BILL REQ. #:  S-0894.1 

Read first time 02/09/11.   Referred to Committee on Economic Development, Trade & Innovation.

     AN ACT Relating to tax credits for economic development for eligible business projects in rural counties; amending RCW 82.62.010, 82.62.020, and 82.62.030; providing an effective date; and declaring an emergency.

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

Sec. 1   RCW 82.62.010 and 2010 1st sp.s. c 16 s 11 are each amended to read as follows:
     Unless the context clearly requires otherwise, the definitions in this section apply throughout this chapter.
     (1) "Applicant" means a person applying for a tax credit under this chapter.
     (2) "Department" means the department of revenue.
     (3) "Eligible area" means a "rural county" as defined in RCW 82.14.370.
     (4)(a) "Eligible business project" means manufacturing or research and development activities which are conducted by an applicant in an eligible area at a specific facility, provided either:
     (i) The applicant's average qualified employment positions at the specific facility will be at least fifteen percent greater in the four consecutive full calendar quarters after the calendar quarter during which the first qualified employment position is filled ((than the applicant's average qualified employment positions at the same facility in the four consecutive full calendar quarters immediately preceding the calendar quarter during which the first qualified employment position is filled));
     (ii) The applicant has made an investment in new equipment exempt under RCW 82.08.02565 or 82.12.02565 of at least one million dollars after July 1, 2011; or
     (iii) The applicant has expended at least fifty thousand dollars in employee skill training after July 1, 2011. Expenditures for which a credit is claimed under RCW 82.04.449 may not be included in calculating whether the fifty thousand dollar threshold has been met.
     (b) "Eligible business project" does not include any portion of a business project undertaken by a light and power business as defined in RCW 82.16.010 or that portion of a business project creating qualified full-time employment positions outside an eligible area.
     (5) "Employee skill training" means training at, or certified by, a qualified training institution as defined by RCW 28B.67.010 or formal on the job training as authorized by the federal workforce investment act, P.L. 105-220, or its successor.
     (6) "First qualified employment position" means the first qualified employment position filled for which a credit under this chapter is sought.
     (((6))) (7) "Manufacturing" means the same as defined in RCW 82.04.120. "Manufacturing" also includes:
     (a) Before July 1, 2010: (i) Computer programming, the production of computer software, and other computer-related services, but only when the computer programming, production of computer software, or other computer-related services are performed by a manufacturer as defined in RCW 82.04.110 and contribute to the production of a new, different, or useful substance or article of tangible personal property for sale; and (ii) the activities performed by research and development laboratories and commercial testing laboratories; and
     (b) Beginning July 1, 2010, the activities performed by research and development laboratories and commercial testing laboratories.
     (((7))) (8) "Person" has the meaning given in RCW 82.04.030.
     (((8))) (9)(a)(i) "Qualified employment position" means a permanent full-time employee employed in the eligible business project during four consecutive full calendar quarters.
     (ii) For seasonal employers, "qualified employment position" also includes the equivalent of a full-time employee in work hours for four consecutive full calendar quarters.
     (b) For purposes of this subsection, "full time" means a normal work week of at least thirty-five hours.
     (c) Once a permanent, full-time employee has been employed, a position does not cease to be a qualified employment position solely due to periods in which the position goes vacant, as long as:
     (i) The cumulative period of any vacancies in that position is not more than one hundred twenty days in the four-quarter period; and
     (ii) During a vacancy, the employer is training or actively recruiting a replacement permanent, full-time employee for the position.
     (((9))) (10) "Recipient" means a person receiving tax credits under this chapter.
     (((10))) (11) "Research and development" means the development, refinement, testing, marketing, and commercialization of a product, service, or process before commercial sales have begun, but only when such activities are intended to ultimately result in the production of a new, different, or useful substance or article of tangible personal property for sale. As used in this subsection, "commercial sales" excludes sales of prototypes or sales for market testing if the total gross receipts from such sales of the product, service, or process do not exceed one million dollars.
     (((11))) (12) "Seasonal employee" means an employee of a seasonal employer who works on a seasonal basis. For the purposes of this subsection and subsection (((12))) (13) of this section, "seasonal basis" means a continuous employment period of less than twelve consecutive months.
     (((12))) (13) "Seasonal employer" means a person who regularly hires more than fifty percent of its employees to work on a seasonal basis.

