W. Va. Code R. § 110-21F-4

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

Section 110-21F-4 - Eligibility to claim the coal severance tax rebate

4.1. The coal severance tax rebate is available to taxpayers that meet every requirement as set forth in W. Va. Code § 11-13EE-1, et. seq., any other controlling section of the W. Va. Code and W. Va. Code of State Rules, and any other recognized legal authority including controlling decisions rendered by courts of competent jurisdiction.

4.2. In order to qualify for the coal severance tax rebate, each of the following criteria must be met. Even if every requirement has been met, the rebate may be denied, limited, suspended or forfeited for any lawful reason.

4.2.1. The taxpayer must be an eligible taxpayer, which means that the taxpayer was engaged in the business of producing coal for sale, profit or commercial use, as defined by W. Va. Code § 11-13EE-2(b)(19), for at least two years in the State of West Virginia before the qualified investment property is placed in service or use in this state. See W. Va. Code § 11-13EE-2(b)(15).

4.2.2. However, a mere change in the form of doing business, from one business form to another, or a mere change in ownership, does not disqualify an otherwise eligible taxpayer as long as the transferor produced coal in this state and paid the tax imposed by W. Va. Code § 11-13A-3(a), for at least two years prior to placing the qualified investment in service or use. See W. Va. Code § 11-13EE-2(b)(15)(B) and section heading 9 of this rule.

4.2.3. When changes in business composition result in a new entity, at least 50 percent of the new entity's business assets must have been actively and directly used in coal production activity in this state for a two-year period, in order for the resulting taxpayer to be eligible to claim the rebate for qualified investments made during the current tax year. See W. Va. Code § 11-13EE-2(b)(15)(B).

4.2.4. The taxpayer must purchase or lease the qualified purchase property on or after July 1, 2019 and place it into service or use at the coal mining operation in the State of West Virginia.

4.2.5. The qualified investment property must result in an increase in the number of tons of coal produced as well as increase in the taxpayer's workforce. Additionally, there must be an increase in the state portion of the severance taxes paid. The rebate paid in any year may not exceed 80 percent of the additional severance taxes payable, before credit for payment of the minimum severance tax, that is attributable to the increase in coal production. When the taxpayer operates more than one mine in West Virginia, the production from all mines is considered when determining whether there is an increase in the taxpayer's production of coal due to placing qualified investment property into service or use. Additionally, when the taxpayer is a member of a controlled or affiliated group that has other members that produce coal in West Virginia, tons of coal produced by all members of the controlled or affiliated group, including the taxpayer, are used to determine whether the qualified investment property has resulted in an increase in the number of tons of coal produced.

4.2.6. The qualified investment property must be directly used at the coal mining operation at which it is placed in service or use for at least five years after it is placed in service or use by the taxpayer. If it is not directly used for at least five years after it is placed in service or use by the taxpayer, the taxpayer is subject to recapture of the rebate granted as described in section heading 13 of these rules.

4.2.7. No credit shall be allowed unless the aggregate total coal production tonnage from all mines operated by the eligible taxpayer in this state during the year for which the rebate or rebate carryover is claimed has increased above the annual average aggregate total coal production tonnage from all mines operated by the eligible taxpayer during the base period.

4.2.8. No rebate shall be allowed unless the aggregate total number of full-time employees along with full-time equivalent employees, at all mines operated by the eligible taxpayer in this state during the rebate year has increased above the annual average aggregate total number of full-time employees, along with full-time equivalent employees at all mines operated by the eligible taxpayer in this state during the base period.

Example 1: Taxpayer company owns three mines, Mine A, Mine B, and Mine C. The base tonnage produced at Mine A and Mine B was 200,000, which is 100,000 tons each. Mine C subsequently opens during 2021. Each of the three mines produced 150,000 tons during the claim year. Therefore, production increased for the aggregate group from 200,000 tons to 450,000 tons.

Example 2: Taxpayer company owns three mines, Mine A, Mine B, and Mine C. The base number of aggregate full-time employees for both Mine A and Mine B was 200, which is 100 each. Mine C subsequently opens during 2021. Each of the three mines had 100 aggregate full-time employees during the claim year. Therefore, the employment increased from 200 to 300 aggregate full-time employees.

4.2.9. No rebate shall be allowed under W. Va. Code § 11-13EE-1, et seq., when credit is claimed under any other article of Chapter 11 of the W. Va. Code for capital investment in the new machinery and equipment. No credit shall be allowed under any other article of Chapter 11 of the W. Va. Code when a rebate is allowed under W. Va. Code § 11-13EE-1, et seq., for the capital investment in new machinery and equipment.

W. Va. Code R. § 110-21F-4