Instructions for Schedule Eotc-1 - Economic Opportunity Tax Credit

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Schedule EOTC-1
InstructIons for EconomIc opportunIty tax crEdIt
(for pErIods aftEr January 1, 2015)
General Information
least 280 new jobs is allowed a credit equal to 25% of its
qualified investment, and a business creating at least 520
the purpose of the economic Opportunity tax Credit is to
new jobs can claim 30% of its qualified investment. For
promote net employment growth within West Virginia. in
projects having qualified investment of $20 million or more
return for net employment growth (e.g., twenty (20) new
that are constructed using construction labor and mechanics
jobs) through capital investment, the state provides a tax
numbering 75 or more employees or equivalent employees,
credit to offset the additional taxes directly attributable to the
who are paid an average wage of at least prevailing wage;
qualified investment and new jobs.
the new jobs percentage for the 20 to 520 employee range
is increased by 5 percentage points.
the economic Opportunity tax Credit is available to
qualified businesses that make a qualified investment (on
If New West Virginia Jobs Total at
The Applicable
or after January 1, 2003) in a new or expanded business in
least:
Percentage is:
West Virginia and, as a result of this investment, create at
least twenty (20) new jobs. Qualified business include only
30%
520
those engaged in the activities of manufacturing, information
25%
280
processing, warehousing, non-retail goods distribution,
qualified research and development, the relocation of a
20%
20
corporate headquarters, or destination-oriented recreation
10%
15 Corporate headquarters relocation only
and tourism.
10%
10 small business credit (see below)
application for credit required
Jobs Calculation
taxpayers must complete an application for West Virginia
the new jobs percentage is based on the number of new
economic Opportunity tax Credit (Form WV/eOtC-a) with
jobs created in this state that are directly attributable to
the Tax Commissioner and receive written acknowledgment
the qualified investment in a new or expanded business
of such application prior to claiming the credit. the application
facility. the number of new jobs created by the investment
must be filed annually no later than the due date of the
is determined by the net increase in employment by the
taxpayer’s annual income tax return determined with regard
business (or controlled group of businesses) in West Virginia
to any extension of time for filling such returns. Form WV/
over a base year level. the base year is the 12-month
EOTC-A must be filed on a timely basis before claiming tax
period immediately preceding the placement of qualified
credits. Failure to do so will result in forfeiture of 50% of the
investment into service or use. The hours of qualified
annual credit allowance utilized until the application is filed.
part-time employees may be aggregated to determine the
Certified Projects
number of equivalent full-time employees for the purpose of
ascertaining the number of new jobs created.
the economic Opportunity tax Credit may be claimed for a
project certified by the Tax Commissioner. A project eligible
a “new Job” is one that did not exist in the business of the
for certification is one in which:
taxpayer in this state prior to the investment in the new or
expanded business facility. This position must be filled by a
The qualified investment creates at least twenty (20) new
new employee. the number of new jobs is the net of new
jobs but such investment is placed in service or use over
jobs created less any jobs lost in any part or segment of
a period of three (3) successive tax years rather than a
the employer’s business in West Virginia over the same time
period of 365 days or less. the investment is eligible for
period.
project certification only if made in accordance with a written
business facility development plan, and the investment
a “new employee” is a West Virginia domiciled resident
placed in service or use during the first year would not have
hired to fill one of the new jobs on a permanent basis.
been made without the expectation of making the qualified
temporary or seasonal employment does not qualify as a
investment placed in service or use during the next two (2)
new job. persons hired on a temporary or seasonal basis do
succeeding tax years.
not qualify as new employees.
