H-4252

AN ACT Relating to tax exemptions for eligible investment projects; adding a new chapter to Title 82 RCW; repealing RCW 82.60.010, 82.60.020, 82.60.030, 82.60.040, 82.60.050, 82.60.060, 82.60.065, 82.60.070, 82.60.080, 82.60.090, 82.60.100, and 82.60.900; 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 that there are several areas in the state that are characterized by very high levels of unemployment and poverty. The legislature further finds that economic stagnation is the primary cause of this high unemployment rate and poverty; that new state policies are necessary in order to promote economic stimulation and new employment opportunities in these distressed areas; and that policies providing incentives for economic growth in these distressed areas are essential. For these reasons, the legislature hereby establishes a tax exemption program to be effective solely in distressed areas and under circumstances where the exempted tax payments are for investments or costs that result in the creation of a specified number of jobs. The legislature declares that this limited program serves the vital public purpose of creating employment opportunities and reducing poverty in the distressed areas of the state.

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 exemption under this chapter.

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

(3) "Eligible area" means: (a) A county in which the average level of unemployment for the three years before the year in which an application is filed under this chapter exceeds the average state unemployment for those years by twenty percent; or (b) a metropolitan statistical area, as defined by the office of federal statistical policy and standards, United States department of commerce, in which the average level of unemployment for the calendar year immediately proceeding the year in which an application is filed under this chapter exceeds the average state unemployment for such calendar year by twenty percent. Applications under this subsection (3)(b) shall be filed by April 30, 1993.

(4)(a) "Eligible investment project" means that portion of an investment project that:

(i) Is directly utilized to create at least one new full-time qualified employment position for each three hundred thousand dollars of investment on which an exemption is requested; and

(ii) Either initiates a new operation, or expands or diversifies a current operation by expanding or renovating an existing building with costs in excess of twenty-five percent of the true and fair value of the plant complex prior to improvement; or

(iii) Acquires machinery and equipment to be used for either manufacturing or research and development if the machinery and equipment is housed in a new leased structure: PROVIDED, That the lessor/owner of the structure is not eligible for an exemption unless the underlying ownership of the buildings, machinery, and equipment vests exclusively in the same person.

(b) "Eligible investment project" does not include any portion of an investment project undertaken by a light and power business as defined in RCW 82.16.010(5) or investment projects that have already received exemptions under this chapter.

(5) "Investment project" means an investment in qualified buildings and qualified machinery and equipment, including labor and services rendered in the planning, installation, and construction of the project.

(6) "Manufacturing" means all activities of a commercial or industrial nature wherein labor or skill is applied, by hand or machinery, to materials 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, and the activities performed by research and development laboratories and commercial testing laboratories.

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

(8) "Qualified buildings" means new structures used for manufacturing and research and development activities, including plant offices and warehouses or other facilities for the storage of raw material or finished goods if such facilities are an essential or an integral part of a factory, mill, plant, or laboratory used for manufacturing or research and development. If a building is used partly for manufacturing or research and development and partly for other purposes, the applicable tax exemption shall be determined by apportionment of the costs of construction under rules adopted by the department.

(9) "Qualified employment position" means a permanent, full-time employee employed in the eligible investment project during the entire tax year.

(10) "Qualified machinery and equipment" means all new industrial and research fixtures, equipment, and support facilities that are an integral and necessary part of a manufacturing or research and development operation. "Qualified machinery and equipment" 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.

(11) "Recipient" means a person receiving a tax exemption under this chapter.

(12) "Research and development" means the development, refinement, testing, marketing, and commercialization of a product, service, or process before commercial sales have begun. 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.

NEW SECTION. Sec. 3. Application for exemption of taxes under this chapter must be made before initiation of the construction of the investment project. 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 investment project, the applicant's average employment in the state for the prior year, 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. The department shall rule on the application within sixty days.

NEW SECTION. Sec. 4. (1) The department shall issue a sales and use tax exemption certificate for state and local sales and use taxes due under chapters 82.08, 82.12, and 82.14 RCW on each eligible investment project located in an eligible area.

(2) The department shall keep a running total of all exemptions granted under this chapter during each fiscal biennium.

NEW SECTION. Sec. 5. (1) Each recipient shall submit a report to the department on December 31st of each year. The report shall contain information, as required by the department, from which the department may determine whether the recipient is meeting the requirements of this chapter. If the recipient fails to submit a report or submits an inadequate report, the department may declare the amount of exempted taxes to be immediately assessed and payable.

(2) If, on the basis of a report under this section or other information, the department finds that an investment project is not eligible for tax exemption under this chapter for reasons other than failure to create the required number of qualified employment positions, the amount of exempted taxes for the project shall be immediately due.

(3) If, on the basis of a report under this section or other information, the department finds that an investment project has failed to create the required number of qualified employment positions, the department shall assess interest, but not penalties, on the exempted taxes for the project. The interest shall be assessed at the rate provided for delinquent excise taxes, shall be assessed retroactively to the date of exemption, and shall accrue until the exempted taxes are repaid.

NEW SECTION. Sec. 6. The employment security department shall make, and certify to the department of revenue, all determinations of employment and wages under this chapter.

NEW SECTION. Sec. 7. Sections 1 through 6 of this act shall constitute a new chapter in Title 82 RCW.

NEW SECTION. Sec. 8. Sections 3 and 4 of this act shall expire July 1, 1996.

NEW SECTION. Sec. 9. The following acts or parts of acts are each repealed:

(1) RCW 82.60.010 and 1985 c 232 s 1;

(2) RCW 82.60.020 and 1988 c 42 s 16, 1986 c 116 s 12 & 1985 c 232 s 2;

(3) RCW 82.60.030 and 1985 c 232 s 3;

(4) RCW 82.60.040 and 1986 c 116 s 13 & 1985 c 232 s 4;

(5) RCW 82.60.050 and 1988 c 41 s 5 & 1985 c 232 s 10;

(6) RCW 82.60.060 and 1985 c 232 s 5;

(7) RCW 82.60.065 and 1986 c 116 s 14;

(8) RCW 82.60.070 and 1985 c 232 s 6;

(9) RCW 82.60.080 and 1985 c 232 s 7;

(10) RCW 82.60.090 and 1985 c 232 s 8;

(11) RCW 82.60.100 and 1987 c 49 s 1; and

(12) RCW 82.60.900 and 1985 c 232 s 11.

NEW SECTION. Sec. 10. 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 shall take effect immediately.