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EXAMPLE:

A small business taxpayer commences business on August 1, 1998, and places its first item of property purchased

or leased for business expansion into service or use on that date. The small business elects to file its federal and State

income taxes and other taxes on a calendar year basis.

The small business taxpayer will be required to file its annual federal and State tax returns for its first tax year for the

period from August 1, 1998 to December 31, 1998. However, the small business taxpayer’s qualified investment upon which

credit will be based will be the qualified investment attributable to property purchased or leased for business expansion placed

in service or use by the small business taxpayer over the three hundred sixty- five (365) day period from August 1, 1998 to

July 31, 1999, notwithstanding the fact that the taxpayer’s tax year ended on December 31, 1998.

The determination of annual gross payroll and annual gross income shall be made at the end of the short tax year (ending

December 31, 1998). The determination of median compensation and the determination of the number of new jobs in place

attributable to qualified investment shall be made on July 31, 1999 based upon the preceding three hundred sixty-five (365)

days, including July 31, 1998.

The amount of qualified investment actually in service or use in the short tax year shall be the qualified investment upon

which credit for that year shall be based, i.e., property placed in service or use from August 1, 1998 to December 31, 1998.

Total qualified investment in service or use as of July 31, 1999, shall be the amount of qualified investment upon which the

1999 and subsequent year’s credit shall be based.

The current tax year of the taxpayer during which the three hundred sixty-five (365) day period ends (on July 31, 1999)

is the tax year of January 1 to December 31, 1999.

The amount of credit allowable is determined by multiplying the amount of the taxpayer’s qualified investment in “property purchased

or leased for business expansion” by the taxpayer’s new jobs percentage.

Small business project

- A small business may apply to the Tax Commissioner under West Virginia Code § 11-13C-4b for project

certification, if that project will create at least ten (10) new jobs. Only multiple year projects may be certified for small business tax credit.

Multiple party projects may not be certified for small business credit participants. The small business credit is allowable

for qualified investment property purchased or leased after June 30, 1987.

A taxpayer making qualified investment and operating with a multiple year certified project would use substantially the same procedure

as a taxpayer entitled to credit for investment made over one (1) year except that qualified investment would be made over three (3) taxable

years. The amount of qualified investment actually in service or use at the end of each tax year is the amount upon which credit for such tax

year is determined.

The maximum allowable credit is determined by multiplying the qualified investment by the new jobs percentage.

QUALIFIED INVESTMENT

Qualified investment property is property constructed, purchased, leased or transferred into West Virginia and placed in service or use,

as a component of a new or expanded business facility located in this State. The amount of the qualified investment is determined by the

cost, or other basis, and the useful life of the property.

Critical elements in the determination of qualified investment property for purposes of this credit are how, and from whom, the property

is acquired; the acquisition date; date and term of a lease; transfer date; date placed in service or use in this State; as well as the useful life

of the property.

For the Business Investment and Jobs Expansion Credit, qualifying investment property acquired and placed in service or use in this State

on or after March 1, 1985 may be counted toward the credit.

QUALIFIED INVESTMENT PROPERTY MAY INCLUDE:

Natural resources in place, purchased or leased on or after July 1, 1987, but prior to March 10, 1990, capable of sustained

production for a period of ten (10) or more years.

Real property and improvements thereto, having a useful life of four (4) or more years, placed in service or use, in West Virginia,

on or after July 1, 1987.

Real property and improvements thereto, or tangible personal property acquired by written lease with a primary term of ten (10) or

more years, placed in service or use, in West Virginia, on or after July 1, 1987.

Depreciable or amortizable tangible personal property, placed in service or use in West Virginia, on or after July 1, 1987, with a

useful life of four (4) or more years at the time the property is placed in service or use in this State.

Wv/bcs-Small - West Virginia Small Business Investment And Jobs Expansion Tax Credit Page 2

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