CHARLESTON AREA TAX GROUP

CHARLESTON AREA TAX GROUP

REVIEW OF CURRENT STATE TAX DEVELOPMENTS

March 28, 2002

I. LEGISLATIVE ACTIVITY

The extended regular session of the West Virginia Legislature ended Sunday, March 17, 2002, when the Legislature passed the budget and adjourned sine die. Thereafter, the Legislature convened in extraordinary session and enacted legislation updating the definitions of "federal adjusted gross income" and "federal taxable income," as used respectively in the West Virginia personal and corporation net income tax laws, to bring them into conformity with their meaning for federal income tax purpose, and several supplemental appropriation bills. The extraordinary session then adjourned sine die later that same day.

A. Business franchise tax

Section 11-23-7 is amended by HB 4005, which passed March 9, 2002, and is effective from passage. However, the exemption for venture capital companies that provide venture capital to West Virginia businesses first applies to taxable years that begin after December 31, 2002. The balance sheets of most venture capital firms have a high ratio of equity to debt. Taxation of this equity is a disincentive for venture equity companies to locate and invest in West Virginia. The West Virginia Economic Development Authority (WVEDA) will certify the venture capital companies that will be eligible for this tax exemption. If the person or organization is not exclusively engaged in providing venture capital to West Virginia businesses, only that portion of its tax base that is attributable to the providing of venture capital to West Virginia businesses is exempt from business franchise tax. In this situation, its business franchise tax liability is determined by multiplying its pre-credit tax liability by a fraction equal to one minus a fraction, the numerator of which is its gross receipts attributable to its venture capital activities in this State and the denominator of which is its total gross receipts from all of its business activities in this State. For purposes of this exemption, a "person or organization engaged in the activity of providing venture capital to West Virginia business" means a certified West Virginia capital company as defined in section 5E-1-4 of the Code.

B. Consumers Sales and Service Tax

1. Section 11-15-9 is amended by HB 4415, which passed March 9, 2002, and is effective June 7, 2002. This bill adds three new exemptions from sales tax:

Subdivision I 1-15-9(a)(25) exempts from sales tax food sold for certain purposes. The new exemption is found in paragraph (G), which exempts food sold after June 30, 2002, by volunteer fire departments and rescue squads that are exempt from federal income taxes under Section 501 (c)(3) or (c)(4) of the Internal Revenue Code of 1986, as amended, if the purpose of the sale is to obtain revenue for the functions and activities of the organization and the revenue obtained is actually expended for that purpose.

Subdivision I 1-15-9(a)(47) exempts from sales tax all fund raising activities of volunteer fire departments and rescue squads that are exempt from federal income taxes under Section 501(c)(3) or (c)(4) of the Internal Revenue Code of 1986, as amended, held after the June 30, 2002, if the sole purpose of the sale is to obtain revenue for the functions and activities of the organization and the revenue obtained is actually expended for that purpose.

The Senate added language on March 9, 2002, phasing out over a period of 5 or 6 years the sales tax on propane sold to heat churches and residences. Enrolled HB 4415 is not yet available.

2. Section 11-15-9 is amended by SB 285, which passed March 6, 2002, and is effective June 4, 2002. This bill adds a new subdivision I 1-15-9(a)(47) that exempts from sales tax the service of providing technical evaluation for compliance with federal and State environmental standards provided by environmental and industrial consultants who have formal certification through the West Virginia Department of Environmental Protection or the West Virginia Bureau for Public Health or both. For purposes of this exemption, the service of providing technical evaluations for compliance with federal and State environmental standards includes those costs of tangible personal property directly used in providing such services that are separately billed to the purchaser of such services, and on which the tax imposed by this article has previously been paid by the service provider.

Note: HB 4415 does not include the amendment to section 11-15-9 made by SB 285. Assuming HB 4415 is signed by the Governor, it, being the last bill enacted by the Legislature amending and reenacting section 11-15-9, eliminates the exemption added by SB 285. The exemption is not totally lost, however, because similar exemption language may be found in section 11-15-9b enacted by HB 4005, which passed March 9, 2001 and is effective from passage.

3. A new section 11-15-9b is added to the consumers sales and service tax by HB 4005, which passed March 9, 2002. This section allows an exemption from sales tax for purchases of tangible personal property after June 30, 2002, that is directly used or consumer in research and development.

The definition of "directly used or consumed" is similar to that for direct use of consumption in manufacturing.

"Research and development" means systematic scientific, engineering or technological study and investigation in a field of knowledge in the physical, computer or software sciences, often involving the formulation of hypotheses and experimentation, for the purpose of revealing new facts, theories or principles, or increasing scientific knowledge, which may reveal the basis for new or enhanced products, equipment or manufacturing processes.

Research and development includes, but is not limited to, design, refinement and testing of prototypes of new or improved products, or design, refinement and testing of manufacturing processes before commercial sales relating thereto have begun. "Commercial sales" includes, but is not limited to, sales of prototypes or sales for market testing.

Research and development does not include: (i) market research, (ii) sales research, (iii) efficiency surveys, (iv) consumer surveys, (v) product market testing, (vi) product testing by product consumers or through consumer surveys for evaluation of consumer product performance or consumer product usability, (vii) the ordinary testing or inspection of materials or products for quality control (quality control testing), (viii) management studies, (ix) advertising, (x) promotions, (xi) the acquisition of another’s patent, model, production or process or investigation or evaluation of the value or investment potential related thereto, (xii) research in connection with literary, historical, or similar projects, (xiii) research in the social sciences, economics, humanities or psychology and other non-technical activities, and (xiv) the providing of sales services or any other service, whether technical service or non-technical service. No provision of new section 11-1 5-9b may be interpreted to alter, abrogate or impede application of the exemption for sales of primary opinion research services set forth in section 11-15-9.

4. A new section 11-15-9c is added to the consumers sales and service tax by HB 4005. This new section exempts from tax the technical evaluation services for compliance with State and federal environmental standards provided by environmental and industrial consultants who have formal certification through the West Virginia Department of Environmental Protection or the West Virginia Bureau of Public Health. This section also exempts the cost of materials and other items of tangible personal property directly used in providing the technical evaluation service that are separately billed to the purchaser of the technical evaluation service. New section 11-1 5-9c took effect March 9, 2002.

5. A second new section 11-15-9c is added to the consumers sales and service tax by HB 4017, which passed March 9, 2002, and is effective June 7, 2002. This bill creates a sales tax holiday for purchase of back-to-school clothing and school supplies that cost $100 or less, per item, during a three-day period in August each year, beginning on the first Friday in August. The sales tax holiday will be August 2-4, 2002.

This holiday does not apply to (1) any special clothing or footwear that is primarily designed for athletic activity or protective use and that is not normally worn except when used for the athletic activity or protective use for which it is designed; (2) accessories, including jewelry, handbags, luggage, umbrellas, wallets, watches, and similar items carried on or about the human body, without regard to whether worn on the body in a manner characteristic of clothing; or (3) the rental of clothing or footwear.

This holiday is a one-time event unless the Legislature passes similar legislation next year.

Note: Because both HB 4005 and HB 4017 passed March 17, 2002, both new sections 1 1-15-9c will become law.

6. A new article 11-1SB is added to the Code by SB 245, which passed February 25, 2002, and is effective from passage. This bill allows West Virginia to participate in the Streamlined Sales Tax Project as one of the implementing states. A primary purpose of the Implementing States is to review and amend the proposed multistate streamlined sales and use tax agreement. West Virginia will be represented by four individuals: one appointed by the President of the Senate, one person appointed by the Speaker of the House, the Tax Commissioner or her designee, and the Secretary of Tax and Revenue or his designee. The Senate President has appointed Senator Walt Helmick.

C. Corporation Net Income Tax

1. Section 11-24-3 is amended by SB 114, which passed February 22, 2002, and is effective from passage. This bill updates the meaning of "federal taxable income" and certain other terms used in the West Virginia Corporation Net Income Tax Act by incorporating changes in federal income tax law made after December 31, 2000, but before January 1, 2002. This change is retroactive to tax years beginning on or after January 1, 2001.

2. Section 11-24-3 was amended a second time by SB 1008, which passed March 17, 2002, and is effective from passage. This bill updates the meaning of "federal taxable income" and certain other terms used in the West Virginia Corporation Net Income Tax Act by incorporating changes in federal income tax law made between January 1, 2002, and March 15, 2002. This change is retroactive to the extent allowable under federal income tax law to taxable years that begin prior to March 15, 2002.

D. Estate tax and estate administration

1. Sections 11-11-2, 11-11-7 and 44-1-14 of the Code are amended by SB 661, which passed March 9, 2002, and takes effect June 7, 2002. This bill phases out the West Virginia estate tax in accordance with provisions of the federal estate tax law; provides that county clerks must submit to the Tax Commissioner the nonprobate inventory form together with the appraisal form; provides for the inventory of nonprobate assets to be confidential tax information; and eliminates the requirement that certain forms be mailed to heirs and beneficiaries.

