Technical Assistance Advisory No. 88-006 Re: Application of the West Virginia Capital Company Tax Credit by a Partnership and its Partners Under Section 5E-1-8 of the West Virginia Code, a partnership must first use the capital company tax credit in the year in which the investment in a qualified capital company is made. The credit must be used against the taxes, and in the order of the taxes, set forth in Section 11­13C­5(c) through (i), inclusive, of the West Virginia Code. The credit would apply against any of those taxes enumerated in Section 11-13C-5(c) through (i) of the West Virginia Code for which the partnership is liable, and would pass through to the partners for the West Virginia personal income tax. If any credit remained after the application of the credit against the then current year's taxes for the partnership and partners, then the credit would carry back up to three years and would again, in each carryback year, be applied against the taxes set forth in Section 11-13C-5(c) through (i) of the West Virginia Code in order. The partners should file amended West Virginia personal income tax returns for each carryback year to recognize the pass through of the Section 5E-1-8 carryback. It would not be appropriate or necessary to recapture the Section 11-21-8(a) business and occupation tax credit against personal income tax taken in the carryback year. This is because Section 5E-1-8 specifies that the capital company credit must be applied after application of all credits set forth in Chapter 11 of the West Virginia Code. Thus, the business and occupation tax credit against personal income tax would be applied first. Then the capital company credit would apply to reduce the business and occupation tax (or severance tax) and to further reduce the personal income tax. After the capital company tax credit has been carried back for three years, any remaining credit may carry forward for up to 15 years in accordance with Section 5E-1-8(d) of the West Virginia Code. ________________________ Michael E. Caryl State Tax Commissioner Date: August 12, 1988