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Schedule CPITC-1
InstructIons for commercIal patent IncentIves tax credIt
(for perIods after January 1, 2015)
**the following information, instructions, and forms are not a substitute for tax laws and regulations.**

the purpose of the Commercial patent incentives tax a. a corporation established under the laws of this state
Credits is to encourage greater development and use in this that meet the requirements of section three, article
state of commercial intellectual properties by West Virginia twelve, chapter eighteen-b of this code; or
businesses and thereby increase economic opportunity in B. a center for economic development and technological
West Virginia. advancement created pursuant to section three, article
a Commercial patent incentives tax Credit is available for twelve-a, chapter eighteen-b of this code.
the following: “Business activity” means all activities engaged in or
caused to be engaged in by a person with the object of
• the development, in West Virginia, of plant gain or economic benefit, direct or indirect. For purposes
patent, design patent, or patents for direct use in a of this definition, the term “gain or economic benefit, direct
manufacturing process or product. or indirect” does not include income realized by any person
in the form of wages, salary or income that is reported on
• the use of a patent in a manufacturing process
federal form W-2.
or product in West Virginia when the patent was
developed in West Virginia. “Commercial use” means selling, licensing, leasing or
available Commercial patent incentives tax Credit may otherwise making patents available to a third party for
be applied against tax liability attributable to the personal a price, fee, royalty, commission or other consideration
income tax (WV Code §11-21 et seq.), or Corporation net called by whatever name. “Commercial use” also means,
income tax (WV Code §11-24 et seq.). no Commercial in the case of patents developed by the developer for
patent incentives tax Credit is allowed for any activity, the developer’s own commercial use, the first use of the
investment, assets, or expenditures for which any of the tax patents in a manufacturing or other business activity of the
credits in the following statutes has been authorized, taken developer. “Commercial use” does not include any selling,
or allowed: licensing, leasing or otherwise making patents available to
a third party when done by a broker or by any person who
• W. Va. Code §11-13D et seq. (industrial expansion
does not own the patent sold, licensed, leased or otherwise
and revitalization Credit)
made available.
• W. Va. Code §11-13e et seq. (Coal Loading Facilities
Credit) “Copyright” means a copyright that is registered with the
United States Copyright Office or with a similar office of a
• W. Va. Code §11-13Q et seq. (economic Opportunity
foreign country when the foreign copyright is recognized
tax Credit)
under federal law.
• W. Va. Code §11-13r et seq. (strategic research and
Development tax Credit) “Development of a patent,” “developing patents” or
“development” means the act of inventing or discovering
• W. Va. Code §11-13s et seq. (manufacturing
any new and useful process, machine, article of
investment tax Credit)
manufacture, or composition of matter, or any new and
• W. Va. Code §11-13x et seq. (Film industry investment useful improvement thereto through significant investment
tax Credit) of money, performance of research, or application of design
also, no Commercial patent incentives tax Credit is allowed or engineering expertise, which culminates in the issuance
for any activity, investment, assets, or expenditures for of a patent, as defined in West Virginia Code §11-13AA et
which any tax credit authorized under W.Va. Code §18B-13 seq.
et seq. has been taken or allowed.
“Developer” means a person engaged in this state in
the Commercial patent incentives tax Credit is available developing patents for direct use in a manufacturing process
for tax years beginning on or after January 1, 2011. or product and who has an agreement, as defined in West
Virginia Code §11-13aa et seq., with marshall University or
West Virginia University.
Commercial Patent Incentives Tax Credit Definitions

“agreement” means any agreement or contractual Directly used in manufacturing process or product, “and
relationship entered into after January 1, 2011 between a “direct use in manufacturing process or product” with
person developing patents in this state and either: reference to patents means application or incorporation

