AN ACT Relating to economic development; adding a new chapter to Title 82 RCW; providing an effective date; and declaring an emergency.

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

NEW SECTION. Sec. 1. The amount of sales and use taxes payable under chapters 82.08, 82.12, and 82.14 RCW on machinery, materials, labor, and services directly utilized in a certified eligible investment project shall be deferred as provided in this chapter.

NEW SECTION. Sec. 2. Unless the context clearly requires otherwise, the definitions in this section apply throughout this chapter.

(1) "Department" means the department of revenue.

(2) "Investment project" means construction of new buildings or major improvements to existing buildings and the machinery installed in such buildings in the course of such construction or major improvements, when the buildings and machinery are used or are to be used for activities defined in RCW 82.04.120 (the definition of the term "to manufacture") or research and development directly related to such activities: PROVIDED, That an investment project undertaken by a business as defined in RCW 82.16.010(5) (an electrical utility) shall not be eligible.

(3) "Buildings" means only those structures used or to be used to house or shelter manufacturing or research and development activities. The term includes plant offices and warehouses or other facilities for the storage of raw material or finished goods when such facilities are an essential or an integral part of a manufacturing plant or research and development facility and such manufacturing plant or research and development facility is used or to be used in the business of manufacturing for sale or commercial or industrial use of an article, substance, or commodity. Where a building is used partly for manufacturing or research and development and partly for other purposes, the applicable tax deferral shall be determined by apportionment of the costs of construction under such rules as the department shall provide.

(4) "Machinery" means all industrial fixtures, equipment, and support facilities that are an integral and necessary part of a manufacturing or research and development operation.

(5) "Major improvement" means the expansion, modernization, or renovation of existing buildings wherein the costs are in excess of twenty-five percent of the true and fair value of the buildings and equipment to be improved prior to the improvement.

(6) "Taxpayer" means the taxpaying entity certified by name pursuant to section 4 of this act, its subsidiaries, and its principal owners. Ownership interest for the purpose of determining whether a corporation or a natural person is a principal owner or a subsidiary of an eligible taxpayer shall be fifty-one percent or a controlling interest as determined by the department.

NEW SECTION. Sec. 3. The department shall certify the eligibility of investment projects, in an amount not to exceed the state and local sales and use tax payable under chapters 82.08, 82.12, and 82.14 RCW on machinery, materials, labor, and services directly utilized in a certified eligible investment project paid for by a firm engaged in or to be engaged in manufacturing or research and development. Total deferrals under this chapter shall not exceed ten million dollars.

NEW SECTION. Sec. 4. Application for certification of an investment project shall be made to the department in such a form and manner as the department may prescribe, but in no case may an application be accepted after initiation of the construction of the investment project. The application shall contain information regarding the location of the investment project, the firm's average employment in the state for the prior year, estimated or actual new employment related to the project, estimated or actual costs, time schedules for completion and operation, and such other information as the department may require. The department shall rule on the application within sixty days.

NEW SECTION. Sec. 5. The department shall conduct an audit of the project upon its completion in order to determine the total amount of tax deferral. Any tax found due on nonqualifying construction or purchases shall be immediately assessed and payable. The manufacturing firm will begin paying the deferred taxes three years after the date certified by the department as the date on which the construction project has been operationally completed. The first payment shall be due on December 31st of the third calendar year after such certified date, with subsequent annual payments due on December 31st of the following four years with amounts of payment scheduled as follows:

!tp1,1 !tlPercent!sc ,1of!tt!sc ,1Deferred

!sc ,4Repaym!ttent!sc ,1Year!tcTax!tt!sc ,1Repaid

!tc1!tc10%

!tc2!tc15%

!tc3!tc20%

!tc4!tc25%

!tc5!tc30%!te

NEW SECTION. Sec. 6. The department may authorize an accelerated repayment schedule upon request of the manufacturing or research and development firm. No interest by the state of Washington shall be charged on any taxes so deferred for the period of deferral, although all other penalties and interest available to the department may be assessed and imposed for delinquent payments as are otherwise provided by law. The debt for deferred taxes shall not be extinguished by insolvency or other failure of the firm.

NEW SECTION. Sec. 7. The department may adopt such rules as it deems necessary for the administration of this chapter.

NEW SECTION. Sec. 8. Sections 1 through 7 of this act shall constitute a new chapter in Title 82 RCW.

NEW SECTION. Sec. 9. This act is necessary for the immediate preservation of the public peace, health, and safety, the support of the state government and its existing public institutions, and shall take effect July 1, 1985.