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SB 131

Creating credit against severance tax for certain infrastructure improvements

2026 Regular Session Introduced by Trenton Barnhart and 2 co-sponsors

West Virginia SB 131 creates a 50% severance tax credit for eligible road/highway and coal/natural gas facility investments, capped at $100,000 per project.

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Bill Summary · SB 131

Summary of SB 131 (2026) — West Virginia

Purpose and intent

SB 131 creates a new tax credit designed to encourage private investment in two areas:
1) road and highway infrastructure improvements, and
2) coal or natural gas production and processing facilities.
The overarching aim is to spur private capital for public-facing infrastructure and for energy sector development, thereby supporting economic growth in coal and natural gas regions.

Key provisions and changes

  • Credit type and scope: Establishes a credit against severance taxes (the tax on coal and natural gas production) for eligible expenditures on road/highway infrastructure projects and on coal/natural gas production and processing facilities.
  • Credit amount: The credit equals 50% of the sum of eligible expenditures for road/highway projects plus qualified investment in coal/natural gas facilities.
  • Credit cap and duration:
    • Each certified project may receive a maximum credit of $100,000, regardless of total project cost.
    • Unused credits can be carried forward for up to nine additional taxable years (no carryback).
    • Unused credits eventually expire after the 10th year if not used.
  • Applicability of credit:
    • The credit can be used to offset up to 20% of a taxpayer’s annual severance tax liability.
    • For road/highway infrastructure improvements, the credit may be claimed in the year the project is completed (as certified by the Transportation Secretary).
    • For coal/natural gas facilities, the credit may be claimed in the year the property is placed in service or use.
    • Annual credit allowance is taken ratably over 12 months on monthly severance tax returns.
  • Application and certification process:
    • Taxpayers must apply for certification of a project before beginning construction.
    • Applications must include detailed project descriptions, engineering drawings, contractor lists, project timetable, cost itemization, and the requested credit amount.
    • The Transportation Secretary reviews and certifies eligible projects; total credits for a certified project are limited to $100,000.
  • Definitions and scope:
    • Specifies terms such as “eligible taxpayer,” “road or highway infrastructure improvement,” and various definitions related to corporations, partnerships, and related persons.
    • Includes examples of eligible expenditures (labor, materials, real property donated to the state, equipment, and related improvements).
  • Qualified investments and depreciation:
    • Sets an applicable percentage for the deduction based on the useful life of the property (ranging from 0% for certain cases to 100% for longer-lived property, with specific brackets).
    • Provides rules for cost calculations (e.g., limits on including trade-ins, leases, and self-constructed property costs).
  • Transferability and succession:
    • Credits can be transferred to successors, including in cases of changes in form of business or sale of stock/assets, enabling continued use by the successor business.
  • Forfeiture and redetermination:
    • If the project ceases to be used in the eligible business or is disposed of before the end of its useful life, the unused credit portion is forfeited.
    • The taxpayer must redetermine and potentially repay taxes with interest/penalties for earlier years if forfeiture occurs.
  • Recordkeeping and compliance:
    • Taxpayers must maintain detailed records identifying each qualified property, its cost, depreciation life, placement in service date, and credit taken.
    • Failure to maintain records results in treating the property as disposed of, with potential adjustments.
  • Effective date: Credits are available for tax years beginning on or after January 1, 2027.

Affected parties

  • Taxpayers subject to West Virginia severance taxes (coal and natural gas producers and processors) who undertake qualifying road/highway infrastructure projects or coal/natural gas facilities.
  • The Transportation Secretary and the State Tax Division (Tax Commissioner) for certification, administration, and auditing of credits.
  • Potential implications for affiliated groups that file consolidated severance tax returns.

Procedural and timeline notes

  • Introduced January 14, 2026; committee substitute reported January 30, 2026.
  • Effective for tax years starting January 1, 2027.
  • Requires pre-project certification before incurring qualified expenditures.

Compiled from official sources — confirm details with the bill’s official record.

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