HB1043: Coal; tax credits for production and use.

HOUSE BILL NO. 1043
Offered January 11, 2006
Prefiled January 11, 2006
A BILL to amend and reenact §§ 58.1-433.1 and 58.1-439.2 of the Code of Virginia, relating to tax credits for the production and use of coal.
Patron-- Kilgore

Referred to Committee on Finance

Be it enacted by the General Assembly of Virginia:

1.  That §§ 58.1-433.1 and 58.1-439.2 of the Code of Virginia are amended and reenacted as follows:

§ 58.1-433.1. Virginia Coal Employment and Production Incentive Tax Credit.

A. For taxable years beginning on and after January 1, 2001, every electricity generator in the Commonwealth shall be allowed a three-dollar-per-ton credit against the tax imposed by § 58.1-400 or § 58.1-400.2 for each ton of coal purchased and consumed by such electricity generator, provided such coal was mined in Virginia as certified by such seller. Notwithstanding any other provision of law, no electricity generator shall be allowed more than a three-dollar-per-ton coal tax credit and shall be subject to all limitations set forth in § 58.1-400.2. In no event shall the credit allowed hereunder exceed the total amount of tax liability of such taxpayer. Any tax credit not usable for the taxable year may be carried over to the extent usable for the next five 10 succeeding taxable years or until the full credit is utilized, whichever is sooner. For the purposes of the credit provided by this section, "electricity generator" means any person who produces electricity for self-consumption or for sale. However, a cogenerator, as defined in § 58.1-2600, shall not be allowed to claim the credit provided by this section and the credit provided by § 58.1-433 on the same ton of coal.

B. For each such ton of coal described in subsection A that is purchased on or after January 1, 2006, from any person with an economic interest in coal as defined under § 58.1-439.2, the $3-dollar-per-ton credit allowed under subsection A shall be allocated between such electricity generator and such person with an economic interest in coal. The allocation of the $3-dollar-per-ton credit shall be provided in the contract between such parties for the sale of such coal. Such allocation may be amended by the execution of a written instrument by the parties prior to December 31 of the year of purchase of such coal. Such contracts and written instruments shall be subject to audit by the Department of Taxation to ensure the proper application of credits.

If no allocation is provided in the contract, the $3-per-ton credit for each such ton of coal shall be allocated equally amongst such parties. In no case shall the credit allocated for each such ton of coal amongst such electricity generators and such persons with an economic interest in coal exceed $3 per ton.

All credit allocated to persons with an economic interest in coal as provided under this subsection may be used as tax credit by such persons against the tax imposed by § 58.1-400 and any other tax imposed by the Commonwealth. If the credit exceeds the state tax liability of such person with an economic interest in coal, the excess shall be redeemable by the Tax Commissioner as set forth in subsection D of § 58.1-439.2.

§ 58.1-439.2. Coalfield employment enhancement tax credit.

A. For tax years beginning on and after January 1, 1996, but before January 1, 2008 2015, any person who has an economic interest in coal mined in the Commonwealth shall be allowed a credit against the tax imposed by § 58.1-400 and any other tax imposed by the Commonwealth in accordance with the following:

1. For coal mined by underground methods, the credit amount shall be based on the seam thickness as follows:


 Seam Thickness                            Credit per Ton
 36" and under                              $2.00
 Above 36"                                  $1.00

The seam thickness shall be based on the weighted average isopach mapping of actual coal thickness by mine as certified by a professional engineer. Copies of such certification shall be maintained by the person qualifying for the credit under this section for a period of three years after the credit is applied for and received and shall be available for inspection by the Department of Taxation. The Department of Mines, Minerals and Energy is hereby authorized to audit all information upon which the isopach mapping is based.

2. For coal mined by surface mining methods, a credit in the amount of forty cents per ton for coal sold in 1996, and each year thereafter.

B. In addition to the credit allowed in subsection A, for tax years beginning on and after January 1, 1996, any person who is a producer of coalbed methane shall be allowed a credit in the amount of one cent per million BTUs of coalbed methane produced in the Commonwealth against the tax imposed by § 58.1-400 and any other tax imposed by the Commonwealth on such person.

