WV court ruling clarifies tax exemptions for businesses - Business, Government Legal News from throughout WV

WV court ruling clarifies tax exemptions for businesses

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A recent West Virginia Supreme Court of Appeals decision has added a bit of clarity to laws regarding a tax exemption many warehousing businesses use in the state.

The court on Sept. 25 ruled that the Brooke County Assessor and the local Circuit Court erred when it ruled that Feroleto Steel Co. Inc. was not entitled to a tax exemption for its warehouse inventory under the 1986 Freeport Amendment to the state constitution.

Feroleto, which is headquartered in Kentucky, has a warehouse in Weirton where it receives, stores and cuts to size large steel coils. The cut steel is then shipped to its five customers, all of which are out of state. Feroleto had been granted the Freeport exemption for more than a decade, but in 2010, when Feroleto applied for the exemption again, the company was denied.

According to lawyers with Spilman, Thomas & Battle PLLC, which represented Feroleto in its Supreme Court appeal, the county assessor and state tax commissioner state that since Feroleto was cutting steel, it was creating a new product, which made the tax exemption void. The company petitioned the Brooke County Circuit Court, and Judge Arthur Recht found in favor of the assessor and tax commissioner.

The company appealed to the Supreme Court, which heard oral arguments last month.

In a 5-0 decision, justices ruled the exemption did apply to the company and the county and state Tax Department were erroneous in their interpretation of the amendment.

Spilman lawyers said the Supreme Court's clear decision accomplished two things. First, it enabled Feroleto to keep its Weirton warehouse open, something the company said it might not be able to do if it suddenly had to pay taxes on the steel stored there. Second, it clarified the amendment for assessors throughout the state.

"There had been number of decisions by tax commission and orders from circuit court regarding this.  But no one had ever taken one of those decisions to the Supreme Court about what businesses get the exemption," said Michael G. Gallaway, a lawyer in Spilman's Wheeling office who argued the case in the Supreme Court.

David Croft, another Spilman lawyer, said the high court's decision "creates some consistency" for businesses, something that he said there is "a thirst for" in the state.

He said had the court ruled the other way or not considered the case at all, the inconsistency between counties' interpretations of what types of businesses are eligible would have continued, causing some businesses to leave the state and other businesses to never locate here.

"The clear provisions in the Freeport amendment is that while materials are in a warehouse you can cut it and do host of things and not lose exemption," Gallaway added. "Businesses that were here relied on that language. Then suddenly changing that really impacts business. … It gives clarity to assessors, judges and businesses who do this type of work some clarify about what they can or can't do to keep incentive."

Don Rigby, executive director of the Regional Economic Partnership in Wheeling, said other businesses in the Northern Panhandle also risked losing their Freeport exemption under the assessor's reading of the amendment. He said those businesses were closely watching the Supreme Court on this case.

"We know of one company for sure, but several others may have been also," he said.



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