W. Va. Code R. § 110-21F-3

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

Section 110-21F-3 - Rebate allowable

3.1.Rebate allowable. Eligible taxpayers shall be allowed a rebate against a portion of severance taxes imposed by W. Va. Code § 11-13A-3 on the privilege of engaging in the production of coal in an amount not to exceed 35 percent of the eligible taxpayer's qualified investment in tangible personal property purchased or leased for business expansion, subject to the limitations in section 3.2. of this rule.

Example. If the taxpayer makes a $1,000,000 qualified investment, the amount of the potential rebate is $350,000.

3.2.Limitations on the rebate. --

3.2.1.Maximum rebate limited to 80 percent of increase above base period severance taxes. The maximum amount of rebate allowable for any given tax year is limited to an amount not to exceed 80 percent of the increase in the state portion of severance taxes paid for coal mined at the specific mine where the qualified investment is made when compared to the average annual state portion of severance taxes paid for coal mined at the specific mine where the qualified investment is made during the base period.

3.2.1.a. "Base period annual average severance taxes" means the annual average of the state portion of severance taxes under W. Va. Code § 11-13A-3 during the five-year period directly preceding the year the qualifying capital investment in new machinery and equipment was placed into service. The annual average of the state portion of severance taxes is found by taking the cumulative total of the state portion of severance taxes paid from all mines operated within the state by the eligible taxpayer and dividing the aggregate cumulative total of the state portion of severance taxes by five.

Example. Taxpayer's base period amount at the investment mine is $1,000,000, which is the annual average of the five-year base period. Taxpayer paid $1,500,000 severance tax in the claim year from production at the investment mine. The difference is $500,000. The taxpayer can claim the rebate against $400,000 of severance taxes paid during the claim year, which is 80 percent of the difference.

3.2.1.b. When the eligible taxpayer has produced coal in this state for two years before making the capital investment in new machinery and equipment but was not in business during a full five-year base period, then the eligible taxpayer's base severance tax amount shall be the amount of state severance tax due under W. Va. Code § 11-13A-3 on coal produced in this state during the most recent tax year prior to making the investment.

Example 1: Taxpayer company has three mines, Mine A, Mine B, and Mine C. Mine A has been in operation for five years. Mine B has been in operation for three years. Mine C goes into production during the current year. The base severance tax amount for this taxpayer is the average annual production of all mines during the past five years.

Example 2: Taxpayer company has three mines, Mine A, Mine B, Mine C. Mine A went into production two years ago, while Mine B and Mine C go into production during the current year. The taxpayer's base severance tax production is the average production for all three mines during the prior year.

Example 3: Taxpayer company has three mines, Mine A, Mine B, and Mine C. All three mines go into production in West Virginia during the current year. The taxpayer is not eligible to claim the rebate until it has been in business in the State of West Virginia for at least two years.

3.2.2. The increase in the state portion of severance taxes paid against which the rebate may be taken is further limited by a fraction, the numerator of which is the increase in coal production, measured in tons produced, at all mines operated by the taxpayer, the denominator of which is the increase in coal production, measured in tons produced, at the specific mine where investment is made;

3.2.2.a. The factor cannot exceed 1.

3.2.2.b. The increase in coal production is determined by subtracting the base period coal production, measured in tons produced, from the coal production, measured in tons produced, during the tax year for which the rebate is claimed.

Example 1: Taxpayer's base period amount at the investment mine is $3,000,000, which is the annual average of the five-year base period. Taxpayer paid $3,800,000 severance tax in the claim year from production at the investment mine. The difference is $800,000. 80 percent of that difference is $640,000 ($800,000 X 0.8 = $640,000). The taxpayer may be able to claim the rebate against $640,000 of severance taxes paid during the claim year, depending upon the result of the limiting factor below.

The base period coal production of all the taxpayer's mines, including the mine where the investment was made, is 400,000 tons. The claim year production of all the taxpayer's mines is 450,000. 450,000 tons minus 400,000 tons is 50,000 tons.

The base period coal production of the taxpayer's mine where the investment was made is 100,000 tons. The claim year production at the taxpayer's mine where the investment was made is 160,000 tons. 160,000 tons minus 100,000 tons is 60,000 tons.

Increase in production all mines = 50,000 tons

Increase in production at investment mine = 60,000 tons

The factor does not exceed one.

The factor is multiplied by 80 percent of the increase in the state portion of severance taxes, which results in $533,333. ((50,000/60,000) X ($800,000 X 0.8) = $533,333). The rebate may only be claimed against $533,333.

Example 2: The taxpayer's increase in severance tax is the same as above, so that the taxpayer may be able to claim the rebate against $640,000 of severance taxes paid during the claim year, depending upon the result of the limiting factor below.

However, this time the base period coal production of all the taxpayer's mines, including the mine where the investment was made, is 400,000 tons. The claim year production of all the taxpayer's mines is 460,000. 460,000 tons minus 400,000 tons is 60,000 tons.

The base period coal production of the taxpayer's mine where the investment was made is 100,000 tons. The claim year production at the taxpayer's mine where the investment was made is 150,000 tons. 150,000 tons minus 100,000 tons is 50,000 tons.

Increase in production all mines = 60,000 tons

Increase in production at investment mine = 50,000 tons

The resulting factor is larger than one. The factor cannot exceed one, so the factor will be reduced to one.

The factor is multiplied by 80 percent of the increase in the state portion of severance taxes, which results in $640,000. (1 X ($800,000 X 0.8) = $640,000). The limiting factor did not decrease the amount of rebate that may be taken.

W. Va. Code R. § 110-21F-3