2. Senate Bill 474 repeals section 44-1-13 of the Code, amends section 44-1-14, adds a new section 44-1-14a, and amends sections 44-2-1 and 44-4-12, all relating generally to the administration of estates. SB 474 passed March 9, 2002, and takes effect June 7, 2002.

a. Repealed §44-1-13 required the executor or administrator of an estate to file an affidavit showing names and addresses of heirs, distributes, devisees and legatees of the decedent.

b. Section 44-1-14 is amended to: clarify that the appraisement form includes both probate and nonprobate real estate;

require the Tax Commissioner to design the personal representative’s questionnaire included in the appraisement form to be phrased as much as possible in understandable English;

require that the original and two copies of the appraisement form plus the completed and notarized inventory form required by section 11-11-7 be returned to the county clerk as under current law;

require the county clerk to send to the Tax Commissioner a certified copy of the recorded appraisement form together with the unrecorded nonprobate inventory form;

eliminate the clerk’s charge for mailing the documents

provide that the nonprobate inventory form is considered a confidential tax return subject to the provisions of section 11-10-Sd and may not be disclosed by the clerk and the clerk’s employees, or by any former official or employee except to the Tax Commissioner.

c. New section 44-1-14a requires the county clerk to publish certain information about the estate in a newspaper of general circulation in the county once a week for two successive weeks within 30 days after the appraisement is filed with the clerk. Information to be published includes:

(1) Name of the decedent;

(2) Name and address of the county commission before whom probate is pending;

(3) Name and address of the personal representative;

(4) Name and address of the attorney representing the personal representative;

(5) Name and address of the fiduciary commissioner, if any;

(6) The first date of publication;

(7) A statement that claims against the estate must be filed in accordance with article 2 or 3A of chapter 44;

(8) A statement that any person seeking to impeach or establish a will must make a complaint in accordance with the provisions of sections 41-5-11, 41-S-12 or 41-S-14;

(9) A statement that an interested person objecting to the qualifications of the personal representative or venue or jurisdiction of the commission must file the objection within 3 months after the date of first publication or 30 days after service of the notice, whichever is later and

(10) If the appraisement of the assets of the estate shows that the assets, exclusive of real estate specifically devise and non probate property is $100,000 or less, or if there is only one beneficiary of the probate estate and that beneficiary is competent at law, a statement to the effect that probate of the estate will proceed without reference to a fiduciary commissioner unless within 90 days from the first date of publication of the notice a party in interest requests reference to a fiduciary commissioner or an unpaid creditor files a claim and good cause is shown to support reference to a fiduciary commissioner.

d. Subsection 44-1-14a(b) provides that if an appraisement is not timely filed, the county clerk is required to send a notice to the personal representative by first class mail, postage prepaid, indicating that the appraisement has not been filed. The county clerk must publish the notice required by subsection 44-1-14a(a) within 6 months of the qualification of the personal representative.

e. Subsection 44-1-14a(c) requires the personal representative to promptly make a diligent search to determine the names and addresses of creditors of the decedent.

f. Subsection 44-1-14a(d) requires the personal representative to, within 90 after the first date of publication of the notice referred to above, serve a copy of the notice by first class mail, postage prepaid, or by personal service on certain persons including:

(1) The decedent’s spouse, if such person is not the personal representative or the sole beneficiary or sole heir;

(2) If there is a will and the personal representative is not the decedent’s spouse and not the sole beneficiary, the other beneficiaries;

(3) If there is not a will and the personal representative is not the sole heir, the other heirs

(4) The trustee of any trust in which the decedent was a grantor, if any; and

(5) All creditors identified under subsection 44-1-14a(c), other than a creditor who filed a claim as provided in article 44-2 of the Code or a creditor whose claim has been paid in full.

g. Subsection 44-1-14(f) provides that a personal representative acting in good faith is not personally liable for serving notice under section 44-1-14a, notwithstanding a determination that notice was not required by section 44-1-14a. Additionally, a personal representative acting in good faith who fails to serve the notice required by section 44-1-14a is not personally liable. Service of the notice may not be construed to admit the validity or enforceability of the claim.

h. Subsection 44-1-14a(g) provides that the county clerk shall collect a fee of $20 for publication of the notice required by section 44-1 -1 4a.

i. Subsection 44-1-14a(h) provides that for purposes of section 44-1-14a, beneficiary means a person designated in a will to receive real or personal property.

j.  Section 44-2-1(b) is amended to delete the publication requirement, which was moved to new section 44-1 -1 4a.

k. Section 44-4-12, pertaining to compensation and expenses of fiduciaries, is amended. Current law caps the reasonable sum paid for a surety bond at one-third of one percent per year of the amount of the surety bond. The amendment to section 44-4-12 defines "reasonable sum paid for a surety bond or other obligation" as cost not to exceed the amount authorized by the Insurance Commissioner pursuant to the provisions of article 33-20 of the Code and the legislative rules promulgated thereunder.
E. Other tax related bills of interest.

New article 7-11B-1 ET. seq. is added to the Code by S.B. 244, which passed March 9, 2002, and takes effect June 7, 2002. This bill authorizes municipalities and county commissions to issue tax increment finance bonds for economic development projects financed by increased ad valorem property taxes attributable to property of the project or the increase in value of property having a tax situs in the development or redevelopment project area or district. This article does not become operational until after the voters ratify an amendment to the West Virginia Constitution allowing issuance of tax increment finance bonds financed by property taxes.

A new article 8-13B is added to the municipal corporations laws by HB 4005, which took effect March 9, 2002. This new article is known as the Downtown Redevelopment District Act.
A stated purpose of this Act is to promote the vitality of retail business areas within municipalities thereby stimulating economic growth and job creation.
This is accomplished by authorizing municipalities to establish downtown redevelopment districts and to finance public improvements in those districts by selling tax increment financing bonds secured by net collections of a special excise tax imposed on sales of tangible personal property and taxable services in the district.
The special excise tax is essentially a local sales tax.
The base of the special excise tax and the rate of tax must conform to the base and rate of the West Virginia consumers sales and service tax.
Exemptions must also conform. Accordingly, if a purchase is exempt from State sales tax, it is also exempt from the district special excise tax; if the sale would otherwise be subject to State sales tax, it is also subject to the district’s special excise tax.
The Tax Commissioner will collect the special excise tax at the same time and in the same manner as the State sales tax is collected.
Distribution of special excise tax revenue

Until the downtown redevelopment district terminates, the difference between the amount of State sales taxes collected from sales in the area of the downtown redevelopment district immediately prior to creation of the district, less a one percent service fee, is deposited in a special account in the State treasury for the particular district. Proceeds in the account may be used to pay debt service and other allowable expenditures of the district.

The one percent administrative charge is to be retained by the Tax Commissioner for administering, collecting and enforcing the district excise tax.

An amount equal to the sales taxes the State collected from transactions in the district prior to its creation will continue to be deposited into the General Revenue Fund of the State so long as the downtown redevelopment district remains in effect.

Once the downtown redevelopment district terminates, the authority to impose the district special excise tax also expires. Transactions are then subject to the State consumers sales and service tax and the tax collected is deposited into the General Revenue Fund.

Downtown redevelopment district

Before a downtown redevelopment district may be created, the governing body of the municipality desiring to establish the district must conduct a public hearing.

The notice of public hearing must be published as a Class 1-0 legal advertisement at least 20 days prior to the date of the hearing. The notice must be published one time in two newspapers of opposite politics in the publication area, unless only one such newspaper exists or only one such newspaper will accept the legal advertisement.

This notice must include the purpose of the hearing, the name of the proposed district, the general purpose of the proposed district, the boundaries of the proposed district, the proposed method of funding the costs of the district and particulars concerning the proposed special excise tax.

Following the public hearing, the governing body of the municipality may apply to the nine-person committee established in section 29-22-18a of HB 4005 for approval of the downtown redevelopment district. (See discussion of committee composition, infra.)

If the committee approves a municipality’s downtown redevelopment project application, it issues to the municipality a written certificate evidencing such approval that must state a base tax revenue, which is the difference between the gross annual district tax revenue amount and the reallocated tax revenue amount, which amounts are determined by the committee from the application documents, information provided by the Tax Commissioner and such other information that is available to the committee.

The committee may promulgate rules to implement the downtown redevelopment district project application approval process and to describe the criteria and procedures it has established in connection therewith. These rules are not subject to the provision of the State Administrative Procedures Act, except that they must be filed with the Secretary of State.

After the committee approves creation of the downtown redevelopment district, the Legislature must authorize its creation. HB 4005 is silent on what constitutes authorization, i.e., is a substantive law required or is adoption of a resolution sufficient?

After the Legislature authorizes creation of the district, the governing body must then adopt an ordinance creating the district that conforms with the requirements of section 8-13B-9 of the bill.

The boundaries of a downtown redevelopment district may be modified only after the committee approved the boundary changes and the governing body of the municipality amends the ordinance creating the district. The procedure of changing boundaries is the same as that for creating the district.

A downtown redevelopment obligations have been paid in full, consent to the district’s dissolution.

district may be abolished only after the tax increment financing or payment of the debt is provided for and the holders of the debt Bonds to finance downtown redevelopment district projects

The governing body of a municipality may issue bonds or notes to finance redevelopment expenditures described in section 8-13B-5 of the bill.
The bonds or notes are limited obligations of the municipality. They are not a pecuniary liability of the municipality.

The debt is not to be considered an indebtedness of the municipality within the meaning of any constitutional or statutory provision limiting indebtedness of the municipality.
Neither the principal of the obligation nor the interest payable may be a charge against the general credit or taxing powers of the municipality. That fact must be stated on the face of each bond.

The repayment schedule may not exceed 40 years.

Debt service is paid from proceeds of the special excise tax on sales made within the district and such other monies as may be deposited into the special account for the district created in the state treasury.

A statutory lien is created on the sub-account for the district created in section 8-1 3B-8 of the bill and on all special district excise taxes collected for the benefit of the district, unless the resolution of the governing body of the municipality that authorizes issuance of the bonds provides otherwise.

The revenue bonds may also be secured by a trust indenture by and between the municipality and a corporate trustee, which may be a trust company, or bank having trust powers, that is located within or without West Virginia.

Revenue bonds may contain a provision to the effect that they may be redeemed at anytime prior to maturity by the municipality upon terms stated in the bond.

Refunding bonds may also be issued but their term may not exceed 40 years from the date the original bonds were issued.

Bonds are made legal investments for banks and other financial institutions organized under the laws of this State, and for business development corporations created under the West Virginia Business Development Corporation Act, W. Va. Code § 31-14-1 et seq.

Bonds are exempt from taxation except for inheritance and transfer taxes.

Real and personal property that a municipality or district board may acquire under the Downtown Redevelopment District Act is exempt from taxation by the State and any local levying body so long as the municipality or the district owns the property.

Article 7, chapter 64 of the Code is amended by SB 397, which passed March 9, 2002, and is effective from passage. This bill authorizes the Insurance Commissioner, the Lottery Commission and the Tax Commissioner to promulgate certain proposed legislative rules filed in the State Register in July of 2001, with the certain amendments approved by the Legislature:
Authorizing the Tax Commissioner to promulgate legislative rules relating to (1) pollution control facilities; (2) payment of taxes by credit card or debit card; (3) senior citizen tax credit against personal income tax for property taxes paid; and (4) tobacco products excise tax.
Authorizing the Insurance Commissioner to promulgate legislative rules relating to (1) medical malpractice loss experience and loss expense annual reporting requirements; (2) privacy of consumer financial and health information; and (3) external review of coverage denials.
Authorizing the Lottery Commission to promulgate a legislative rule relating to limited video lottery.
F. Personal Income Tax

Section 11-21-9 is amended by SB 140, which passed February 22, 2002, and is effective from passage.

