BILL REQ. #:  H-3746.2 

Read first time 01/31/12.   Referred to Committee on Ways & Means.

     AN ACT Relating to strengthening the review process for tax incentives; amending RCW 43.136.055; adding a new section to chapter 43.135 RCW; adding a new section to chapter 82.04 RCW; adding a new section to chapter 82.08 RCW; adding a new section to chapter 82.12 RCW; adding a new section to chapter 84.36 RCW; adding a new section to chapter 83.100 RCW; and providing an effective date.

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

NEW SECTION.  Sec. 1   A new section is added to chapter 43.135 RCW to read as follows:
     (1) For any bill enacted by the legislature that creates a new tax preference or expands or extends an existing tax preference, the bill must include legislative intent provisions, establishing the policy goals and any related metrics that might provide context and/or data for purposes of reviewing the tax preference under chapter 43.136 RCW.
     (2) Any bill that is enacted without the legislative intent provisions required by subsection (1) of this section must be reviewed under chapter 43.136 RCW within five years of its enactment unless the bill contains an expiration date specified in the enacting legislation that is sooner than the five year review provided for in this subsection.
     (3) For the purposes of this section, "tax preference" has the same meaning as in RCW 43.136.021.

NEW SECTION.  Sec. 2   A new section is added to chapter 82.04 RCW to read as follows:
     (1) Except as provided in subsection (2) of this section, any tax preference, as defined in RCW 43.136.021, that takes effect on or after July 1, 2012, expires on the June 30th that is the tenth June 30th subsequent to the effective date of the tax preference.
     (2) Subsection (1) of this section does not apply to any tax preference:
     (a) Enacted with a separate expiration date; or
     (b) Specifically exempted from the requirements of (a) of this subsection.

NEW SECTION.  Sec. 3   A new section is added to chapter 82.08 RCW to read as follows:
     (1) Except as provided in subsection (2) of this section, any tax preference, as defined in RCW 43.136.021, that takes effect on or after July 1, 2012, expires on the June 30th that is the tenth June 30th subsequent to the effective date of the tax preference.
     (2) Subsection (1) of this section does not apply to any tax preference:
     (a) Enacted with a separate expiration date; or
     (b) Specifically exempted from the requirements of (a) of this subsection.

NEW SECTION.  Sec. 4   A new section is added to chapter 82.12 RCW to read as follows:
     (1) Except as provided in subsection (2) of this section, any tax preference, as defined in RCW 43.136.021, that takes effect on or after July 1, 2012, expires on the June 30th that is the tenth June 30th subsequent to the effective date of the tax preference.
     (2) Subsection (1) of this section does not apply to any tax preference:
     (a) Enacted with a separate expiration date; or
     (b) Specifically exempted from the requirements of (a) of this subsection.

NEW SECTION.  Sec. 5   A new section is added to chapter 84.36 RCW to read as follows:
     (1) Except as provided in subsection (2) of this section, any tax preference, as defined in RCW 43.136.021, that takes effect on or after July 1, 2012, expires on the June 30th that is the tenth June 30th subsequent to the effective date of the tax preference.
     (2) Subsection (1) of this section does not apply to any tax preference:
     (a) Enacted with a separate expiration date; or
     (b) Specifically exempted from the requirements of (a) of this subsection.

NEW SECTION.  Sec. 6   A new section is added to chapter 83.100 RCW to read as follows:
     (1) Except as provided in subsection (2) of this section, any tax preference, as defined in RCW 43.136.021, that takes effect on or after July 1, 2012, expires on the June 30th that is the tenth June 30th subsequent to the effective date of the tax preference.
     (2) Subsection (1) of this section does not apply to any tax preference:
     (a) Enacted with a separate expiration date; or
     (b) Specifically exempted from the requirements of (a) of this subsection.

Sec. 7   RCW 43.136.055 and 2011 c 335 s 3 are each amended to read as follows:
     (1) The joint legislative audit and review committee must review tax preferences according to the schedule developed under RCW 43.136.045. The committee must consider, but not be limited to, the following factors in the review as relevant to each particular tax preference:
     (a) The classes of individuals, types of organizations, or types of industries whose state tax liabilities are directly affected by the tax preference;
     (b) Public policy objectives that might provide a justification for the tax preference, including but not limited to the legislative history, any legislative intent, or the extent to which the tax preference encourages business growth or relocation into this state, promotes growth or retention of high wage jobs, or helps stabilize communities. However, when reviewing a tax preference with a specific expiration date, the committee may not conclude that the legislative intent was for the tax preference to be temporary in nature unless the legislative history or legislative intent expressly provides that it is temporary;
     (c) Evidence that the existence of the tax preference has contributed to the achievement of any of the public policy objectives;
     (d) The extent to which continuation of the tax preference might contribute to any of the public policy objectives;
     (e) The extent to which the tax preference may provide unintended benefits to an individual, organization, or industry other than those the legislature intended;
     (f) The extent to which terminating the tax preference may have negative effects on the category of taxpayers that currently benefit from the tax preference, and the extent to which resulting higher taxes may have negative effects on employment and the economy;
     (g) The feasibility of modifying the tax preference to provide for adjustment or recapture of the tax benefits of the tax preference if the objectives are not fulfilled;
     (h) Fiscal impacts of the tax preference, including past impacts and expected future impacts if it is continued. For the purposes of this subsection, "fiscal impact" includes an analysis of the general effects of the tax preference on the overall state economy, including, but not limited to, the effects of the tax preference on the consumption and expenditures of persons and businesses within the state;
     (i) The extent to which termination of the tax preference would affect the distribution of liability for payment of state taxes;
     (j) The economic impact of the tax preference compared to the economic impact of government activities funded by the tax for which the tax preference is taken at the same level of expenditure as the tax preference. For purposes of this subsection the economic impact shall be determined using the Washington input-output model as published by the office of financial management;
     (k) Consideration of similar tax preferences adopted in other states, and potential public policy benefits that might be gained by incorporating corresponding provisions in Washington.
     (2) For each tax preference, the committee must provide a recommendation as to whether the tax preference should be continued without modification, modified, scheduled for sunset review at a future date, or terminated immediately. The committee may recommend accountability standards for the future review of a tax preference.

NEW SECTION.  Sec. 8   This act takes effect July 1, 2012.