Sec. 2   RCW 82.62.020 and 2007 c 485 s 2 are each amended to read as follows:
     (1) Application for tax credits under this chapter must be made within ninety consecutive days after and not before:
     (a) The first qualified employment position is filled;
     (b) The investment threshold for new equipment in RCW 82.62.010(4)(a)(ii) is met; or
     (c) The expenditure threshold for employee skill training in RCW 82.62.010(4)(a)(iii) is met.
     (2) The application ((shall)) must be made to the department in a form and manner prescribed by the department.
     (3) The application ((shall)) must contain information regarding the location of the business project, the applicant's average employment, if any, at the facility for the four consecutive full calendar quarters immediately preceding the earlier of the calendar quarter during which the application required by this section is submitted to the department or the first qualified employment position is filled, estimated or actual new employment related to the project, estimated or actual wages of employees related to the project, estimated or actual costs, time schedules for completion and operation, and other information required by the department.
     (4) The department ((shall)) must prescribe a method for calculating a seasonal employer's average employment levels.
     (5) The department ((shall)) must rule on the application within sixty days.
     (6) Applicants must elect to apply for tax credits based on either hiring qualified employment positions, investing in new equipment, or spending for employee skill training and may not receive credits for more than one of these activities per application.
     (7) A person cannot apply for a credit under this chapter more than once within any four consecutive full calendar quarter period.

Sec. 3   RCW 82.62.030 and 2007 c 485 s 3 are each amended to read as follows:
     (1)(a) A person ((shall be)) is allowed a credit against the tax due under chapter 82.04 RCW as provided in this section. The credit ((shall)) equals:
     (i) Four thousand dollars for each qualified employment position with wages and benefits greater than ((forty)) fifty thousand dollars annually that is directly created in an eligible business project ((and));
     (ii) Two thousand dollars for each qualified employment position with wages and benefits less than or equal to ((forty)) fifty thousand dollars annually that is directly created in an eligible business project;
     (iii) One percent of the value of the investment in new equipment exempt under RCW 82.08.02565 or 82.12.02565 and used by the person in an eligible business project; and
     (iv) One hundred percent of the value of the expenditure in employee skill training for employees employed at an eligible business project, but no more than three thousand dollars per worker trained.
     (b) For purposes of calculating the amount of credit under (a) of this subsection with respect to qualified employment positions as defined in RCW 82.62.010(((8))) (9)(a)(ii):
     (i) In determining the number of qualified employment positions, a fractional amount is rounded down to the nearest whole number; and
     (ii) Wages and benefits for each qualified employment position shall be equal to the quotient derived by dividing: (A) The sum of the wages and benefits earned for the four consecutive full calendar quarter period for which a credit under this chapter is earned by all of the person's new seasonal employees hired during that period; by (B) the number of qualified employment positions plus any fractional amount subject to rounding as provided under (b)(i) of this subsection. For purposes of this chapter, a credit is earned for the four consecutive full calendar quarters after the calendar quarter during which the first qualified employment position is filled.
     (2) The department shall keep a running total of all credits allowed under this chapter during each fiscal year. The department shall not allow any credits which would cause the total to exceed seven million five hundred thousand dollars in any fiscal year. If all or part of an application for credit is disallowed under this subsection, the disallowed portion shall be carried over to the next fiscal year. However, the carryover into the next fiscal year is only permitted to the extent that the cap for the next fiscal year is not exceeded.
     (3) No recipient may use the tax credits to decertify a union or to displace existing jobs in any community in the state.
     (4) The credit may be used against any tax due under chapter 82.04 RCW, and may be carried over until used. No refunds may be granted for credits under this section.
     (5) The credit may not be claimed for expenditures for which a credit is claimed under RCW 82.04.449.

NEW SECTION.  Sec. 4   This act is necessary for the immediate preservation of the public peace, health, or safety, or support of the state government and its existing public institutions, and takes effect July 1, 2011.