1998 VA S.B. 619

SYNOPSIS:

A BILL to amend and reenact §§ 58.1-2626, 58.1-2627, 58-1-2628, 58.1-2633, 58.1-2660, 58-1-2690 and 58.1-3731 of the Code of Virginia and to amend the Code of Virginia by adding to Title 58.1 a chapter numbered 29 consisting of sections numbered 58.1-2900 and 58.1-2901, relating to electric utility taxation.

CHAPTER 19

ELECTRIC UTILITY CONSUMPTION TAX.

SECTION 58.1-2900. IMPOSITION OF TAX.

Be it enacted by the General Assembly of Virginia:

1. That §§ 58.1-2626, 58.1-2627, 58.1-2628, 58.1-2633, 58.1-2660, 58.1-2690, 58.1-3731 and 58.1-3814 of the Code of Virginia are amended and reenacted, and that the Code of Virginia is amended by adding Title 58.1 a chapter numbered 29 consisting of sections numbered 58.1-2900 and 58.1-2901, as follows:

A. THERE IS HEREBY IMPOSED, IN ADDITION TO THE LOCAL CONSUMER UTILITY TAX OF SECTION 58.1-3812 ET SEQ., A TAX ON THE CONSUMERS OF ELECTRICITY IN THE COMMONWEALTH BASED ON KILOWATT HOURS USED PER MONTH AS FOLLOWS:

     KWH PER MONTH          MAXIMUM TAX RATE

          0-2,500           $0.00161/KWH
		  
     2,501-50,000           $0.00105/KWH

           50,000 +         $0.00079/KWH

B. THE TAX AUTHORIZED BY THIS CHAPTER SHALL NOT APPLY TO MUNICIPALITIES OR DIVISIONS OR AGENCIES OF FEDERAL OR STATE GOVERNMENTS.

SECTION 58.1-2901. COLLECTION AND REMITTANCE OF TAX.

A. THE SERVICE PROVIDER SHALL COLLECT THE TAX FROM THE CONSUMER BY ADDING IT AS A SEPARATE CHARGE TO THE CONSUMER'S MONTHLY STATEMENT. UNTIL THE CONSUMER PAYS THE TAX TO SUCH PROVIDER, THE TAX SHALL CONSTITUTE A DEBT OF THE CONSUMER TO THE COMMONWEALTH COMMISSION. IF ANY CONSUMER REFUSES TO PAY THE TAX, THE SERVICE PROVIDER SHALL NOTIFY THE COMMISSION. AFTER THE CONSUMER PAYS THE TAX TO THE SERVICE PROVIDER, THE TAXES COLLECTED SHALL BE DEEMED TO BE HELD IN TRUST BY SUCH PROVIDER UNTIL REMITTED TO THE COMMISSION.

B. A SERVICE PROVIDER SHALL REMIT MONTHLY TO THE COMMISSION THE AMOUNT OF TAX PAID BILLED DURING THE PRECEDING MONTH TO BY THE SERVICE PROVIDER'S CONSUMERS, EXCEPT FOR THE PORTION WHICH REPLACES THE LOCAL LICENSE TAX REVENUES THAT WOULD HAVE BEEN COLLECTED UNDER SECTION 58.1-3731. SUCH PORTION SHALL BE REMITTED TO THE LOCALITY IN WHICH THE ELECTRICITY WAS SOLD AND SHALL BE BASED ON SUCH LOCALITY'S FEE RATE WHICH IT IMPOSES IN ACCORDANCE WITH SECTION 58.1-3731. THE AMOUNT OF TAX REMITTED TO EACH LOCALITY WILL BE BASED ON A RATIO: THE NUMERATOR WILL EQUAL THE TAX RATE IMPOSED BY THE LOCALITY PRIOR TO THE ENACTMENT OF THIS BILL (S.B. 619), USUALLY .5 PERCENT AND THE DENOMINATOR WILL BE THE TOTAL TAX RATE, AGGREGATING THE 2 PERCENT STATE RATE, THE LOCAL RATE IN EFFECT PRIOR TO THIS BILL'S ENACTMENT AND THE .01 PERCENT SCC RATE. THIS RATIO WILL THEN BE MULTIPLIED BY THE TOTAL AMOUNT OF TAX COLLECTED FROM THE CONSUMERS LOCATED IN THE LOCALITY.

C. "Service Provider" means the person who delivers electricity to the consumer.

SECTION 58.1-3731. CERTAIN PUBLIC CORPORATIONS; RATE LIMITATION.

Every county, city or town is hereby authorized to impose a license tax, in addition to any tax levied under Chapter 26 of this title, on (i) telephone and telegraph companies, (ii) water companies and (iii) GAS OR STEAM, heat, light and power companies at a rate not to exceed one-half of one percent of the gross receipt of such company accruing from sales to the ultimate consumer in such county, city or town. However, in the case of telephone companies, charges for long distance telephone calls shall not be included in gross receipts for purposes of license taxation. After December 31, 1999 the license tax authorized by this section shall not be imposed on persons carrying on the business of furnishing water, heat, light or power by means of electricity.

