W. Va. Code R. § 110-13KK-3
Current through Register Vol. XLI, No. 50, December 13, 2024
Section 110-13KK-3 - The amount of credit3.1. Credit allowed. -- Eligible taxpayers are allowed a credit against the portion of taxes imposed by this state that are attributable to and the consequence of the taxpayer's qualified investment in a new or expanded small arms and ammunition manufacturing facility in this state.3.1.1. The qualified investment must be equal to or greater than $2 million.3.1.2. The amount of this credit is determined and applied as provided in W. Va. Code § 11-13KK-1, et seq., and this rule.3.1.3. The amount of this credit claimed for any taxable year cannot exceed the amount of federal excise tax paid or payable to the government of the United States under section 4181 of Title 26 of the Internal Revenue Code, after application of any federal credits that may have been claimed.3.2. Amount of credit. -- The amount of credit allowable is 100 percent of the amount of federal excise tax paid in a tax year under section 4181, Title 26 of the Internal Revenue Code, which is attributable to and the consequence of the taxpayer's qualified investment.3.2.1. Threshold for the credit. -- No credit shall be allowed under W. Va. Code § 11-13KK-1, et seq., or this rule unless the taxpayer has invested at least $2 million in property purchased or leased for business expansion during the tax year for which the credit is claimed.3.2.2. It is the intent of W. Va. Code § 11-13KK-1, et seq., that a qualified taxpayer makes and continuously maintains a minimum capital investment in a qualified munitions manufacturing facility of no less than $2 million. The sole purpose of the capital investment portion of W. Va. Code § 11-13KK-1, et seq., is to determine whether the $2 million threshold requirement is met in every operational year based on a rolling 10 year time span for creation and extinguishment for measurement of capital investment. 3.2.2.a. If the $2 million capital investment threshold is met or exceeded in any given tax year, then the taxpayer is authorized to apply the annual dollar for dollar W. Va. Code § 11-13KK-1, et seq. tax credit against corporation net income tax or personal income tax, as applicable, in the amount of federal excise tax paid pursuant to 26 U.S.C. 4181.3.2.2.b. If the $2 million threshold has not been met, then the taxpayer may not apply the annual tax credit in the amount of the federal excise tax paid each year.3.2.2.c. Under §11-13KK-5, the statute contemplates placement of potential qualified investment in service or use in each taxable year. Therefore, the $2 million threshold is an ongoing determination, with each year contributing a new layer of capital investment over a 10 year time span. Year 1 investment is counted from year 1 to year 10
Year 2 investment is counted from year 2 to year 11
Year 3 investment is counted from year 3 to year 12
etc.
A taxpayer cannot gain entitlement to the credit until at least $2 million of accumulated qualified investment is in place.
3.2.2.c.1. EXAMPLE: If the taxpayer meets the $2 million threshold in year 1, then the taxpayer can apply the credit beginning in year 1. If the qualified investment is made in phases such that the $2 million threshold qualified investment is not in place until a later year, the taxpayer may begin taking the tax credit in the year when the $2 million threshold is met, based on the qualified investment made in the current year, combined with investments placed in service or use in the prior 10 years (under the 10 year rolling measurement system), provided that all other requirements of W. Va. Code § 11-13KK-1, et seq., are met, including the filing for of an application for credit.3.2.2.c.2. The tax credit set forth in W. Va. Code § 11-13KK-1, et seq., uses a 10 year rolling measurement of qualified investment to determine that at least $2 million of capital is continuously in place in the facility.3.2.2.d. If the $2 million threshold is reached or exceeded, then the taxpayer is authorized to take the annual W. Va. Code § 11-13KK-1, et seq., tax credit, the amount of which is an annual dollar for dollar offset of West Virginia income taxes, in the amount of federal excise tax paid in each taxable year on manufacture of certain firearms and ammunition, pursuant to 26 U.S.C. § 4181.3.2.3. Nothing in this subsection shall prevent the taxpayer from making a subsequent $2 million investment and claiming an additional credit during a subsequent tax year.3.3. Application of credit over 10 years. -- The amount of credit allowable shall be taken over a 10 year period, beginning with the taxable year in which the taxpayer places the qualified investment in service or use in this state that is used to reach the $2 million threshold.3.3.1. The taxpayer may elect to delay the beginning of the 10 year period until the next succeeding taxable year.3.3.1.a. This election shall be made in the annual income tax return filed for the taxable year in which qualified investment is first placed into service or use by the taxpayer.3.3.1.b. Once made, the election cannot be revoked.3.3.2. The annual credit allowance is taken in the manner prescribed in W. Va. Code § 11-13KK-4 and this rule.3.4. Placed in service or use. -- For purposes of the credit allowed by W. Va. Code § 11-13KK-1, et seq., and this section heading, property is considered placed in service or use in the earlier of the following taxable years: 3.4.1. The taxable year in which, under the taxpayer's depreciation practice, the period for depreciation with respect to the property begins; or3.4.2. The taxable year in which the property is placed in a condition or state of readiness and availability for a specifically assigned function.W. Va. Code R. § 110-13KK-3