Read first time 01/17/14.   Referred to Committee on Finance.

     AN ACT Relating to a property tax exemption for qualified nonprofit small business incubators that assist in the creation and expansion of innovative small commercial enterprises; adding a new section to chapter 84.36 RCW; creating new sections; and providing an expiration date.

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

NEW SECTION.  Sec. 1   (1) The legislature finds that nonprofit organizations and associations engaged in the education and training of people, located in economically disadvantaged areas, who are involved in the creation and expansion of businesses with marketable products and services provide many public benefits to the people of the state of Washington. The legislature further finds that facilitating emerging businesses in their expansion creates jobs for the state. The legislature further finds that facilities owned by nonprofit organizations are not afforded the same tax treatment as facilities owned by public entities creating an unfair playing field for the nonprofit organizations. Therefore, the legislature finds that it is in the best interest of the state to provide a limited property tax exemption for the use of these facilities by certain organizations in order to be self-sustaining for their exempt purposes.
     (2) It is the specific public policy object of the legislature to provide a property tax exemption to nonprofit small business incubators that promote economic growth and jobs for Washington. The legislature categorizes this tax preference as one intended to provide tax relief for nonprofit small business incubators and to create jobs, as described in RCW 82.32.808(2) (c) and (e).
     (3) In order to obtain the necessary data to perform a review of this tax preference, the department of commerce must provide to the joint legislative audit and review committee the annual reports submitted by qualified small business incubators receiving the property tax exemption provided in this act. In addition, the committee must review the tax exemption and its actual fiscal impact on state revenues to determine if the fiscal impact to state revenues reasonably conforms to the fiscal estimate in the fiscal note for this legislation.

NEW SECTION.  Sec. 2   A new section is added to chapter 84.36 RCW to read as follows:
     (1) The real and personal property owned or used by a nonprofit organization is exempt from property taxes levied for any state or local purpose if the property is:
     (a) Located in an economically distressed area; and
     (b) Used to provide shared use of equipment and work areas and daily technical resources and daily management support services that enable small start-up and emerging businesses to become successful.
     (2) The organization or association must meet all of the additional following conditions:
     (a) The organization is organized and conducted for nonsectarian purposes;
     (b) The organization is qualified for exemption under 26 U.S.C. Sec. 501(c)(3) of the federal internal revenue code;
     (c) The organization is governed by a volunteer board of directors of at least five members;
     (d) The organization charges fair market rent to the businesses that use that organization's work areas; and
     (e) Is certified by the department of commerce as a "qualified small business incubator" under chapter 43.176 RCW that meets the requirements of this act.
     (3) Any qualified nonprofit small business incubator organization claiming the exemption under subsection (2) of this section must annually report to the department of commerce:
     (a) The number of businesses served by the nonprofit;
     (b) The estimated number of jobs created by the businesses served, in the year in which they were served;
     (c) Specific details for the businesses served, including but not limited to: The name of the business, the unified business identifier of the business, the type of business identified by the North American industry classification system, and detailed information about the business required under subsection (5)(b)(i) and (c)(i) of this section; and
     (d) Qualified small business incubators failing to report to the department of commerce are ineligible for the exemption under subsection (2) of this section. The department of commerce must compile the information provided by all qualified small business incubators and provide the joint legislative audit and review committee with the detailed data on an annual basis.
     (4) The department may revoke a small business incubator's property tax exemption under this section upon clear and convincing evidence that the qualified small business incubator is not complying with the requirements of this section. It is presumed that a small business incubator is meeting the requirements of subsection (1)(b) of this section if the incubator files the annual reports required under subsection (3) of this section and the small start-up and emerging businesses served by the incubator meet the requirements under subsection (5)(b)(ii) and (c)(ii) of this section.
     (5) The definitions in this subsection apply throughout this section unless the context clearly requires otherwise.
     (a) "Economically distressed area" means a rural county as defined in RCW 82.14.370, a county with a community empowerment zone under RCW 43.31C.020, or a community empowerment zone under RCW 43.31C.020.
     (b) "Emerging business" means a business that is:
     (i) Engaged in activities related to the development of initial product or service offerings, such as prototype development or establishment of initial production or services processes;
     (ii) Less than five years old and during the previous fiscal year had gross revenues of no more than two million dollars; or
     (iii) In a growth mode, expanding its operation or its market.
     (c) "Start-up business" means a formal business venture that:
     (i) Is involved in activities related to the development of initial product or service offerings, such as prototype development or establishment of initial production or services processes;
     (ii) Is less than three years old and during the previous fiscal year had gross revenues of no more than two million dollars; and
     (iii) Has fewer than twenty employees.

NEW SECTION.  Sec. 3   This act applies to taxes levied for collection in 2015 and thereafter.

NEW SECTION.  Sec. 4   This act expires January 1, 2023.