Current through Register Vol. XLI, No. 50, December 13, 2024
Section 117-1-5 - Tax Credits5.1. Semi-Annual Reports. -- Each Qualified Company shall report to the Tax Commissioner and the Authority on a semi-annual basis, and shall file separate reports for each separate capital base that is designated as qualified by the Authority. In each fiscal year until the Qualified Company is decertified by the Authority, a report covering the first and second quarters of the Company's fiscal year, and a report covering the third and fourth quarters of the Company's fiscal year, shall be submitted to the Authority no later than thirty (30) days following the end of the respective two-quarter period. However, the initial report need not be submitted until thirty (30) days following the end of the first two-quarter period ending more than six (6) months after the Company's designation as a Qualified Company or the designation as qualified of the separate capital base. The initial report shall contain the following information: 5.1.a. The name of each investor in the Qualified Company who has received, or is to receive, a tax credit as the result of investment in the subject capital base;5.1.b. The amount of each investor's investment in the subject capital base and the date on which the investment was made;5.1.c. The amount of tax credit allowed to the investor as the result of investment in the subject capital base;5.1.d. All Qualified Investments the Qualified Company has made;5.1.e. In the case of a Qualified Company which is a SBIC, a statement as to the compliance by the SBIC with the Small Business Investment Act of 1958, 15 U.S.C. §§ 661 et seq., as amended, and the federal regulations promulgated under that Act, as well as a copy of the status or results of any examinations, audits or investigations conducted by or on behalf of the U.S. Small Business Administration with regard to compliance by the SBIC; and5.1.f. Any additional information requested by the Authority.5.1.g. Each subsequent report shall contain only changes or additions in information from the initial report.5.2. Maximum Authorized Credits. -- The total amount of tax credits authorized for a single Qualified Company may not exceed Two Million Dollars during any single State fiscal year.5.3. Additional Tax Credits. -- If a Qualified Company has not received approval for the maximum tax credit of Two Million Dollars within any State fiscal year, the Qualified Company may apply, pursuant to Subsection 4.2 of this Rule, as many as three times during any State fiscal year for additional credits of at least $50,000.00 each by seeking to have increases to its capital base designated as qualified.5.4. Total Credits; Allocation. -- The total credits which may be authorized by the Authority in each fiscal year is set forth in the Act. Subject to the provisions of Subdivision 3.10 of the Rule, the Authority shall allocate these credits to Qualified Companies in the order in which the companies are designated as Qualified West Virginia Capital Companies or their separate capital bases or increases to capital base are designated as qualified, as the case may be.5.5. Certificate of Tax Credit. -- The Authority shall issue to the Qualified Company the Authority's Certificate approving the amount of tax credits allocated to the Qualified Company. The Authority's Certificate shall list the investors entitled to a tax credit and the amount of credit allotted to each investor. The Qualified Company shall issue to each investor entitled to a tax credit, the Qualified Company's Certificate on a form prepared by the Authority, signed and verified by the Qualified company or by a duly authorized officer, partner, limited liability company member or manager, or trustee of the Qualified Company. The Qualified Company's Certificate shall set forth the amount of the investor's credit. The investor shall submit a true copy of the Qualified Company's Certificate with the investor's tax return requesting a tax credit. If the investor entitled to a tax credit is a partnership, an S corporation, a limited liability company, any other pass-through entity or an individual joint investor, the partners, shareholders, members, owners or individual investors shall apportion the tax credit among themselves pursuant to the provisions of Subdivision 5.7.f of this Rule.5.6. Investors Entitled to Tax Credit; Amount. -- Any investor, including an individual, partnership, limited liability company, corporation or other entity, who makes an investment in an Applicant that is designated a Qualified Company pursuant to this Rule or who makes an investment in a Qualified Company's separate capital base or increase to capital base that is designated as qualified, is entitled to a tax credit, as allocated under Subsection 3.10 of this