W. Va. Code R. § 175-5-4

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

Section 175-5-4 - Limitations on Licenses

4.1. In general. -- A person may hold, directly or indirectly, one or more Class A retail licenses and one or more Class B retail licenses for a market zone.

4.2. Aggregate limitation rule. -- No individual or other person may directly or indirectly hold a combination of licenses that, in the aggregate, authorizes that person to operate more than thirty percent (30%) of the total number of Class A and Class B retail outlets authorized under the provisions of W. Va. Code § 60-3A-1, et seq. to be operated in this state during the ten-year (10) license period that begins July 1, 2010. The following constitutes examples of the instant rule:

Example 1. -- The Commissioner advertises for bid Class A and Class B retail licenses that, in the aggregate, will allow one hundred eighty (180) retail outlets to be operated in this state during the ten-year (10) period that begins July 1, 2010. Thirty percent (30%) of one hundred eighty (180) retail outlets is fifty-four (54) retail outlets. ABC Corporation submits bids for Class A and Class B licenses that would authorize it to operate 55 retail outlets should ABC Corporation be the winning bidder for all of those licenses. After the bids are opened, it is determined that ABC Corporation would be the winning bidder for licenses authorizing it to operate 55 retail outlets. Due to the aggregate limitation rule, ABC Corporation may only be issued licenses that allow it to operate no more than 54 retail outlets.

Example 2. -- The Commissioner advertises for bid Class A and Class B retail licenses that, in the aggregate, will allow one hundred eighty (180) retail outlets to be operated in this state during the ten-year (10) period that begins July 1, 2010. Thirty percent (30%) of one hundred eighty (180) retail outlets is fifty-four (54) retail outlets. ABC Corporation submits bids for Class A and Class B licenses that would authorize it to operate thirty (30) retail outlets should ABC Corporation be the winning bidder for all of those licenses. D&E Corporation submits bids for Class A and Class B licenses that would authorize it to operate thirty (30) retail outlets should D&E Corporation be the winning bidder for all of those licenses. After the bids are opened, it is determined that ABC Corporation would be the winning bidder for licenses authorizing it to operate 30 retail outlets and that D&E Corporation would be the winning bidder for licenses authorizing it to operate 30 retail outlets. However, because ABC Corporation and D&E Corporation are wholly owned subsidiaries of Alphabet Corporation, they are disqualified from holding a license that allows them to operate, in the aggregate, more than 54 retail outlets due to application of the thirty percent (30%) rule. No individual or other person may directly or indirectly hold a license that authorizes the operation of more than 54 retail outlets.

4.3. Indirect ownership. -- A license is indirectly held by a person when that license is held by:

4.3.a. Members of a family. For purposes of this rule, the family of an individual includes only his or her brothers and sisters (whether by whole or half blood), spouse, ancestors, and lineal descendants, whether by birth or adoption and within the degree of consanguinity of second cousins and persons related by current marriage;

4.3.b. An individual and a corporation if more than fifty percent (50%) in value of the outstanding stock of the corporation is owned, directly or indirectly, by or for the individual;

4.3.c. An individual and a partnership or limited liability company if more than fifty percent (50%) in value of the ownership interests is owned, directly or indirectly, by or for that individual;

4.3.d. A partnership and another partnership if the same persons own, directly or indirectly, more than fifty percent (50%) of the capital interest, or the profits interest, in each partnership;

4.3.e. A limited liability company and another limited liability company if the same persons own, directly or indirectly, more than fifty percent (50%) of the capital interest, or the profits interest, in each limited liability company;

4.3.f. A partnership and a limited liability company if the same persons own, directly or indirectly, more than fifty percent (50%) of the capital interest, or the profits interest, in the partnership and the limited liability company;

4.3.g. Two corporations that are members of the same "controlled group" as that term is defined in section 4.6 of this rule;

4.3.h. A grantor of a trust and a fiduciary of a trust created by that grantor;

4.3.i. A fiduciary of a trust and a fiduciary of another trust, if the same person is a grantor of both trusts;

4.3.j. A fiduciary of a trust and a beneficiary of that trust;

4.3.k. A fiduciary of a trust and a beneficiary of another trust, if the same person is a grantor of both trusts;

4.3.l. A fiduciary of a trust and a corporation if more than fifty percent (50%) in value of the outstanding stock of the corporation is owned, directly or indirectly, by or for the trust or by or for a person who is a grantor of the trust;

4.3.m. A corporation and a partnership or limited liability company if the same persons own, directly or indirectly, more than fifty percent (50%) in value of the outstanding stock of the corporation, and more than fifty percent (50%) of the capital interest, or the profits interest, in the partnership or limited liability company;

4.3.n. An S corporation and another S corporation if the same persons own, directly or indirectly, more than fifty percent (50%) in value of the outstanding stock of each corporation; or

4.3.o. An S corporation and a C corporation, if the same persons own, directly or indirectly, more than fifty percent (50%) in value of the outstanding stock of each corporation.

