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, 58.1-3731, and 58.1-3814 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

REVISED 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 to 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 REVISED 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

      50,001 +           $0.00079/KWH

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 CONSTIUTE 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.

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 THE LOCALITIES WILL BE BASED ON A RATIO: THE NUMERATOR WILL EQUAL THE TAX RATE IMPOSED BY THE LOCALITY PRIOR TO THE ENACTMENT OF THE BILL, 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 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 LOCALITIES.

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

SECTION 58.1-3731. CERTAIN PUBLIC SERVICE 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 June 30, 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 July 1, 1999 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.

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, 58.1-2626.1, 58.1-2604, 58.1-2606, 58.1-2628, and 58.1-3507 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 suppliers.

Patrons - Watkins, Holland, Norment and Reasor

Referred to the Committee on Finance

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

That Section Sections 58.1-401, 58.1-440, 58.1-2626.1 and 58.1-2604, 58.1-2606, 58.1-2628, and 58.1-3507 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 NECESSSARY 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 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:

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.
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.
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 above only if it is predominantly used in connection with the transmission or distribution of electricity.

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:

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;

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

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;

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;

Electing small business corporations (S corporations);

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;

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;

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

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 July 1, 1999, 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 dollar 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.--…
In the case of an electric power supplier that was subject to the tax imposed under §58.1-2626 with respect to its gross receipts received during the year commencing January 1, 1999, and on or after July 1, 1999 is subject to the corporate net income tax under §58.1-400, net income shall be computed by taking into account the following adjustments:
The allowance for depreciation, amortization and other cost recovery methods and the computation of gain or loss on the sale or other disposition with respect to all assets placed in service prior to July 1, 1999, 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 July 1, 1999. The allowance for depreciation, amortization and other cost recovery methods on assets having a Virginia Tax Basis shall be computed using the straight-line method over a period of ten years. For property placed in service on or after July 1, 1999, the Internal Revenue Service's tax rules will apply to determine tax depreciation, amortization and other cost recovery methods and tax impact of dispositions.
Add depreciation, amortization and other cost recovery methods allowable under the Internal Revenue Code for the taxable year with respect to assets having a Virginia Tax Basis.
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.

§58.1-2604. Increase in assessed valuation. - A. Except as otherwise provided in § 58.1-2608, any increase in the assessed valuation of any public service corporation property in any taxing district shall be made by application of the local assessment ratio prevailing in such taxing district for other real estate as most recently determined and published by the Department of Taxation. On January 1, 1967, one-twentieth, and on each subsequent January 1 for nineteen years an additional one-twentieth, of the assessed valuation on January 1, 1966, (reduced by forty percent of the value of the amount, if any, by which total retirements since January 1, 1966, exceed total additions since that date), shall be assessed by application of the local assessment ratio as provided above, and the remainder shall continue to be assessed by application of the forty percent assessment ratio as heretofore administered. Thereafter the whole shall be assessed by application of the local assessment ratio as provided above.
All public service corporation property in the process of equalization over a twenty-year period as provided in subsection A is hereby defined as a separate item of taxation and shall be identified as a separate category of property for local taxation. Such property in the process of equalization shall, for such period as provided for in subsection A, continue to be assessed at forty percent of the fair market value.
On request of any local taxing district in connection with any reassessment of property, representatives of the State Corporation Commission and the Department shall consult with representatives of the district with regard to ascertainment and equalization of values to help assure uniformity of appraisals and assessments in accordance with the provisions of this section.
The Department of Taxation shall furnish to each county, city or town in which a public service corporation's property represents twenty-five percent or more of the total assessed value of real estate in such county, city or town, the local assessment ratio to be applied within that county, city or town no later than April 1 of the year for which it is applicable.
The Department of Taxation shall furnish to each county, city or town, by April 1 of each year, a description of the manner in which the local assessment ratio applicable to the county, city or town for the year was determined. The description furnished by the Department shall include, but not be limited to, a description of the parcels used, the time period from which sales transactions were drawn, the classification applied by the Department to any parcel or transaction, and any mathematical formulas used in calculating the local assessment ratio.
With regard to this section, public service corporation's property for electric power suppliers as defined in 58.1-400.2 shall consist of only transmission and distribution property.

