of West Virginia.
3.30. Treasury stock. -- The term "treasury
stock" means shares of a corporation which have been issued and have been
subsequently acquired by and belong to such corporation, and have not been
cancelled or restored to the status of authorized but unissued shares. Treasury
stock is deemed to be issued shares, but not outstanding shares.
3.31. W. Va. Code. -- The term "W. Va. Code"
means the Code of West Virginia of 1931, as amended.
3.32. Meaning of terms. -- Any term used in
these regulations shall have the same meaning as when used in a comparable
context in the laws of the United States relating to federal income taxes,
unless a different meaning is clearly required by the context or by definition
in these regulations. Any reference in these regulations to the laws of the
United States, or to the Internal Revenue Code or to the federal income tax law
shall mean the provisions of the laws of the United States relating to the
determination of income for federal income tax purposes. All amendments made to
the laws of the United States prior to January 1, 1989 shall be given effect in
determining taxes imposed by the Business Franchise Tax Act for the tax period
beginning January 1, 1988. No amendment to laws of the United States made after
December 31, 1988 shall be given effect unless superseding West Virginia
statutory law shall have been passed giving effect to such amendments for
purposes of the West Virginia Business Franchise Tax Act.
