5991

AN ACT Relating to an optional gross income tax; amending RCW 82.03.130, 82.03.140, 2.10.180, 2.12.090, 6.13.030, 41.44.240, and 43.43.310; reenacting and amending RCW 41.24.240, 41.26.180, 41.32.052, and 41.40.052; adding a new title to the Revised Code of Washington to be codified as Title 82A RCW; creating new sections; prescribing penalties; and providing an effective date.

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

PART I

DEFINITIONS

NEW SECTION. Sec. 1. INTRODUCTORY. Unless the context clearly requires otherwise, the definitions in sections 2 through 12 of this act apply throughout this title.

NEW SECTION. Sec. 2. CORPORATION. "Corporation" means a person taxable as a corporation under the Internal Revenue Code, including a corporation electing to be taxed under subchapter S of chapter 1 of the Internal Revenue Code.

NEW SECTION. Sec. 3. DEPARTMENT. "Department" means the department of revenue.

NEW SECTION. Sec. 4. GROSS INCOME. (1) "Gross income" means all income from whatever source derived, including but not limited to the following items:

(a) Compensation for services, including fees, commissions, and similar items;

(b) Gross income derived from business;

(d) Interest;

(e) Rents;

(f) Royalties;

(g) Dividends;

(h) Alimony and separate maintenance payments;

(i) Annuities;

(j) Income from life insurance and endowment contracts;

(k) Pensions;

(l) Income from discharge of indebtedness;

(m) Distributive share of partnership gross income;

(n) Income in respect of a decedent; and

(o) Income from an interest in an estate or trust.

(2) Notwithstanding subsection (1) of this section, gross income does not include property of the United States and of the state, counties, school districts and other municipal corporations, and credits secured by property actually taxed in this state, not exceeding in value the value of the property.

NEW SECTION. Sec. 5. INDIVIDUAL. "Individual" means a natural person.

NEW SECTION. Sec. 6. INTERNAL REVENUE CODE. "Internal Revenue Code" means the United States Internal Revenue Code of 1986, as amended, as existing on January 1, 1993.

NEW SECTION. Sec. 7. PERSON. "Person" includes individuals, corporations, partnerships, firms, companies, fiduciaries, and any other group or combination acting as a unit.

NEW SECTION. Sec. 8. RESIDENT. "Resident" includes:

(1) An individual who:

(a) Has resided in this state for the entire taxable year;

(b) Is domiciled in this state unless the individual:

(i) Maintains no permanent place of abode in this state;

(ii) Does maintain a permanent place of abode elsewhere; and

(iii) Spends in the aggregate not more than thirty days in the taxable year in this state;

(c) Is not domiciled in this state, but maintains a permanent place of abode in this state and spends in the aggregate more than one hundred eighty-three days of the taxable year in this state unless the individual establishes to the satisfaction of the director of revenue that the individual is in the state only for temporary or transitory purposes; or

(d) Claims the state of Washington as the individual's tax home for federal income tax purposes;

(2) A "resident" estate means an estate of which a personal representative was appointed by a Washington court or an estate the administration of which is carried on in this state; and

(3) A "resident" trust means a trust whose situs as determined under RCW 11.96.040 is within the state of Washington.

NEW SECTION. Sec. 9. TAXABLE INCOME. "Taxable income" means gross income as modified under section 14 of this act.

NEW SECTION. Sec. 10. TAXABLE YEAR. "Taxable year" means the taxpayer's taxable year as defined under the Internal Revenue Code.

NEW SECTION. Sec. 11. TAXPAYER. "Taxpayer" means a person receiving income subject to the optional tax provision under this title.

NEW SECTION. Sec. 12. DEFINITION OF TERMS GENERALLY. Except as provided in sections 1 through 11 of this act, a term used in this title has the same meaning as when used in a comparable context in the Internal Revenue Code.

PART II

OPTIONAL INCOME TAX‑-TAXABLE INCOME MODIFICATIONS

NEW SECTION. Sec. 13. OPTIONAL TAX. A person may elect to be taxed under this title. With respect to those persons who elect to be taxed under this title, there is levied and shall be collected a tax at the rate of one percent on all taxable income that they receive.

NEW SECTION. Sec. 14. TAXABLE INCOME MODIFICATIONS. In computing taxable income, the following modifications must be made to the taxpayer's gross income:

(1) Deduct income derived from obligations of the United States that this state is prohibited by federal law from subjecting to an income tax; and

(2) Allocate and apportion income as required in section 15 of this act.