A qualified business creating at least twenty (20) new jobs
For all economic Opportunity tax Credit applications, except
within three (3) tax years is allowed a credit equal to 20%
small business, an estimation of the expected number of new
of its qualified investment. This percentage increases with
jobs is made in the first taxable year for which the credit is
the number of new jobs created. a business creating at
claimed. in the third tax year the actual number of new jobs
West Virginia state tax Department
page 1 of 7
eOtC-1 instructions — rev. 10/15
Schedule EOTC-1
InstructIons for EconomIc opportunIty tax crEdIt
(for pErIods aftEr January 1, 2015)
General Information
least 280 new jobs is allowed a credit equal to 25% of its
qualified investment, and a business creating at least 520
the purpose of the economic Opportunity tax Credit is to
new jobs can claim 30% of its qualified investment. For
promote net employment growth within West Virginia. in
projects having qualified investment of $20 million or more
return for net employment growth (e.g., twenty (20) new
that are constructed using construction labor and mechanics
jobs) through capital investment, the state provides a tax
numbering 75 or more employees or equivalent employees,
credit to offset the additional taxes directly attributable to the
who are paid an average wage of at least prevailing wage;
qualified investment and new jobs.
the new jobs percentage for the 20 to 520 employee range
is increased by 5 percentage points.
the economic Opportunity tax Credit is available to
qualified businesses that make a qualified investment (on
If New West Virginia Jobs Total at
The Applicable
or after January 1, 2003) in a new or expanded business in
least:
Percentage is:
West Virginia and, as a result of this investment, create at
least twenty (20) new jobs. Qualified business include only
30%
520
those engaged in the activities of manufacturing, information
25%
280
processing, warehousing, non-retail goods distribution,
qualified research and development, the relocation of a
20%
20
corporate headquarters, or destination-oriented recreation
10%
15 Corporate headquarters relocation only
and tourism.
10%
10 small business credit (see below)
application for credit required
Jobs Calculation
taxpayers must complete an application for West Virginia
the new jobs percentage is based on the number of new
economic Opportunity tax Credit (Form WV/eOtC-a) with
jobs created in this state that are directly attributable to
the Tax Commissioner and receive written acknowledgment
the qualified investment in a new or expanded business
of such application prior to claiming the credit. the application
facility. the number of new jobs created by the investment
must be filed annually no later than the due date of the
is determined by the net increase in employment by the
taxpayer’s annual income tax return determined with regard
business (or controlled group of businesses) in West Virginia
to any extension of time for filling such returns. Form WV/
over a base year level. the base year is the 12-month
EOTC-A must be filed on a timely basis before claiming tax
period immediately preceding the placement of qualified
credits. Failure to do so will result in forfeiture of 50% of the
investment into service or use. The hours of qualified
annual credit allowance utilized until the application is filed.
part-time employees may be aggregated to determine the
Certified Projects
number of equivalent full-time employees for the purpose of
ascertaining the number of new jobs created.
the economic Opportunity tax Credit may be claimed for a
project certified by the Tax Commissioner. A project eligible
a “new Job” is one that did not exist in the business of the
for certification is one in which:
taxpayer in this state prior to the investment in the new or
expanded business facility. This position must be filled by a
The qualified investment creates at least twenty (20) new
new employee. the number of new jobs is the net of new
jobs but such investment is placed in service or use over
jobs created less any jobs lost in any part or segment of
a period of three (3) successive tax years rather than a
the employer’s business in West Virginia over the same time
period of 365 days or less. the investment is eligible for
period.
project certification only if made in accordance with a written
business facility development plan, and the investment
a “new employee” is a West Virginia domiciled resident
placed in service or use during the first year would not have
hired to fill one of the new jobs on a permanent basis.
been made without the expectation of making the qualified
temporary or seasonal employment does not qualify as a
investment placed in service or use during the next two (2)
new job. persons hired on a temporary or seasonal basis do
succeeding tax years.
not qualify as new employees.
A qualified business creating at least twenty (20) new jobs
For all economic Opportunity tax Credit applications, except
within three (3) tax years is allowed a credit equal to 20%
small business, an estimation of the expected number of new
of its qualified investment. This percentage increases with
jobs is made in the first taxable year for which the credit is
the number of new jobs created. a business creating at
claimed. in the third tax year the actual number of new jobs
West Virginia state tax Department
page 1 of 7
eOtC-1 instructions — rev. 10/15
created must be certified by the business. Adjustments must
total net Full-time equivalent employees
= 50.18
be made for the new jobs percentage if the number of new
* Must work for at least 6 months at 20 or more hours per
jobs certified varies from the number of new jobs estimated.
week to qualify
the allowable credit is then redetermined for prior and future
years. Once certified, if the number of new jobs declines in
** These employees work at least 20 hours per week for at
any tax year, resulting in a decreased new jobs percentage,
least 6 months during the year
the credit is redetermined. However, if the number of new
jobs subsequently increases to the former threshold, the
*** Hours beyond 1,680 may not be counted as additional
credit will be reinstated.
employees.