West Virginia state tax Department
CpitC-1 instructions — rev. 10/15 page 1 of 5

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of a patented process, machine, article of manufacture             and which is treated as a partnership for federal income tax 
or composition  of matter, in manufacturing  operations  or        purposes for the taxable year.
processes, or in manufactured products, in circumstances 
where United  states or foreign patent laws require  that          “pass-through entity” means a partnership, limited liability 
the  specific  patent  for  the  process,  machine,  article  of   company, small  business  corporation  (s corporation)  or 
manufacture or  composition of  matter  be owned by                other entity treated as a partnership for federal income tax 
the  manufacturer,  or  purchased, leased, licensed or             purposes for the taxable year.
authorized by  contract  to  be applied or  incorporated in 
the manufacturing operation, processes or product, and             “patent” means a United states patent issued pursuant to 
where such lawful ownership, purchase, lease, licensure or         35 U.s.C. §101, et seq. or the patent Cooperation treaty 
contractual authorization is in effect.                            done  at Washington, on June 19, 1970  and is limited  to 
                                                                   plant patents, design patents and patents developed in this 
“Manufacturing” means any business activity classified as          state for direct use in a manufacturing process or product, or 
having a sector identifier, consisting of the first two digits of  both developed for use and directly used in a manufacturing 
the six-digit North American Industry Classification System        process or product in this state.  For purposes of this article, 
code number of thirty-one, thirty-two or thirty-three.             patents do not include copyrights, trademarks, mask works, 
                                                                   trade secrets or any intellectual property that is not a patent.
“mask work” means a series of related  images, however 
fixed or encoded:                                                  “person” includes a natural person, corporation, limited 
                                                                   liability company or partnership.  a single member liability 
a. Having  or representing  the predetermined,  three-             company that is treated as a disregarded entity for federal 
dimensional  pattern of metallic, insulating  or                   income tax purposes is be treated as a disregarded entity 
semiconductor material present or removed from the                 for purposes of this article.
layers of a semiconductor chip product; and
B. in which series the relation of the images to one another       “purchase” means a transaction under  which  title to an 
is that each image has the pattern of the surface of one           item is transferred for consideration, or a license or lease 
form of the semiconductor chip product.                            contract for at least three years is executed, regardless of 
                                                                   whether title to the item is transferred at the end of the lease 
“Net  profits”  means  West  Virginia  taxable  income  as         or license period.
determined for purposes of West Virginia Code §11-24  et 
seq. before application of this credit and after application of 
                                                                   “taxpayer” means any person subject to the tax imposed 
all credits allowable under Chapter 11 of the West Virginia 
                                                                   by article twenty-three or twenty-four of Chapter 11 of the 
Code except this credit.  in the case of taxpayers that are 
                                                                   West Virginia Code or to both taxes.  in the case of a sole 
not subject to the tax imposed by article twenty-four, “net 
                                                                   proprietorship that is not subject to either the tax imposed 
profits” means West Virginia taxable income as determined 
                                                                   by article twenty-three or twenty-four, the term “taxpayer” 
for purposes of article twenty-one of Chapter 11 of the West 
                                                                   means a natural person who owns a disregarded entity and 
Virginia  Code,  before  application  of this credit and  after 
                                                                   who is subject to the tax imposed by article twenty-one of 
application  of  all credits allowable  under this Chapter 11 
                                                                   Chapter 11 on his or her income from business activity in 
except this credit.  In circumstances where net profit is not 
                                                                   this state, or any sole proprietor who is subject to the tax 
solely attributable to and the exclusive result of the direct 
                                                                   imposed by article twenty-one.
use of a patent in a manufacturing process or product in 
this  state,  the  taxpayer  shall  determine  net  profit  solely 
attributable  to and  the exclusive  result of the direct use      “trademark” means any trademark, trade name, service 
of a patent in a manufacturing process or product in this          mark or other identifying symbol or name that is registered 
state, and net profit for purposes of determining the amount       with  the  United  States  Patent  and  Trademark  Office  or 
of credit allowable under this article shall be the net profit     with a similar office of a foreign country when the foreign 
solely attributable to and the exclusive result of the direct      registration is recognized under federal law.
use of a patent in a manufacturing process or product in 
this state.                                                         “trade secret” means information, including  a formula, 
                                                                   pattern, compilation, program device, method, technique or 
 “Owner”, when used in reference to a pass-through entity,         process, that:
means a person who owns an equity interest in the pass-
through entity.                                                    a. Derives independent economic value, actual or 
                                                                   potential, from not being generally  known to,  and 
“partnership” includes a syndicate, group, pool, joint venture     not being readily ascertainable by proper means, by 
or other unincorporated organization through or by means           other persons who can obtain economic value from its 
of  which  any  business,  financial  operation  or  venture  is   disclosure or use; and
carried on, which is not a sole proprietorship, trust or estate, 
West Virginia state tax Department
CpitC-1 instructions — rev. 10/15                                                                               page 2 of 5