PART III

OPTIONAL INCOME TAX‑-DIVISION OF INCOME, MODIFICATIONS, AND CREDITS

NEW SECTION. Sec. 15. APPORTIONMENT AND ALLOCATION OF INCOME. (1) For resident individuals and corporations other than financial organizations or public utilities, all income must be apportioned and allocated to this state except income that is apportioned or allocated to another state under RCW 82.56.010.

(2) For nonresident individuals, all income must be apportioned and allocated to this state if it is not apportioned or allocated to another state under RCW 82.56.010 and is received:

(a) For the rendition of personal services in this state;

(b) As a result of the ownership or disposition of any interest in real or tangible personal property in this state; or

(3) For financial organizations and public utilities, the department shall adopt rules under which the extent of the taxpayer's income attributable to this state may be fairly determined and apportioned and allocated to this state. As used in this subsection, "financial organization" and "public utility" have the meanings given in RCW 82.56.010 Article IV, section 1.

NEW SECTION. Sec. 16. PARTNERSHIPS. (1) Partnerships are not subject to the optional tax under this title. Partners are subject to tax in their separate or individual capacities.

(2) The taxable incomes of partners is computed by including a share of the modifications under section 14 of this act if the modification relates to the income of the partnership. A partner's share of a modification is the amount of modification multiplied by a fraction. The numerator of the fraction is the partner's distributive share of partnership income. The denominator of the fraction is the total partnership income. The fraction may not be greater than one.

NEW SECTION. Sec. 17. TAX RETURNS FOR FRACTIONAL YEAR. If the first taxable year of a taxpayer with respect to which an optional tax is imposed by this title ends before December 31st of the calendar year in which this title becomes effective, referred to in this section as a fractional taxable year, the taxable income for the fractional taxable year is the taxpayer's taxable income for the entire taxable year, adjusted by one of the following methods, at the taxpayer's election:

(1) The taxable income is multiplied by a fraction. The numerator of the fraction is the number of days in the fractional taxable year. The denominator of the fraction is the number of days in the entire taxable year; or

(2) The taxable income is adjusted, in accordance with rules of the department, so as to include only such an income and be reduced only by such deductions as can be clearly determined from the permanent records of the taxpayer to be attributable to the fractional taxable year.

An election made under section 13 of this act remains in effect for at least one taxable year.

NEW SECTION. Sec. 18. CREDIT AGAINST TAX LIABILITY. For a given taxable year a taxpayer is entitled to a credit up to seven hundred ten dollars against its tax liability.

PART IV

CRIMES

NEW SECTION. Sec. 19. CRIMES. (1) A person who knowingly attempts to evade the optional tax imposed under this title or payment of the tax imposed under this title is guilty of a class C felony as provided in chapter 9A.20 RCW.

(2) A person required to collect the optional tax imposed under this title who knowingly fails to collect, truthfully account for, or pay over the tax is guilty of a class C felony as provided in chapter 9A.20 RCW.

(3) A person who knowingly fails to pay the optional tax, pay estimated tax, make returns, keep records, or supply information, as required under this title, is guilty of a gross misdemeanor as provided in chapter 9A.20 RCW.

PART V

OPTIONAL INCOME TAX‑-ADMINISTRATION AND ENFORCEMENT

NEW SECTION. Sec. 20. METHOD OF ACCOUNTING. (1) A taxpayer's method of accounting for purposes of the optional tax imposed under this title must be the same as the taxpayer's method of accounting for federal income tax purposes. If a method of accounting has not been regularly used by a taxpayer for federal income tax purposes, tax due under this title must be computed by a method of accounting that in the opinion of the department fairly reflects income.

(2) If a person's method of accounting is changed for federal income tax purposes, it must be similarly changed for purposes of this title.

NEW SECTION. Sec. 21. RECORDS‑-RETURNS. (1) A taxpayer and a person required to collect the optional tax imposed under this title shall keep records, render statements, make returns, file reports, and perform other acts, as the department requires by rule. A return must be made under penalty of perjury and on forms prescribed by the department. The department may require other statements and reports be made under penalty of perjury and on forms prescribed by the department. The department may require a taxpayer and a person required to collect the optional tax imposed under this title to furnish to the department a correct copy of a return or document that the taxpayer has filed with the internal revenue service or received from the internal revenue service.