A qualified small business with no more than $9,233,450
*
Required Employment Records
in annualized sales must create at least ten (10) new
the taxpayer must maintain records to establish the
West Virginia jobs within twelve (12) months of placement of
following:
qualified investment into service or use. See administrative
notice 2014-22 for tax years beginning during calendar year
1. total full-time equivalent employment in place during
2015. if the number of new jobs declines in any subsequent
the year immediately preceding the year qualified
year below the minimum of ten (10), then the credit is lost for
investment was first placed into service or use.
that year. However, if the number of new jobs subsequently
increases to the former threshold, the credit will be reinstated.
2. total full-time equivalent employment in place during
if the new number of new jobs rises to twenty (20) or more,
each year of the project.
then the new jobs percentage will increase to twenty percent
such records must be retained for a period of three (3) years
(20%), and the general job calculation rules of the economic
after the last year for which the credit is claimed.
Opportunity Credit will apply.
Qualified Investment Property
A job is attributable to the qualified investment if:
Qualified investment property is property constructed,
1. the employee’s service is performed or his base of
purchased, leased or transferred into West Virginia and
operations is at the new or expanded facility; and
placed in service or use, as a component of a new or
2. The position did not exist prior to the making of the
expanded business facility located in this state. the amount
investment in the new or expanded facility; and,
of the qualified investment is determined by the cost, or
3. the position exists only because of the investment in
other basis, and the useful life of the property.
the new or expanded facility.
Critical elements in the determination of qualified investment
Calculation of Full-Time Equivalent Employees
property for purposes of this credit are how, and from whom,
The hours of qualified part-time employees are aggregated
the property is acquired; the acquisition date; date and term
to determine the number of equivalent full-time employees
of a lease; transfer date; date placed in service or use in this
for the purpose of determining the applicable new jobs
state; as well as the useful life of the property.
percentage. However, they may not be aggregated for the
For the economic Opportunity tax Credit, qualifying
purpose of determining when a job is attributable to the
investment property acquired and placed in service or use
qualified investment.
in this state on or after January 1, 2003 may be counted
Part-time employment qualifies if the employee works at
toward the credit.
least twenty (20) hours per week for at least six (6) months
Qualified Investment Property May Include:
or 520 hours per year (26 weeks @ 20 hours per week). Full-
time employment is 140 hours per month or 1,680 hours per
1. real property and improvements thereto, having a
year (140 hours times 12 months). The following example
useful life of four (4) or more years placed in service
illustrates a calculation of full-time equivalent employees:
or use in West Virginia on or after January 1, 2003.
2. real property and improvements thereto, or tangible
Qualified Employees
full-time
net full-time
personal property acquired by written lease with
Equivalent
Equivalent
a primary term of ten (10) or more years placed in
200 @ < 520 hrs
1,680
Do not Qualify*
service or use in West Virginia on or after January 1,
50 @ 750 hrs
1,680**
= 22.32
2003.
20 @ 1,500 hrs
1,680**
= 17.86
3. Depreciable or amortizable tangible personal property
placed in service or use in West Virginia on or after
6 @ 1,700 hrs
1,680***
= 6.00
January 1, 2003 with a useful life of four (4) or more
4 @ 2,080 hrs
1,680***
= 4.00
years at the time the property is placed in service or
use in this state.
*
Administrative notice 2014-22 for tax years during
4. tangible personal property acquired by written lease
calendar year 2015.
West Virginia state tax Department
page 2 of 7
eOtC-1 instructions — rev. 10/15
having a primary term of four (4) or more years that
6. the date it was disposed of or otherwise ceased to be
was commenced and executed on or after January 1,
qualified property.
