BILL REQ. #:  H-0088.3 

Prefiled 1/7/2003. Read first time 01/13/2003.   Referred to Committee on Trade & Economic Development.

     AN ACT Relating to authorizing a business and occupation tax credit for corporations establishing headquarters in this state; adding a new section to chapter 82.04 RCW; providing an effective date; and declaring an emergency.

BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF WASHINGTON:

NEW SECTION.  Sec. 1   A new section is added to chapter 82.04 RCW to read as follows:
     (1) Subject to the limits and provisions of this section, a credit is authorized against the tax otherwise due under this chapter for corporations establishing corporate headquarters in this state, or expanding or adding to an existing corporate headquarters.
     (2) In order to qualify for the credit, each of the following shall be satisfied:
     (a) The qualifying real property costs of the corporate headquarters establishment, expansion, or addition are at least fifty thousand dollars. "Qualifying real property costs" means:
     (i) Costs incurred in the design, preparation, and development of establishing, expanding, or adding to a corporate headquarters; and
     (ii)(A) Direct construction costs; or
     (B) With respect to leased facilities, direct lease costs during the first five years of operations for the corporate headquarters.
     (b) The headquarters establishment, expansion, or addition results in the creation of:
     (i) At least forty new jobs performing headquarters related functions and services or research and development related functions and services. These jobs must be permanent, full-time positions located in this state; and
     (ii) At least twenty of the above-referenced new jobs must be classified as headquarters staff employees.
     (c) The corporation principally conducts high-technology activities.
     (3) The amount of the credit is equal to twenty percent of the qualifying real property costs listed in subsection (2)(a) of this section.
     (4) For a headquarters establishment, expansion, or addition that meets the criteria of subsection (2) of this section, an additional credit equal to twenty percent of the cost for tangible personal property may be taken if the following conditions are met:
     (a) The personal property is:
     (i) Capitalized as personal property for federal income tax purposes; and
     (ii) Purchased for the establishment, expansion, or addition of a corporate headquarters, or for the establishment, expansion, or addition of a research and development facility which is part of the same corporate project as the headquarters establishment, addition, or expansion; and
     (iii) Used for corporate headquarters related functions and services or research and development related functions and services in this state.
     (b) The establishment, expansion, or addition of a corporate headquarters or research and development facility results in:
     (i) The creation of at least seventy-five new full-time jobs performing either:
     (A) Headquarters related functions and services; or
     (B) Research and development related functions and services.
     The jobs must have an average level of income of more than one and one-half times the per capita income of this state based on the most recent estimates of current per capita income data available from the office of financial management as of the end of the reporting period in which the jobs are filled; and
     (ii) An average income level of all the corporation's employees in this state of more than twice the per capita income in the state based on the most recent estimates of current per capita income data available from the office of financial management as of the end of the reporting period in which the jobs are filled.
     (5)(a)(i) For facilities which are constructed, the credit may only be claimed in the reporting period when the headquarters establishment, expansion, or addition, and the research and development facility establishment, expansion, or addition, in the case of corporations qualifying under subsection (4) of this section, is placed in service for federal income tax purposes. For construction projects completed in phases and placed in service for federal income tax purposes in more than one reporting period, the credit may only be claimed in the reporting period in which property that qualifies for the credit is placed in service. Credits may not be obtained for costs incurred more than three years after the reporting period in which the first property for which the credit is claimed is placed in service. The credit may not be claimed for personal property which replaces personal property for which the credit was already claimed. The department may for good cause extend the time for incurring additional costs and for claiming the credit if the project is not completed within the time period allowed by this subsection (5).
     (ii) For leased real property, the credit may only be claimed in the reporting period in which the first direct lease costs are incurred.
     (b) The staffing requirements of subsection (2)(b) of this section and, if applicable, subsection (4)(b) of this section, shall be met by the end of the second calendar year following the most recent calendar year in which the credit is claimed. The person claiming the credit shall provide documented plans to meet the staffing requirements at the time the credit is first claimed in a form and manner as required by the department. If the staffing requirements are not met within the time required by this subsection (5), the person that claimed the credits shall be liable for payment of the additional taxes represented by the amount of credits taken under this section, with interest.
     (6) Unused credit may be carried forward for ten years after the credit is claimed. Unused credit may be carried forward fifteen years after the credit is claimed if the criteria set forth in subsection (4)(b) of this section are met. No credit may be claimed in a reporting period in which the qualifying employment requirements provided in this section are not met.
     (7) For the purposes of this section, unless the context clearly requires otherwise, the following definitions apply.
     (a) "Corporate headquarters" means the facility or portion of a facility where corporate staff employees are physically employed, and where the majority of the company's financial, personnel, legal, planning, information technology, or other headquarters related functions are handled either on a regional or national basis. A corporate headquarters must be a regional corporate headquarters or a national corporate headquarters.
     (i) National corporate headquarters must be the sole corporate headquarters in the nation and handle headquarters related functions on a national basis. A national corporate headquarters is deemed to handle headquarters related functions on a national basis from this state if the corporation has a facility in this state from which the corporation engages in interstate commerce by providing goods or services for customers outside of this state in return for compensation.
     (ii) Regional corporate headquarters must be the sole corporate headquarters within the region and must handle headquarters related functions on a regional basis. For purposes of this section, "region" or "regional" means a geographic area comprised of either:
     (A) At least five states, including this state; or
     (B) Two or more states, including this state, if the entire business operations of the corporation are performed within fewer than five states.
     (b) "New job" means an employment position created in the corporation in this state at the time the new facility, expansion, or addition is initially staffed, but does not include an employment position created when an employee is transferred from an existing location in this state to the new or expanded facility. "New job" includes an employment position that is created at a temporary location in this state pending completion of the new facility, expansion, or addition.
     (c) "Full-time position" means an employment position requiring a minimum of thirty-five hours of labor per week.
     (d) "Headquarters related functions and services" means financial, personnel, administrative, legal, planning, information technology, or similar business activities.
     (e) "Headquarters staff employees" means executive, administrative, or professional employees performing headquarters related functions and services.
     (i) An "executive employee" means an employee in a full-time position in which the employee spends at least eighty percent of his or her time managing the enterprise and directing the work of at least two employees. An executive employee has the authority to hire and fire or to make recommendations related to hiring, firing, advancement, and promotion decisions, and must customarily exercise discretionary powers.
     (ii) An "administrative employee" means an employee in a full-time position who does not perform manual labor and whose employment is directly related to management policies or general headquarters operations. An administrative employee must customarily exercise discretion and independent judgment.
     (iii) A "professional employee" means an employee whose primary duty is work requiring knowledge of an advanced type in a field of science or learning. This knowledge is characterized by a prolonged course of specialized study. The work must be original and creative in nature, and the work may not be standardized over a specific period of time. The work must require consistent exercise of discretion and the employee must spend at least eighty percent of the time performing headquarters related functions and services.
     (f) "Research and development" means the same as in RCW 82.63.010.
     (g) "Research and development facility" means the same as "qualified buildings" under RCW 82.63.010.
     (h) "Direct lease costs" means cash lease payments. The term does not include any accrued, costs.
     (i) "High-technology" means "advanced computing," "advanced materials," "biotechnology," "electronic device technology," or "environmental technology" as those terms are defined in RCW 82.63.010.

NEW SECTION.  Sec. 2   This act is necessary for the immediate preservation of the public peace, health, or safety, or support of the state government and its existing public institutions, and takes effect July 1, 2003.