CPITC-1: Commercial Patent Incentives Tax Credit (Revision 2015-10)

Who files this form

Schedule CPITC-1 is for taxpayers claiming the West Virginia Commercial Patent Incentives Tax Credit. The parts you must complete depend on your claim:

• Developing patents in West Virginia for direct use in a manufacturing process or product: Complete Parts A and B.
• Using a patent in a manufacturing process or product in West Virginia: Complete Parts A and C. Part C covers patents developed in West Virginia.
• Claiming credit allocated by a pass-through entity in which you have an ownership interest: Complete Parts A and D.

What you'll need

Have the information needed for the parts that apply to your claim:

• All claims: Business name, ID number, tax-period beginning and ending dates, tax amounts before credits, and other credits applied.
• Patent development claims: Patent number, application date, assignment, classification, development locations, agreement or contractual relationship details, sale or licensing date, and royalties, license fees, or other consideration. If development also occurred outside West Virginia, you need direct development costs for West Virginia and all locations.
• Patent use claims: Patent number, owner, development locations, first sale or licensing date, first West Virginia manufacturing-use locations, and net profit attributable to the patent.
• Reinvestment calculations: The prior year's credit amount and amounts reinvested in the categories listed in Part B or C.
• Credits received from a pass-through entity: The entity's name, EIN, and assigned credit amount for Part D.
• Unused credits from prior years: Prior-year CPITC-1 amounts and records of credits used or allocated for Part E.
• Credits allocated to owners: Each owner's name, EIN or SSN, ownership percentage, and allocated credit for Part F.

Parts B, C, and D also direct claimants to the instructions for additional documentation requirements. Those instructions are not included in the supplied text.

Common mistakes

• Leaving out supporting parts: The form says credit amounts will be denied without the attached Part B, C, or D, as applicable. Prior-year unused credit amounts require a completed Part E.
• Including excluded amounts in Part B, line 2: Do not include amounts tied to activities, investments, assets, or expenditures for which the listed Industrial Expansion and Revitalization, Coal Loading Facilities, Economic Opportunity, Strategic Research and Development, Manufacturing Investment, or High-Tech Research Zone, Parks and Technology credits or incentives have been authorized, taken, or allowed.
• Reporting prior-year credits that were not established on CPITC-1: Part E states that the original credit must have been established on a CPITC-1 for the indicated tax year.
• Overlooking additional documentation: Parts B, C, and D remind claimants to consult the instructions for additional documentation requirements.

Questions people ask

What credit percentage does the form use?

Parts B and C generally use 20%. The percentage is 30% if the applicable reinvestment ratio is greater than 80%. If no qualifying prior-year credit was reinvested, or no credit schedule was completed for the prior year, the form directs you to use 20%.

What if a patent was developed partly outside West Virginia?

Part B uses a development-cost ratio: direct costs incurred in West Virginia divided by direct costs incurred in all locations. That ratio is applied to royalties, license fees, and other consideration. If development occurred only in West Virginia, the form directs you to carry line 2 directly to line 6.

Which taxes can the credit reduce?

Part A applies the available credit first against adjusted Personal Income Tax, then against adjusted Corporation Net Income Tax. Each application is limited to the smaller of the available credit and the applicable adjusted tax amount.

How does the form handle unused credit?

Part E lists unused, unallocated credits from prior years. A pass-through entity allocating remaining credit to owners completes Part F and Part A, line 12. Part A, line 13 reports the unused, unallocated balance for carryforward to subsequent years.

Official sources

• https://tax.wv.gov/Documents/TaxForms/2015/cpitc1.pdf