(2) Books and records and other papers and documents required to be kept under this title are subject to inspection by the department at all times during business hours of the day.

NEW SECTION. Sec. 22. COMBINED REPORTING‑-ADMINISTRATIVE ADJUSTMENTS. (1) If a corporation that reports under this title owns or controls, either directly or indirectly, another corporation or corporations except foreign corporations, or if a corporation that reports under this title is owned or controlled, either directly or indirectly, by another corporation except a foreign corporation, the department may require a combined or consolidated report showing the combined taxable income and apportionment factors of the controlled group, excluding foreign corporations, and other information the department deems necessary to ascertain the taxable income of the corporations. The department may, in such a manner as it may determine, assess the tax against the corporations that report under this title and whose taxable income is involved in the report upon the basis of the combined entire taxable income; or the department may adjust the optional tax in such another manner as the department determines to be equitable if it determines the adjustment is necessary to prevent evasion of taxes or to reflect the income earned by the corporations from business done in this state. Direct or indirect ownership or control of more than fifty percent of the voting stock of a corporation constitutes ownership or control for purposes of this section.

(2) If two or more organizations, trades, or businesses, whether or not incorporated, whether or not organized in or having income from sources allocable to this state, and whether or not affiliated, are owned or controlled directly or indirectly by the same interests, the department may distribute, apportion, or allocate income, deductions, credits, exemptions, or allowances between or among the organizations, trades, or businesses if it determines that the distribution, apportionment, or allocation is necessary to prevent evasion of the optional tax imposed by this title.

NEW SECTION. Sec. 23. SERVICE OF PROCESS. (1) A person who incurs the optional tax liability under this title and who removes from this state or conceals his or her whereabouts is considered to appoint the secretary of state of this state as the person's agent for service of process or notice in a judicial or administrative proceeding under this title. The department shall serve this process or notice on the secretary of state by leaving at the office of the secretary of state, at least fifteen days before the return day of the process or notice, a certified copy of the process or notice and by sending to the person, by registered or certified mail, a certified copy with an endorsement on the copy of the service upon the secretary of state, addressed to the person at the person's last known address.

(2) Service of process or notice in the manner and under the circumstances provided in this section is of the same force and validity as if served upon the person personally within this state. Proof of this service may be made in a judicial or administrative proceeding by the affidavit of the authorized agent of the department who made the service, with a copy of the process or notice that was so served attached to the affidavit.

NEW SECTION. Sec. 24. PROVISIONS OF INTERNAL REVENUE CODE CONTROL. (1) To the extent possible, without being inconsistent with this title, all of the provisions of the Internal Revenue Code relating to the following subjects apply to the optional taxes imposed under this title:

(a) Time and manner of payment of the optional tax imposed under this title, including tax withheld under section 18 of this act;

(b) Periods of limitation upon assessment and collection of taxes. However, if a taxpayer fails to report a change or correction increasing his or her federal gross income, or fails to report a change or correction that is treated as if it were a deficiency for federal income tax purposes, an assessment may be made at any time within one year of the date on which the department first learns of the change or correction;

(d) Liability of transferees;

(e) Closing agreements and compromises;

(f) Deficiency procedures, except that the state board of tax appeals shall review deficiencies under chapter 82.03 RCW;

(g) Penalties and additions for failure to timely file returns or pay taxes;

(h) Timing, amount, and manner of payment of estimated tax payments;

(i) Time and manner of making returns, verification of returns, and the time when a return is deemed filed; and

(j) Powers of the secretary of the treasury, exercised under this title by the department, to prepare and execute returns, to prescribe forms, to enforce collection of the optional tax through liens and seizure of property, and to impose penalties.

(2) The department may adopt rules to provide modifications and exceptions to the provisions listed in subsection (1) of this section if reasonably necessary to facilitate the prompt, efficient, and equitable collection of the optional tax under this title.

NEW SECTION. Sec. 25. RULES. The department may adopt rules under chapter 34.05 RCW for the administration and enforcement of this title. The rules, to the extent possible without being inconsistent with this title, must follow the Internal Revenue Code, and the regulations and rulings of the United States treasury department with respect to the federal income tax. The department may adopt as a part of these rules portions of the Internal Revenue Code and treasury department regulations and rulings, in whole or in part.

NEW SECTION. Sec. 26. REFUNDS OF OVERPAYMENTS‑-OTHER ADMINISTRATIVE PROVISIONS. (1) The department shall refund all taxes and penalties improperly paid or collected.