This bill updates the meaning of "federal adjusted gross income" and certain other terms used in the West Virginia Personal Income Tax Act by incorporating changes in federal income tax law made after December 31, 2000 but before January 1, 2002. This change is retroactive to tax years beginning on or after January 1, 2001.

Section 11-21-9 is amended by SB 1009, which passed March 17, 2002, and is effective from passage.

This bill updates the meaning of "federal adjusted gross income" and certain other terms used in the West Virginia Personal Income Tax Act by incorporating changes in federal income tax law made between January 1, 2002, and March 15, 2002. This change is retroactive to the extent allowable under federal income tax law to taxable years that begin prior to March 15, 2002.

Section 11-21-12 is amended by SB 713, which passed March 9, 2002, and is effective June 7, 2002, for taxable years beginning after December 31, 2002. This bill amends the decreasing modification to federal adjusted gross income allowed by subdivision I 1-21-12(c)(7) to provide:

(A) For taxable years beginning after December 31, 2000 and ending prior to January 1, 2003, an amount equal to two percent multiplied by the number of years of active duty in the armed forces of the United States of America with the product thereof multiplied by.the first thirty thousand dollars of military retirement income, including retirement income from the regular armed forces, reserves and national guard paid by the United States or by this state after December 31, 2002, including any survivorship annuities, to the extent included in gross income for federal income tax purposes for the taxable year.

(B) For taxable years beginning after the December 31, 2002, the first $20,000 of military retirement income, including retirement income from the regular armed forces, reserves and national guard paid by the United States or by this State after December 31, 2002, including any survivorship annuities, to the extent included in gross income for federal income tax purposes for the taxable year.

(C) In the event that any of the provisions of this subdivision are found by a court of competent jurisdiction to violate either the constitution of this State or of the United States, or is held to be extended to persons other than specified in this subdivision, this subdivision shall become null and void by operation of law.

New section 11-21-8h is added by HB 4005, which passed March 9, 2002, and is effective from passage. This section permits the sale or other transfer of historic preservation tax credits allowed under section 11-21-8a or 1 1-21-8g, as provided in new section 1 1-21-8h.

Section 11-21-93 is amended by HB 2372, which passed March 8, 2002, and is effective 90 days from passage. This bill clarifies the procedures by which moneys are deposited into the fund reserved for the payment of income tax refunds; renames the fund as the Personal Income Tax Reserve Fund; clarifies that the fund is administered by the Secretary of Administration; specifies purpose for which the moneys of the fund may be expended, i.e., to make timely personal income tax refunds; clarifies legislative intent that the moneys of the fund are not part of the general revenue fund of the State treasury; and clarifies that amounts in the fund which exceed amounts needed for the purpose of the fund may be transferred by appropriation of the Legislature.

G. Property Tax.

Section 11-1C-14 is amended by SB 578, which passed March 8, 2002, and takes effect June 6, 2992. This bill allows the Tax Commissioner to share confidential property tax returns, maps and geographic information and property tax audit information with the West Virginia Geological and Economic Survey. Any employee of the Survey who makes an unauthorized disclosure of confidential information is guilty of a misdemeanor.

H. Severance and Business Privilege Tax.

Section 11-13A-3 is amended by HB 651, which passed March 7, 2002, and takes effect June 5, 2002. This bill eliminates "community care services" from the definition of "certain health care services." The result is that gross receipts a person receives from providing community care services will no longer be subject to the 5 percent tax imposed by section 1 1-13A-3. Caveat: The Tax Commissioner is looking at how the effective repeal of the tax on providers of community care services should be treated in light of language in W. Va. Code § 1 1-10-Sr which provides that any amendment to any article administered under the West Virginia Tax Procedure and Administration Act shall first apply to a particular taxpayer for taxable years beginning on or after the effective date of the act of the Legislature containing such amendment, as determined in article VI, § 30 of the West Virginia Constitution, unless the language of the act provides a controlling internal effective date,

Section 11-1 3A-3a is amended by SB 731, which passed March 9, 2002, and is effective from passage. This bill adds a new subsection 11-13A-3a(d), which requires the Tax Commissioner to, on or before July 1, 2003, develop a single form for reporting oil and gas production information to all government agencies. This form must readily permit a filing without financial information when such information is not necessary. The form must be available in various formats, including an electronic format.

I. Tax administration

Section 11-1-la is added to the Code by HB 4010, which passed February 1, 2002. This bill allows the Tax Commissioner to acquire any legal services to carry out the functions and duties of the State Tax Division or the Office of the Tax Commissioner, including but not limited to representation of the Tax Division or the Commissioner in any administrative or judicial proceeding. Legal services may be provided by attorneys licensed to practice law who are employed by the Commissioner on a salary basis or retained by the Commissioner on a reasonable fee basis. The commissioner will also be allowed to request the assistance of the Attorney General and be represented in an administrative or judicial proceeding by a Deputy or Assistant Attorney General acceptable to the Commissioner.

Section 11-10-Sd is amended by SB 290, which passed March 9, 2002, and takes effect June 7 2002. This bill amends the taxpayer confidentiality rule by specifying tax returns and other tax information the Tax Commissioner may provide to local governments pursuant to an exchange of information agreement or otherwise pursuant to the provisions of subsections 11-10-5d(d) through 11-10-Sd(n) which is in the possession of any officer, employee, agent or representative of any local or municipal governmental entity or other governmental subdivision is subject to the confidentiality and disclosure restrictions set forth in said article. This bill also provides that unlawful disclosure of such information by any officer, employee or agent of any local, municipal or governmental subdivision is a misdemeanor under subsection 11-1 0-Sd(f).

Sections 11-10-4, 11-10-8, 11-10-9, 11-10-9a, 11-10-10, 11-10-14 and 11-10-17 are amended by HB 4305, which passed March 8, 2002, and is effective 90 days from passage. This bill also adds new sections 11-10-23 (alternative dispute resolution of tax disputes), 11-10-24 (Commissioner to review taxpayer problem resolution procedures and report to Legislature) and a new article I 1-bA creating the West Virginia Office of Tax Appeals.

J. Tax Credits.

1. Section SE-1-8 of the West Virginia Capital Company Act is amended by HB 4663, which passed March 7, 2002, and takes effect July 1, 2002. This bill provides that for the fiscal year beginning July 1, 2002, the total tax credits authorized for all companies may not exceed a total of $3 million dollars. The capital base of any qualified company must be invested in accordance with the provisions of the Capital Company Act. The West Virginia Economic Development Authority is required to allocate these credits to qualified companies in the order that the companies are qualified.

a. Not more than $2 million of the $3 million in capital company tax credits allowed may be allocated by the West Virginia Economic Development Authority during each fiscal year to one or more small business investment companies.

b. The remainder of the tax credits allowed during the fiscal year shall be allocated by the authority under the provisions of section SE-2-4 of the West Virginia Venture Capital Act.

c. The portion of the tax credits allowed for small business investment companies is allowed only if allocated by the ‘AAIEDA during the first 30 days of the fiscal year, and may only be allocated to companies that: (1) were organized on or after the first day of January, one thousand nine hundred ninety-nine; (2) are licensed by the Small Business Administration as a small business investment company under the Small Business Investment Act; and (3) have certified in writing to the ‘WVEDA in its credit application that the company will diligently seek to obtain and thereafter diligently seek to invest leverage available to the small business investment companies under the Small Business Investment Act. These credits shall be allocated by the VVVEDA in the order that the companies are qualified. Any credits that have not been allocated to qualified small business investment companies during the first 30 days of the fiscal year are then available for allocation by the VVVEDA under the provisions of section SE-2-4 of the West Virginia Venture Capital Act.

2. New section SE-1-22 is added to the West Virginia Capital Company Act by HB 4005, which passed March 9, 2002, and is effective from passage. This section provides that:

a. Capital company tax credits may not be allocated to any company that is not a small business investment company;

b. Capital companies that are not small business investment companies are no longer considered to be qualified capital companies; and

c. Without further action by companies that are no longer eligible to be qualified companies, they are, by operation of law, decertified as qualified West Virginia capital companies.

Desertification does not affect tax credits previously awarded to those capital companies that are being carried forward, until used, by investors in those capital companies. New section SE-1-22 took effect March 9, 2002.

3. Sections 11-13J-3 and 11-13J-12 of the Neighborhood Investment Program Act are amended by HB

4437, which passed March 7, 2002, and is effective June 5, 2002. This bill revises certain definitions, requires and independent program evaluation by December IS each year, and sets a date of July 1, 200S for termination of the Program.

a. The definition of "eligible contribution" is amended to include (i) cash; (ii) tangible personal property, valued at its fair market value; (iii) real property, valued at its fair market value; (iv) in kind professional services, valued at 7S percent of fair market value; and (v) publicly traded common or preferred stock representing ownership in a corporation, valued at its fair market value in accordance with regulations of the Internal Revenue Service. Stock must be sold within 180 days after its receipt. Minor changes are made in other definitions.

b. Section 11-1 3J-1 2 is amended to require that by the ₁₅th day of December each year the Director of the Development Office must secure an independent review of the Neighborhood Investment Program and present the findings to the Joint Committee on Government and Finance. It also extends the Program’s termination date to July 1, 200S.

4. West Virginia’s various tax credits for different types of business investment activity or for business investment and jobs creation received a major overhaul when H.B. 400S was enacted by the Legislature on March 9, 2002. This bill is effective from passage and includes additional economic development tools. To the extent some of these are discussed previously in this document, the discussion will not be repeated here.

HB 4005 repeals:
Article I 1-13H — B&O tax credit against 2m tax for increased generation of electricity.
Section 11-23-24 — Tax credit for coal coking facilities against business franchise tax.
Section 11-24-22 — Tax credit for coal coking facilities against corporation net income tax.
Section 21-13-S — Tax credit for convenience store security devices.

