W. Va. Code R. § 110-21G-7

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

Section 110-21G-7 - Taxable Income

7.1. West Virginia Taxable Income -- An electing PTE's West Virginia taxable income is the total of:

(1) all resident owner's share of the electing PTE's income or loss;

(2) all nonresident owner's share of pass-through entity income or loss, other than apportionable income, multiplied by the pass-through entity's apportionment percentage; and

(3) each nonresident owner's share of income allocable to West Virginia.

7.1.1. The electing PTE must determine the status of each owner as a resident or nonresident of West Virginia.

7.1.2. Individual owners of a pass-through entity are West Virginia residents if they meet the definition of "resident individual" specified in W. Va. Code §11-21-7.

7.1.3. Estates or trusts that are owners of a pass-through entity are West Virginia residents if they meet the definition of "resident estate or trust" specified in W. Va. Code §11-21-7.

7.1.4. Individual owners of a pass-through entity are nonresidents of West Virginia if they meet the definition of "nonresident individual" specified in W. Va. Code §11-21-7.

7.1.5. Estates or trusts that are owners of a pass-through entity are nonresidents of West Virginia if they meet the definition of "nonresident estate or trust" specified in W. Va. Code §11-21-7.

7.1.6. For the purposes of the electing PTE tax computation, owners may not be classified as part-year residents. Part-year residents will be calculated as nonresidents on the electing PTE return.

7.2. Computation For Resident Owners. --

7.2.1. An electing PTE's calculation of its pass-through entity taxable income must include all items of income, gain, loss, and deduction, to the extent they would flow through and be included in the income of resident owners that are taxable under W. Va. Code §11-21-1et seq.

7.2.2. Pass-through entity taxable income includes each resident owner's share of the electing PTE's income or loss, subject to increasing and decreasing modifications directly applicable to the electing PTE's income or loss that is attributable to West Virginia. Modifications subject to the provisions of W. Va. Code §11-21-17 and W. Va. Code §11-21-17a shall be made in accordance with the requirements of those sections as applicable.

7.2.3. The West Virginia personal exemption specified in W. Va. Code §11-21-16 may not be applied by the electing PTE in determining electing PTE taxable income.

7.2.4. West Virginia residents are taxable on all of their pass-through entity income regardless of the pass-through entity's allocation and apportionment. However, subject to the requirements and limitations of W. Va. Code §11-21-20, owners of the electing PTE may claim a credit for income taxes paid to another state. Any such credit may also be used as a credit against the PTE's tax liability as determined by such individual resident owner's includable income in any PTE tax liability pursuant to Section 7.2.1 to the extent paid on behalf of such owner through nonresident withholding, a composite return, or a similar PTE in such other state.

7.2.5. In determining West Virginia taxable income, an electing PTE must add to its West Virginia taxable income any state and local taxes to the extent that the electing PTE deducted such taxes in determining the electing PTE's federal taxable income.

7.3. Computation For Nonresident Owners.

7.3.1. A pass-through entity's taxable income includes each nonresident owner's share of the electing PTE's income or loss, subject to increasing and decreasing modifications directly applicable to the pass-through entity's income or loss attributable to West Virginia. Modifications subject to the provisions of W. Va. Code §11-21-17 and W. Va. Code §11-21-17a shall be made in accordance with the requirements of those sections as applicable.

7.3.2. The West Virginia personal exemption specified in W. Va. Code §11-21-16 may not be applied by the electing PTE in determining the electing PTE's taxable income.

7.3.3. In determining the share of pass-through entity income or loss that is attributable to West Virginia, the electing PTE adds each nonresident owner's share of pass-through entity income or loss other than dividend income ("apportionable income"), after any increasing or decreasing modifications, multiplied by the pass-through entity's apportionment percentage; and each nonresident owner's share of dividend income ("allocable income") if the pass-through entity is commercially domiciled in West Virginia.

7.3.4. An electing PTE's calculation of its pass-through entity taxable income must include all items of income, gain, loss, and deduction, to the extent they would flow through and be included in the income of owners that are taxable under W. Va. Code §11-21-1et seq.

7.3.5. The electing PTE can exclude income from the calculation of pass-through entity taxable income to the extent that the electing PTE can establish that the amount is properly allocable to an owner who is not subject to tax on such amount under W. Va. Code §11-21-1et seq. Two examples are:

(1) income that is not U.S. sourced and is allocable to nonresident alien partners and, therefore, not included in federal adjusted gross income under the Internal Revenue Code; and

(2) retirement income of former partners that is exempt from nonresident state taxation under 4 U.S.C §114.

7.3.6. In determining West Virginia taxable income, an electing PTE must add to its West Virginia taxable income any state and local taxes to the extent that the electing PTE deducted such taxes in determining the electing PTE's federal taxable income.

W. Va. Code R. § 110-21G-7