(2) RCW 82.32.110, 82.32.120, 82.32.130, 82.32.320, 82.32.330, 82.32.340, and 82.32.380 apply to the administration of the optional taxes imposed under this title.

PART VI

OPTIONAL INCOME TAX‑-APPEALS

Sec. 27. RCW 82.03.130 and 1992 c 206 s 9 are each amended to read as follows:

BOARD OF TAX APPEALS--JURISDICTION. The board shall have jurisdiction to decide the following types of appeals:

(1) Appeals taken pursuant to RCW 82.03.190.

(2) Appeals from a county board of equalization pursuant to RCW 84.08.130.

(3) Appeals by an assessor or landowner from an order of the director of revenue made pursuant to RCW 84.08.010 and 84.08.060, if filed with the board of tax appeals within thirty days after the mailing of the order, the right to such an appeal being hereby established.

(4) Appeals by an assessor or owner of an intercounty public utility or private car company from determinations by the director of revenue of equalized assessed valuation of property and the apportionment thereof to a county made pursuant to chapter 84.12 RCW and 84.16 RCW, if filed with the board of tax appeals within thirty days after mailing of the determination, the right to such appeal being hereby established.

(5) Appeals by an assessor, landowner, or owner of an intercounty public utility or private car company from a determination of any county indicated ratio for such county compiled by the department of revenue pursuant to RCW 84.48.075: PROVIDED, That

(a) Said appeal be filed after review of the ratio under RCW 84.48.075(3) and not later than fifteen days after the mailing of the certification; and

(b) The hearing before the board shall be expeditiously held in accordance with rules prescribed by the board and shall take precedence over all matters of the same character.

(6) Appeals from the decisions of sale price of second class shorelands on navigable lakes by the department of natural resources pursuant to RCW 79.94.210.

(7) Appeals from urban redevelopment property tax apportionment district proposals established by governmental ordinances pursuant to RCW 39.88.060.

(8) Appeals from interest rates as determined by the department of revenue for use in valuing farmland under current use assessment pursuant to RCW 84.34.065.

(9) Appeals from revisions to stumpage value tables used to determine value by the department of revenue pursuant to RCW 84.33.091.

(10) Appeals from denial of tax exemption application by the department of revenue pursuant to RCW 84.36.850.

(11) Appeals pursuant to RCW 84.40.038(2).

(12) Appeals relating to income tax deficiencies and refunds including penalties and interest under Title 82A RCW (sections 1 through 26 of this act).

Sec. 28. RCW 82.03.140 and 1988 c 222 s 4 are each amended to read as follows:

ELECTION OF FORMAL OR INFORMAL HEARING. In all appeals over which the board has jurisdiction under RCW 82.03.130, a party taking an appeal may elect either a formal or an informal hearing, such election to be made according to rules of practice and procedure to be promulgated by the board: PROVIDED, That nothing shall prevent the assessor or taxpayer, as a party to an appeal pursuant to RCW 84.08.130, within twenty days from the date of the receipt of the notice of appeal, from filing with the clerk of the board notice of intention that the hearing be a formal one: PROVIDED, HOWEVER, That nothing herein shall be construed to modify the provisions of RCW 82.03.190: AND PROVIDED FURTHER, That upon an appeal under RCW 82.03.130(5) or (6), the director of revenue may, within ten days from the date of its receipt of the notice of appeal, file with the clerk of the board notice of its ((~~intention that the hearing be held pursuant to chapter 34.05 RCW~~)) election of a formal hearing. In the event that appeals are taken from the same decision, order, or determination, as the case may be, by different parties and only one of such parties elects a formal hearing, a formal hearing shall be granted.

PART VII

CONFORMING AMENDMENTS

Sec. 29. RCW 2.10.180 and 1991 c 365 s 18 are each amended to read as follows:

JUDICIAL RETIREMENT SYSTEM. (1) Except as provided in subsections (2), (3), ((~~and~~)) (4), and (5) of this section, the right of a person to a retirement allowance, disability allowance, or death benefit, the retirement, disability or death allowance itself, any optional benefit, any other right accrued or accruing to any person under the provisions of this chapter, and the moneys in the fund created under this chapter, are hereby exempt from any state, county, municipal, or other local tax and shall not be subject to execution, garnishment, or any other process of law whatsoever.

