BILL REQ. #:  S-4991.4 

Read first time 02/24/10.   Referred to Committee on Ways & Means.

     AN ACT Relating to providing funding for levy equalization, state need grants, kindergarten programs, and working families' tax exemptions by increasing revenues and facilitating the funding within the state expenditure limit; amending RCW 82.08.020, 82.08.020, 82.08.0206, and 43.135.035; reenacting and amending RCW 82.08.064; creating a new section; making an appropriation; providing effective dates; providing an expiration date; and declaring an emergency.

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

NEW SECTION.  Sec. 1   The legislature finds that the economic crisis has impacted the many Washington families which do not earn enough annually to keep pace with increasing health care, child care, and work-related expenses. The legislature further finds that revenues are insufficient to maintain necessary funding for education, public safety, health care, and safety net services for elderly, disabled, and vulnerable people during the unprecedented economic crisis in the 2009-2011 fiscal biennium. Therefore, it is the intent of the legislature to provide a means to stabilize revenue collections by imposing a temporary sales and use tax. It is also the legislature's intent to provide relief to lower-income working families in Washington in the form of a sales and use tax exemption.

Sec. 2   RCW 82.08.020 and 2009 c 469 s 802 are each amended to read as follows:
     (1) There is levied and ((there shall be)) collected a tax on each retail sale in this state equal to six and five-tenths percent of the selling price.
     (2) There is levied and ((there shall be)) collected an additional tax on each retail car rental, regardless of whether the vehicle is licensed in this state, equal to five and nine-tenths percent of the selling price. The revenue collected under this subsection ((shall)) must be deposited in the multimodal transportation account created in RCW 47.66.070.
     (3) Beginning July 1, 2003, there is levied and collected an additional tax of three-tenths of one percent of the selling price on each retail sale of a motor vehicle in this state, other than retail car rentals taxed under subsection (2) of this section. The revenue collected under this subsection ((shall)) must be deposited in the multimodal transportation account created in RCW 47.66.070.
     (4) For purposes of subsection (3) of this section, "motor vehicle" has the meaning provided in RCW 46.04.320, but does not include farm tractors or farm vehicles as defined in RCW 46.04.180 and 46.04.181, off-road and nonhighway vehicles as defined in RCW 46.09.020, and snowmobiles as defined in RCW 46.10.010.
     (5) From June 1, 2010, until June 30, 2013, in addition to the tax imposed upon each retail sale in this state set forth in subsection (1) of this section, there is imposed a tax in an amount equal to three-tenths of one percent of the selling price.
     (6) Beginning on December 8, 2005, 0.16 percent of the taxes collected under subsection (1) of this section ((shall)) must be dedicated to funding comprehensive performance audits required under RCW 43.09.470. The revenue identified in this subsection ((shall)) must be deposited in the performance audits of government account created in RCW 43.09.475.
     (((6))) (7) The taxes imposed under this chapter ((shall)) apply to successive retail sales of the same property.
     (((7))) (8)(a) Until January 1, 2011, the tax imposed in subsection (3) of this section and the dedication of revenue provided for in subsection (((5))) (6) of this section((,)) do not apply with respect to the sales of new passenger cars, light duty trucks, and medium duty passenger vehicles, which utilize hybrid technology and have a United States environmental protection agency estimated highway gasoline mileage rating of at least forty miles per gallon.
     (b) As used in this subsection, "hybrid technology" means propulsion units powered by both electricity and gasoline.
     (((8))) (9) The rates provided in this section apply to taxes imposed under chapter 82.12 RCW as provided in RCW 82.12.020.

Sec. 3   RCW 82.08.020 and 2006 c 1 s 3 are each amended to read as follows:
     (1) There is levied and ((there shall be)) collected a tax on each retail sale in this state equal to six and five-tenths percent of the selling price.
     (2) There is levied and ((there shall be)) collected an additional tax on each retail car rental, regardless of whether the vehicle is licensed in this state, equal to five and nine-tenths percent of the selling price. The revenue collected under this subsection ((shall)) must be deposited in the multimodal transportation account created in RCW 47.66.070.
     (3) Beginning July 1, 2003, there is levied and collected an additional tax of three-tenths of one percent of the selling price on each retail sale of a motor vehicle in this state, other than retail car rentals taxed under subsection (2) of this section. The revenue collected under this subsection ((shall)) must be deposited in the multimodal transportation account created in RCW 47.66.070.
     (4) For purposes of subsection (3) of this section, "motor vehicle" has the meaning provided in RCW 46.04.320, but does not include farm tractors or farm vehicles as defined in RCW 46.04.180 and 46.04.181, off-road and nonhighway vehicles as defined in RCW 46.09.020, and snowmobiles as defined in RCW 46.10.010.
     (5) From June 1, 2010, until June 30, 2013, in addition to the tax imposed upon each retail sale in this state set forth in subsection (1) of this section, there is imposed a tax in an amount equal to three-tenths of one percent of the selling price.
     (6) Beginning on December 8, 2005, 0.16 percent of the taxes collected under subsection (1) of this section ((shall)) must be dedicated to funding comprehensive performance audits required under RCW 43.09.470. The revenue identified in this subsection ((shall)) must be deposited in the performance audits of government account created in RCW 43.09.475.
     (((6))) (7) The taxes imposed under this chapter ((shall)) apply to successive retail sales of the same property.
     (((7))) (8) The rates provided in this section apply to taxes imposed under chapter 82.12 RCW as provided in RCW 82.12.020.

