W. Va. Code R. § 110-6F-5

Current through Register Vol. XLI, No. 48, November 27, 2024

Section 110-6F-5 - The Point in Time When Entitlement to Special Property Tax Valuation Accrues

A Taxpayer is entitled to the special valuation allowed under the Act when at least $50 million of qualified capital addition property has been enrolled in the name of the Taxpayer. The special valuation shall be granted for the tax year when the aggregate total value of enrolled qualified capital addition property enrolled in the name of the Taxpayer has exceeded $50 million and for succeeding years in accordance with W. Va. Code '11-6F-3 and 4.

5.1. Qualified capital addition property enrolled in the name of the Taxpayer before the $50 million threshold has been exceeded shall not be treated as having been placed in service for purposes of the Act. When the first $50 million of the qualified capital addition property has been enrolled in the name of the Taxpayer, that $50 million threshold investment in the property is considered to be placed in service on the date of enrollment of the property. Qualified capital addition property in excess of $50 million that is enrolled in the name of the Taxpayer on or after the date of enrollment of property representing the $50 million threshold amount shall be treated as having been placed in service when enrolled in the name of the Taxpayer.

5.2. The qualified capital addition property as well as the initial $50 million investment in property constitutes a "qualified capital addition to a manufacturing facility" and "certified capital addition property," and shall be valued in accordance with W Va. Code '11-6F-3 beginning in the tax year for which the amount of the original cost of the investment in new qualified capital addition property in place first exceeds $50 million on the July 1 assessment day.

5.3. Example:

Construction of a capital addition to an existing eligible manufacturing facility begins on April 1, 1997. The construction shall be accomplished over a period of 24 months. It shall be completed on April 1, 1999, and the capital addition shall be placed in operation on June 1, 1999.

On July1, 1997, three months of construction have been completed. On July 1,1998, 15 months of construction have been completed, and more that $50 million of qualified capital addition property is in place.

Construction is completed April 1, 1999. The plant is placed in operation on June1, 1999, and as of July 1, 1999 is assessed as a completed qualified capital addition to a manufacturing facility for tax year 2000.

5.3.1. The addition is assessed as follows for the tax years 1998, 1999 and 2000:

5.3.1.1. On July 1, 1997, 3 months of construction in progress is enrolled in the name of the Taxpayer with an appraised value equal to the fair market value of the materials in place in the construction. The $50 million threshold has not yet been reached. Therefore, for purposes of the Act, the property is not treated as having been placed in service, and the construction in progress is valued and taxed for the 1998 tax year without applying the special property tax valuation. The 1998 tax year is the January 1 to December 31 calendar year next succeeding the July 1, 1997 assessment date.

5.3.1.2. The Act does not yet apply because the $50 million threshold has not been reached. For the 1998 tax year, the assessed value is 60% of the appraised value. Typically the appraised value of construction in progress is set at the value of the materials in place without any cost of labor component.

5.3.1.3. On July 1, 1998, fifteen months of construction have been completed, and more than $50 million of construction materials have been incorporated into the construction in progress and are assessed on July 1. The $50 million threshold has now been exceeded. The property having a cost of more than $50 million, even though it has not yet been placed into operation, shall be treated as having been placed in service on July 1, 1998 for purposes of the Act. This is the date when the cost of the property enrolled in the name of the Taxpayer attributable to the project exceeds $50 million.

5.3.1.4. The physical placement of property into operation and the placement of property into service for purposes of the Act are not related concepts, and these events do not typically occur simultaneously. The term "placed in service" is defined in Section 2 of this rule. Property is placed into service for purposes of the Act when the criteria set forth in that definition have been satisfied. W. Va. Code '11-6F-4 states that the certified capital addition property receives special property tax valuation beginning at the point in time when the qualified capital addition property is "placed in service." The Taxpayer's entitlement to special property tax valuation accrues only when qualified capital addition property is "placed in service."

5.3.1.5. For the 1999 tax year (the tax year following July 1, 1998), the assessed value is the appraised value multiplied by 5% multiplied by 60%. Again, for construction in progress, the materials cost is counted in the appraised value, but not the labor cost component.

5.3.1.6. Construction is completed on April 1, 1999. The plant goes into operation on June 1, 1999. The placement of property in service for purposes of the Act bears no relationship to the date when property is placed into operation as a functioning part of the manufacturing facility.

5.3.1.7. On July 1, 1999, the construction has been completed for about 3 months. The qualified capital addition property enrolled for the first time in the name of the Taxpayer on July 1, 1999 shall be treated as having been placed in service immediately upon enrollment because the $50 million threshold was reached on July 1, 1998. New qualified capital addition property enrolled in the name of the Taxpayer after the $50 million threshold has been exceeded is treated as having been placed in service for purposes of the Act when enrolled in the name of the Taxpayer. The plant's appraised value shall now include not only the cost of the materials incorporated into the plant, but also the value of the labor for the construction. Appraised value shall increase significantly for the 2000 tax year (the calendar year after July 1, 1999).

5.3.2. The assessed value is original cost multiplied by 5% multiplied by 60%.

5.3.2.1. The cost layers created by the property enrolled in the name of the Taxpayer on July 1, 1997 and on July 1, 1998 shall have special property tax valuation treatment for the tax years 1999 through 2008 inclusive (ten years).

5.3.2.2. The value of property enrolled in the name of the Taxpayer on July 1, 1997 was below the $50 million threshold. Therefore, the qualified capital addition property enrolled in the name of the Taxpayer in that year is not treated as having been placed in service in the 1998 tax year (the next calendar year after July 1, 1997). The $50 million threshold is exceeded on July 1, 1998. The investment that makes up the $50 million amount is composed of the investment in the property enrolled in the name of the Taxpayer on July 1, 1997, as well as the investment in property enrolled in the name of the Taxpayer on July 1, 1998. Thus, the property enrolled in the name of the Taxpayer as of July 1, 1997 is treated as having been placed in service for purposes of the Act on July 1, 1998, along with the remaining investment in property comprising the $50 million amount that was enrolled in the name of the Taxpayer on July 1, 1998. This is why the property enrolled in the name of the Taxpayer on both assessment days, July 1, 1997 and July 1, 1998, is treated as placed in service on July 1, 1998. The July 1, 1998 assessment day is the assessment day for the tax year beginning on January 1, 1999. This is why the property enrolled in the name of the Taxpayer on July 1, 1997 and the property enrolled in the name of the Taxpayer on July 1, 1998 shall receive special property tax valuation under the Act beginning in tax year 1999 and ending in tax year 2008.

5.3.2.3. The cost layer created by the property enrolled in the name of the Taxpayer on July 1, 1999 shall have special property tax valuation treatment for the tax years 2000 through 2009 (ten years). The special property tax valuation treatment for both layers shall be concurrent for the years 2000 to 2008.

W. Va. Code R. § 110-6F-5