West Virginia Response to Bonus Depreciation

From Commerce Clearinghouse
From RIA
WV Department of Tax and Revenue

FROM: COMMERCE CLEARINGHOUSE (CCH), 4/10/02

Changes to federal law made after 2001 but before March 15, 2002, that affect the determination of federal corporate income tax and personal income tax are adopted for West Virginia corporate income tax and personal income tax purposes. (CCH Note: This includes changes to federal law made by the Job Creation and Worker Assistance Act of 2002 (P.L. 107-147), signed by President Bush on March 9, 2002.) (S.B. 1008 and 1009, Laws 2002, First Special Session, effective retroactively to the extent allowable under federal income tax law.)

FROM: RIA

West Virginia legislators have enacted two new laws that conform the state's personal income tax and corporate income tax acts to federal changes made before March 15, 2002. The amendments to the state income tax acts are retroactive to the extent allowable under federal income tax law.

This means that the state conforms to the changes made by the federal Job Creation and Worker Assistance Act of 2002 (P.L. 107-147; the economic stimulus package), which was signed into law on March 9, 2002. (L. 2002, S1008 and S1009 (1st Ex. Sess.), eff. 3/17/2002.)

The 2002 Job Creation and Worker Assistance Act contains many provisions that impact 2001 and earlier tax returns. It contains significant retroactive depreciation changes that may affect returns that have already been filed for tax year 2001, or are about to be filed (namely, the additional first-year depreciation allowance of 30% for certain property put in service after September 10, 2001). Other changes that may affect 2001 returns include an increased net operating loss (NOL) carryback period of five years, a change for S corporation debt discharge income, and several technical corrections dealing with the deemed sale-and-repurchase election for 5-year gain. The state's enactment of these conformity statutes keeps the state in lock-step with federal changes and, thus, avoids possible problems arising from nonconformity such as different federal-state basis for depreciation and the need to modify federal income to compute state taxable income on state returns.

FROM: WV Dept. of Tax and Revenue

West Virginia uses "federal adjusted gross income" as the starting point to determine West Virginia personal income tax liability.

West Virginia's income tax laws do not automatically conform to changes in federal income tax law affecting "federal adjusted gross income" of individuals or "federal taxable income" of C corporations.

Annually, the West Virginia Legislature enacts conforming legislation.

During the 2002 Regular session of the Legislature, bills were enacted incorporating federal law changes enacted or adopted before January 1, 2002. These changes in West Virginia law are retroactive to taxable years beginning before January 1, 2002, to the extend the federal changes apply.

During the first Extraordinary session held March 17, 2002, the West Virginia Legislature enacted bills conforming West Virginia's income tax definitions of "federal adjusted gross income," for individuals, and "federal taxable income," for C corporations, with their meanings for federal income tax purposes after Congress enacted the stimulus package March 7, 2002. These changes are retroactive to tax year 2001, to the extent the federal changes reached back. They also apply to the current tax year.

No changes enacted by Congress after March 14, 2002 will apply unless the West Virginia Legislature enacts additional conforming legislation.

THE TWO ENROLLED BILLS FOLLOW: ENROLLED
Senate Bill No. 1008
(By Senators Tomblin, Mr. President, and Sprouse, By Request of the Executive)
__________
[Passed March 17, 2002; in effect from passage.]
__________
AN ACT to amend and reenact section nine, article twenty-one, chapter eleven of the code of West Virginia, one thousand nine hundred thirty-one, as amended, relating to updating the meaning of certain terms used in the West Virginia personal income tax act by bringing them into conformity with their meanings for federal income tax purposes; and specifying effective date.

Be it enacted by the Legislature of West Virginia:

That section nine, article twenty-one, chapter eleven of the code of West Virginia, one thousand nine hundred thirty-one, as amended, be amended and reenacted to read as follows:
ARTICLE 21. PERSONAL INCOME TAX.
§11-21-9. Meaning of terms.

(a) Any term used in this article has the same meaning as when used in a comparable context in the laws of the United States relating to income taxes, un

ENROLLED
Senate Bill No. 1009
(By Senators Tomblin, Mr. President, and Sprouse, By Request of the Executive)
___________
[Passed March 17, 2002; in effect from passage.]
___________AN ACT to amend and reenact section three, article twenty-four, chapter eleven of the code of West Virginia, one thousand nine hundred thirty-one, as amended, relating to updating the meaning of certain terms used in the West Virginia corporation net income tax act by bringing them into conformity with their meanings for federal income tax purposes; and specifying effective date.
Be it enacted by the Legislature of West Virginia:
That section three, article twenty-four, chapter eleven of the code of West Virginia, one thousand nine hundred thirty-one, as amended, be amended and reenacted to read as follows:

ARTICLE 24. CORPORATION NET INCOME TAX.
§11-24-3. Meaning of terms; general rule.

(a) Any term used in this article has the same meaning as when used in a comparable context in the laws of the United States relating to federal income taxes, unless a different meaning is clearly required by the context or by definition in this article. Any reference in this article to the laws of the United States means the provisions of the Internal Revenue Code of 1986, as amended, and any other provisions of the laws of the United States that relate to the determination of income for federal income tax purposes. All amendments made to the laws of the United States after the thirty-first day of December, two thousand one, but prior to the fifteenth day of March, two thousand two, shall be given effect in determining the taxes imposed by this article to the same extent those changes are allowed for federal income tax purposes, whether the changes are retroactive or prospective, but no amendment to the laws of the United States made on or after the fifteenth day of March, two thousand two, shall be given any effect.

(b) The term "Internal Revenue Code of 1986" means the Internal Revenue Code of the United States enacted by the Federal Tax Reform Act of 1986 and includes the provisions of law formerly known as the Internal Revenue Code of 1954, as amended, and in effect when the Federal Tax Reform Act of 1986 was enacted that were not amended or repealed by the Federal Tax Reform Act of 1986. Except when inappropriate, any reference in any law, executive order or other document:
(1) To the Internal Revenue Code of 1954 includes a reference to the Internal Revenue Code of 1986; and
(2) To the Internal Revenue Code of 1986 includes a reference to the provisions of law formerly known as the Internal Revenue Code of 1954.

(c) Effective date. -- The amendments to this section enacted in the year two thousand two are retroactive to the extent allowable under federal income tax law. With respect to taxable years that begin prior to the fifteenth day of March, two thousand two, the law in effect for each of those years shall be fully preserved as to that year, except as provided in this section.