AN ACT Relating to sales and use tax deferrals for industrial energy conservation projects conducted by persons under valid agreement with the United States Bonneville Power Administration to participate in its industrial energy conservation-modernization program, which projects are commenced prior to December 31, 1988; adding a new chapter to Title 82 RCW; 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 generally that declining prices for aluminum and increasing costs for electric energy are threatening the competitive position of Washington producers of aluminum in the world aluminum market. The legislature recognizes the substantial contribution of these producers to the economy of the state and, therefore, declares it the public policy of the state to direct financial resources of this state toward promotion of more cost-efficient production of aluminum by encouraging producers to modernize their smelters in order to conserve electric energy.

It is further declared that this encouragement should be offered through provision of sales and use tax deferrals as provided in this chapter for those producers of aluminum who are modernizing their smelters pursuant to a valid agreement with the United States Bonneville Power Administration as a participant in its industrial energy conservation-modernization program. Tax deferrals permitted under this chapter are declared to be in the public interest.

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

(1) "Applicant" means a person applying for a tax deferral under this chapter.

(2) "Person" has the meaning given in RCW 82.04.030.

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

(4) "Conservation project" means construction and/or acquisition of equipment and/or machinery, including services and labor, intended to increase energy efficiency by a person pursuant to a valid agreement with the United States Bonneville Power Administration as a participant in its industrial energy conservation-modernization program.

(5) "Equipment and machinery" means all new industrial fixtures, equipment, and support facilities that are an integral and necessary part of an industrial or manufacturing process or operation. "Equipment and machinery" includes computers; software; data processing equipment; laboratory equipment; manufacturing components such as belts, pulleys, shafts, and moving parts; molds, tools, and dies; operating structures; and all equipment used to control or operate the machinery. For purposes of this definition, new machinery and equipment means either new to the taxing jurisdiction of the state or new to the certificate holder. Used machinery and equipment are eligible for deferral if the certificate holder either brings the machinery and equipment into Washington or makes a retail purchase of the machinery and equipment in Washington or elsewhere.

(6) "Recipient" means a person receiving a tax deferral under this chapter.

(7) "Certificate holder" means an applicant to whom a tax deferral certificate has been issued.

(8) "Operationally complete" means constructed or improved to the point of being functionally useable for the intended purpose.

(9) "Initiation of construction" means the date upon which on-site construction or improvement commences.

(10) "Manufacturing" means all activities of a commercial or industrial nature wherein labor or skill is applied, by hand or machinery, to material so that as a result thereof a new, different, or useful substance or article of tangible personal property is produced for sale or commercial or industrial use and shall include the production or fabrication of specially made or custom-made articles. "Manufacturing" also includes computer programming, the production of computer software, and other computer-related services.

(11) "Valid agreement with the United States Bonneville Power Administration as a participant in its industrial energy conservation-modernization program" means the contract or agreement between a Washington producer of aluminum and the United States Bonneville Power Administration under which the producer modifies its aluminum smelter to improve its energy efficiency and thereby enables the producer to sell electric energy back to the United States Bonneville Power Administration.

NEW SECTION. Sec. 3. Application for deferral of taxes under this chapter shall be made before initiation of the construction of the conservation project or acquisition of machinery and equipment. The application shall be made to the department in a form and manner prescribed by the department. The application shall contain information regarding the location of the proposed conservation project, estimated or actual costs, time schedules for completion and operation, and other information required by the department. The department shall rule on the application within sixty days. A certificate holder shall initiate construction of the conservation project within one hundred eighty days of receiving approval from the department and issuance of the tax deferral certificate.

NEW SECTION. Sec. 4. A tax deferral certificate shall be issued only to persons who, on the effective date of this act, will engage in a conservation project pursuant to a valid agreement with the United States Bonneville Power Administration as a participant in its industrial energy conservation-modernization program. Any person who has succeeded by merger, consolidation, incorporation, or any other form or change of identity to the business of a person engaged in such a conservation project on the effective date of this act shall also be eligible to receive a tax deferral certificate.

NEW SECTION. Sec. 5. The department shall issue a sales and use tax deferral certificate for state and local sales and use taxes due under chapters 82.08, 82.12, and 82.14 RCW on each eligible conservation project. The use of the certificate shall be governed by rules established by the department.

NEW SECTION. Sec. 6. (1) The recipient shall begin paying the deferred taxes in the third year after the date certified by the department as the date on which the conservation project is operationally complete. The first payment will 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:

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!tj1!tcTax!sc ,1Repaid

!tc1!tc10%

!tc2!tc15%

!tc3!tc20%

!tc4!tc25%

!tc5!tc30%

(2) The department may authorize an accelerated repayment schedule upon request of the recipient.

(3) Interest shall not be charged on any taxes deferred under this chapter for the period of deferral, although all other penalties and interest applicable to delinquent excise taxes may be assessed and imposed for delinquent payments under this chapter. The debt for deferred taxes is not extinguished by insolvency or other failure of the recipient.

NEW SECTION. Sec. 7. The department and the department of trade and economic development shall jointly report to the legislature about the effects of this chapter on conservation projects in this state. The report shall contain information concerning the number of deferral certificates granted, the amount of sales tax deferred, and other information useful in measuring such effects. Reports shall be submitted by January 1, 1987, by January 1, 1988, and by January 1, 1989.

NEW SECTION. Sec. 8. Chapter 82.32 RCW applies to the administration of this chapter.

NEW SECTION. Sec. 9. Sections 3 and 4 of this act shall expire on July 1, 1988.

NEW SECTION. Sec. 10. Sections 1 through 9 of this act shall constitute a new chapter in Title 82 RCW.

NEW SECTION. Sec. 11. 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 immediately.