"NEW SECTION.  Sec. 1   This act shall be known and cited as the accountability for tax preferences act of 2010.

NEW SECTION.  Sec. 2   For the purposes of this act, "tax preference" has the same meaning as provided in RCW 43.136.021.

NEW SECTION.  Sec. 3   The legislature finds that properly designed and justified tax preferences may be an effective method of allocating state resources to fulfill public objectives for job, community, and economic development. However, the legislature also recognizes that tax preferences can become tools for tax avoidance or preferential treatment that puts the burden of paying for common government services and functions disproportionately on nonfavored taxpayers. Therefore, clear performance measures must be established to ensure that they are providing value to the citizens of the state and carefully evaluated before and after being enacted. The legislature finds that the tax structure works best when it is fair and equitable to everyone and the burden of proof that a tax preference is warranted is on those receiving the direct benefit of the preference. The legislature finds that tax preferences should be regularly reviewed in an open and transparent manner and require a positive action by the legislature for continuation. It is the intent of the legislature that a process be established to review and evaluate tax preferences equivalent to the review of proposed expenditures for other public benefits, services, or programs.

NEW SECTION.  Sec. 4   A new section is added to chapter 44.04 RCW to read as follows:
     (1) Any legislation that creates, modifies, or extends a tax preference should include the following provisions:
     (a) An intent statement that clearly provides the rationale and purpose for the tax preference, against which its effectiveness can be measured;
     (b) A reporting requirement for beneficiaries, if the legislature determines reporting will be necessary to evaluate the effectiveness of the tax preference;
     (c) A requirement that the grant, renewal, continuance, or benefit of any tax preference provided under this chapter is conditioned upon full compliance with any reporting requirement;
     (d) To ensure greater transparency, a requirement that the recipient of any tax preference must provide the dollar amount of the tax savings obtained as a result of the tax preference. Unless the legislature has set forth, with particularity, the justification for not providing such information, the information must be provided by the recipient (i) upon request of the legislature or department of revenue and (ii) in any report that the recipient is required to complete to obtain the tax preference; and
     (e) An expiration date that is no later than five years after the enactment of the preference.
     (2) In determining whether to create, modify, or extend a tax preference, the legislature should consider those factors contained in RCW 43.136.055, and may consider additional factors such as those recommended by the citizen commission for performance measurement of tax preferences under section 6 of this act.

Sec. 5   RCW 43.136.035 and 2006 c 197 s 3 are each amended to read as follows:
     (1) The citizen commission for performance measurement of tax preferences is created.
     (2) The commission has ((seven)) nine members as follows:
     (a) One member is the state auditor, who is a nonvoting member;
     (b) One member is the state treasurer, who is a nonvoting member;
     (c) One member is the chair of the joint legislative audit and review committee, who is a nonvoting member;
     (((c))) (d) The chair of each of the two largest caucuses of the senate and the two largest caucuses of the house of representatives ((shall)) must each appoint a member. None of these appointees may be members of the legislature; and
     (((d))) (e) The governor ((shall)) must select the ((seventh member)) eighth and ninth members, at least one of whom must be a citizen representing working families or a nonprofit organization.
     (3) Persons appointed by the caucus chairs should be individuals who ((represent a balance of perspectives and constituencies, and)) have a basic understanding of state tax policy, government operations, and public services. ((These appointees should have knowledge and expertise in performance management, fiscal analysis, strategic planning, economic development, performance assessments, or closely related fields.))
     (4) The commission ((shall)) must elect a chair from among its voting or nonvoting members. Decisions of the commission must be made using the sufficient consensus model. For the purposes of this subsection, "sufficient consensus" means the point at which the vast majority of the commission favors taking a particular action. If the commission determines that sufficient consensus cannot be reached, a vote must be taken. The commission must allow a minority report to be included with a decision of the commission, if requested by a member of the commission.
     (5) Members serve for terms of four years, with the terms expiring on June 30th on the fourth year of the term. However, in the case of the initial terms, the members appointed by the chairs of senate caucuses ((shall)) must serve four-year terms, the members appointed by the chairs of house of representatives caucuses ((shall)) must serve three-year terms, and the member appointed by the governor ((shall)) must serve a two-year term, with each of the terms expiring on June 30th of the applicable year. Appointees may be reappointed to serve more than one term.
     (6) The joint legislative audit and review committee ((shall)) must provide clerical, technical, and management personnel to the commission to serve as the commission's staff. The department of revenue ((shall)) must provide necessary support and information to the joint legislative audit and review committee.
     (7) The commission ((shall)) must meet at least once a quarter and may hold additional meetings at the call of the chair or by a majority vote of the members of the commission. The members of the commission ((shall)) must be compensated in accordance with RCW 43.03.220 and reimbursed for travel expenses in accordance with RCW 43.03.050 and 43.03.060.

