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110CSR21G

W. Va. Code §11-21-3a authorizes an electing pass-through entity (“electing PTE”) to make an annual election to pay an elective income tax at the entity level, at a rate equal to the top marginal personal income tax rate on individuals. A nonrefundable income tax credit, subject to a 5-year carryforward, is authorized for owners of the electing PTE for West Virginia income tax paid by the electing PTE. The electing PTE tax is payable in addition to any other taxes imposed on the entity, including sales and use taxes, withholding taxes with respect to employees, property tax, and other local or municipal taxes.

110-21G-4. Owner's Reconciliation Tax Credit for Tax Paid at the Entity Level.

4.1. Owner’s reconciliation tax credit -- Subject to the requirements and limitations of W. Va. Code §11-21-3a the owner of an electing PTE may apply a reconciliation tax credit against the owner’s personal income tax liability under W. Va. Code §11-21-1 et seq., in the amount of the owner’s proportionate share of the tax paid under W. Va. Code §11-21-1 et seq., by the electing PTE for the taxable year.

4.1.1. An owner of an electing PTE may claim a reconciliation tax credit against the owner's West Virginia individual income tax or fiduciary income tax.

4.1.2. A trust (other than a trust that is disregarded for income tax purposes) that is an owner of an electing Subchapter S corporation may claim the reconciliation tax credit that it receives on its fiduciary income tax return or distribute any portion of the reconciliation tax credit to its beneficiaries as may be appropriate: Provided, That no credit may be claimed by both a trust and a beneficiary of the trust.

4.2. Timing -- The reconciliation tax credit for tax paid by the electing PTE may only be claimed in the taxable year for which the tax was paid by the electing PTE. If the reconciliation tax credit exceeds the owner’s tax liability for the taxable year, the excess credit may be carried forward by the owner for not more than five consecutive tax years.

4.2.1. Eligible taxpayers must wait until the electing PTE makes the election and pays the tax at the entity level before claiming the reconciliation tax credit.

4.2.2. If the electing PTE does not make the election and pay the tax until after the due date for the owner’s return, the owner may (1) make any necessary extension payments and file the return during the extension period, or (2) file the original return without claiming the credit and then file an amended tax return once the election has been made and the tax paid by the electing PTE.

4.3. Resident owners’ tax credit for tax paid to another state -- Subject to the requirements and limitations of W. Va. Code §11-21-20, individual resident owners of the electing PTE may claim a credit for income taxes paid by the electing PTE to other states for the same taxable year under laws substantially similar to the West Virginia pass-through entity income tax, or directly paid by a West Virginia resident pass-through entity owner, on pass-through income taxed by another state, that is also subject to West Virginia personal income tax, which would be taxed by both the other state and the State of West Virginia but for the W. Va. Code §11-21-20 tax credit. Any such credit may also be included as a credit against the PTE tax liability as determined by such individual resident owner's includable income in any PTE tax liability pursuant to Section 7.2.1 to the extent paid on behalf of such owner through non-resident withholding, a composite return, or a similar PTE tax in such other state.

110-21G-5. Making the Election.