4.4. Constructive ownership of stock. -- For purposes of applying section 4.3 of this rule when determining the ownership of stock:

4.4.a. Stock owned, directly or indirectly, by or for a corporation, partnership, limited liability company, estate, or trust shall be considered as owned proportionately by or for its shareholders, partners, members, or beneficiaries;

4.4.b. An individual shall be considered as owning the stock owned, directly or indirectly, by or for his or her family;

4.4.c. An individual owning (otherwise than by the application of subsection 4.4.b of this section) any stock in a corporation shall be considered as owning the stock owned, directly or indirectly, by or for his or her spouse;

4.4.d. The family of an individual shall include only his or her brothers and sisters (whether by whole or half blood), spouse, ancestors, and lineal descendants, whether by birth or adoption; and

4.4.e. Stock constructively owned by a person by reason of the application of subsection 4.4.a of this section shall, for the purpose of applying subsections 4.4.a, 4.4.b or 4.4.c of this section, be treated as actually owned by that person. However, stock constructively owned by an individual by reason of the application of subsections 4.4.b or 4.4.c of this section shall not be treated as owned by him or her for the purpose of again applying either of these paragraphs in order to make another the constructive owner of the stock.

4.5. Constructive ownership in the case of partnerships and limited liability companies. For purposes of determining ownership of a capital interest, or profits interest, in a partnership or limited liability company, the principles of section 4.4 shall apply, except that:

4.5.a. Subsection 4.4.c of this rule shall not apply, and

4.5.b. Interests owned, directly or indirectly, by or for a C corporation shall be considered as owned by or for any shareholder only if the shareholder owns, directly or indirectly, five percent (5%) or more in value of the stock of that corporation.

4.6. Controlled group of corporations defined; special rules applicable to controlled groups. -- For purposes of this rule, the term "controlled group of corporations" means any group of:

4.6.a. Parent-subsidiary controlled group. -- One or more chains of corporations connected through stock ownership with a common parent corporation if:

4.6.a.1. Stock possessing at least fifty percent (50%) of the total combined voting power of all classes of stock entitled to vote or at least fifty percent (50%) of the total value of shares of all classes of stock of each of the corporations, except the common parent corporation, is owned (within the meaning of subsection 4.7.a of section 4.7) by one or more of the other corporations; and

4.6.a.2. The common parent corporation owns (within the meaning of subsection 4.7.a of section 4.7) stock possessing at least fifty percent (50%) of the total combined voting power of all classes of stock entitled to vote or at least fifty percent (50%) of the total value of shares of all classes of stock of at least one of the other corporations, excluding, in computing such voting power or value, stock owned directly by such other corporations.

4.6.b. Brother-sister controlled group. -- Two or more corporations if 5 or fewer persons who are individuals, estates, or trusts own (within the meaning of subsection 4.7.b of section 4.7) stock possessing:

4.6.b.1. At least fifty percent (50%) of the total combined voting power of all classes of stock entitled to vote or at least fifty percent (50%) of the total value of shares of all classes of the stock of each corporation, and

4.6.b.2. More than fifty percent (50%) of the total combined voting power of all classes of stock entitled to vote, or more than fifty percent (50%) of the total value of shares of all classes of stock of each corporation, taking into account the stock ownership of each such person only to the extent such stock ownership is identical with respect to each corporation.

4.6.c. Combined group. -- Three (3) or more corporations each of which is a member of a group of corporations described in subsections 4.6.a or 4.6.b of this section and one of which:

4.6.c.1. Is a common parent corporation included in a group of corporations described in subsection 4.6.a of this section, and also

4.6.c.2. Is included in a group of corporations described in subsection 4.6.b of this section.