NEW SECTION.  Sec. 4   The sum of three hundred thirteen million three hundred seven thousand dollars, which reflects the increased revenue receipts from additional taxes imposed in sections 2 and 3 of this act, is appropriated for fiscal year ending June 30, 2011, from the state general fund for deposit to the education legacy trust account. The resources provided in this act will maintain support for property-poor school districts through the state's levy equalization program, provide funding for approximately sixteen thousand students to continue to receive state-funded all-day kindergarten, and allow approximately thirty-four thousand students to attend institutions of higher education with the assistance of the state need grant.

Sec. 5   RCW 82.08.0206 and 2008 c 325 s 2 are each amended to read as follows:
     (1) A working families' tax exemption, in the form of a remittance tax due under this chapter and chapter 82.12 RCW, is provided to eligible low-income persons for sales taxes paid under this chapter after ((January 1, 2008)) June 1, 2010.
     (2) For purposes of the exemption in this section, an eligible low-income person is:
     (a) An individual, or an individual and that individual's spouse if they file a federal joint income tax return;
     (b) (([An individual who])) An individual who is eligible for, and is granted, the credit provided in ((Title)) 26 U.S.C. Sec. 32 of the federal internal revenue code; and
     (c) (([An individual who])) An individual who properly files a federal income tax return as a Washington resident, and has been a resident of the state of Washington more than one hundred eighty days of the year for which the exemption is claimed.
     (3)(a) For remittances made in ((2009 and 2010)) 2011, the working families' tax exemption for the prior year is a retail sales tax exemption equal to the greater of twenty-five dollars or five percent of the credit granted as a result of ((Title)) 26 U.S.C. Sec. 32 of the federal internal revenue code in the most recent year for which data is available ((or twenty-five dollars)), adjusted by a proportionate amount reflecting the seven months of increased tax imposed in sections 2 and 3 of this act in calendar year 2010.
     (b) For remittances made in 2012, the working families' tax exemption for the prior year is a retail sales tax exemption equal to the greater of five percent of the credit granted as a result of 26 U.S.C. Sec. 32 of the federal internal revenue code in the most recent year for which data is available or twenty-five dollars.
     (c) For ((2011)) 2013 and thereafter, the working families' tax exemption for the prior year is equal to the greater of ten percent of the credit granted as a result of ((Title)) 26 U.S.C. Sec. 32 of the federal internal revenue code in the most recent year for which data is available or fifty dollars.
     (4) For any fiscal period, the working families' tax exemption authorized under this section ((shall)) must be approved by the legislature in the state omnibus appropriations act before persons may claim the exemption during the fiscal period.
     (5) The working families' tax exemption ((shall)) must be administered as provided in this subsection.
     (a) An eligible low-income person claiming an exemption under this section must pay the tax imposed under chapters 82.08, 82.12, and 82.14 RCW in the year for which the exemption is claimed. The eligible low-income person may then apply to the department for the remittance as calculated under subsection (3) of this section.
     (b) Application ((shall)) must be made to the department in a form and manner determined by the department, ((but the)) except for the following:
     (i) The department must provide alternative filing methods for applicants who do not have access to electronic filing; and
     (ii) The department must allow joint filing for exemptions claimed under this section in 2012 and thereafter with the federal joint income tax return.
     (c) Application for the exemption remittance under this section must be made in the year following the year for which the federal return was filed, but in no case may any remittance be provided for any period before ((January 1, 2008)) June 1, 2010. The department may use the best available data to process the exemption remittance. The department ((shall)) must begin accepting applications ((October 1, 2009)) January 1, 2011.
     (d) The department ((shall)) must review the application and determine eligibility for the working families' tax exemption based on information provided by the applicant and through audit and other administrative records, including, when it deems it necessary, verification through internal revenue service data.
     (e) The department ((shall)) must remit the exempted amounts to eligible low-income persons who submitted applications. Remittances may be made by electronic funds transfer or other means.
     (f) The department may, in conjunction with other agencies or organizations, design and implement a public information campaign to inform potentially eligible persons of the existence of and requirements for this exemption.
     (g) The department may contact persons who appear to be eligible low-income persons as a result of information received from the internal revenue service under such conditions and requirements as the internal revenue service may by law require.
     (6) The provisions of chapter 82.32 RCW apply to the exemption in this section.
     (7) The department may adopt rules necessary to implement this section.
     (8) For the remittances provided in fiscal year 2015 and thereafter, the department ((shall)) must limit its ongoing costs ((for)) to administer the exemption program to ((the initial start-up costs to implement the program. The state omnibus appropriations act shall specify funding to be used for the ongoing administrative costs of the program. These ongoing administrative costs include, but are not limited to, costs for: The processing of internet and mail applications, verification of application claims, compliance and collections, additional full-time employees at the department's call center, processing warrants, updating printed materials and web information, media advertising, and support and maintenance of computer systems)) no more than five percent of the total exemptions provided each year.