58.1-3814. Water or heat, light and power companies.
F. For years beginning on and after January 1, 2000 any tax imposed by a county, city or town on consumers of electricity under this section shall be based on kilowatt hours used per month. The tax shall be collected and remitted by the service provider. The term "service provider" is defined in §58.1-2901.

VIRGINIA 1998 SESSION

SENATE BILL 620

SENATE BILL NO. 620
OFFERED JANUARY 26, 1998

1998 VA S.B. 620

SYNOPSIS:

A BILL to amend and reenact Sections Section 58.1-401, 58.1-440, and 58.1-2626.1 of the Code of Virginia and to amend the Code of Virginia by adding a section sections numbered 58.1-400.2, 58.1-420.1, and 58.1-433.1 relating to taxation of wholesale electric power suppliers.

Patrons - Watkins, Holland, Norment and Reasor

Referred to the Committee on Finance

TEXT: Be it enacted by the General Assembly of Virginia:

1. That Section Sections 58.1-401, 58.1-440 and 58.1-2626.1 of the Code of Virginia are amended and reenacted, and that the Code of Virginia is amended by adding a section sections numbered 58.1-400.2, 58.1-420.1 and 58.1-433.1 as follows:

SECTION 58.1-400.2, TAXATION OF WHOLESALE ELECTRIC POWER SUPPLIERS.

A. AN INVESTOR-OWNED WHOLESALE CORPORATION THAT IS AN ELECTRIC POWER SUPPLIER SHALL BE SUBJECT TO THE TAX LEVIED PURSUANT TO SECTION 58.1-400.

B. COOPERATIVES, ASSOCIATIONS, PARTNERSHIPS, AND OTHER BUSINESS ENTITIES OTHER THAN CORPORATIONS THAT ARE ENGAGED IN SELLING WHOLESALE ELECTRIC POWER SUPPLIERS SHALL BE SUBJECT TO CORPORATE TAX AT THE RATE PROVIDED IN §58.400 BASED ON MODIFIED GROSS RECEIPTS.

C. THE FOLLOWING WORDS AND TERMS, WHEN USED IN THIS SECTION, SHALL HAVE THE FOLLOWING MEANINGS:

"MODIFIED GROSS RECEIPTS" MEANS ALL REVENUE FROM THE SALE OF WHOLESALE ELECTRIC POWER WITHIN THE COMMONWEALTH, INCLUDING THE PROPORTIONATE PART OF INTERSTATE REVENUE ATTRIBUTABLE TO SALES IN THE COMMONWEALTH, WITH THE FOLLOWING DEDUCTIONS:

1. ALL THE ORDINARY AND NECESSARY EXPENSES PAID OR INCURRED DURING THE TAXABLE YEAR IN CARRYING ON THE SALE OF WHOLESALE ELECTRIC POWER.

2. REVENUES BILLED ON BEHALF OF AN ANOTHER SUCH WHOLESALE ELECTRIC POWER SUPPLIER TO THE EXTENT SUCH REVENUES ARE LATER PAID OVER OR SETTLED WITH THAT SUPPLIER.

"ORDINARY AND NECESSARY EXPENSES PAID OR INCURRED" MEANS ORDINARY AND NECESSARY EXPENSES PAID OR INCURRED AS DEFINED IN SECTION 162 OF THE INTERNAL REVENUE CODE.

"SALE OF WHOLESALE ELECTRIC POWER" MEANS ALL SALES OTHER THAN TO THE ULTIMATE RETAIL CONSUMER.

"ELECTRIC POWER SUPPLIER" MEANS ANY CORPORATION, COOPERATIVE, PARTNERSHIP OR OTHER BUSINESS ENTITY GENERATING ELECTRIC POWER.

THE DEPARTMENT OF TAXATION SHALL MAY ADOPT REGULATIONS TO CARRY OUT THE INTENT OF THIS SECTION. BY REGULATION PRESCRIBE SUCH EXCEPTIONS TO THIS SECTION AS IT DEEMS APPROPRIATE

§58.1-420.1. Electric power suppliers; apportionment- In the case of a corporation that is an electric power supplier, the property, payroll and sales factors shall be computed in the manner set forth in §§58.1-409, 58.1-412 and 58.1-414, respectively, modified as follows:

1. The numerator of the property factor shall include all property in the Commonwealth except property that is used in connection with the transmission or distribution of electricity.

2. The numerator of the payroll factor shall include all payroll in the Commonwealth except the payroll that is incurred in connection with the transmission or distribution of electricity.