§ 58.12606. Local taxation of real and tangible personal property of public service corporations. - A. Notwithstanding the provisions of this section and §§ 58.1-2607 and 58.1-2690, all local taxes on the real estate and tangible personal property of public service corporations referred to in such sections shall be at the real estate rate applicable in the respective locality. Property, however, which has not been equalized as provided for in § 58.1-2604 shall continue to be assessed at forty percent of fair market value and taxed at the nominal rate applicable to public service corporation real property for the taxable year immediately preceding the year such locality assesses as provided in § 58.1-3201. If the resulting effective tax rate for such unequalized public service corporation property in any county, city or town is less than the effective tax rate applicable to other real property therein, the locality shall adjust such nominal rate to equalize the effective tax rate applicable to other real property.
The assessed valuation of any class of property taxed as tangible personal property by any county, city or town before January 1, 1966, may continue to be taxed at rates no higher than those levied on other tangible personal property on January 1, 1966. On January 1, 1967, one-twentieth, and on each subsequent January 1 for nineteen years an additional one-twentieth, of the assessed valuation of such tangible personal property on January 1, 1966, shall be taxed at the real estate rate and the remainder may continue to be taxed at a rate no higher than the rate levied on tangible personal property on January 1, 1966. After December 31, 1985, the whole shall be taxed at the full local real estate tax rate.
Notwithstanding any of the foregoing provisions, all automobiles and trucks of such corporations shall be taxed at the same rate or rates applicable to other automobiles and trucks in the respective locality.
With regard to this section, public service corporation's property for electric power suppliers as defined in 58.1-400.2 shall consist of only transmission and distribution property.
Annual report. - A. Each telegraph company and telephone company shall report annually, on April 15, to the Commission all real and tangible personal property of every description in the Commonwealth, owned, operated or used by it as of January 1 preceding, showing particularly the county, city, town or magisterial district wherein such property is located.
The report shall also show the total gross receipts for the twelve months ending December 31 next preceding and the interstate revenue, if any, attributable to the Commonwealth. Such revenue shall include all interstate revenue from business originating and terminating within the Commonwealth and a proportion of interstate revenue from all interstate business passing through, into or out of the Commonwealth.
Every corporation doing in the Commonwealth the business of furnishing water, heat, light and power, whether by means of electricity, gas or steam shall report annually, on April 15, to the Commission all real and tangible personal property of every description in the Commonwealth, belonging to it as of January 1 preceding, showing particularly, as to property owned by it, the county, city, town or magisterial district wherein such property is located. The report shall also show the total gross receipts for the twelve months ending December 31 next preceding.
Every pipeline transmission company shall report annually, on April 15, to the Department all of its real and tangible personal property of every description as of the beginning of January 1 preceding, showing particularly in what city, town or county and magisterial district therein the property is located.
The report required by subsections A and B shall be completed on forms prepared and furnished by the Commission. The Commission shall include on such forms such information as the Commission deems necessary for the property administration of this chapter.
The report required by this section shall be certified by the oath of the president or other designated official of the corporation.
Every corporation doing in the Commonwealth the business of furnishing water, heat, light and power, by means of electricity shall report annually, on April 15, to the Commission all transmission and distribution real and tangible personal property of every description in the Commonwealth, belonging to it as of January 1, preceding, showing particularly, as to property owned by it, the county, city, town or magisterial district wherein such property is located.

§58.1-3507. Certain machinery and tools segregated for local taxation only. - A. Machinery and tools, except machinery and equipment used by farm wineries as defined in §4.1-100, used in a manufacturing, mining, processing or reprocessing, radio or television broadcasting, dairy, dry cleaning or laundry business or generation of electricity shall be listed and are hereby segregated as a class of tangible personal property separate from all other classes of property and shall be subject to local taxation only. The rate of tax imposed by a county, city or town on such machinery and tools shall not exceed the rate imposed upon the general class of tangible personal property.
Machinery and tools segregated for local taxation pursuant to subsection A, other than energy conservation equipment of manufacturers, shall be valued by means of depreciated cost or a percentage or percentages of original total capitalized cost excluding capitalized interest.
C. All motor vehicles which are registered pursuant to § 46.2-600 with the Department of Motor Vehicles and owned by persons engaged in those businesses set forth in subsection A shall be taxed as tangible personal property by the county, city or town in accordance with the provisions of this chapter. All other motor vehicles and delivery equipment owned by persons engaged in those businesses set forth in subsection A shall be included in and taxed as machinery and tools.