HB 4005 adds or amends and reenacts the following credit provision by providing, or changing, credit termination dates:
New §1 1-13C-16 — Termination of business investment and jobs expansion tax credit for new investment placed in service or use after December 31, 2002. Transition rules are provided for projects already in progress. A taxpayer intending to claim credit under one of the transition rules must file notice of taxpayer’s intention by December 31, 2002. See subsection I 1-13C-16(d). If a notice is not filed timely, any credit allowable will be determined under the new economic opportunity credit. See subsection 11-13C-16(e). For qualified investment property placed in service or use before January 1, 2003, credit is allowed and applied under the law in effect prior to enactment of HB 400S.
New §11-13D-10 — Termination of credit allowed under article 11-13D for industrial expansion or revitalization for new investment placed in service or use after December 31, 2002. Exception: Persons generating electric power who pay tax under section 1 1-13-2o will continue to claim credit under article 11-13D. Any taxpayer who places qualified property purchased or leased for industrial expansion or revitalization in service or use before January 1, 2003, credit is allowed and applied under the law in effect prior to enactment of HB 400S.
§11-1 3N-4 — Tax credit for new steel manufacturing operations expires July 1, 2002.
§11-23-24a — Tax credit against business franchise tax for value-added products from raw agricultural products expires July 1, 2002.
§11-24-22a — Tax credit against corporation net income tax for value-added products from raw agricultural products expires July 1, 2002.

The West Virginia Economic Opportunity Credit is enacted as article 1 1-13Q of the Code. This tax credit replaces the business investment and jobs expansion tax credit ("Supercredit"). Persons currently claiming Supercredit will continue to claim that credit during the remaining credit period under current law rules and new applications for Supercredit would be allowed until the new credit goes into effect January 1, 2003.
The new credit is structurally similar to the Supercredit, but the complicated "rebate credit" and "deferred credit" provisions of the Supercredit are not included in the new credit.
Additionally, under the new credit, eligible taxpayers who create at least 20 new jobs will be allowed a tax credit of at least 20% of their qualified investment.
The new credit applies against business franchise tax, State business and occupation tax, corporation net income tax, and personal income tax if the business is a sole proprietorship, partnership, S corporation or limited liability company.
The types of business activity previously eligible for Supercredit are the types of business activity bligible for the new economic opportunity credit. Additionally, the new credit is available for research and development.
Strategic Research and Development Tax Credit.

The West Virginia Strategic Research and Development Tax Credit Act is codified as new article 1 1-13R of the Code and applies to qualified investment made on or after January 1, 2003.

The new strategic research and development (R&D) credit replaces the current R&D projects credit in an effort to attract greater levels of actual research and development to West Virginia. The bill grandfathers any taxpayer that currently participates in the program.

The definition of research and development is more precise than the definition in article 11-1 3D.

Additionally, the new strategic R&D credit is not restricted to firms otherwise engaged in the production of goods within the State. The new credit is available to West Virginia businesses that focus on the commercialization of products or services derived from research and development, technology transfer, or any other application of new technology. Eligible taxpayers include companies in the fields of computer hardware, software, circuitry, or related components; telecommunications; biotechnology; energy technology; environmental technology; biometrics; polymers; chemicals; pharmaceuticals; natural resources; and other manufactured industrial products.

Manufacturing Investment Tax Credit

The West Virginia Manufacturing Investment Credit Act is codified in new article 11-13S of the Code and applies to qualified property purchased manufacturing investment placed in service or use after December 31 2002.

This credit replaces the existing credits for industrial expansion, industrial revitalization and research and development with a manufacturing investment credit, excluding electric power generation. Persons claiming article 1 3D credits for qualified investment property placed in service or use before January 1, 2003, may claim them during the remaining credit period under article 11-1 3D as in effect prior to enactment of HB 440S.

The manufacturing investment credit replaces the industrial expansion and revitalization credit for the manufacturing sector. However, the bill grandfathers any taxpayer that currently participates in the industrial expansion and revitalization credit program.

The old B&O tax statute’s definition of manufacturing is replaced with a more up-to-date definition tied to the North American Industry Classification System. Some activities would be added to the definition of manufacturing (e.g., poultry processing) while other activities would be deleted (e.g., processing coal purchased from others).

Qualified investment for the manufacturing investment credit is determined in exactly the same way as qualified investment is determined for the industrial expansion and revitalization credit.

Property with an economic useful life of at least eight years is 100 percent qualified.

Property with an economic useful life of between six and eight years is two-thirds qualified, while property with an economic useful life of between four and six years is one-third qualified.

The amount of credit allowable is 5 percent of the cost of the qualified investment, determined under rules like those that presently apply for determining the amount of allowable industrial expansion and revitalization tax credits. Electric power companies will continue to be eligible for a 10 percent credit because they still pay the state B&O tax whereas other manufacturers do not pay that tax.

The amount of credit allowable is applied over a 10-year period as under current law. The manufacturing investment credit would apply against up to 50 percent of a taxpayer’s liability for business franchise tax, severance tax, and corporation net income tax. The extension of the new manufacturing investment credit to the corporation net income tax further increases investment incentive at the margin, and also contributes to a more competitive state business tax structure. With periodic capital investment, most manufacturers can reduce their business franchise tax and corporation net income tax liabilities by 50 percent.

Other provisions of HB 4005

5. HB 4005 amends and reenacts section 12-6-9e of the Code to allow the West Virginia Investment Management Board to invest funds in the West Virginia Enterprise Capital Fund, LLC. The funds so invested may be used to provide assistance to create jobs and businesses within West Virginia and to provide needed risk capital to assist business and industrial development.
Subject to the availability of funds, the Investment Management Board is required to make a non-recourse loan, in an amount not to exceed $25 million, to the West Virginia Economic Development Authority (WVEDA).
WVEDA is required to use the loan from the Investment Management Board to make one or more loans to the West Virginia Enterprise Advancement Corporation, a non-profit corporation affiliated with the WVEDA.
The West Virginia Enterprise Advancement Corporation is required to invest the loan from the WVEDA in the West Virginia Enterprise Capital Fund, LLC, the manager of which is the Enterprise Advancement Corporation.
The amendments to section 12-6-9e took effect March 9, 2002.
6. HB 4005 makes technical changes in section 29-22-18 of the State Lottery Act, which creates the State Lottery Fund and provides for expenditure of monies deposited in that fund. These changes took effect March 9, 2002.
The major technical change is to ensure that any additional monies available in the State Lottery Fund after all required amounts are paid each year are available to secure bonds sold under section 29-22-18a. The changes to section 18a took effect March 9, 2002.
HB 4005 allows the West Virginia Economic Development Authority to sell revenue bonds secured by $19 million of proceeds from the excess lottery fund created in section 29-22-18a of the State Lottery Act.
Proceeds from sale of the bonds must be used to construct, equip, improve or maintain various economic development projects, capital improvement projects and infrastructure projects that promote economic development in West Virginia.
Bonds may be issued all at once or in two series.
The term of the bonds may not exceed 30 years from the date they are issued.
The Governor determines when the WVEDA sells the bonds.
Bond proceeds must be deposited in the Economic Development Project Fund, a special fund created in the State treasury. This fund also consists of all interest earned from investment of the fund, and all gifts, grants or other contributions to the Fund.
Amounts deposited in the Fund are pledged to pay debt service, including all commercially customary and reasonable costs and expenses that may be incurred in connection with the issuance, refunding redemption or defeasance of the bonds.
This $19 million is generated each year over the life of the bonds by:
· Reducing from $25 to $20 million the amount of excess lottery revenue available annually to the School Building Authority;
· Reducing from $50 to $40 million the amount of excess lottery revenue available annually to the West Virginia infrastructure fund; and
· Reducing from $9 to $5 million the amount of excess lottery revenue available to fund park improvements.

The amendment to section 29-22-18a creates a nine-member committee to certify projects that will be funded, in whole or in part, from bond proceeds and to certify downtown redevelopment districts a municipalities desire to create under the Downtown Redevelopment District Act, W. Va. Code §8-1 3B-1 et seq.

This committee consists of:

· The Governor or his designee,
· The Secretary of Tax and Revenue,
· The Executive Director of the Development Office,
· Three persons appointed by the Governor from a list of five names submitted by the Senate President, and
· Three persons appointed by the Governor from a list of five names submitted by the Speaker of the House.

This committee is required to meet as often as necessary.

This committee is required to take recommendations from any source regarding possible projects to be funded, in whole or in part from bond proceeds.

The committee is required to meet within 30 days from the effective date of the amendments to section 29-22-18a, i.e., by April 8

Before certifying each project, the committee is required to conduct at least one public hearing, which may be held outside Kanawha County.

Notice of the time, place, date and purpose of the public hearing must be published in at least one newspaper in each of the three congressional districts, at least 14 days prior to the date of the public hearing.

Before issuance of bonds, the committee must certify to the VVVEDA a list of those projects that will receive funds from the proceeds of the bonds.

Once certified, the list may not thereafter be altered or amended except by the Legislature.

Bond proceeds must be expended in conformity with requirements in W. Va. Code § 21-SA-1, et seq., concerning payment of prevailing wage, and either the requirements of W. Va. Code §S-22-1, concerning competitive bidding on government construction contracts, or W. Va. Code §5-22A-1, et seq., known as the design-bid procurement act.

If bond proceeds are expended pursuant to the provisions of the design-bid procurement act, W. Va. Code § 5-22A-1 et seq., and if the design-build board created in section 5-22A-4 of the Act determines that execution of a design-build contract in connection with the project is appropriate, pursuant to criteria set forth in the design-bid procurement act, and that a competitive bidding process was used in selecting a design builder and awarding that contract, then that determination shall be deemed conclusive for all purposes and shall be deemed to satisfy all of the requirements of design-bid procurement act.

