W. Va. Code R. § 110-24-6a

Current through Register Vol. XLI, No. 45, November 8, 2024

Section 110-24-6a - Transition Rules for C Corporations having a Fiscal Tax Year ending after January 1, 2022, and before December 31, 2022

6a.1. Amendments to W. Va. Code § 11-24-7 enacted by House Bill 2026, during the 2021 Regular Legislative Session, made several changes to how income is apportioned and sourced:

6a.1.1. For tax years beginning on or after January 1, 2022, income apportionment formula method is changed from the 4-factor formula set forth in section heading 7 to a single sales factor formula set forth in section heading 6.

6a.1.2. For sales made on or after January 1, 2022, HB 2026 voids the "throw out rule" set forth in section heading 7. Sales made after that date are subject to the "no throw rule" set forth in section 6.

6a.1.3. For sales of services and intangible property made on or after January 1, 2022, HB 2026 voids the former "cost of performance" sales allocation rule set forth in section heading 7. Sales made after that date are subject to the market-based sourcing sales allocation rule set forth in section heading 6.

6a.2. For taxpayers having a fiscal tax year ending after January 1, 2022, and before December 31, 2022, some of these changes straddle that fiscal tax year:

6a.2.1. Sales made during any portion of the fiscal tax year before January 1, 2022, are still subject to the "throw out rule." Sales made after January 1, 2022, of the same fiscal tax year, are subject to the "no throw rule."

6a.2.2. Sales of services and intangible property for the portion of the fiscal tax year before January 1, 2022, are subject to the "cost of performance" rule. Sales after January 1, 2022, of the same fiscal tax year, are subject to the "market-based sourcing" rule.

6a.3. Filing Option Election. -- For C corporations having a taxable year ending after January 1, 2022, and before December 31, 2022, the taxpayer may elect one of two filing options:

6a.3.1. Option 1. -- The taxpayer may file its West Virginia corporation net income tax return based upon the above-described changes for throw out rule and market based sourcing becoming effective for the taxpayer's tax year beginning on or after January 1, 2022.

6a.3.2. Option 2. -- The taxpayer may file:

6a.3.2.a. A short period West Virginia corporation net income tax return for the period beginning with the beginning date of the taxpayer's fiscal tax year immediately preceding January 1, 2022, and ending on December 31, 2022, and

6a.3.2.b. A second short period tax return for the period beginning January 1, 2022, and ending on the date that the taxpayer's fiscal tax year closes.

6a.3.2.c. The taxpayer would prepare its first short period tax return based on terms, conditions, and requirements of the corporation net income tax statute prior to the effective dates mandated by HB 2026. The taxpayer would prepare its second short period tax return based on terms, conditions, and requirements of the corporation net income tax statute effective on those dates mandated by HB 2026.

6a.3.3. There is no option regarding the apportionment formula. For taxpayers having a fiscal tax year ending after January 1, 2022, and before December 31, 2022, the taxpayer must use the 4-factor formula set forth in section heading 7 for that fiscal year. The single sales factor formula set forth in section heading 6 would apply in the next fiscal year.

W. Va. Code R. § 110-24-6a