3. The numerator of the sales factor shall include all sales in the Commonwealth except the sales of transmission or distribution services whether charged on a bundled or unbundled basis.

Property shall be excluded from the numerator of the property factor pursuant to paragraph 1. above only if it is predominantly used in connection with the transmission or distribution of electricity. Property, payroll and sales shall be included in the denominator of the property factor, the payroll factor and the sales factor, respectively, even if used to produce income of the type that is exempt under Section 58.1-401.1.a.

Section 58.1-401. Exemptions and exclusions.

No tax levied pursuant to Section 58.1-400 or Section 58.1-400-1 or Section 58-1.400.2 is imposed on:

1. A public service corporation to the extent such corporation is subject to the license tax on gross receipts contained in Chapter 26 (Section 58.1-2600 et seq.) of this title;

1.a. A public service corporation on its income from the transmission or distribution of electricity.

2. Insurance companies to the extent such company is subject to the license tax on gross premiums under Chapter 25 (Section 58.1-2500 et seq.) of this title and reciprocal or interinsurance exchanges which pay a premium tax to the Commonwealth as provided by law;

3. State and national banks, banking associations and trust companies to the extent such companies are subject to the bank franchise tax on net capital:

3a. Credit unions organized and conducted as such under the laws of the Commonwealth or under the laws of the United States:

4. Electing small business corporations (S corporations):

5. Religious, educational, benevolent and other corporations not organized or conducted for pecuniary profit which by reason of their purposes or activities are exempt from income tax under the laws of the United States, except those organizations which have unrelated business income or other taxable income under such laws;

6. Telephone companies chartered in the Commonwealth which are exclusively a local mutual association and are not designated to accumulate profits for the benefit of, or to pay dividends to, the stockholders or members thereof;

7. A corporation that has contracted with a commercial printer for printing and that is not otherwise taxable shall not become taxable by reason of: (i) the ownership or leasing by that corporation of tangible personal property located at the Virginia premises of the commercial printer and used solely in connection with the printing contract with such person; (ii) the sale by that corporation at another location of property of any kind printed at and shipped or distributed from the Virginia premises of the commercial printer; (iii) the activities in connection with the printing contract with such person of any kind performed by or on behalf of that corporation at the Virginia premises of the commercial printer; and (iv) the activities in connection with the printing contract with such person performed by the commercial printer for or on behalf of that corporation; and

8. Foreign sales corporations (FSC) and any income attributable to an FSC under the rules relating to the taxation of an FSC in part III, Subpart C of the Internal Revenue Code (Section 921 et seq.) and the regulations thereunder.

§58.1-433.1. The Virginia Coal Employment and Production Incentive Tax Credit. For tax years beginning on or after January 1, 2000, every corporation in the Commonwealth doing the business of furnishing water, heat, light or power to the Commonwealth or its citizens, whether by means of electricity, gas or steam, shall be allowed additional credit against the tax imposed by §58,1-400 in the following amount: three dollars per ton for each ton of coal purchased by such corporation provided such coal was mined in Virginia as certified by such seller. The credit shall be prorated equally against the corporation's estimated payments made in September and December and the final payment.

§58.1-440. Accounting.-

G. In the case of an electric service provider that was subject to the tax imposed under §58.1-2626 with respect to its gross receipts received during the year commencing January 1, 2000, net income shall be computed by taking into account the following adjustments:

1. The allowance for depreciation and the computation of gain or loss on the sale or other disposition with respect to all assets placed in service prior to January 1, 2000, shall be made with reference to the "Virginia Tax Basis" of such assets. For purposes of this section, the "Virginia Tax Basis" means the adjusted basis of such assets as recorded on the company's books of account on January 1, 2000. The allowance for depreciation on assets having a Virginia Tax Basis shall be computed using the straight-line method over a period of ten years. In the case of assets acquired on or after January 1, 2000, the basis of which is determined in whole or in part with reference to assets having a Virginia Tax Basis, the allowance for depreciation and the computation of gain or loss on the sale or other disposition of such assets shall be computed with respect to the portion of such basis relating to assets with a Virginia Tax Basis as if such assets were acquired prior to January 1, 2000. The allowance for depreciation and the computation of gain or loss on the sale or other disposition of such assets computed with respect to the portion of such basis relating to assets acquired on or after January 1, 2000, shall be computed as if the assets were placed in service by the electric service provider on or after January 1, 2000.

2. Add depreciation allowable under the Internal Revenue Code for the taxable year with respect to assets having a Virginia Tax Basis.

3. Deduct any gain, and add any loss, recognized under the Internal Revenue Code for the taxable year with respect to the sale or other disposition of assets having a Virginia Tax Basis.

This paragraph G shall be applied in accordance with the taxpayer's method of accounting for its assets, including recording such assets within mass asset accounts, regularly kept in the ordinary course of business.