2003.
such records must be retained for a period of three (3) years
5. tangible personal property owned or leased, used at
after the last year for which the credit is claimed.
a business location outside this state which is moved
Cost or Other Basis
into this state on or after January 1, 2003. if owned,
property must be depreciable or amortizable and
1. the cost of purchased property may not include the
have a useful life of four (4) or more years remaining
value of property given in trade or exchange for the
at the time the property is placed in service or use
property purchased.
in this state. if leased, the primary term of the lease
2. the cost of replacement property may not include
remaining at the time the property is placed in service
any insurance proceeds received in compensation for
or use in West Virginia must be four (4) or more years.
property damaged or destroyed by fire, flood, storm or
Qualified Investment Property May Not Include:
other casualty or is stolen.
1. property owned or leased, for which another tax
3. the cost of real property with a written primary lease
credit (e.g. for manufacturing investment tax Credit,
term of ten (10) or more years is 100% of the rent
industrial expansion and revitalization; or research
reserved for the primary term of the lease, not to
and Development Projects) has been taken by the
exceed twenty (20) years.
taxpayer, seller, lessor, or other transferor.
4. the cost of tangible personal property with a written
2. repair costs, unless capitalized for federal income tax
primary lease term of at least four (4) years but less
purposes.
than six (6) years is one-third (1/3) of the rent reserved
for the primary term of the lease.
3. airplanes.
5. For tangible personal property with a written primary
4. property primarily used outside this state.
lease term of at least six (6) years but less than
5. property acquired incidental to the purchase of the
eight (8) years, the cost is two-thirds (2/3) of the rent
stock or assets of the seller. This restriction can be
reserved for the primary term of the lease.
waived by the tax Commissioner.
6. For tangible personal property with a written lease
6. natural resources in place.
term of eight (8) or more years, the cost is 100% of the
7. property purchased or leased, the cost of which cannot
rent reserved for the primary term of the lease, not to
be quantified when such property is placed in service.
exceed twenty (20) years. the rent reserved may not
include rent for any year subsequent to the expiration
8. Property not directly attributable to the qualified
of the book life of the property, determined by use of
investment activity (e.g. recreational boat, vehicle for
the straight line method of depreciation.
personal use).
7. For qualifying property purchased for multiple use the
Date Placed In Service or Use
cost must be pro-rated.
property is considered to be placed in service or use in the
8. For self-constructed property the cost is the amount
earlier of:
properly charged to the capital account for depreciation
in accordance with federal income tax law.
1. the taxable year in which, under the taxpayer’s
depreciation practice, the period for depreciation for
9. the cost of property transferred into this state is
such property begins; or
determined based on remaining useful life of the
property at the time it is placed in service or use in this
2. the taxable year in which the property is placed in a
state. the cost is the original cost of the property to
condition of state or readiness and availability for a
the taxpayer less straight line depreciation allowable
specifically assigned function.
for tax years, or portions of tax years, the property was
Required Records
used outside West Virginia.
For each item of qualified property, the taxpayer must
10. For leased tangible personal property transferred into
maintain records to establish the following:
this state, the cost is based on the period remaining
in the primary term of the lease after the property is
1. its identity.
brought into this state for use in a new or expanded
2. its actual or reasonably determined cost.
business. the cost is the rent reserved for the
3. the month and taxable year in which it was placed in
remaining period of the primary lease term, not to
service or use.
exceed twenty (20) years or the remaining useful life,
whichever is less.
4. its straight line depreciation.
11. For leased property placed into service for which the
5. The amount of credit taken.
West Virginia state tax Department
page 3 of 7
eOtC-1 instructions — rev. 10/15
cost is not quantifiable at the outset of the lease, only
For example, if a Taxpayer purchases a machine for $25,000,
the quantifiable portion, if any, may be aggregated as
for use in a new industrial facility, which has a useful life of
a qualified investment.
six (6) years, the qualified investment is equal to $16,666.66.