(2) Subsection (1) of this section shall not be deemed to prohibit a beneficiary of a retirement allowance from authorizing deductions therefrom for payment of premiums due on any group insurance policy or plan issued for the benefit of a group comprised of public employees of the state of Washington.

(3) Deductions made in the past from retirement benefits are hereby expressly recognized, ratified, and affirmed. Future deductions may only be made in accordance with this section.

(4) Subsection (1) of this section shall not prohibit the department of retirement systems from complying with (a) a wage assignment order for child support issued pursuant to chapter 26.18 RCW, (b) a notice of payroll deduction issued under chapter 26.23 RCW, (c) an order to withhold and deliver issued pursuant to chapter 74.20A RCW, (d) a mandatory benefits assignment order issued pursuant to chapter 41.50 RCW, (e) a court order directing the department of retirement systems to pay benefits directly to an obligee under a dissolution order as defined in RCW 41.50.500(3) which fully complies with RCW 41.50.670 and 41.50.700, or (f) any administrative or court order expressly authorized by federal law.

(5) Subsection (1) of this section does not exempt any pension or other benefit received under this chapter from the optional tax under Title 82A RCW (sections 1 through 26 of this act), nor does it prohibit the department of retirement systems from complying with the tax withholding requirements of Title 82A RCW (sections 1 through 26 of this act).

Sec. 30. RCW 2.12.090 and 1991 c 365 s 19 are each amended to read as follows:

JUDGES' RETIREMENT. (1) Except as provided in subsections (2), (3), ((~~and~~)) (4), and (5) of this section, the right of any person to a retirement allowance or optional retirement allowance under the provisions of this chapter and all moneys and investments and income thereof are exempt from any state, county, municipal, or other local tax and shall not be subject to execution, garnishment, attachment, the operation of bankruptcy or the insolvency laws, or other processes of law whatsoever and shall be unassignable except as herein specifically provided.

(2) Subsection (1) of this section shall not prohibit the department of retirement systems from complying with (a) a wage assignment order for child support issued pursuant to chapter 26.18 RCW, (b) a notice of payroll deduction issued under chapter 26.23 RCW, (c) an order to withhold and deliver issued pursuant to chapter 74.20A RCW, (d) a mandatory benefits assignment order issued pursuant to chapter 41.50 RCW, (e) a court order directing the department of retirement systems to pay benefits directly to an obligee under a dissolution order as defined in RCW 41.50.500(3) which fully complies with RCW 41.50.670 and 41.50.700, or (f) any administrative or court order expressly authorized by federal law.

(3) Subsection (1) of this section shall not be deemed to prohibit a beneficiary of a retirement allowance from authorizing deductions therefrom for payment of premiums due on any group insurance policy or plan issued for the benefit of a group comprised of public employees of the state of Washington.

(4) Deductions made in the past from retirement benefits are hereby expressly recognized, ratified, and affirmed. Future deductions may only be made in accordance with this section.

Sec. 31. RCW 6.13.030 and 1991 c 123 s 2 are each amended to read as follows:

HOMESTEADS. A homestead may consist of lands, as described in RCW 6.13.010, regardless of area, but the homestead exemption amount shall not exceed the lesser of (1) the total net value of the lands, mobile home, and improvements as described in RCW 6.13.010, or (2) the sum of thirty thousand dollars((, except where the homestead is subject to execution, attachment, or seizure by or under any legal process whatever to satisfy a judgment in favor of any state for failure to pay that state's income tax on benefits received while a resident of the state of Washington from a pension or other retirement plan, in which event there shall be no dollar limit on the value of the exemption)).

Sec. 32. RCW 41.24.240 and 1989 c 360 s 26 and 1989 c 91 s 21 are each reenacted and amended to read as follows:

FIRE FIGHTERS' PENSIONS. (1) The right of any person to any future payment under the provisions of this chapter shall not be transferable or assignable at law or in equity, and none of the moneys paid or payable or the rights existing under this chapter, shall be subject to execution, levy, attachment, garnishment, or other legal process, or to the operation of any bankruptcy or insolvency law. This section shall not be applicable to any child support collection action taken under chapter 26.18, 26.23, or 74.20A RCW. Benefits under this chapter shall be payable to a spouse or ex-spouse to the extent expressly provided for in any court decree of dissolution or legal separation or in any court order or court-approved property settlement agreement incident to any court decree of dissolution or legal separation.