Sec. 6   RCW 82.08.064 and 2003 c 361 s 304 and 2003 c 168 s 205 are each reenacted and amended to read as follows:
     (1) A sales and use tax rate change under this chapter or chapter 82.12 RCW shall be imposed (a) no sooner than seventy-five days after its enactment into law and (b) only on the first day of January, April, July, or October.
     (2) Subsection (1) of this section does not apply to the tax rate change in section 301, chapter 361, Laws of 2003 or to the tax rate changes in sections 2 and 3 of this act.
     (3)(a) A sales and use tax rate increase under this chapter or chapter 82.12 RCW imposed on services applies to the first billing period starting on or after the effective date of the increase.
     (b) A sales and use tax rate decrease under this chapter or chapter 82.12 RCW imposed on services applies to bills rendered on or after the effective date of the decrease.
     (c) For the purposes of this subsection (3), "services" means retail services such as installing and constructing and retail services such as telecommunications, but does not include services such as tattooing.

Sec. 7   RCW 43.135.035 and 2010 c ... (ESSB 6130 as amended by the House) s 2 are each amended to read as follows:
     (1) After July 1, 2011, any action or combination of actions by the legislature that raises taxes may be taken only if approved by a two-thirds vote of each house of the legislature, and then only if state expenditures in any fiscal year, including the new revenue, will not exceed the state expenditure limits established under this chapter. Pursuant to the referendum power set forth in Article II, section 1(b) of the state Constitution, tax increases may be referred to the voters for their approval or rejection at an election.
     (2)(a) If the legislative action under subsection (1) of this section will result in expenditures in excess of the state expenditure limit, then the action of the legislature ((shall)) may not take effect until approved by a vote of the people at a November general election. The state expenditure limit committee ((shall)) must adjust the state expenditure limit by the amount of additional revenue approved by the voters under this section. This adjustment ((shall)) may not exceed the amount of revenue generated by the legislative action during the first full fiscal year in which it is in effect. The state expenditure limit ((shall)) must be adjusted downward upon expiration or repeal of the legislative action.
     (b) The ballot title for any vote of the people required under this section ((shall)) must be substantially as follows:

     "Shall taxes be imposed on . . . . . . . in order to allow a spending increase above last year's authorized spending adjusted for personal income growth?"

     (3)(a) The state expenditure limit may be exceeded upon declaration of an emergency for a period not to exceed twenty-four months by a law approved by a two-thirds vote of each house of the legislature and signed by the governor. The law ((shall)) must set forth the nature of the emergency, which is limited to natural disasters that require immediate government action to alleviate human suffering and provide humanitarian assistance. The state expenditure limit may be exceeded for no more than twenty-four months following the declaration of the emergency and only for the purposes contained in the emergency declaration.
     (b) Additional taxes required for an emergency under this section may be imposed only until thirty days following the next general election, unless an extension is approved at that general election. The additional taxes ((shall)) expire upon expiration of the declaration of emergency. The legislature ((shall)) may not impose additional taxes for emergency purposes under this subsection unless funds in the education construction fund have been exhausted.
     (c) The state or any political subdivision of the state ((shall)) may not impose any tax on intangible property listed in RCW 84.36.070 as that statute exists on January 1, 1993.
     (4) If the cost of any state program or function is shifted from the state general fund to another source of funding, or if moneys are transferred from the state general fund to another fund or account, the state expenditure limit committee, acting pursuant to RCW 43.135.025(5), ((shall)) must lower the state expenditure limit to reflect the shift. For the purposes of this section, a transfer of money from the state general fund to another fund or account includes any state legislative action taken that has the effect of reducing revenues from a particular source, where such revenues would otherwise be deposited into the state general fund, while increasing the revenues from that particular source to another state or local government account. This subsection does not apply to: (a) The dedication or use of lottery revenues under RCW 67.70.240(3), in support of education or education expenditures; ((or)) (b) a transfer of moneys to, or an expenditure from, the budget stabilization account; or (c) the deposit of funds to the education legacy trust account under section 4 of this act or the appropriation of those funds.
     (5) If the cost of any state program or function and the ongoing revenue necessary to fund the program or function are shifted to the state general fund on or after January 1, 2007, the state expenditure limit committee, acting pursuant to RCW 43.135.025(5), ((shall)) must increase the state expenditure limit to reflect the shift unless the shifted revenue had previously been shifted from the general fund.
     (6) For the purposes of chapter 1, Laws of 2008, "raises taxes" means any action or combination of actions by the legislature that increases state tax revenue deposited in any fund, budget, or account, regardless of whether the revenues are deposited into the general fund.

NEW SECTION.  Sec. 8   Section 2 of this act expires January 1, 2011.

NEW SECTION.  Sec. 9   Section 3 of this act takes effect January 1, 2011.

NEW SECTION.  Sec. 10   Except for section 3 of this act, 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 June 1, 2010.