Other Bills

1. HB 2899 adds a new West Virginia Nonprofit Corporation Act codified in article 31-lE, which revises, arranges, consolidates and recodifies West Virginia laws pertaining to nonprofit corporations. This bill passed March 9, 2002, and takes effect June 7, 2002. However, bill section 31E-16-1603 provides that the new article does not take effect until October 1, 2002.
2. HB 2900 repeals the West Virginia Corporation Act codified in article 1, chapter 31 of the Code, and add a new West Virginia Business Corporation Act, codified in article I D of chapter 31, which revises, arranges, consolidates and recodifies West Virginia laws pertaining to business corporations. This bill passed March 9, 2002, and takes effect June 7, 2002. However, bill section 31D-17-1703 provides that the new article does not take effect until October 1, 2002. Because the effective date of the repeal of the current corporations law does not coincide with October 1, 2002, this means that 115 days there will be not corporations law in effect in West Virginia unless the Governor vetoes this bill.
II. COURT ACTIVITY

A. United States Supreme Court

1. Decisions Issued
On March 4, 2002, the Court decided Young v. United States, No. 00-1 567 (U.S., 3/4/02). This is case involves application of the Bankruptcy Code’s three-year lookback period to past due taxes. The Court ruled that that Iookback period is tolled during the pendency of a prior bankruptcy petition. Under the Bankruptcy Code’s three-year lookback period, a claim for income taxes for which the return was due within three years before the bankruptcy petition was filed is nondischargeable. Exploiting what the Court said appeared to be a loophole in the Code, the taxpayers first filed a Chapter 13 petition in 1996, while they owed the IRS $13,000 for their 1992 income taxes, and then, just after the three-year period after the 1992 taxes were due had expired, voluntarily dismissed the Chapter 13 petition and filed a Chapter 7 petition. When the IRS sought to collect the 1992 taxes after the Chapter 7 bankruptcy had been closed, the taxpayers asserted that the 1992 taxes had been discharged in the Chapter 7 bankruptcy, because they were due more than three years before the filing of the Chapter 7 petition. The First Circuit Court of Appeals affirmed the lower court findings that the 1992 tax was not discharged because the three-year lookback period is tolled during the pendency of a prior bankruptcy petition, and the U.S. Supreme Court affirmed that ruling. In a unanimous opinion written by Justice Scalia, the Court rejected the taxpayers’ argument that the lookback period is a substantive component of the Bankruptcy Code, as part of a definition of dischargeable taxes, and determined that the three-year look back period is a limitations period subject to traditional equitable principles.
2. Petitions for Certiorari Granted

None
3. Petitions for Certiorari Denied

On February 19, 2002, the Supreme Court denied the petition for certiorari filed in Idaho State Tax Commission v. Goodman Oil Co. of Lewiston, 28 P.3d 996 (Idaho, 6/8/01), S.Ct. No. 01-794.
- Here, Idaho assessed the taxpayer with fuel tax for sales of gasoline to an Indian tribe that occurred at the border of Washington State and the tribe’s reservation; the fuel was then sold at an auto center on the reservation. Idaho asserted that Congressional authorization for its tax was provided by the federal Hayden-Cartwright Act, which allows states to impose fuels taxes on "fuels when sold by or through . . . licensed traders . . . located on United States military or other reservations." The Supreme Court of Idaho disallowed the tax, finding that the federal act did not clearly abolish tribal immunity from state motor fuel taxation and that, because the legal incidence of the Idaho tax was on either the tribal retailer or tribal consumer, the tax could not be enforced without clear authorization from Congress.

On February 19, 2002, the Supreme Court denied the petition for certiorari filed in Goldberg v. EIlett, 254 F.3d 1135 (9th Cir., 7/16/01), S.Ct. No. 01-731. Here, the Ninth Circuit Court of Appeals ruled that a bankruptcy court’s discharge order is binding on a state, despite that the state had not filed a proof of claim. A taxpayer who owed several years’ personal income taxes filed a Chapter 13 bankruptcy and, two years later, completed the payment plan and received a discharge by the bankruptcy court. Shortly thereafter, the California Franchise Tax Board, which had been given notice of the bankruptcy but had not filed a claim, sought to collect the pre-petition taxes owed by garnishing the taxpayer’s wages. The taxpayer reopened his bankruptcy case and filed an adversary proceeding against the Executive Director of the FTB, seeking a declaratory judgment that his tax obligation to California was discharged by the bankruptcy court’s discharge order, and an injunction against any further collection action. The Director moved for dismissal, based on Eleventh Amendment sovereign immunity. The Ninth Circuit affirmed the ruling of the bankruptcy courts, that the doctrine of Ex parte Young allowed this suit against the state official, since the Bankruptcy Code does not contain a detailed remedial scheme that would serve as a barrier under Seminole Tribe, and there was not at stake any special sovereignty interest that would serve as a barrier under Coeur d’Alene. The court also ruled that the general dictates of the Tax Injunction Act do not defeat the specific powers granted to the federal courts under the Bankruptcy Code.

On March 18, 2002, the Supreme Court denied the petition for certiorari filed in Pennzoll Co. and Subsidiaries. v. Dept. of Revenue, 33 P.2d 314 (Or., 10/4/01), S.Ct. No. 01-964. Here, the taxpayer contended that the $2 billion it received in settlement of an interference-with-contract claim, arising out of a failed attempt to merge with another oil company, was nonbusiness income that could not be apportioned to Oregon. In 2000, the Oregon Tax Court determined that the proceeds constituted apportionable business income under both the transactional test and the functional test, because the taxpayer regularly acquired and disposed of interests in oil and gas assets. The tax court also dismissed the taxpayer’s Due Process and Commerce Clause claims on the bases that the taxpayer’s unitary business provided sufficient nexus to allow the state to tax the income, and that the contract that was interfered with served an operational function in the taxpayer’s unitary business. Further, the court dismissed the taxpayer’s claim that the size of the settlement distorted the taxpayer’s income to such an extent that taxing it would mean that the state was taxing income earned outside its borders finding that the size of a transaction was not a basis for treating it differently. The Supreme Court of Oregon affirmed those findings, except that, after finding that the income was business income under the transactional test, the court found it unnecessary to apply the functional test. In applying the transactional test, the court determined that the transaction in question was the agreement to merge, not the jury verdict that led to the settlement, as the taxpayer had asserted, and that the agreement to merge was made in an effort to gain access to additional oil reserves, which was within the regular course of the taxpayer’s business of extracting, processing and selling oil.

On March 18, 2002, the Supreme Court denied the petition for certiorari filed in Ventura Group Ventures, Inc. v. Ventura Port District, No. 97-55269 (9th Cir., 8/29/01), S.Ct. No. 01-940. Here, relying on answers to legal questions certified to the California Supreme Court, the Ninth Circuit Court of Appeals ruled that a California port district could not raise property taxes or impose a special assessment to satisfy a money judgment that had been rendered against it.

On March 18, 2002, the Supreme Court denied the petition for certiorari filed in Programmed Land, Inc., et al. v. O’Connor, et al., 633 N.W.2d S17 (Minn., 9/20/01), S.Ct. No. 01-1061. Some taxpayers whose property tax assessments had been calculated using the wrong rates missed the statutory deadline for requesting relief for realty that had been "unfairly, or unequally assessed," and the assessing counties denied their request for equitable relief, on the basis that the statute was the exclusive remedy available to the taxpayers. The Minnesota Court of Appeals sided with the taxpayers, finding that the errors made in applying the tax rates incorrectly did not constitute unfair or unequal assessments, so that the statutory remedy was not available to the taxpayers, and equitable remedies could be allowed. 602 N.W.2d 895. The Supreme Court of Minnesota then reversed that holding, finding that the errors made fell within the assessment process, so that the taxpayers exclusive remedy was the statute whose deadline they had missed. The court also ruled that a more general statute allowing remedies did not apply, and that the tax notices issued by the counties did not violate due process concerns by not setting out every factor that went into setting the taxable value.

On March 18, 2002, the Supreme Court denied the petition for certiorari filed in Bay Mills Indian Community v. Michigan, No. 218S80 (Mich. Ct. App., 3/2/01), S.Ct. No. 01-1 036. In a case involving a claim that property of a Native American’s ancestors was improperly subject to a tax sale in 188S, the Michigan Court of Appeals ruled that, because the property had previously been acquired from the federal government in fee simple by a non-Indian, the taxability of the land was established, consistent with the U.S. Supreme Court’s 1998 Cass County decision. The court also ruled that the plaintiffs claims were time barred under any applicable statute of limitations.
On March 18, 2002, the Supreme Court denied the petition for certiorari filed in Owner-Operator Independent Drivers Association v. Urbach, 718 N.Y.S.2d 282, 749 N.E.2d 209 (N.Y. App. Div., 12/7/00), S.Ct. No. 01-1047. In a class action, an association of owners and operators of motor carriers asserted that New York State’s fuel use tax violates the Commerce Clause as a user fee imposed without any relation to any service provided by the state. The New York Supreme Court, Appellate Division, affirmed the trial court’s dismissal of the case, finding that the charge is a tax and not a user fee, and that the tax is fairly apportioned because the International Fuel Tax Agreement bases each participant’s share of tax revenues on the number of miles traveled through the jurisdiction.
On March 18, 2002, the Supreme Court denied the petition for certiorari filed in Jefferson v. Comm’r of Revenue, 631 N.W.2d 391 (Minn., 8/2/01), S.Ct. No. 01-1037. Two Native Americans who were members of a tribe but did not reside on a reservation claimed that Minnesota’s taxation of their income from their tribe’s gaming revenues violated federal statutory and constitutional concerns. The Supreme Court of Minnesota affirmed the state tax court’s denial of the taxpayers’ claims, finding that tribal members not residing on their tribe’s reservation are subject to state tax. The court ruled that nothing in the Indian Gaming Regulatory Act prohibits the state from taxing the taxpayers’ income; that federal and state constitutional concerns for equal protection are not violated by taxing Native Americans who live on reservations differently from those who do not; and that the state’s taxation of the taxpayers’ income did not infringe on tribal self-governance.
4. Petitions for Certiorari Filed

On December 20, 2001, a petition for certiorari was filed in Ventura Group Ventures, Inc. v. Ventura Port District, No. 97-55269 (9th Cir., 8/29/01), S.Ct. No. 01-940. Here, relying on answers to legal questions certified to the California Supreme Court, the Ninth Circuit Court of Appeals ruled that a California port district could not raise property taxes or impose a special assessment to satisfy a money judgment that had been rendered against it.
On December 28, 2001, a petition for certiorari was filed with the Supreme Court in Pennzoll Co. and Subsidiaries v. Dept. of Revenue, 33 P.2d 314 (Or., 10/4/01), S.Ct. No. 01-964. Here, the taxpayer contended that the $2 billion it received in settlement of an interference-with-contract claim, arising out of a failed attempt to merge with another oil company, was nonbusiness income that could not be apportioned to Oregon. In 2000, the Oregon Tax Court determined that the proceeds constituted apportionable business income under both the transactional test and the functional test, because the taxpayer regularly acquired and disposed of interests in oil and gas assets. The tax court also dismissed the taxpayer’s Due Process and Commerce Clause claims on the bases that the taxpayer’s unitary business provided sufficient nexus to allow the state to tax the income, and that the contract that was interfered with served an operational function in the taxpayer’s unitary business. Further, the court dismissed the taxpayer’s claim that the size of the settlement distorted the taxpayer’s income to such an extent that taxing it would mean that the state was taxing income earned outside its borders, finding that the size of a transaction was not a basis for treating it differently. The Supreme Court of Oregon affirmed those findings, except that, after finding that the income was business income under the transactional test, the court found it unnecessary to apply the functional test. In applying the transactional test, the court determined that the transaction in question was the agreement to merge, not the jury verdict that led to the settlement, as the taxpayer had asserted, and that the agreement to merge was made in an effort to gain access to additional oil reserves, which was within the regular course of the taxpayer’s business of extracting, processing and selling oil.