Rule, equal to fifty percent (50%) of the investment, except as otherwise provided by the Act or this Rule. The partners of a partnership, the shareholders of an S corporation, the members of a limited liability company, the owners of any other pass-through entity and individual joint investors are entitled to the credits allocated and authorized by the Authority for investments by the partnership, the S corporation, the limited liability company, the other pass-through entity or the joint investors in accordance with the apportionment plan provided for in Subdivision 5.7.f of this Rule.5.7. Application of Tax Credits.5.7.a. General Rule. -- The amount of tax credit allowed for the taxable year is the portion of the tax credit authorized under W. Va. Code § 5E-1-8(c) and Subsection 5.6 of this Rule that does not exceed the tax liability limitation as provided in this Subsection.5.7.b. Tax Credit Available. -- The credit available for the taxable year is the sum of: 1. Unused tax credit carried forward from prior taxable years (carryforwards); and2. The amount of tax credit determined under W. Va. Code § 5E-1-8(c) for the taxable year and described in Subsection 5.6 of this Rule (tax credits earned).5.7.c. Tax Liability Information. -- Tax credit available for a taxable year beginning after June 30, 1986, must be applied against the same taxes as set forth in W. Va. Code § 11-13C-5(c) through (i), and in that order.5.7.d. Excess Tax Credit. -- The excess of the tax credit available over the applicable tax liability limitation for the year is an unused credit which the Qualified Company may carry forward as provided for under Subsection 5.8 of this Rule.5.7.e. Order of Application. -- If the tax credit available for a taxable year is not allowed in full because of the tax liability limitation, carry forwards are applied against the tax liability limitation first. To the extent the tax liability limitation exceeds carry forwards, tax credit earned for the taxable year is then applied.5.7.f. Apportionment. 1. The partners, shareholders, members, owners or individuals shall by election divide the tax credits authorized by the Authority for investments by a partnership, an S corporation, a limited liability company, pass-through entity or individual joint investors pursuant to this Subdivision 5.7.f.2. The partners, S corporation shareholders, limited liability company members, pass-through entity owners or individual joint investors shall apportion the tax credit authorized in any manner they may select, provided that each partner, shareholder, member, owner or individual consents in writing to an apportionment plan. The written consent to an apportionment plan shall be signed by each partner, shareholder, member, owner or individual, or their duly authorized agents. The written consent shall set forth the name, address, employer identification number or social security number and taxable year for which the credit will be claimed for each partner, shareholder, member, owner or individual and the amount of tax credit apportioned to each of them under the plan. The consent of more than one partner, shareholder, member, owner or individual may be incorporated in a single statement. Each partner, shareholder, member, owner or individual shall file the statement with the application required pursuant to Subsection 3.3 of this Rule and the statement is irrevocable and not subject to change after filing unless the tax credit authorized by the Authority is less than the tax credit applied for, in which case the Authority may request the apportionment plan to be amended. Each partner, shareholder, member, owner and individual consenting to an apportionment plan shall keep as part of his or her records a copy of the statement containing all of the required consents.3. An apportionment plan adopted and consented to by all partners, S corporation shareholders, limited liability company members, pass-through entity owners or joint individual investors is valid only for the tax credits authorized by the Authority pursuant to the application with respect to which the plan is filed. A separate consent to an apportionment plan must be filed with respect to each application filed pursuant to Subsection 3.3 of this Rule.5.7.g. Limitation. -- Tax credits authorized by the Authority may not be used against any liability the taxpayer may have for interest, penalties, or additions to tax.5.8. Carryforward of Unused Tax Credit. 