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B. is the subject of efforts that are reasonable under the line 4 enter any Commercial patent incentives tax
circumstances to maintain its secrecy. Credit earned or allocated in a previous year that
was not used or allocated from the total on part
cpItc-1 Instructions e. amounts not supported by completed part e
information will be denied.
taxpayers desiring to claim the Commercial patent
incentives tax Credit for Developing patents in West Virginia line 5 add the amounts on lines 1 through 4. this is the
for Direct Use in a manufacturing process or product must total Commercial patent incentives tax Credit
complete parts a and B of schedule WV/CpitC-1. no credit available to you for the current tax period.
is allowed for patents developed before January 1, 2011. For
purposes of the tax credit, a patent was developed for direct
use in a manufacturing process or product before January line 6 adjusted personal income tax. Compute the
1, 2011, if it was sold, leased or licensed to a third party amount of personal income tax against which
prior to January 1, 2011, or before January 1, 2011 it was the Commercial patent incentives tax Credit can
reduced to practice for purely commercial purposes by the be applied by subtracting any other tax credit
developer or a person related to the developer, as defined amounts applied from the personal income tax
in subsection (b) section 267 of the internal revenue Code as calculated before application of the other tax
of 1986, as amended. credits. if the adjusted personal income tax is
less than zero, enter $0.
taxpayers desiring to claim the Commercial patent
incentives tax Credit for Use of a patent in a manufacturing line 7 Compute the Commercial patent incentives
process or product in West Virginia must complete parts tax Credit for application against the personal
a and C of schedule WV/CpitC-1. no credit is allowed income tax as the smaller of the amount on Line
for using a patent in West Virginia when the person began 5 and the amount on Line 6c.
using the patent before January 1, 2011. no credit is allowed
for any patent acquired from, by or between, leased from,
by or between, licensed from, by or between, or otherwise line 8 Compute the remaining Commercial patent
authorized to be used from by or between related person, incentives tax Credit by subtracting the amount
as defined in subsection (b) Section 267 of the Internal on Line 7 from the amount on Line 5.

revenue Code of 1986, as amended. adjusted Corporation net income tax. Compute
line 9
the amount of Corporation net income tax against
an owner taxpayer desiring to claim Commercial patent which the Commercial patent incentives tax
incentives tax Credit allocated by a pass-through entity Credit can be applied by subtracting any other tax
subsidiary must complete parts a and D of schedule WV/ credit amounts applied from the Corporation net
CpitC-1. income tax as calculated before application of
the other tax credits. if the adjusted Corporation
cpItc-1 part a - commercial patent Incentives tax net income tax is less than zero, enter $0.
credit summary
line 1 enter the total Commercial patent incentives tax line 10 Compute the Commercial patent incentives tax
Credit for Developing patents in West Virginia for Credit for application against the Corporation net
Direct Use in a manufacturing process or product income tax as the smaller of the amount on Line
as shown on part B Line 9. a completed part B 8 and the amount on Line 9c.
must be attached for each qualifying patent.
amounts not supported by completed part B line 11 Compute the remaining Commercial patent
information will be denied. incentives tax Credit by subtracting the amount
on Line 10 from the amount on Line 8.
line 2 enter the total Commercial patent incentives tax
Credit for Use of a patent in a manufacturing if you are a pass-through entity and any of the
line 12
process or product in West Virginia as shown amount on Line 11 is to be allocated to the owners
on part C Line 5. amounts not supported by of the pass-through entity complete part F and
completed part C information will be denied. enter the total amount of credit to be allocated.
line 3 enter the amount of Commercial patent incentives
tax Credit as shown in part D, allocated to you as line 13 enter the amount of unused, unallocated
an owner of a pass-through entity that earned Commercial patent incentives tax Credit for
the credit. a completed part D must be attached. carry forward to subsequent years. subtract the
amounts not supported by completed part D amount on Line 12 from the amount on Line 11.
information will be denied.

West Virginia state tax Department
CpitC-1 instructions — rev. 10/15 page 3 of 5

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cpItc-1 part B line 2 Enter the net profit attributable to the use of the
patent described on Line 1.
commercial patent Incentives tax credit for
developing patents in West virginia for direct use in a line 3 Compute the portion of previous tax year
manufacturing process or product Commercial patent incentives tax Credit for Use
line 1 enter the indicated information for the patent of a patent in a manufacturing process or product
developed in West Virginia for which the in West Virginia that was reinvested in the current
Commercial patent incentives tax Credit for tax year.