NEW SECTION.  Sec. 6   A new section is added to chapter 43.136 RCW to read as follows:
     The citizen commission may recommend to the fiscal committees of the legislature additional factors that it determines may be applicable or appropriate to consider in review of tax preferences, including factors such as the following:
     (1) The positive and negative impacts of the preference on the taxpayer or taxpayers receiving the preference if the preference is continued;
     (2) The effective state tax rate of the beneficiary taxpayer or taxpayers before and after the preference;
     (3) The economic development impacts of the preference, including any demonstrated multiplier effect and demonstrated impact on jobs, wages, and benefits;
     (4) The federal income tax benefits generally available under current federal law to businesses engaged in activities comparable to the activities of the beneficiary taxpayer or taxpayers;
     (5) The availability of other tax benefits for the beneficiary taxpayers under state law and the cumulative fiscal effects of such benefits;
     (6) If the beneficiary taxpayer is a nonprofit or public institution, comparisons of those activities to private activity and if so, the comparable tax burden between the two;
     (7) A comparison of the preference with tax treatment of taxpayers engaged in similar activities in neighboring states; and
     (8) Consideration of the probable impact on overall uniformity and fairness of the tax code.

NEW SECTION.  Sec. 7   A new section is added to chapter 44.04 RCW to read as follows:
     (1) To the maximum extent possible, the legislature must evaluate existing tax preferences in the year subsequent to the year in which the tax preference is reviewed and findings or recommendations are reported by the citizen commission on the performance measurement of tax preferences.
     (2) The legislature may use the citizen commission's recommendations and review as part of its own review and analysis. Each tax preference must be considered as if it were included as an expenditure in the appropriate category of budget expenditures.

NEW SECTION.  Sec. 8   A new section is added to chapter 43.88 RCW to read as follows:
     (1) When the governor submits a budget, revenue, or policy proposal that includes a new, modified, or extended tax preference, there must be a recommended expiration date for the tax preference, a statement of the anticipated and particular beneficiaries and benefits, a recommendation of proposed methods for measurement and review of the effectiveness of such tax preference, and a recommendation of existing tax preferences that should be discontinued or modified sufficient to fully offset the costs of the new, modified, or extended tax preference during any biennium during which the new, modified, or extended tax preference is in effect.
     (2) With each budget required to be submitted by the governor pursuant to this chapter, there must also be a recommendation submitted by the governor which describes the aggregate cost and expected benefits of all proposals submitted with such budget for tax preference modification or extension, a statement of the manner in which such proposals are intended to achieve economic development and job creation, and a recommendation of the maximum amount which, in the judgment of the governor, should be expended in each future biennium in support of such proposals.

Sec. 9   RCW 43.06.400 and 1999 c 372 s 5 are each amended to read as follows:
     (1) Beginning in January 1984, and in January of every ((fourth)) second year thereafter, the department of revenue ((shall)) must submit to the legislature prior to the regular session a listing of the amount of reduction for the current and next biennium in the revenues of the state or the revenues of local government collected by the state as a result of tax exemptions. The listing ((shall)) must include an estimate of the revenue lost from the tax exemption, the purpose of the tax exemption, the persons, organizations, or parts of the population which benefit from the tax exemption, and whether or not the tax exemption conflicts with another state program. The listing ((shall)) must include but not be limited to the following revenue sources:
     (((1))) (a) Real and personal property tax exemptions under Title 84 RCW;
     (((2))) (b) Business and occupation tax exemptions, deductions, and credits under chapter 82.04 RCW;
     (((3))) (c) Retail sales and use tax exemptions under chapters 82.08, 82.12, and 82.14 RCW;
     (((4))) (d) Public utility tax exemptions and deductions under chapter 82.16 RCW;
     (((5))) (e) Food fish and shellfish tax exemptions under chapter 82.27 RCW;
     (((6))) (f) Leasehold excise tax exemptions under chapter 82.29A RCW;
     (((7))) (g) Motor vehicle and special fuel tax exemptions and refunds under chapters 82.36 and 82.38 RCW;
     (((8))) (h) Aircraft fuel tax exemptions under chapter 82.42 RCW;
     (((9))) (i) Motor vehicle excise tax exclusions under chapter 82.44 RCW; and
     (((10))) (j) Insurance premiums tax exemptions under chapter 48.14 RCW.
     (2) The department of revenue ((shall)) must prepare the listing required by this section with the assistance of any other agencies or departments as may be required.
     (3) The department of revenue ((shall)) must present the listing to the ways and means committees of each house in public hearings.
     ((Beginning in January 1984, and)) (4) Every ((four)) two years ((thereafter)) the governor is requested to review the report from the department of revenue and may submit recommendations to the legislature with respect to the repeal ((or)), modification, or extension of any tax exemption. The ways and means committees of each house and the appropriate standing committee of each house ((shall)) must hold public hearings and take appropriate action on the recommendations submitted by the governor.
     (5) As used in this section, "tax exemption" means an exemption, exclusion, or deduction from the base of a tax; a credit against a tax; a deferral of a tax; or a preferential tax rate."