On January 14, 2002, a petition for certiorari was filed in Bay Mills Indian Community v. Michigan, No. 218S80 (Mich. Ct. App., 3/2/01), S.Ct. No. 01-1036. In a case involving a claim that property of a Native American’s ancestors was improperly subject to a tax sale in 1885, the Michigan Court of Appeals ruled that, because the property had previously been acquired from the federal government in fee simple by a non-Indian, the taxability of the land was established, consistent with the U.S. Supreme Court’s 1998 Cass County decision. The court also ruled that the plaintiffs claims were time barred under any applicable statute of limitations.

On January 14, 2002, a petition for certiorari was filed in Owner-Operator Independent Drivers Association v. Urbach, 718 N.Y.S.2d 282, 749 N.E.2d 209 (N.Y. App. Div., 12/7/00), S.Ct. No. 01-1047. In a class action, an association of owners and operators of motor carriers asserted that New York State’s fuel use tax violates the Commerce Clause as a user fee imposed without any relation to any service provided by the state. The New York Supreme Court, Appellate Division, affirmed the trial court’s dismissal of the case, finding that the charge is a tax and not a user fee, and that the tax is fairly apportioned because the International Fuel Tax Agreement bases each participant’s share of tax revenues on the number of miles traveled through the jurisdiction.

On January 16, 2002, a petition for certiorari was filed in Programmed Land, Inc., et al. v. O’Connor, et al., 633 N.W.2d S17 (Minn., 9/20/01), S.Ct. No. 01-1061. Some taxpayers whose property tax assessments had been calculated using the wrong rates missed the statutory deadline for requesting relief for realty that had been "unfairly, or unequally assessed," and the assessing counties denied their request for equitable relief, on the basis that the statute was the exclusive remedy available to the taxpayers. The Minnesota Court of Appeals sided with the taxpayers, finding that the errors made in applying the tax rates incorrectly did not constitute unfair or unequal assessments, so that the statutory remedy was not available to the taxpayers, and equitable remedies could be allowed. 602 N.W.2d 895. The Supreme Court of Minnesota then reversed that holding, finding that the errors made did fall within the assessment process, so that the taxpayers exclusive remedy was the statute whose deadline they had missed. The court also ruled that a more general statute allowing remedies did not apply, and that the tax notices issued by the counties did not violate due process concerns by not setting out every factor that went into setting the taxable value.

On January 17, 2002, a petition for certiorari was filed in Textron, Inc. v. Commissioner of Revenue, 756 N.E.2d 1142 (Mass., 10/22/01), S.Ct. No. 01-1083. Massachusetts corporate excise tax statutes provide for different methods for domestic and foreign corporations to determine whether they are classified as tangible property or intangible property corporations, and, if classified as an intangible corporation, different methods to calculate net worth. In earlier litigation in which the Massachusetts courts determined that the differential treatment discriminated against interstate commerce in violation of the Commerce Clause, the final judgment had the practical effect of severing the offending language, so that all intangible corporations were treated similarly. After that decision, and during the litigation of this case, the Department of Revenue issued a directive providing that taxpayers could choose the formulas they preferred to determine whether they are tangible or intangible corporations, and to determine net worth. In this case, the taxpayer and its combined reporting group claimed that, despite the directive, the statutes violated the Commerce Clause, and that the Department did not have the authority to issue the directive. The Supreme Judicial Court of Massachusetts determined that, although none of the taxpayers had standing to raise the constitutional claims because none of them were adversely affected by the statutes in question, the court would decide the constitutional issue; the court ruled that it was not clear how interstate commerce was adversely affected by the statutes, and that, even if that did occur, the Department’s directive, which was fully authorized, eliminated any constitutional infirmities.

On February 28, 2002, a petition for certiorari was filed in Zantop International Airlines, Inc. v. Dept. of Treasury, No. 217513 (Mich. Ct. App., 4/24/01), S.Ct. No. 01-1284. In an unpublished opinion, the Michigan Court of Appeals ruled that an airline made a taxable use of airplane parts in Michigan when those parts were received and installed into planes in Michigan, and that the imposition of the use tax did not violate the Commerce Clause. The court found that the principle of internal consistency was not violated because the only other state that had a relationship with the parts did not collect a sales tax, and that, even if it had done so, the statute would have allowed the taxpayer a credit. The court also found that, to the extent that the "taxable moment" test was still viable, the parts were put to a taxable use when they were installed in the plane in the state.
On March 5, 2002, a petition for certiorari was filed in Milwaukee Safeguard Insurance Co., et al. v. Selcke, etal., No. 1-00-1979 (III. App. Ct., 7/17/01), S.Ct. No. 01-1311. In 1997, Illinois’ two-percent privilege tax on insurance gross premiums, which contained an exemption for domestic companies, was declared unconstitutional by the state supreme court. In addressing the remedies issue on remand, the Illinois Appellate Court ruled that the state may assert the pass-on defense, under which, in order for these taxpayers to be entitled to a refund, they must show that they bore the burden of the tax and did not pass it on to their policyholders, so that a refund would not amount to a windfall. The court also ruled that, since the pass-on defense had been raised by the state, the taxpayers had the burden of establishing that there was no windfall, and that the state had not waived the issue by not raising it as an affirmative defense, since the defense could be raised at the remedial phase of the litigation.

B. Other Federal Courts

None
C. West Virginia Supreme Court of Appeals

None
D. West Virginia Circuit Courts

None
E. Courts of Other States

None
Ill. ADMINISTRATIVE ACTIVITY

A. Administrative Decisions

· CONSUMERS’ SALES AND SERVICE TAX — POST-AUDIT EXEMPTIONS ALLOWED — Pursuant to 110 C.S.R. IS, § 14b.5.1, exemption certificates acquired by a Petitioner after the audit begins may be considered, subject to independent verification. ADMIN DEC 00-384 U & 00-38S C - ISSUED — 12/12/01.

· CONSUMERS’ SALES AND SERVICE TAX - BURDEN OF PROOF NOT MET - Pursuant to W. Va. Code § 11-10-14(d)(3), when a petition for refund is properly filed, the procedures for hearing and decision applicable when a petition for reassessment is timely filed shall be followed, thereby requiring Petitioner to meet its burden of proof under W. Va. Code § 11-10-9. ADMIN DEC 00-418 RC — ISSUED —12101101.

· PURCHASERS’ USE TAX — SALES TAX CREDIT NOT APPLICABLE — Tax Credit provided in W. Va. Code § 11-15A-10 is not applicable where a product (raw material) is transported into the State of West Virginia and subsequently its form is changed during the manufacture of asphalt for contracting purposes, because the product’s change of form during manufacturing results in a separate taxable activity. ADMIN DEC —01 -616 RC — ISSUED —01117102.

· PURCHASERS’ USE TAX — TAXABLE PURCHASES OF SERVICES OF INDEPENDENT CONTRACTOR-LABORERS — The State Tax Commissioner will affirm an assessment of purchasers’ use tax when the purchaser fails to show that any tax exemption or exclusion applies to the purchases of the services of data entry operators, lawn workers, and office cleaners, whom the purchaser asserts are independent contractor-laborers and not employees. ADMIN DEC — 01-44S U — ISSUED — 01/18/02.

· BROAD-BASED HEALTH CARE PROVIDER TAX — NO ABATEMENT OF INTEREST — Abatement of interest pursuant to W. Va. Code § 1 1-10-7b requires error or delay on the part of state officials or its representatives and absent both of these causes no legal justification exists for the interest abatement. ADMIN DEC — 01-4S3 RHP, 01-4S4 RHP, 01-4SS RHP & 01-4S6 RHP — ISSUED — 01/02/02.

· PURCHASERS’ USE TAX — ASSESSMENT REVISED FOR NONTAXABLE ITEMS AND FOR NONRECURRING ITEMS IN SAMPLE — The State Tax Commissioner will revise purchasers’ use tax assessments to totally exclude nontaxable items, such as purchases of modular dwellings and purchases of items directly used in the production of natural resources; the State Tax Commissioner will further revise the purchasers’ use tax assessments to remove from the monthly sample those taxable items that are shown not to be recurring each month, such as first-year start-up purchases, one-time purchases, or purchases occurring annually. ADMIN DEC — 01-490 U, 01-492 U & 01-493 U — ISSUED — 12/21/01.

· PERSONAL INCOME TAX — WV RESIDENT’S INCOME EARNED IN VIRGINIA — FAILURE TO FOLLOW REGULATION — A taxpayer who is a West Virginia resident and who fails to follow the special procedure set forth in the personal income tax regulation section 71.3 is not entitled to a credit against the West Virginia personal income tax for the Virginia personal income tax withheld from wages earned in Virginia; instead, the taxpayer must seek a refund of the Virginia income tax. ADMIN DEC — 01-497 P(R)— ISSUED — 01/11/02.

· CONSUMERS’ SALES AND SERVICE TAX - ADDITIONS TO TAX WAIVED WHEN CONFUSION ABOUT STATE TAX LIABILITY ATTRIBUTABLE IN PART TO EMPLOYEE OF A RELEVANT STATE GOVERNMENT AGENCY — Pursuant to the authority provided by W. Va. Code § 11-10-18(a)(1)-(2), the State Tax Commissioner will waive regular additions to tax when the late filing of consumers’ sales and service tax returns and late remittance of that tax by the taxpayer-vendor was attributable at least in part to the somewhat vague written advice of an employee of a state government agency charged with giving fairly broad advice to the taxpayer’s customer (the purchaser). ADMIN DEC — 01-501 C & 01-502C —ISSUED— 12/06/01.

