HOUSE BILL REPORT

E2SHB 321

BYHouse Committee on Ways & Means/Revenue (originally sponsored by Representatives Peery, Sutherland, L. Smith, Cooper, Nutley and P. King) 

Authorizing excise tax deferrals on machinery, equipment, and other personal property used in the production or casting of aluminum.

House Committe on Trade & Economic Development

Majority Report:     The substitute bill be substituted therefor and the substitute bill do pass.  (16)

     Signed by Representatives Vekich, Chair; Wineberry, Vice Chair; Amondson, Beck, Cantwell, Doty, Grant, Hargrove, Holm, McLean, McMullen, Moyer, Rasmussen, Schoon, B. Williams and J. Williams.

Minority Report:     Do not pass.  (3)

     Signed by Representatives Belcher, Braddock and Kremen.

House Staff:Stephen Hodes (786-7092)

Rereferred House Committee on Ways & Means/Revenue

Majority Report:     The second substitute bill be substituted therefor and the second substitute bill do pass.  (9)

     Signed by Representatives Appelwick, Chair; Basich, Grimm, Holland, Madsen, Schoon, Taylor, Valle and Winsley.

House Staff:    Susan Kavanaugh (786-7145)

AS PASSED HOUSE MARCH 20, 1987

BACKGROUND:

The provisions of law permitting out-of-state firms locating new facilities in Washington state to defer sales taxes on new construction were extended through June of 1988 as a result of legislation passed in the 1986 legislative session.  Under these provisions, taxes may be deferred for up to three years, with payment required over the following five years.  The sales tax deferral program covers taxes on new construction and equipment.  The sales tax on the labor utilized in investment project is not covered by the deferral permitted by these provisions.

SUMMARY:

The bill extends the definition of situations in which sales tax deferrals shall be granted to include acquisition of all new or used machinery, equipment or personal property used in the production or casting of aluminum. This is to apply to any aluminum smelter plant, and its related facilities, in operation prior to 1975, that has ceased operation or is imminent danger of ceasing operation for economic reasons.

In order to receive an excise tax deferral, consultation is required with any collective bargaining unit representing employees of the plant on the proposed operation of the plant and the terms and conditions of employment for wage and salaried employees.  A written concurrence from the bargaining unit on the decision to apply for a deferral is also required unless a concurrence waiver is granted by the Department of Trade and Economic Development.

Excise tax deferrals shall also be granted in cases of modernization projects in aluminum smelters and rolling mills involving construction, acquisition, or upgrading of equipment or machinery, including services or labor, which are commenced after the effective date of this act and which are intended to increase the operating efficiencies of existing facilities.  Plant must have been in operation prior to 1975.  As in the case of the purchase of a plant, consultation is required with any collective bargaining unit representing employees of the plant on the proposed operation of the plant and the terms and conditions of employment for wage and salaried employees.  Again, a written concurrence from the bargaining unit on the decision to apply for a deferral is required, unless the Department of Trade and Economic Development grants a concurrence waiver.

Fiscal Note:    Requested February 5, 1987.

House Committee ‑ Testified For:     (Trade & Economic Development) Representative Peery; Senator Joe Tanner;  Terry Millard, Aluminum Trades Council, Vancouver; Tom Berkholder, Vancouver Aluminum Trades Council; Richard Weddle, United Steel Workers Local 8147; Gregg Dohrn, Washington State Department of Community Development (gave description of economic problems caused in Goldendale as a consequence of the closure of the aluminum plant);  Patrick Dunn, attorney, member, Alcoa Task Force; Al Hamilton, Klickitat County Economic Development Organization and Art Anderson, City of Goldendale.

(Ways & Means/Revenue) Terry Millard, Aluminum Trades Council; Representative Kim Peery, Prime Sponsor.

House Committee - Testified Against: (Trade & Economic Development)  None presented.

(Ways & Means/Revenue)  None Presented.

House Committee - Testimony For:     (Trade & Economic Development)  It is important that people who worked in closed aluminum plants before closures be hired back rather than others.  New owners have a responsibility to community to hire existing labor. Major impacts suffered by communities with the closure of aluminum facilities. Tax deferral would not only effect a short-term solution, but would be part of plan to reopen plants and make them profitable in the long-term. Unemployment in Goldendale is above 30% since aluminum plant closure.  There is a need to buy time to permit economic diversification to take place in area.

(Ways & Means/Revenue)  Aluminum plant in Goldendale is that town's economic base.  Deferral of sales tax could help seal planned sales of closed or about to close plants in both Goldendale and Vancouver.  Deferral of sales tax on modernization will assist a plant in Spokane and possibly one in Pierce County.  Requirement that labor concur in decision to apply for deferral will help ensure that it is the laid-off workers, rather than others, who are re-hired when plants re-open as a result of the deferral.

House Committee - Testimony Against: (Trade & Economic Development)  None presented.

(Ways & Means/Revenue)  None Presented.