2009 West Virginia Corporation Net Income Tax Returns and Instructions

The State and Local Tax Practice Group at Spilman Thomas & Battle, PLLC has studied the new West Virginia corporation net income/business franchise tax return due March 15, 2010, and has identified a number of problems with the forms and instructions.

We apprised the West Virginia Tax Commissioner of our concerns and the specific nature of each identified problem. We have been advised by the Department that it will soon be issuing one or more special notices regarding some of these problems and that the forms and instructions will be changed for the 2010 tax year. With the due date of this return fast approaching, we want to make you aware of two of the problems that have been identified.

- One identified problem pertains to how corporations treat distributive share from interests in partnerships (and other pass-through entities). In prior years, partnership distributive share was allocated and the corporation's proportionate share of the partnership's property, payroll and sales factors were not included in the corporation's factors. For taxable years beginning after December 31, 2008, the corporation's share of a partnership's income, gain, loss, expenses and deductions are treated like those of the corporation and subject to apportionment if the corporation or the partnership is doing business in West Virginia and in one or more other states. The corporation's proportionate share of the partnership's property, payroll and sales factors are also added to the corporation's property, payroll and sales factors. While the law has changed, the forms and instructions have not.

- A second problem identified is that for taxable years beginning after December 31, 2008, certain interest and intangible expenses paid to a related member must be added back to federal taxable income when determining West Virginia adjusted federal taxable income. The return form does not provide for these new increasing modifications. Additionally, the instructions do not discuss these add-back requirements, explain the exceptions to add back, explain when credit is allowed, or define "related member."

These are just two of the problems our practitioners have identified with the WV/CNF-120 return and instructions. The information presented in this message was compiled by Dale W. Steager, who has closely followed the evolution of combined reporting in West Virginia. For more information regarding these concerns and/or for assistance in addressing preparation of the 2009 WV/CNF return, please contact your regular Spilman attorney or one of the following members of our State and Local Tax Practice Group:

Dale W. Steager
(304) 340-1692
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Brian C. Helmick
(304) 340-3826
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David R. Croft
(304) 230-6952
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W. Eric Gadd
(304) 230-6965
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Please be aware that news update is published with the understanding that the author, publisher and distributor are not rendering legal or other professional advice on specific facts or matters, and, accordingly, assume no liability whatsoever in connection with its use.

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Spilman Thomas & Battle is a full-service law firm with more than 100 attorneys. Founded in 1864, Spilman has offices in Charleston, Morgantown and Wheeling, West Virginia; Pittsburgh, Pennsylvania; Winston-Salem, North Carolina and Roanoke, Virginia.