C. For purposes of this section, economic interest is the same as the economic ownership interest required by § 611 of the Internal Revenue Code which was in effect on December 31, 1977. A party who only receives an arm's length royalty shall not be considered as having an economic interest in coal mined in the Commonwealth.

D. If the credit exceeds the person's state tax liability for the tax year, the excess shall be redeemable by the Tax Commissioner on behalf of the Commonwealth for ninety percent of the face value within ninety days after filing the return; however, for credit earned in tax years beginning on and after January 1, 2002, such excess shall be redeemable by the Tax Commissioner on behalf of the Commonwealth for eighty-five percent of the face value within ninety days after filing the return. The remaining ten or fifteen percent of the value of the credit being redeemed, as applicable for such tax year, shall be deposited by the Commissioner in a regional economic development fund administered by the Coalfields Economic Development Authority to be used for regional economic diversification in accordance with guidelines developed by the Coalfields Economic Development Authority and the Virginia Economic Development Partnership.

E. No person may utilize more than one of the credits on a given ton of coal described in subsection A. No person may claim a credit pursuant to this section for any ton of coal for which a credit has been claimed under §§ 58.1-433, 58.1-433.1 or § 58.1-2626.1. Persons who qualify for the credit may not apply such credit to their tax returns prior to January 1, 1999, and only one year of credits shall be allowed annually beginning in 1999.

F. The amount of credit allowed pursuant to subsection A shall be the amount of credit earned multiplied by the person's employment factor. The person's employment factor shall be the percentage obtained by dividing the total number of coal mining jobs of the person filing the return, including the jobs of the contract operators of such person, as reflected in the annual tonnage reports filed with the Department of Mines, Minerals and Energy for the year in which the credit was earned by the total number of coal mining jobs of such persons or operators as reflected in the annual tonnage reports for the year immediately prior to the year in which the credit was earned. In no case shall the credit claimed exceed that amount set forth in subsection A.

G. The tax credit allowed under this section shall be claimed according to the following schedule:

1. 50% of the credit allowed in tax year 1996 shall be claimed in tax year 1999 and the remainder in tax year 2005.

2. 50% of the credit allowed in tax year 1997 shall be claimed in tax year 2000 and the remainder in tax year 2006.

3. 75% of the credit allowed in tax year 1998 shall be claimed in tax year 2001 and the remainder in tax year 2007.

4. 75% of the credit allowed in tax year 1999 shall be claimed in tax year 2002 and the remainder in tax year 2008.

5. 100% of the credit allowed in tax year 2000 shall be claimed in tax year 2003.

6. 100% of the credit allowed in tax year 2001 shall be claimed in tax year 2004.

7. 100% of the credit allowed in tax year 2002 shall be claimed in tax year 2005.

8. 100% of the credit allowed in tax year 2003 shall be claimed in tax year 2006.

9. 100% of the credit allowed in tax year 2004 shall be claimed in tax year 2007.

10. 100% of the credit allowed in tax year 2005 shall be claimed in tax year 2008.

11. 100% of the credit allowed in tax year 2006 shall be claimed in tax year 2009.

12. 100% of the credit allowed in tax year 2007 shall be claimed in tax year 2010.

13. 100% of the credit allowed in tax year 2008 shall be claimed in tax year 2011.

14. 100% of the credit allowed in tax year 2009 shall be claimed in tax year 2012.

15. 100% of the credit allowed in tax year 2010 shall be claimed in tax year 2013.

16. 100% of the credit allowed in tax year 2011 shall be claimed in tax year 2014.

17. 100% of the credit allowed in tax year 2012 shall be claimed in tax year 2015.

18. 100% of the credit allowed in tax year 2013 shall be claimed in tax year 2016.

19. 100% of the credit allowed in tax year 2014 shall be claimed in tax year 2017.

2. That the provisions of this act amending subsection A of § 58.1-433.1 shall be applicable to any tax credit allowed under such section for coal purchased and consumed on or after January 1, 2001.