West Virginia Code of State Rules
Agency 110 - Tax
Title 110 - LEGISLATIVE RULE STATE TAX DEPARTMENT
Series 110-24 - Corporation Net Income Tax
Section 110-24-13c - Net operating loss (NOL) carryovers earned during a year in which the Taxpayer filed a consolidated tax return

Universal Citation: 110 WV Code of State Rules 110-24-13c

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

13c.1. West Virginia computes net operating losses on a post-apportionment basis, including business and non-business income adjustments. NOLs can only be carried forward (or backwards) to be applied against West-Virginia source income of the combined group member to which it is attributable. NOLs cannot be used by other members of the combined group. There is an exception for NOLs earned when the Taxpayer was filing on a consolidated basis for West Virginia corporation net income tax purposes for a taxable year that began before January 1, 2009. Those NOLs can be carried over and applied against the income of any former member of the consolidated (controlled) group.

13c.1.a. West Virginia Code § 11-24-13c(b)(1)(G) reads in relevant part as follows:
§11-24-13c. Determination of taxable income or loss using combined report.
(a) . . . .

(b) Components of income subject to tax in this State; application of tax credits and post-apportionment deductions.

(1) Each taxpayer member is responsible for tax based on its taxable income or loss apportioned or allocated to this State, which shall include:
(F) Its income or loss allocated or apportioned in an earlier year, required to be taken into account as state source income during the income year, other than a net operating loss; and

(G) Its net operating loss carryover. If the taxable income computed pursuant to this section and section thirteen-d of this article results in a loss for a taxpayer member of the combined group, that taxpayer member has a West Virginia net operating loss, subject to the net operating loss limitations, and carryover provisions of this article. This West Virginia net operating loss is applied as a deduction in a prior or subsequent year only if that taxpayer has West Virginia source positive net income, whether or not the taxpayer is or was a member of a combined reporting group in the prior or subsequent year: Provided, That net operating loss carryovers that were earned during a tax year in which the taxpayer filed a consolidated return under this article may be applied as a deduction from the West Virginia taxable income of any member of the taxpayer's controlled group until the net operating loss carryover is used or expires pursuant to the net operating loss provisions of this article.

13c.1.a.1. West Virginia Code § 11-24-13c(b)(1)(G) specifies that there is an exception for NOLs earned when the Taxpayer filed its annual West Virginia corporation net income tax return on a consolidated basis.

13c.1.a.2. An attempt to amend a pre-2009 separate return and file a consolidated return for that year, and to use an NOL on that return that was earned in a year when the Taxpayer was filing separately will be disallowed. And the Taxpayer cannot claim those NOLs on the 2009 and forward combined return.

13c.2. Economic Development Tax Credits.

West Virginia Code § 11-24-13c(b)(2) reads as follows:

(2) Except where otherwise provided, no tax credit or post-apportionment deduction earned by one member of the group, but not fully used by or allowed to that member, may be used, in whole or in part, by another member of the group or applied, in whole or in part, against the total income of the combined group; and a post-apportionment deduction carried over into a subsequent year as to the member that incurred it, and available as a deduction to that member in a subsequent year, will be considered in the computation of the income of that member in the subsequent year regardless of the composition of that income as apportioned, allocated or wholly within this state: Provided, That unused and unexpired economic development tax credits that were earned during a tax year in which the taxpayer filed a consolidated return under this article may, if otherwise allowed within the statutory limitations applicable to the tax credit, be used, in whole or in part, against taxes imposed by this article on any member of the taxpayer's combined group to the extent the credits would have been allowed had the taxpayer continued to file a consolidated return. For purposes of this section, the term "economic development tax credit" means, and is limited to, a tax credit asserted on a tax return under article thirteen-c [§§ 11-13C-1, et seq.], thirteen-d [§§ 11-13D-1, et seq.], thirteen-e [§§ 11-13E-1, et seq.], thirteen-f [§§ 11-13F-1, et seq.], thirteen-g [§§ 11-13G-1, et seq.], thirteen-j [§§ 11-13J-1, et seq.], thirteen-q [§§ 11-13Q-1, et seq.], thirteen-r [§§ 11-13R-1, et seq.] or thirteen-s [§§ 11-13S-1, et seq.] of this chapter or under article one [§§ 5E-1-1, et seq.], chapter five-e of this code.

Emphasis added.

13c.2.a. General; No Sharing of Credits Within a Combined Group; Exception C In general, an economic development tax credit generated by a taxpayer belongs to that taxpayer and can be applied against the corporation net income tax and business franchise tax liabilities of that taxpayer subject to the rules that govern the use of the particular credit.

13c.2.b. Possible Sharing of Credits Within a Combined Group. - For tax years beginning after December 31, 2008, an economic development tax credit that may be validly claimed by a taxable member of a combined group and that is attributable to the combined group's unitary business may not be shared with the other taxable members of the combined group. However, where entitlement to the credit arose prior to any taxable year beginning after December 31, 2008, and was taken on a consolidated West Virginia corporation net income tax return for a taxable year that began before January 1, 2009, the amount of the annual credit allowable may be claimed, in whole or in part, by any member of the combined group that was included in the consolidated West Virginia corporation net income tax return for the taxable year in which the investment was made giving rise to the credit, subject to the rules that govern use of the credit. West Virginia Code § 11-24-13c(b)(2).

13c.2.c. "Economic development tax credit defined." - For purposes of this section, the term "economic development tax credit" means, and is limited to, a tax credit asserted on a tax return under W. Va. Code §§ 11-13C-1, et seq. (business investment and jobs expansion tax credit), W. Va. Code §§ 11-13D-1, et seq. (credit for industrial expansion and revitalization), W. Va. Code §§ 11-13E-1, et seq. (credit for coal loading facilities), W. Va. Code §§ 11-13F-1. et seq. (credit for reducing electric and natural gas rates for low-income residential customers), W. Va. Code §§ 11-13G-1, et seq. (credit for reducing telephone utility rates for certain low-income residential customers), W. Va. Code §§ 11-13J-1, et seq. (neighborhood investment program), W. Va. Code §§ 11-13Q-1, et seq. (economic opportunity credit), W. Va. Code §§ 11-13R-1, et seq. (strategic research and development tax credit), W. Va. Code §§ 11-13S-1, et seq. (manufacturing investment tax credit) or W. Va. Code §§ 5E-1-1, et seq. (capital company credit).

13c.2.d. Application of current year credits. - In any case where a taxpayer's credit can be shared among the taxable members of the taxpayer's combined group, the credit shall first be applied against the taxes of the taxpayer that generated the credit consistent with the requirements and limitations that apply to the credit. If the taxpayer has more credit than it may use against its own taxes, the excess credit may be applied against the taxes of the other taxable members that are eligible to share the credit, again consistent with the requirements and limitations that apply to the credit.

13c.2.e. Economic development tax credit and recapture: recapture in general. - Where a taxpayer generates an economic development tax credit, as defined in subdivision 13c.2.c, for a taxable year and then subsequently disposes of the property, or where the property otherwise ceases to be in qualified use within the meaning of the applicable tax credit statute, recapture of the credit is determined pursuant to the article of the Code governing the tax credit, based upon the total credit previously taken by the taxpayer, and its consolidated group when the credit was first claimed on a consolidated West Virginia corporation net income tax return for a taxable year that began before January 1, 2009. This rule applies even if the taxpayer first leaves the combined group, then in a subsequent year disposes of the qualified property or otherwise causes recapture, and therefore in the subsequent tax year is no longer included in a combined group with the corporations whose use of the credit shall be considered for purposes of recapture.

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