4.7. Rules for determining stock ownership of controlled group.

4.7.a. Parent-subsidiary controlled group. -- For purposes of determining whether a corporation is a member of a parent-subsidiary controlled group of corporations (within the meaning of subsection 4.6.a of section 4.6), stock owned by a corporation means:

4.7.a.1. Stock owned directly by the corporation, and

4.7.a.2. Stock owned with the application of subsections 4.8.a, 4.8.b and 4.8.c of section 4.8.

4.7.b. Brother-sister controlled group. -- For purposes of determining whether a corporation is a member of a brother-sister controlled group of corporations (within the meaning of subsection 4.6.b of section 4.6), stock owned by a person who is an individual, estate, or trust means:

4.7.b.1. Stock owned directly by such person, and

4.7.b.2. Stock owned with the application of section 4.8 of this rule.

4.8. Constructive ownership of stock of corporation.

4.8.a. Options. -- If any person has an option to acquire stock, the stock shall be considered as owned by the person. For purposes of this paragraph, an option to acquire an option, and each one of a series of options, shall be considered as an option to acquire the stock.

4.8.b. Attribution from partnerships and limited liability companies. -- Stock owned, directly or indirectly, by or for a partnership or limited liability company shall be considered as owned by any partner or member having an interest of five percent (5%) or more in either the capital or profits of the partnership or limited liability company in proportion to his or her interest in capital or profits, whichever proportion is the greater.

4.8.c. Attribution from estates or trusts.

4.8.c.1. Stock owned, directly or indirectly, by or for an estate or trust shall be considered as owned by any beneficiary who has an actuarial interest of five percent (5%) or more in the stock, to the extent of his or her actuarial interest. For purposes of this subparagraph, the actuarial interest of each beneficiary shall be determined by assuming the maximum exercise of discretion by the fiduciary in favor of the beneficiary and the maximum use of the stock to satisfy his or her rights as a beneficiary.

4.8.c.2. Stock owned, directly or indirectly, by or for any portion of a trust of which a person is considered the owner under Internal Revenue Code of 1986, as amended; 26 U.S.C. §§671 through 679 (relating to grantors and others treated as substantial owners) shall be considered as owned by the person.

4.8.d. Attribution from corporations. -- Stock owned, directly or indirectly, by or for a corporation shall be considered as owned by any person who owns (within the meaning of section 4.7 of this rule) five percent (5) or more in value of its stock in that proportion which the value of the stock which such person so owns bears to the value of all the stock in the corporation.

4.8.e. Spouse. -- An individual shall be considered as owning stock in a corporation owned, directly or indirectly, by or for his spouse (other than a spouse who is legally separated from the individual under a decree of divorce whether interlocutory or final, or a decree of separate maintenance), except in the case of a corporation with respect to which each of the following conditions is satisfied for its taxable year:

4.8.e.1. The individual does not, at any time during such taxable year, own directly any stock in the corporation;

4.8.e.2. The individual is not a director or employee and does not participate in the management of such corporation at any time during the taxable year;

4.8.e.3. Not more than fifty percent (50%) of the corporation's gross income for the taxable year was derived from royalties, rents, dividends, interest, and annuities; and

4.8.e.4. The stock in the corporation is not, at any time during the taxable year, subject to conditions which substantially restrict or limit the spouse's right to dispose of such stock and which run in favor of the individual or his or her children who have not attained the age of twenty-one (21) years.

4.8.f. Children, grandchildren, parents, and grandparents.

4.8.f.1. Minor children. -- An individual shall be considered as owning stock owned, directly or indirectly, by or for his or her children who have not attained the age of twenty-one (21) years, and, if the individual has not attained the age of twenty-one (21) years, the stock owned, directly or indirectly, by or for his or her parents.

4.8.f.2. Adult children and grandchildren. -- An individual who owns (within the meaning of subsection 4.7.b of this rule, but without regard to this subparagraph) more than fifty percent (50%) of the total combined voting power of all classes of stock entitled to vote or more than fifty percent (50%) of the total value of shares of all classes of stock in a corporation shall be considered as owning the stock in such corporation owned, directly or indirectly, by or for his parents, grandparents, grandchildren, and children who have attained the age of twenty-one (21) years.

4.8.f.3. Adopted child. -- For purposes of this section, a legally adopted child of an individual shall be treated as a child of such individual by blood.

W. Va. Code R. § 175-5-4