W. Va. Code R. § 110-13Q-3

Current through Register Vol. XLI, No. 50, December 13, 2024

Section 110-13Q-3 - Overview of the Credits

3.1. The tax incentive for developing patents in this State is a credit equal to 20% of the royalties, license fees or other consideration received by the developer of a patent in the taxable year who has an agreement, as defined in Subsection 2.1 of this rule, except as otherwise provided in this section. A new tax credit shall not accrue for any royalties, license fees or other consideration received after December 31, 2016.

3.1.a. A credit is not allowed under Subsection 3.1 or 3.2 of this rule for a patent developed entirely outside this State.

3.1.b. When a patent has been developed through activity in this State under Subsection 3.1., and through activity in one or more other states, any royalties, license fees or other consideration received by the developer of the patent must be multiplied by a fraction, the numerator of which is the direct costs of developing the patent in this State under an agreement, and the denominator of which is the total direct costs of developing the patent. The product of this calculation is to be used when determining the credit allowed under Subsection 3.1 or 3.2 of this rule.

3.1.c. If a person other than a developer of the patent receives a portion of a royalty that would be eligible for a tax credit under Subsection 3.1 or 3.2 of this rule because of a business association, licensing agreement or otherwise, that person may receive the tax credit allowable only as to the portion of royalties that person actually receives;

3.1.d. Unused credit accrued under Subsection 3.1 or 3.2 of this rule may be carried forward until used only for a period of nine consecutive years after the taxable year in which the credit allowed by this section is first available.

3.1.e. A credit is not allowed under Subsection 3.1 or 3.2 of this rule for a patent if it was sold, leased or licensed to a third party prior to January 1, 2011, or before that day if it was reduced to practice for purely commercial purposes by the developer or a person related to the developer, as that term is defined in subsection (b), Section 267 of the Internal Revenue Code of 1986, as amended, and in W. Va. Code §§ 11-21-9 or 11-24-3; and

3.1.f. A credit is not allowed under Subsection 3.1 or 3.2 of this rule beginning with the eleventh taxable year after the patent was first directly used in a manufacturing process or product.

3.1.g. A credit is not allowed under this rule for any activity, investment, assets, or expenditures for which any of the tax credits authorized under W. Va. Code §§ 11-13D-1 et seq., 11-13E-1 et seq.,11-13Q-1 et seq., 11-13R-1 et seq., 11-13S-1 et seq., or 11-13X-1 et seq., have been authorized, taken or allowed.

3.1.h. A credit is not allowed under this rule for any activity, investment, assets, or expenditures for which the tax credits authorized under W. Va. Code §§ 18B-13-1, et. seq., have been, authorized, taken or allowed.

3.2. For any taxable year in which a person who claimed the credit under Subsection 3.1 of this rule in the previous credit year invests an amount equal to at least 80% of the credit claimed under Subsection 3.1 of this rule for that previous credit year in depreciable property for purposes of developing additional patents, the person claiming the credit may take a credit of 30% of the royalties, license fees or other consideration received by the developer of a patent who has an agreement, as defined in Subsection 2.1 of this rule, and was developed in its entirety after January 1, 2011. This tax credit is available as an alternative to the tax credit in Subsection 3.1 of this rule, and may not accrue jointly. A new tax credit shall not accrue for any royalties, license fees or other consideration received after December 31, 2016.

3.3. The tax credit for use in a manufacturing process or product in this State is a credit equal to 20% of the net profit attributable to a patent, as determined under Subsection 5.1, et seq. of this rule that was developed in this State pursuant to the eligibility criteria for the credit in Subsections 3.1 and 3.2 of this rule, and is used in a manufacturing process or product in this State for the first time after January 1, 2011. A tax credit shall not be allowed for any net profit attributable to a patent received after December 31, 2016.

3.4. For any taxable year in which a person claiming the credit under Subsection 3.3 of this rule invests an amount equal to at least 80% of the credit claimed under Subsection 3.3 of this rule for that taxable year in capital improvements to add product lines to or increase productivity in this State during the next taxable year, the person claiming the credit may take a credit of 30% of the net profit attributable to a patent that was developed in this State pursuant to the eligibility criteria for the credit in Subsections 3.1 and 3.2 of this rule, and is used in a manufacturing process or product in this State for the first time after January 1, 2011. This tax credit is available as an alternative to the tax credit in Subsection 3.1 of this rule, and may not accrue jointly. A new tax credit shall not accrue for any net profit attributable to a patent received after December 31, 2016.

W. Va. Code R. § 110-13Q-3