(2) Nothing in this chapter shall be construed to deprive any fire fighter, eligible to receive a pension hereunder, from receiving a pension under any other act to which that fire fighter may become eligible by reason of services other than or in addition to his or her services as a fire fighter under this chapter.

(3) Subsection (1) of this section does not exempt any pension or other benefit received under this chapter from the optional tax under Title 82A RCW (sections 1 through 26 of this act), nor does it prohibit the department of retirement systems from complying with the tax withholding requirements of Title 82A RCW (sections 1 through 26 of this act).

Sec. 33. RCW 41.26.180 and 1991 c 365 s 20 and 1991 c 35 s 25 are each reenacted and amended to read as follows:

LAW ENFORCEMENT OFFICERS' AND FIRE FIGHTERS' RETIREMENT SYSTEM. (1) Subject to subsections (2) ((~~and~~)), (3), and (4) of this section, the right of a person to a retirement allowance, disability allowance, or death benefit, to the return of accumulated contributions, the retirement, disability or death allowance itself, any optional benefit, any other right accrued or accruing to any person under the provisions of this chapter, and the moneys in the fund created under this chapter, are hereby exempt from any state, county, municipal, or other local tax and shall not be subject to execution, garnishment, attachment, the operation of bankruptcy or insolvency laws, or any other process of law whatsoever, and shall be unassignable.

(2) On the written request of any person eligible to receive benefits under this section, the department may deduct from such payments the premiums for life, health, or other insurance. The request on behalf of any child or children shall be made by the legal guardian of such child or children. The department may provide for such persons one or more plans of group insurance, through contracts with regularly constituted insurance carriers or health care service contractors.

(3) Subsection (1) of this section shall not prohibit the department from complying with (a) a wage assignment order for child support issued pursuant to chapter 26.18 RCW, (b) an order to withhold and deliver issued pursuant to chapter 74.20A RCW, (c) a notice of payroll deduction issued pursuant to RCW 26.23.060, (d) a mandatory benefits assignment order issued by the department, (e) a court order directing the department of retirement systems to pay benefits directly to an obligee under a dissolution order as defined in RCW 41.50.500(3) which fully complies with RCW 41.50.670 and 41.50.700, or (f) any administrative or court order expressly authorized by federal law.

(4) Subsection (1) of this section does not exempt any pension or other benefit received under this chapter from the optional tax under Title 82A RCW (sections 1 through 26 of this act), nor does it prohibit the department of retirement systems from complying with the tax withholding requirements of Title 82A RCW (sections 1 through 26 of this act).

Sec. 34. RCW 41.32.052 and 1991 c 365 s 21 and 1991 c 35 s 63 are each reenacted and amended to read as follows:

TEACHERS' RETIREMENT SYSTEM. (1) Subject to subsections (2) ((~~and~~)), (3), and (4) of this section, the right of a person to a pension, an annuity, a retirement allowance, or disability allowance, to the return of contributions, any optional benefit or death benefit, any other right accrued or accruing to any person under the provisions of this chapter and the moneys in the various funds created by this chapter shall be unassignable, and are hereby exempt from any state, county, municipal or other local tax, and shall not be subject to execution, garnishment, attachment, the operation of bankruptcy or insolvency laws, or other process of law whatsoever.

(2) This section shall not be deemed to prohibit a beneficiary of a retirement allowance who is eligible:

(a) Under RCW 41.05.080 from authorizing monthly deductions therefrom for payment of premiums due on any group insurance policy or plan issued for the benefit of a group comprised of public employees of the state of Washington or its political subdivisions;

(b) Under a group health care benefit plan approved pursuant to RCW 28A.400.350 or 41.05.065 from authorizing monthly deductions therefrom, of the amount or amounts of subscription payments, premiums, or contributions to any person, firm, or corporation furnishing or providing medical, surgical, and hospital care or other health care insurance; or

(c) Under this system from authorizing monthly deductions therefrom for payment of dues and other membership fees to any retirement association composed of retired teachers and/or public employees pursuant to a written agreement between the director and the retirement association.

Deductions under (a) and (b) of this subsection shall be made in accordance with rules that may be adopted by the director.

Sec. 35. RCW 41.40.052 and 1991 c 365 s 22 and 1991 c 35 s 92 are each reenacted and amended to read as follows:

PUBLIC EMPLOYEES' RETIREMENT SYSTEM. (1) Subject to subsections (2) ((~~and~~)), (3), and (4) of this section, the right of a person to a pension, an annuity, or retirement allowance, any optional benefit, any other right accrued or accruing to any person under the provisions of this chapter, the various funds created by this chapter, and all moneys and investments and income thereof, are hereby exempt from any state, county, municipal, or other local tax, and shall not be subject to execution, garnishment, attachment, the operation of bankruptcy or insolvency laws, or other process of law whatsoever, and shall be unassignable.