Developing patents in West Virginia for Direct enter the credit percentage.
line 4
Use in a manufacturing process or product
is to be claimed. (a separate part B must be line 5 Compute the amount of Commercial patent
completed for each patent for which credit is to incentives tax Credit for Use of a patent in a
be claimed). manufacturing process or product in West Virginia
for the current year by multiplying the amount on
line 2 enter the total amount of royalties, license fees, or Line 2 by the decimal value on line 4. also, enter
other consideration from sale, lease or licensing the value on part a Line 2.
of the patent described on Line 1.
cpItc-1 part d – commercial patent Incentives tax
line 3 enter the direct costs of developing the
credit from
patent described on Line 1 that were
pass-through entity.
incurred in West Virginia.
Enter the name and Employer Identification Number (EIN)
line 4 enter the direct costs of developing the patent of the pass-through entity and the amount of Commercial
described on Line 1 that were incurred at all patent incentives tax Credit allocated to you as an owner
locations. of the pass-through entity. the pass-through entity
line 5 Compute the West Virginia development cost must establish original entitlement to Commercial patent
ratio by dividing the amount on Line 3 by the Incentives Tax Credit through the filing of their own form
amount on Line 4. WV/CpitC-1.

line 6 Compute the West Virginia allocation of patent enter the total of credit allocated on part a Line 3.
royalties, license fees, and other consideration by
multiplying the amount on Line 1 by the decimal cpItc-1 part e – unused commercial patent
value from Line 5. Incentives tax credit from prior years.

line 7 Compute the portion of previous tax year Unused credit may be carried forward until the earlier of the
Commercial patent incentives tax Credit for tax year when the credit is used up or the ninth consecutive
Developing patents in West Virginia for Direct tax year after the first tax year in which the taxpayer is
Use in a manufacturing process or product that eligible to claim the credit.
was reinvested in the current tax year.
Complete the table in part e to determine the amount of any
line 8 enter the credit percentage. prior year credit that is unused in the current tax year.
line 9 Compute the amount of Commercial patent
enter the total on part a Line 4.
incentives tax Credit for Developing patents in
West Virginia for Direct Use in a manufacturing Wv/cpItc-1 part f – unused commercial patent
process or product for the current tax year by Incentives tax credit allocation to owners.
multiplying the amount on Line 6 by the decimal
value from Line 8. also enter the amount on part When the taxpayer that earns original entitlement to
a Line 1. Commercial patent incentives tax Credit is a pass-through
entity, any credit unused to offset the tax liability of the pass-
cpItc-1 part c – commercial patent Incentives tax through entity is to be allocated to the owners of the pass-
credit for use of a patent in a manufacturing process through entity in the same manner that distributive share
or product in West virginia flows through to the equity owners.
line 1 enter the indicated information for the patent Enter the name, identification number (EIN/SSN), ownership
used in a manufacturing process or product in percentage, and amount of unused credit allocated for each
West Virginia for which the tax credit is to be equity owner.
claimed. (a separate part C must be completed
for each patent for which credit is to be claimed). enter the total allocated credit on part a Line 12.

West Virginia state tax Department
CpitC-1 instructions — rev. 10/15 page 4 of 5

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required records 1. each and every item of depreciable property purchased
every developer of a patent in this state for direct use in for purposes of claiming the enhanced credit;
a manufacturing process or product and every person 2. The date the depreciable property identified in
who uses a patent directly in a manufacturing process or subdivision (1) of this subsection was purchased, its
product in this state who claims a credit under this article cost and its estimated useful life determined using
shall maintain sufficient records to establish the following straight-line method of depreciation;
facts for each item of a patent for which a credit is allowed 3. The date the depreciable property identified in
under this article: subdivision (1) of this subsection was placed in service
1. its identity; or used in the person’s business activity in this state;
2. The amount of net profit attributable to the patent; 4. The date the depreciable property identified in
subdivision (1) of this subsection was taken out of
3. the month and taxable year in which the patent was service or use in the person’s business activity in this
first used, placed in service or directly used in the state and the reason why the property was taken out
person’s manufacturing process or product in this of service or use; and
state;
5. Other information that the tax Commissioner may
4. the amount of credit taken; and reasonably require by rule promulgated as provided in
5. the date the patent was disposed of or otherwise section eleven of this article.
ceased to be directly used in the person’s manufacturing New jobs. -- every person who claims a Commercial patent
process or product in this state. Incentives Tax credit shall also maintain sufficient records to
establish the number and types of new jobs, if any created,
Enhanced credit. -- any person who claims the enhanced the wages and benefits paid to employees filling the new
credit for reinvestment of prior year tax credit shall maintain jobs and the duration of each job.
sufficient records to clearly establish entitlement to claim
the amount of the enhanced credit. at a minimum those Exception. – the records requirements section do not apply
records shall identify: to an owner of a pass-through entity that develops or uses
a patent for which a credit is earned.

West Virginia state tax Department
CpitC-1 instructions — rev. 10/15 page 5 of 5

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