· CONSUMERS’ SALES AND SERVICE TAX - INTEREST ABATABLE UNDER W. VA. CODE § 11-10-7b ONLY FOR ERROR OR DELAY ATTRIBUTABLE TO EMPLOYEE OF STATE TAX COMMISSIONER — The State Tax Commissioner is not authorized under W. Va. Code § 11-10-17(a) to "waive" interest on state tax underpayments for any reason and is authorized to "abate" interest under W. Va. Code § 11-1 0-7b(a) only to the extent that the state tax deficiency or late payment is attributable to an officer or employee of the State Tax Commissioner being erroneous or dilatory in performing a ministerial act (and without any significant aspect of the deficiency or late payment being attributable to the taxpayer). Thus, the State Tax Commissioner is not authorized to abate interest on the late filing of consumers’ sales and service tax returns and late remittance of that tax by a taxpayer-vendor that was .attributable at least in part to the somewhat vague written advice of an employee of a state government agency, outside the State Tax Commissioner’s office, that was charged with giving fairly broad advice to the taxpayer’s customer (the purchaser). ADMIN DEC — 01-501 C & 01-502 C — ISSUED— 12/06/01.

· CORPORATE LICENSE TAX - ASSESSMENT AFFIRMED AGAINST FOREIGN CORPORATION FAILING TO ALLEGE AND SHOW NO BUSINESS ACTIVITY IN THIS STATE DURING ASSESSMENT PERIOD — The State Tax Commissioner will affirm a West Virginia corporate license tax assessment issued against a foreign corporation that fails to allege and show that it did not engage in any business activity within the State of West Virginia during any part of the corporate license tax years in question. See W. Va. Code § 11-12C-2(b)(2) and W. Va. Code § 11-10-9. ADMIN DEC — 01-549 CL — ISSUED —12/05/01.

· CONSUMERS’ SALES AND SERVICE TAX - SALE AND INSTALLATION OF ANGIOPLASTY PROCEDURE EQUIPMENT SHOWN TO BE CONTRACTING ACTIVITY NOT SUBJECT TO TAX – A hospital that purchases angioplasty procedure equipment and the services for its installation by the equipment supplier is entitled to a refund of consumers’ sales and service tax remitted to the equipment supplier/installer, when the hospital establishes that the transactions in question constitute contracting services not subject to the consumers’ sales and service tax, because the equipment upon installation becomes a capital improvement, as set forth in various sections of the consumers’ sales and service tax/use tax regulations, see, e.g., 110 C.S.R. IS, §§ 8a.S, 107.3.17.2 and, particularly, 111.2.1 (effective on and after May 1, 1992). ADMIN DEC — 01-SS8 RC — ISSUED — 01/23/02 SUBMITTED FOR DECISION - January 16, 2002.

· PERSONAL INCOME TAX — FEDERAL LAW ENFORCEMENT OFFICER’S RETIREMENT BENEFITS NOT TAXABLE — Retired federal law enforcement officer who performed duties similar to those performed by state fire fighters and police officers and who was within that limited class of federal retirees who could not collect social security benefits may exclude said retirement benefits from the West Virginia personal income tax pursuant to the ruling in Dodson v. Palmer. ADMIN DEC — 02-037 RPD — ISSUED —01/23/02.

· SEVERANCE TAX - GROSS VALUE OF LIMESTONE PRODUCTION — PRODUCTION COST-PLUS MARK-UP METHOD APPLICABLE — For West Virginia severance tax purposes, the gross value (fair market value) of raw limestone production, immediately upon severance, that is, on the limestone quarry floor, is to be computed, under the legislatively approved regulation set forth in 110 C.S.R. 13A, § 2a.6.3 (effective April 15, 1992), by adding all of the costs of producing the raw limestone, including direct and indirect overhead costs, plus an average mark-up realized by the taxpayer on all natural resource products produced and sold, when (1) the taxpayer uses or consumes the raw limestone products in its other businesses and does not sell similar-quality raw limestone products during the taxable year to an unrelated person, see 110 C.S.R. 13A, § 2a.6.1 (1992), and (2) there is no evidence of current sales in the vicinity by other taxpayers of similar-quality raw limestone products, see 110 C.S.R. 13A, § 2a.6.2 (1992). ADMIN DEC — 99-313 SV — ISSUED — 12/21/01. SUBMITTED FOR DECISION ON BRIEFS -November 30, 2001.

· SEVERANCE TAX - GROSS VALUE OF LIMESTONE PRODUCTION - INCLUDES COSTS OF NECESSARY REMOVAL OF OVERBURDEN — For severance tax purposes, the production cost-plus mark-up method of computing the gross value (fair market value) of raw limestone products used or consumed by the taxpayer in its other businesses does properly include all of the costs of removing any existing overburden because the taxpayer must remove the overburden as part of the process of severing the raw limestone. ADMIN DEC — 99-313 SV — ISSUED — 12/21/01. SUBMITTED FOR DECISION ON BRIEFS - November 30, 2001.

· PERSONAL INCOME TAX - REASONABLE CAUSE SHOWN FOR WAIVER OF ADDITIONS TO TAX— Executrix’s reliance upon the estate accountant’s decision not to file a return until completion of its federal tax filing constitutes reasonable cause for waiver of additions to tax pursuant to W. Va. Code § 11- 10-18(a)(1). ADMIN DEC — 01-676 RP — ISSUED — 02/O5/02.

· WITHHOLDING TAX — LIABILITY FOR MONEY PENALTY AS A PERSON "REQUIRED" TO COLLECT, ACCOUNT FOR, AND PAY OVER TRUST FUND TAX ON BEHALF OF CORPORATION AND WHO "WILLFULLY" FAILED TO DO SO — Under W. Va. Code § 11-10-19(a), a person is liable, jointly and severally, for a civil money penalty for 100% of an unpaid withholding tax obligation of a corporation if (1) he or she was "required" to collect, account for, and pay over such a trust fund tax on behalf of the corporation and (2) if he or she "willfully" failed truthfully to perform these responsibilities on behalf of the corporation.

A person was "required" to collect, account for, and pay over a withholding tax, within the meaning of W. Va. Code § 11-10-19(a), if he or she, at the time the tax filing and payment were due, had the authority to make or to supervise directly the day-to-day financial decisions on behalf of the corporation.

The term "willfully" failed truthfully to collect, account for, and pay over a withholding tax, within the meaning of W. Va. Code § 11-10-19(a), means that the person in question knowingly or recklessly failed truthfully to collect, account for, and pay over the withholding tax. That is, the person in question, prior to the money penalty tax assessment against him or her, had actual knowledge of the corporation’s default with respect to the withholding tax or recklessly ignored obvious financial facts which, with only a cursory inquiry, would have revealed that default. ADMIN DECS — 00-161 W, 00-162 C, 00-163 C, 00-164 C, 00-16S C & 00-166W— ISSUED — 02/25/02.

· CONSUMERS’ SALES AND SERVICE TAX — LIABILITY FOR SALES TAX DEBT AS A PERSON ELECTED OR APPOINTED WITH AUTHORITY OF AN OFFICER — Effective May 1, 1992, 110 C.S.R.1S, §§ 4a.S and 4a.S.2 require that the officers of a corporation or association are personally liable for consumers’ sales tax, as is any person who is elected or appointed to any position with the authority of an officer, and who performs duties or responsibilities in the management of the corporation, regardless of whether said officer or officers acted willfully or with intent to evade the tax or payment thereof. ADMIN DECS — 00-161 W, 00-162 C, 00-163 C, 00-164 C, 00-16S C & 00-166W— ISSUED — 02/25/02.

· BROAD-BASED HEALTH CARE PROVIDER TAX — OPTICIANS’ SERVICES TAXABLE — Optician which bought and then re-sold pre-made lenses and glasses from a prescription from a licensed health care provider constitutes a maker or dealer in optical items or instruments as defined in W. Va. Code §11-27-13(c), and is therefore taxable as one providing optician services, as defined in W. Va. Code § 11- 27-13(c)(4). ADMIN DEC — 00-370 HP — ISSUED — 02/04/02.

· BROAD-BASED HEALTH CARE PROVIDER TAX — NO CONSTITUTIONAL VIOLATION SHOWN - The fact that the West Virginia Legislature saw fit to tax opticians’ services and not pharmacists’ services, although both fill prescriptions, is not violative of either the United States Constitution or the West Virginia Constitution because there are differences in licensing and scope of work between the two; in addition, this tribunal, being a part of the executive branch of state government, does not have the legal authority to declare statutes unconstitutional; only a court can do so. ADMIN DEC — 00-370 HP — ISSUED —02/04/02.

· CONSUMERS’ SALES AND SERVICE TAX — NO TAXABLE ADMINISTRATIVE SERVICES — Practice by a related third party to pay salaries of Petitioner’s two (2) employees, solely as an accommodation and without remuneration for doing same or any other type of consideration does not constitute taxable administrative services for consumers’ sales and service tax purposes under W. Va. Code § 11-15-2(s). ADMIN DEC — 00-380 C — ISSUED — 02/OS/02 — SUBMITTED ON BRIEFS — 11/02/01.

· CORPORATION NET INCOME TAX - OUT-OF-STATE FINANCIAL ORGANIZATIONS HAVING INSTATE BUSINESS ACTIVITIES - APPORTIONMENT — SPECIAL GROSS RECEIPTS FACTOR -DENOMINATOR — GROSS, NOT NET, RECEIPTS — Under W.Va. Code § 11-24-7b(g)(2), a financial organization not having a commercial domicile in this State but regularly engaging in business activities both within and without this State does properly report the gross, not the net, receipts, from Federal Income Tax Form 4797 sales, in the denominator of the special gross receipts factor, for West Virginia corporation net income tax business income apportionment purposes. ADMIN DECS. — 01-090 RN & 01-..322 N — ISSUED — 02/27/02 — SUBMITTED FOR DECISION ON BRIEFS — 02/22/02.

· CORPORATION NET TAX INCOME TAX AND BUSINESS FRANCHISE TAX — CONSOLIDATED RETURN OF AFFILIATED GROUP WITH ONE OR MORE FINANCIAL ORGANIZATIONS -TAXPAYER SHOWING COMPLIANCE WITH STATUTE — The State Tax Commissioner will abate assessments of West Virginia corporation net income tax and business franchise tax when the taxpayer shows that it complied with the provisions of W. Va. Code § 11-24-13a(c) (corporation net income tax) and § 11-23-9a(c) (business franchise tax), and more particularly, with Code § 11-24-13a(c)(3)(B) and §11 -23-9a(c)(3)(B), by reporting on a combined pro forma basis for each member of the affiliated group of financial organizations not having their commercial domicile in this State. ADMIN DECS — 01-340 N & 01-346 FN — ISSUED — 02/11/02— HEARING HELD & MATTER SUBMITTED - 01/23/02.

