S-54                  _______________________________________________

                                                   SENATE BILL NO. 3382

                        _______________________________________________

State of Washington                              49th Legislature                              1985 Regular Session

By Senators Fleming and Lee

Read first time 1/28/85 and referred to Committee on Ways and Means.

AN ACT Relating to excise taxes; and adding a new section to chapter 82.04 RCW.

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

NEW SECTION. Sec. 1.  There is added to chapter 82.04 RCW a new section to read as follows:

          (1) Partnerships and sole proprietorships shall be allowed a credit for taxes payable under this chapter in an amount not to exceed the amount by which the taxes paid under this chapter for the previous calendar year exceeded the net profit earned in Washington by the partnership or sole proprietorship during the previous calendar year that is attributable to activities taxable under this chapter.  The maximum credit allowable is the amount of taxes paid under this chapter for the previous calendar year.

          For the purposes of this subsection, "net profit earned in Washington" shall be based:

          (a) For sole proprietorships, on the figure reported to the Internal Revenue Service for net profit or loss for the previous calendar year by the proprietorship on Schedule C, Form 1040, "Profit (Or Loss) From Business or Profession", as redesignated or amended.

          (b) For partnerships, on the figure reported to the Internal Revenue Service for total partnership income or loss for the previous calendar year by the partnership on Schedule E, Part 2, Form 1040, "Supplemental Income Schedule", as redesignated or amended.

          (2) Corporations initially formed within the ten years preceding the current calendar year shall be allowed a credit for taxes payable under this chapter in an amount not to exceed the amount by which the taxes paid under this chapter for the previous calendar year exceeded the net profit earned in Washington by the corporation during the previous calendar year that is attributable to activities taxable under this chapter.  The maximum credit allowable is the amount of taxes paid under this chapter for the previous calendar year.

          For the purposes of this subsection, "net profit earned in Washington" shall be based on the figure reported to the Internal Revenue Service for net profit or loss for the previous calendar year by the corporation on Schedule ...., Form ...., .......... , as redesignated or amended.

          (3) If the reported figure reflects net income, profit, or loss attributable to activities not taxable under this chapter, the net income, profit, or loss shall be adjusted using the allocation formula in RCW 82.56.010, in accordance with the rules of the department, to determine the portion allocable to activities taxable in Washington under this chapter.

          (4) The department shall prescribe by rule the procedure to be followed and information required to be submitted to obtain a credit under this section.  If the department so requires, claimants shall submit copies of their federal income tax forms as filed with the Internal Revenue Service, and as thereafter amended, in support of their claims.

          (5) No credit claimed under this  section may be  deducted on any return until the claimed amount has been approved by the department.