Tax Type
Corporation Income Tax
Description
Coalfield Employment Enhancement Tax Credit
Topic
Credits
Date Issued
09-04-1997
September 4, 1997
Re: Ruling Request: Corporate Income Tax
Dear***********
This is in reply to your letter which asks for a ruling on the application of the Coalfield Employment Enhancement Tax Credit to the coal mining operations of ****** (the "Taxpayer”).
FACTS
The Taxpayer presents two different scenarios. In the first scenario, the Taxpayer operates an underground mine in Virginia. It anticipates that the mine will cross over into an adjoining state. The coal that is located in the adjoining state will be belted through to the mine mouth in Virginia where it will be portalled to the surface.
In the second scenario, the Taxpayer operates two separate mining operations, one in a Virginia locality, one in an adjoining state. It expects to eventually interconnect these operations. Once these mines are interconnected, the Taxpayer proposes to belt coal mined in the adjoining state's mine through the Virginia mine and portal it through the Virginia drift mouth. Because the terrain is so mountainous, the belt carrying the coal will periodically surface in the adjoining state. However, it will go back underground and the coal will ultimately be portalled in Virginia.
The Coalfield Employment Enhancement Tax Credit applies to coal mined in Virginia. The Taxpayer requests rulings on whether its operations constitute mining in Virginia.
RULING
Code of Virginia § 58.1-439.2, copy enclosed, states that the Coalfield Employment Enhancement Tax Credit (the "Credit") is available to "... any person who has an economic interest in coal mined in Commonwealth...." Virginia Tax Bulletin 97-1, copy enclosed, provides that coal is mined in the Commonwealth"... if the portal through which the coal is brought to the surface is located in Virginia." Coal is brought to the surface when it permanently exits the earth.
Scenario One
In the first scenario, the coal is being mined in an adjoining state, but it is brought to the surface in Virginia. The physical location of the portal where the coal reaches the surface determines where it is mined, not the physical location of the coal being removed. Therefore, the coal is mined in Virginia and qualifies for the credit.
Scenario Two
The second 'scenario is more complex. In this situation, the coal surfaces in the adjoining state while on the conveyor belt before reentering the earth and being brought to the surface in Virginia. The determinative question is whether coal surfacing in an adjoining state is considered the portal from which the coal is brought to the surface.
It is my opinion that "the portal through which the coal is brought to the surface" is the mine opening from which the coal is permanently removed from the ground. If coal leaves the earth while being transported, it has not been brought to the surface for the purposes of the credit provided that it reenters the earth. In the instant case, the coal temporarily surfaces in an adjoining state before reentering the earth. It is permanently removed from the earth in Virginia. Therefore, in this scenario, the coal is mined in Virginia and qualifies for the credit.
I trust this will answer the question posed in your letter, however, please contact ********at*****if you need additional assistance.
Sincerely,
Danny M. Payne
Tax Commissioner
OTP/12827B
Rulings of the Tax Commissioner