Va. Code art. 11-13C, sets forth the rules for determining the amount of qualified investment created by the lease or purchase of natural resources in place for purposes of business expansion. Section 11-13C-6(c)(7) reads as follows: (7) Natural resources in place. - In the case of natural resources in place, the property must be capable of sustained production for a period of at least ten years. If this qualification is met, then the qualified investment is one hundred percent of the purchase price of the natural resource in place that is attributable to ten years of production, but not more than twenty years of production. If such price is not quantifiable at the time the mining operation is placed into production, cost shall be determined annually and shall be the amount of royalties actually paid to the owner of the natural resource in place during each year for a total period of ten years. The amount of such royalties multiplied by the taxpayer's new jobs percentage (determined at the time the mining operation is placed in service or use) divided by ten establishes the credit allowable each year for ten successive years beginning with the year in which the royalties were paid. In all circumstances, it is necessary that qualified investment be made in "property purchased or leased for business expansion" as defined in Section 11-13C-3(b)(19) of the West Virginia Code. That Section, in relevant part, and with relation to leased real property reads as follows: (19) Property purchased or leased for business expansion. (A) Included property. -- Except as provided in subparagraph (B), the term "property purchased or leased for business expansion" means real property and improvements thereto, and tangible personal property, but only if such real or personal property was constructed, purchased, or leased and placed in service or use by the taxpayer, for use as a component part of a new or expanded business facility, as defined in this section, which is located within West Virginia. This terms includes only: .

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. (2) Real property and improvements thereto, or tangible personal property acquired by written lease having a primary term of ten or more years and placed in service or use by the taxpayer on or after the first day of March, one thousand nine hundred eighty-five. (Emphasis added.) .

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. It is essential that property be purchased or leased for business expansion before any investment in that property will qualify for the business investment and jobs expansion tax credit. W.

Va. Code §

11-13C-6(a). Consequently, Section 11-13C-6(c)(7), has no application when the lease of natural resources in place has a primary lease term of less than ten years. Therefore, unless a lease of natural resources in place is for a primary term of at least ten (10) years, the leased property is excluded from treatment as "property purchased or leased for business expansion," see W. Va. Code §

11-13C-3(b)(19), and there is no qualified investment in such property under W. Va. Code §

11-13C-6(a). Additionally, even when the primary term of the lease is for ten (10) or more years, there in no qualified investment for purposes of W. Va. Code §

11-13C-6(a) unless the leased property is capable of sustained production for a period of at least ten (10) years. W. Va. Code §

11-13C-6(c)(7). This application of the relationship between subsection 11-13C-6(a) and subsection 11-13C-6(c)(7) of the West Virginia Code shall be applied from the date of this Technical Assistance Advisory as provided in W.

Va. Code §

11-10-5r(c) (requiring modification of an advisory to be prospective). Any business investment and jobs expansion tax credit project certified prior to the date of this Technical Assistance Advisory and under the terms of former Technical Assistance Advisory No. 88-009 shall remain in effect as then approved under the terms of Technical Assistance Advisory No. 88-009 for mineral property leases, provided the project plan was implemented prior to August

15, 1989. Any nonproject business investment and jobs expansion tax credit investment in natural resource property which was placed in service or use prior to August

15, 1989 and which includes investment in natural resource property which qualifies for credit in accordance with the terms of Technical Assistance Advisory No. 88-009 shall be entitled to the treatment set forth in Technical Assistance Advisory No. 88-009 for leases of that natural resource property. Any taxpayer claiming to be grandfathered under the former advisory who believes he is adversely affected by today's advisory should promptly seek further guidance from this Office. Charles O. Lorensen, State Tax Commissioner, disqualified himself from participating in this matter under Rule 11.1 of the Code of Professional Conduct. Authority to decide this matter was delegated to Dale W. Steager, General Counsel. _________________________________ Dale W. Steager, General Counsel West Virginia Department of Tax and Revenue Date: August 22, 1989