H-0470.1  _______________________________________________

                          HOUSE BILL 1042

          _______________________________________________

State of Washington      54th Legislature     1995 Regular Session

By Representative B. Thomas

Prefiled 1/6/95.  Read first time 01/09/95.  Referred to Committee on Finance.

Modifying apportionment of taxable income for businesses providing services to a collective investment fund.

    AN ACT Relating to apportionment of taxable income; amending RCW 82.04.460; providing an effective date; and declaring an emergency.

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

    Sec. 1.  RCW 82.04.460 and 1985 c 7 s 154 are each amended to read as follows:

    (1) Any person rendering services taxable under RCW 82.04.290 and maintaining places of business both within and without this state which contribute to the rendition of such services shall, for the purpose of computing tax liability under RCW 82.04.290, apportion to this state that portion of his gross income which is derived from services rendered within this state.  Where such apportionment cannot be accurately made by separate accounting methods, the taxpayer shall apportion to this state that proportion of his total income which the cost of doing business within the state bears to the total cost of doing business both within and without the state.

    (2) Notwithstanding the provision of subsection (1) of this section, persons doing business both within and without the state who receive gross income from service charges, as defined in RCW 63.14.010 (relating to amounts charged for granting the right or privilege to make deferred or installment payments) or who receive gross income from engaging in business as financial institutions within the scope of chapter 82.14A RCW (relating to city taxes on financial institutions) shall apportion or allocate gross income taxable under RCW 82.04.290 to this state pursuant to rules promulgated by the department consistent with uniform rules for apportionment or allocation developed by the states.

    (3) Notwithstanding the provisions of subsections (1) and (2) of this section, persons engaging in the business of providing management, investment consulting, administration, or distribution services directly or indirectly to a collective investment fund, as described in RCW 82.04.055(2)(d), shall apportion or allocate gross income taxable under RCW 82.04.290 to this state by multiplying the total gross income from engaging in such business by a fraction, the numerator of which is the average of the beginning-of-the-year and end-of-the-year balances of shares owned by the collective investment fund shareholders domiciled in this state and the denominator of which is the average of the beginning-of-the-year and end-of-the-year balances of shares owned by the collective investment fund shareholders everywhere.

(4) The department shall by rule provide a method or methods of apportioning or allocating gross income derived from sales of telephone services taxed under this chapter, if the gross proceeds of sales subject to tax under this chapter do not fairly represent the extent of the taxpayer's income attributable to this state.  The rules shall be, so far as feasible, consistent with the methods of apportionment contained in this section and shall require the consideration of those facts, circumstances, and apportionment factors as will result in an equitable and constitutionally permissible division of the services.

NEW SECTION. Sec. 2.  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 July 1, 1995.

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