The $25,000 investment is multiplied by the applicable
12. the cost of relocating corporate headquarters is the
useful life percentage of 66 2/3% to arrive at $16,666.66 in
expenses incurred and paid by the corporation to
qualified investment.
unrelated third parties and which have been certified by
the tax Commissioner to have been both reasonable
the credit can offset a portion of the tax attributable to
and necessary to effectuate the move.
qualified investment for the Business and Occupation Tax
Corporate Headquarters Relocation
[electric power generation taxes only], Corporation net
Income Tax, and Personal Income Tax [tax on flow through
the Corporate Headquarters relocation Credit is allowable
business profits only], in the order stated.
for corporate headquarters placed in service or use in
West Virginia on or after January 1, 2003. an out-of-state
the economic Opportunity tax Credit is generally available
corporation relocating its headquarters to West Virginia
for investment placed into service or use over a period of
is allowed a tax credit if it employs at lease fifteen (15)
365 days, beginning on the date when property purchased
domiciled West Virginia residents on a full-time basis at its
or leased for business expansion is first placed into service
new location.
or use. provisions are available for multiple year projects as
long as project certification has been obtained from the Tax
The adjusted qualified investment is the same as the qualified
Commissioner.
investment determined for the economic Opportunity tax
Credit, plus the cost of reasonable and necessary expenses
redetermination, forfeiture, and recapture of credit
incurred to relocate the corporate headquarters.
If during any taxable year, property used as a qualified
the amount of the credit is determined by multiplying the
investment for any of these credits is disposed of prior to
adjusted qualified investment by 10 percent (10%). However,
the end of its useful life or ceases to be used in an eligible
if at least twenty (20) jobs are attributable to the relocation or a
business, the unused portion of the credit attributable
combination of other qualified investment and the relocation,
to that investment is forfeited for the taxable year and all
the regular economic Opportunity tax Credit percentages
ensuing years. Forfeiture also applies if the taxpayer ceases
beginning at twenty percent (20%) may be used.
operation of a business facility for which credit was allowed
before expiration of the useful life of the qualified investment
calculation of Economic opportunity tax credit
property. the failure to create or maintain the necessary
number of new jobs for credit entitlement also results in
the credit is determined by multiplying the amount of the
credit forfeiture.
taxpayer’s qualified investment by the taxpayer’s new jobs
percentage and is generally applied over a ten (10) year
redetermination, forfeiture, and recapture of credit
period (at 1/10th per year) beginning in the taxable year in
which the qualified investment is placed in service or use,
1. Failure to create the minimum number of new jobs
or, at the taxpayer’s option, in the next succeeding tax year.
within the required two to three year period: The entire
For example, a Credit of $200,000 attributable to $1 million
credit is forfeited. Any Credit claimed during the first
of qualified investment made in 2003 is applied at a rate of
three (3) years must be paid back (recaptured) with
$20,000 per year for the 2003-2012 period, or alternatively,
interest and a ten (10%) percent penalty.
at a rate of $20,000 per year for the 2004-2013 period.
2. Failure to maintain the minimum number of new jobs in
any year subsequent to the initial three-year (3) period
This calculation of qualified investment is determined by
(i.e. years four (4) through ten (10)): The credit is
multiplying the net cost of eligible property by its applicable
forfeited for any year in question, but may be reinstated
useful life percentage based on the projected actual
for any remaining year in which the minimum number
economic useful life of the asset. the following percentages
is attained, thus enabling the taxpayer to utilize the full
apply:
annual credit allowance for that taxable year.
The Applicable
3. Failure to maintain the number of jobs necessary to
If Useful Life is:
Percentage is:
attain a jobs percentage in the 25% to 30% category:
the credit for year (s) affected must be redetermined
Less than 4 years
0 %
to reflect the jobs percentage attributable to the actual
4 years or more but less than 6
33 ⅓ %
employment increase.
years
4. Credit attributable to property that ceases to be used
6 years or more but less than 8
66 ⅔ %
in this state prior to the end of its categorized useful
years
life must be recalculated for all tax years according to
8 years or more
100 %
actual useful life. if the recalculation of credit according
West Virginia state tax Department
Page 4 of 7
eOtC-1 instructions — rev. 10/15
to actual useful life results in an overutilization in a
this schedule for your 2005 tax return.
previous year, then a reconciliation statement must be
Line 2
Investment Summary [complete if you made
filed with the payment of any additional tax and interest
qualified investment during the year]: enter
due. Credit attributable to property with a useful life of
the net costs of the property in Column (1) on
less than four (4) years is forfeited for all years.
the appropriate line determined by the life of the
EXAMPLE
property. then multiply the net costs in Column
Company A creates 50 new jobs and invests $10 million in
(1) by the applicable percentages in Column (2).
equipment with a designated useful life of eight (8) years
Enter the results in Column (3). Add the figures
in 2003. the credit for Company a is calculated to equal
in Column (3) and enter on Line 4 of this section.