(2) This section shall not be deemed to prohibit a beneficiary of a retirement allowance from authorizing deductions therefrom for payment of premiums due on any group insurance policy or plan issued for the benefit of a group comprised of public employees of the state of Washington or its political subdivisions and which has been approved for deduction in accordance with rules that may be adopted by the state health care authority and/or the department, and this section shall not be deemed to prohibit a beneficiary of a retirement allowance from authorizing deductions therefrom for payment of dues and other membership fees to any retirement association or organization the membership of which is composed of retired public employees, if a total of three hundred or more of such retired employees have authorized such deduction for payment to the same retirement association or organization.

Sec. 36. RCW 41.44.240 and 1989 c 360 s 28 are each amended to read as follows:

STATE-WIDE CITY EMPLOYEES' RETIREMENT. (1) The right of a person to a pension, annuity or a retirement allowance, to the return of contribution, the pension, annuity or retirement allowance itself, any optional benefit, any other right accrued or accruing to any person under the provisions of this chapter, and the moneys in the fund created under this chapter shall not be subject to execution, garnishment, or any other process whatsoever.

(2) This section shall not apply to child support collection actions taken under chapter 26.18, 26.23, or 74.20A RCW against benefits payable under any such plan or arrangement. Benefits under this chapter shall be payable to a spouse or ex-spouse to the extent expressly provided for in any court decree of dissolution or legal separation or in any court order or court-approved property settlement agreement incident to any court decree of dissolution or legal separation.

Sec. 37. RCW 43.43.310 and 1991 c 365 s 23 are each amended to read as follows:

WASHINGTON STATE PATROL RETIREMENT. (1) Except as provided in subsections (2) ((~~and~~)), (3), and (4) of this section, the right of any person to a retirement allowance or optional retirement allowance under the provisions hereof and all moneys and investments and income thereof are exempt from any state, county, municipal, or other local tax and shall not be subject to execution, garnishment, attachment, the operation of bankruptcy or the insolvency laws, or other processes of law whatsoever and shall be unassignable except as herein specifically provided.

(2) Subsection (1) of this section shall not prohibit the department of retirement systems from complying with (a) a wage assignment order for child support issued pursuant to chapter 26.18 RCW, (b) an order to withhold and deliver issued pursuant to chapter 74.20A RCW, (c) a notice of payroll deduction issued pursuant to RCW 26.23.060, (d) a mandatory benefits assignment order issued pursuant to chapter 41.50 RCW, (e) a court order directing the department of retirement systems to pay benefits directly to an obligee under a dissolution order as defined in RCW 41.50.500(3) which fully complies with RCW 41.50.670 and 41.50.700, or (f) any administrative or court order expressly authorized by federal law.

PART VIII

MISCELLANEOUS

NEW SECTION. Sec. 38. The department of revenue shall, in conjunction with the fiscal committees of the legislature, conduct a study of the fiscal and administrative impacts of this act. The study shall include, but not necessarily be limited to, an examination of the number of persons likely to be taxed under Title 82A RCW (sections 1 through 26 of this act), the amount of revenues estimated to be raised under Title 82A RCW (sections 1 through 26 of this act), and the costs of administering the optional tax imposed under Title 82A RCW (sections 1 through 26 of this act). The department shall submit to the fiscal committees of the legislature by December 1, 1993, a report of the findings of its study. The report shall also include the department's recommendations, if any, regarding the need for amendments to this act.

NEW SECTION. Sec. 39. SEVERABILITY. If any provision of this act or its application to any person or circumstance is held invalid, the remainder of the act or the application of the provision to other persons or circumstances is not affected.

NEW SECTION. Sec. 40. CAPTIONS AND PART HEADINGS. Captions and part headings as used in this act constitute no part of the law.

NEW SECTION. Sec. 41. CODIFICATION. Sections 1 through 26 of this act shall constitute a new title in the Revised Code of Washington, to be numbered Title 82A RCW.

NEW SECTION. Sec. 42. EFFECTIVE DATE. This act shall take effect January 1, 1994, and shall apply to income earned after that date.