· SOFT DRINK EXCISE TAX — REASONABLE CAUSE NOT SHOWN — Personnel change which resulted in returns not being filed for over three (3) years constitutes willful neglect and is therefore not reasonable cause for waiver of additions to tax pursuant to W. Va. Code § 1 1-10-18(a)(1). ADMIN DECS — 01-S71 S & 01-S72 S — ISSUED — 02/01/02.

· PURCHASERS’ USE TAX AND BROAD-BASED HEALTH CARE PROVIDER TAX — TAXPAYER’S FAILURE TO CARRY BURDEN OF PROOF — The State Tax Commissioner will affirm a purchasers’ use tax assessment and a broad-based health care provider tax assessment when the taxpayer fails to submit documentation supporting its challenges to the assessments, either at the administrative hearing or within the time period allowed after the hearing. ADMIN DECS — 01-625 U & 01-626 HP — ISSUED —02/19/02 — SUBMITTED FOR DECISION — 02/08/02.
B. Administrative Notices

2001-22R Average Wholesale Fuel Price — State Tax Commissioner’s Notice concerning the average wholesale price of fuel in West Virginia for calendar year 2001, this average wholesale price to be used in calculating the Consumers Sales Tax on fuel for calendar year 2002. (Published in State Register 12/13/01)
2002-02 Property Tax — State Tax Commissioner’s Statement for the Determination of the Capitalization Rates for Producing and Reserve Coal, Oil and Gas and Other Mined Minerals for Property Tax Purposes for Tax Year 2002, Pursuant to §§ 110 CSR 11-4.1.7, 1 J-4.S and 1 K-4. 1.7. Issued 1/14/02.
2002-03 Property Tax — State Tax Commissioner’s Statement for the Determination of Royalty Rates for Producing Coal and Other Natural Resources for Ad Valorem Property Tax Purposes for Tax Year 2002, Pursuant to §§110 CSR 11-4.1.6 and 1K-4.1.6. Issued 1/14/02.
2002-04 Property Tax — State Tax Commissioner’s Statement for the Determination of Production Decline Rates for Producing Oil and Gas Properties for Property Tax Purposes for Tax Year 2002, Pursuant to § 110 CSR IJ-4.4. Issued 1/14/02.
2002-05 Property Tax — State Tax Commissioner’s Statement Concerning Primary Reliance on the Income Approach to Value for Appraisals of Producing and Reserve Coal, and Producing Oil and Gas, and Producing Other Mined Minerals Pursuant to §§1 10 CSR 11-4, 1J-4 and 1K-4. Issued 1/14/02.
2002-06 Property Tax — State Tax Commissioner’s Statement for the Determination of Oil and Gas Operating Expenses for Property Tax Purposes for Tax Year 2002, Pursuant to § 110 CSR IJ-4.3. Issued 1/14/02.
2002-07 Property Tax — State Tax Commissioner’s Statement for the Determination of the Soil Productivity Maps for Managed Timberland, Pursuant to § 110 CSR 1 H-3.16. Issued 1/14/02.
2002-08 Property Tax — State Tax Commissioner’s Statement for the Determination of the In-Place Tonnage Per Acre-Foot of Coal and Other Natural Resources. Issued 1/14/02.
2002-09 Property Tax — State Tax Commissioner’s Statement Concerning Primary Reliance on the Market Comparable Approach for Appraising Reserve Other Natural Resources Pursuant to §110 CSR 1 K 4.2. Issued 1/14/02.
2002-10 Property Tax — State Tax Commissioner’s Statement Concerning Primary Reliance on the Income Approach for Appraising Reserve Oil and Gas Property Pursuant to § 110 CSR 1J-4. Issued 1/14/02.
2002-11 Property Tax — State Tax Commissioner’s Statement for Value Analysis of Reserve Coal Properties Pursuant to § 110 CSR 11-4.2. Issued 1/14/02.
2002-12 Property Tax — State Tax Commissioner’s Statement Concerning Primary Reliance on the Cost Approach to Value for Appraisals of Industrial Personal Property i.e. Machinery, Equipment, Furniture, Fixtures, and Leasehold Improvements Pursuant to § 110 CSR 1 P-2.5.3. 1. Issued 1/14/02.
2002-13 Property Tax — State Tax Commissioner’s Statement Concerning Primary Reliance on the Green Guide for the Appraisal of Used Heavy Equipment. Issued 1/14/02.
2002-14 Property Tax — State Tax Commissioner’s Statement for the Allocation or Separation of Values of a Pollution Control Facility Pursuant to §110 CSR 6-5. Issued 1/14/02.
2002-I5 Property Tax — State Tax Commissioner’s Statement Concerning Methods By Which Residential Real Estate Is Appraised Statewide. Issued 1/14/02.
2002-16 Property Tax — State Tax Commissioner’s Statement for the Determination of the Capitalization Rates for Managed Timberland for Property Tax Purposes for Tax Year 2002, Pursuant to § 110 CSR 1H-12. Issued 1/14/02.

C. Property Tax Rulings

02-01 A health and fitness club owned by an I.R.C. § 501(c)(3) organization and charges membership fees with there being a reduced fee for lower income persons is exempt from ad valorem taxation as property used for charitable purposes and not held or leased out for profit. Legal Log 01-171. Issued 1/09/02.
02-02 Tangible personal property in the form of a sailboat that is owned by a resident of West Virginia but is permanently located in another state is subject to ad valorem taxation. Legal Log 01-257. Issued 1/22/02.
02-03 Real property owned by a section 501(c)(3) organization and used as an animal sanctuary is not exempt from ad valorem taxation because insufficient information was provided to demonstrate that the property was being used for charitable use on July 1, 2001. Legal Log 02-033. Issued 2/21/02.
02-04 Property used for the manufacturing of oriented strand board qualifies for salvage value treatment for specialized manufacturing production property under Chapter 11, Article 6E of the Code of West Virginia. Legal Log 02-013. Issued 2/21/02.
02-05 Real property owned by a section 501 (c)(3) organization and used for residences for senior citizens does not satisfy the requirement for a lower classification, is not exempt from ad valorem taxation as property used for charitable purpose and not held or leased out for profit because -charity was not demonstrated, and does not qualify for Homestead Exemption because it does not satisfy the requirement of West Virginia Constitution Article X, Section 1 b. Legal Log 02-030. Issued 2/28/02.
02-06 Real property composed of both land and structures situated thereon that is owned by the West Virginia Economic Development Authority and leased to Edgewood Summit, Inc. is exempt from ad valorem taxation under the authority of West Virginia Code § 31-15-17 and it is also my ruling that the property interest held by Edgewood Summit, Inc. in the property known as Edgewood Summit in Kanawha County is not exempt from ad valorem taxation because Edgewood Summit, Inc. has not provided information sufficient to demonstrate the Assessor’s decision is incorrect. Issued 2/21/02.
02-07 Tangible personal property is subject to ad valorem taxation because there was insufficient information provided to establish exemption under the authority of West Virginia Constitution Article X, Section 1c, the Freeport Amendment, and no information to suggest the decision of the Assessor is incorrect. Legal Log 02-044. Issued 2/25/02.
02-08 Property is not exempt from ad valorem taxation because insufficient information was provided to demonstrate that the property is used exclusively for divine worship. Legal Log 02-041. Issued 2/26/02.
02-09 Real property owned by a 501 (c)(3) organization and leased to another 501(c)(3) organization is not exempt from ad valorem taxation because the property is not used for charitable purposes. Legal Log 02-048. Issued 2/28/02.
02-10 Real property composed of both land and structures situated thereon is not exempt from ad valorem taxation because information provided was not sufficient to demonstrate the Assessor’s decision is incorrect. Legal Log 02-043. Issued 2/28/02.
02-11 Real property owned by a 501(c) organization and used by non-profit organizations for their activities is exempt from ad valorem taxation as property used for charitable purposes and not held or leased out for profit. Legal log 02-049. Issued 2/28/02.
02-12 Property does not qualify as a pollution control facility as required by 110 C.S.R. 6, § 110-6A-4. Legal Log 02-05 1. Issued 2/28/02.
02-13 Real property used as a fraternity house at a university that has restored full recognition status to the property was undergoing repairs does not satisfy the requirements of the fraternity is not exempt from ad valorem taxation when and renovation on the July 1 assessment date because it 110 C.S.R. 3. Legal Log 02-050. Issued 2/28/02.
02-14 Tangible personal property in the form of materials waiting to be used in the manufacturing activity (generally referred to as "raw materials inventory"), materials which are undergoing the manufacturing activity (generally referred to as "goods in process") and materials which have finished the manufacturing activity (generally referred to as "finished goods") are not exempt from ad valorem taxation under West Virginia Constitution Article X, Section 1c, commonly referred to as the Freeport amendment. Legal Log # 02-052. Issued 2/28/02.

D. Other Publications
· Press Release — updating West Virginia personal income and corporate net income tax laws to bring them into conformity with their meaning for federal purposes (issued 03/4/02)
· WV/IT-I41QFT—WV Fiduciary Income Tax Return for Resident & Nonresident Qualified Funeral Trusts (Revised: 02/13/02)
· WV/SN-I — WV Application for Sparklers & Novelties Registration Certificate (Revised: 02/02)
· Governor Bob Wise says... Earned Income Tax Credit (EITC) — http://www.state.wv.us/taxrev/eitc.htm
· Press Release — Taxpayer Assistance Relocating to Downtown Charleston (issued 01/28/02)
· Press Release — Increased Property Tax Assessments on Oil & Gas Properties (issued 01/10/02)
· WV/NIPA-2 — Neighborhood Investment Program Credit Schedule (Revised: 12/01)
· Organization Chart — State Tax Department Organization Chart (Revised:
· WV/IT-100.1-A — Employers Withholding Tax Tables (Revised: 01/02)
· WV/IT-104— Employee’s Withholding Exemption Certificate (Revised: 01/02)
· TSD-2 — Tax Division Telephone Listing (Revised: 11/01)
· TSD-365 — How Interest and Additions to Tax are Assessed (Revised: 11/01)

E. Internet Sites

Tax Division’s site for forms/publications: http://www.state.wv.us/taxrev/forms.html West Virginia Legislature’s Home Page: http://www.legis.state.wv.us/

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