$2,000,000 or $200,000 per year for ten (10) years. However,
The amount on Line 4 represents the Taxpayer’s
Company A moves this equipment to New York in 2008;
qualified investment for this year.
therefore the equipment’s actual useful life in West Virginia
Line 3
Available
Credit
Calculation:
enter
your
is reduced to only five (5) years. The corresponding credit
qualified investment from Line 4 above in Column
is reduced according to the above formula from $2,000,000
(1). enter the appropriate new jobs percentage in
to $666,667 or $66,667 per year for ten (10) years. A
Column (2). Then multiply the qualified investment
reconciliation statement for tax years 2003 through 2008
in Column (1) by the new jobs percentage in
reflecting an overutilization of credit must be filed with
Column (2) and enter the result in Column (3). the
payment of any additional tax, interest, and penalties owed.
amount entered in Column 3 represents your total
Redetermination is not Required:
available credit attributable to this year’s qualified
investment. this credit must be pro-rated for use
1. For a mere change in the form of conducting business.
over a ten-year period. multiply the available credit
However, the property must be retained in a business
in Column (3) by 10% to arrive at the pro-rated
in this state and the taxpayer must retain a controlling
available credit in Column (4).
interest in the successor business .
2. if the forfeiture occurs because property is stolen, or
Line 4
Pro-Rated Credit Allocation Summary: this
damaged by fire, flood, storm, or other casualty.
spreadsheet contains space for twelve rows of
tax credit data. if the taxpayer places investment
3. if the business is transferred or sold to a successor
into service over a single tax year, the taxpayer
business in this state. according to laws governing the
would have a pro-rated credit available over a
credit, any available credit allowed for is subsequent
10-year period beginning either with the year of
tax years.
investment or the following year per election of
the tax Credit Computation schedule is designed to
the taxpayer. if the taxpayer places investment
accommodate all or any part of these tax credits. Contained
into service over a period of up to three tax
within the schedule and instructions is more detailed
years per certified multiple year project, then the
information regarding the economic Opportunity tax Credits.
taxpayer would have as many as three separate
pro-rated credit streams beginning on up tothree
Instructions for Schedule EOTC-1
separate years. For example, a taxpayer with a
Complete business identification section, including business
multiple project certification has tax credits of $10
name, address, tax year, federal identification number and
million, $5 million, and $2 million attributable to
North American Industry Classification System (NAICS)
the 2003, 2004 and 2005 tax years. This Taxpayer
code.
elects to begin claiming each tax credit in the
year investment was first placed into service.
Line 1
Investment Years: the investment window for
Therefore, the Taxpayer has a pro-rated $1 million
the economic Opportunity tax Credit is normally
per year tax credit for the 2003-2012 period, a
one full year. However, the investment window
prorated $0.5 million per year tax credit for the
for projects with a multiple year certification is
2004-2013 period, and a pro-rated $0.2 million
up to three tax years. Enter the year(s) qualified
per year tax credit for the 2005-2014 period. An
investment is (was) placed into service. For
economic Opportunity tax Credit is available to
example, if you placed qualified investment into
this taxpayer for a period covering 12 years.
service during the 2003 tax year, you would
enter 1/2003-12/2003 in the space provided for
Column 1 [Year available] – enter the tax years for which
Year 1. if you contemplate a multiple year project
a pro-rated credit is available for use (e.g., 2003 in the first
certification and your first investment year occurred
row, followed by 2004 in the second row, and continuing
in 2003, you would possibly add information for
until 2012 in the tenth row). if your investment occurred in
Year 2 when you complete this schedule for your
2003, then your first year should either be 2003 or 2004 [if
2004 tax return, and for Year 3 when you complete
you elected to defer the beginning year of credit on your
West Virginia state tax Department
page 5 of 7
eOtC-1 instructions — rev. 10/15

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