Economic Opportunity Tax Credit May Include Movie Theaters

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Economic Opportunity Tax Credit May Include Movie Theaters

Do you know of a new business to which people travel that emphasizes providing some pastime, diversion, entertainment, or amusement? If so, it may be eligible for a credit under the WV Economic Opportunity Tax Credit Act (?EOTCA?). Recently, the WV Supreme Court decided Fountain Place Cinema v. Morris, as State Tax Commn. of WV, involving whether a movie theater in Logan County was eligible to claim a tax credit pursuant to the EOTCA.

Main Issue: the definition of a ?destination-oriented recreation and tourism? under ? 11-13Q-19(a)(5) of the EOTCA.

In this case: A nearly $4 million, 26,000 square foot, 8-screen movie theater in Logan County applied for a tax credit under the EOTCA as a ?destination-oriented recreation and tourism? business activity.

The Litigation: The theater?s eligibility for a tax credit depended upon the (1) economy of the region, (2) availability of other recreational choices in the area, (3) cultural significance of the business or activity, (4) business?s distance from other similar businesses, and (5) amount of patronage from local or nearby customers versus customers from farther away

The Result:

  • According to the WV Supreme Court, ?destination-oriented recreation and tourism?
    • ?consists of traveling from one location to another for the purpose of amusement and/or relaxation, when such travel provides a source of income to a business entity? and
    • involves a business activity ?to which people travel that emphasizes providing some pastime, diversion, entertainment or amusement.?
  • The movie theater in this case was deemed eligible for the EOTCA tax credit.

What does this mean to you?

  • The Logan County movie theater was eligible for the tax credit due to factors such as meeting the EOTCA ?new jobs percentage? of 10%, proximity to the Hatfield-McCoy Trail System, nearly 30% of its customers travel from places outside Logan County, and about 40% are Kentucky residents and/or non-residents of the Logan area. Although not all movie theaters are eligible for a tax credit, there are many other opportunities.
  • A tax credit under the EOTCA is available to new or expanding businesses that make a qualified investment in West Virginia, resulting in the creation of at least 20 new jobs. A qualified business is one engaged in manufacturing, information processing, warehousing, non-retail goods distribution, qualified research and development, the relocation of a corporate headquarters, or destination-oriented recreation and tourism.

The form to apply for a credit under the EOTCA can be found here, 

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Steptoe & Johnson PLLC

Betsy Spellman

Chief Marketing Officer

(304) 933-8377

press@steptoe-johnson.com

Bridgeport, WV