5.8.a. General Rule. -- The holder of a tax credit may carry forward an unused tax credit to succeeding taxable years but not beyond fifteen (15) years. Carry forwards of unused tax credit are taken into account in determining the amount of tax credit available and the tax credit allowed for the taxable years to which they may be carried.5.8.b. Unused Credit. -- If carry forwards and tax credit earned exceed the tax liability limitation, the excess attributable to tax credit earned is an unused tax credit.5.8.c. Limitation on Carry forwards. -- Tax credit carry forwards to a taxable year may not exceed the applicable tax liability limitation for that year. Tax credit carry forwards from an unused tax credit year (the taxable year in which an unused tax credit arises) are applied before tax credit carry forwards from a later unused tax credit year.5.8.d. Joint Return by Husband and Wife. -- This Subdivision prescribes additional rules for computing the tax credit carry forwards of a husband and wife making a joint return for one or more of the taxable years involved in the computation of the tax credit earned. 1. From Separate to Joint Return. -- If a husband and wife, making a joint return for any taxable year, did not make a joint return for any of the taxable years involved in the computation of the tax credit earned, the separate tax credits apportioned in accordance with Subdivision 5.7.f of this Rule shall together be considered a joint tax credit carryforward to the taxable year.2. Continuous Use of Joint Return. -- If a husband and wife making a joint return for a taxable year made a joint return for each of the taxable years involved in the computation of the tax credit earned or the tax credit carryforward to the taxable years, the joint tax credit or tax credit carryforward to the taxable year is computed in the same manner as the tax credit carryforward of an individual as provided in Subdivisions 5.8.a through 5.8.c of this Rule.3. From Joint to Separate Return. -- If a husband and wife making separate returns for a taxable year made a joint return for any, or all, of the taxable years involved in the computation of the tax credit earned or tax credit carryforward to the taxable year, the separate tax credit carryforward of each spouse to the taxable year is computed in accordance with Subdivisions 5.8.a through 5.8.c of this Rule but with the following modification: The tax credit of each spouse for a taxable year for which a joint return was made shall be considered to be that portion of the joint tax credit apportioned to the spouse in accordance with Subdivision 5.7.f of this Rule.4. Recurrent Use of Joint Return. -- If a husband and wife making a joint return for any taxable year made a joint return for one or more, but not all, of the taxable years involved in the computation of a tax credit carryforward to the taxable years, the taxable year is computed in the manner set forth in Paragraph 5.8.d.3. of this Rule. The tax credit carryforward is considered a joint tax credit carryforward to the taxable year.5. Joint Tax Credit Carryforwards. -- The joint tax credit carryforwards to any taxable year for which a joint return is made are all the tax credit carryforwards of both spouses to the taxable year.6. Divorce and Remarriage. -- It is the intent of this Rule to allow the carryforward of joint tax credits to joint returns and of separate tax credits to joint returns so long as the two individuals remain married in both the taxable year in which the tax credit is earned and the taxable year to which the tax credit is to be carried. Divorce and remarriage in joint return cases present special problems. A joint tax credit of one couple cannot be carried to another taxable year and applied to the tax liability of a different couple. The principles established under the Internal Revenue Code and Treasury Regulations, and interpretations thereof, for net operating loss carryovers and investment tax credit carryforwards may be used as a guide in applying the rules for joint returns of husband and wife and separate returns of husband and wife and in cases involving divorce and remarriage.5.8.e. Tax Credits Not Assignable. -- No portion of the tax credit earned by any investor is subject in any manner to alienation, sale, transfer or assignment, except that tax credits authorized by the Authority for investments by a partnership, an S corporation, a limited liability company, any other pass-through entity or individual joint investors may be apportioned pursuant to Subdivision 5.7.f of this Rule.5.9. Investment to Date. -- The tax credit provided for in W. Va. Code § 5E-1-8 is available only to those investors whose investment in a Qualified West Virginia Capital Company occurs on or after July 1, 1986. 5.10. Recapture. -- If the amount invested by the investor is not used by the Qualified Company for qualified investments as required by the Act and this Rule, the investor is not subject to a recapture provision for any credit claimed by him or her to date. However, the Qualified Company is subject to the penalty imposed under W. Va. Code § 5E-1-12 and Subsection 7.6 of this Rule.