1714-S

AN ACT Relating to sales and use tax deferral for construction of new or expanded business; adding a new chapter to Title 82 RCW; and providing an effective date.

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

NEW SECTION. Sec. 1. It is the legislature's intent to grant a deferral of sales and use taxes for construction of new or expanded manufacturing operations, and thereby provide an incentive to the continuous improvement of our business economy.

NEW SECTION. Sec. 2. Unless the context clearly indicates otherwise, the definitions in this section apply throughout this chapter.

(1) "Applicant" means a person applying for a deferral under this chapter.

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

(3) "Eligible investment project" means an investment in qualified buildings, including labor and services rendered in the planning and construction of the project.

(4) "Manufacturing operation" means the manufacturing of articles, substances, or commodities for sale as tangible personal property. The manufacturing operation begins at the point where the raw materials enter the manufacturing site and ends at the point where the finished product leaves the manufacturing site. The term does not include research and development, cogeneration or the production of electricity, or the preparation of food products on the premises of a person selling food products at retail.

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

(6) "Qualified buildings" means new or expanded structures necessary for a manufacturing operation, including plant offices and warehouses. If a building is used partly for manufacturing and partly for other purposes, the applicable tax deferral shall be determined by appropriation of the costs of construction under rules adopted by the department.

(7) "Recipient" means a person receiving a tax deferral under this chapter.

NEW SECTION. Sec. 3. Application for deferral of taxes under this chapter must be made before initiation of the construction of the eligible 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.

Applicants for deferral of taxes under this chapter shall agree to supply the department with nonproprietary information necessary to measure the results of the tax deferral program. The department shall use the information to perform three assessments on the tax deferral program authorized under this chapter. The assessments will take place in 1998, 2001, and 2004. The department shall prepare reports on each assessment and deliver their reports by September 1, 1998, September 1, 2001, and September 1, 2004. The assessments shall measure the effect of the program on job creation, the number of jobs created for Washington residents, company growth, the introduction of new products, the diversification of the state's economy, the movement of firms or the consolidation of firms' operations into the state, and such other factors as the department selects.

NEW SECTION. Sec. 4. (1) Except as provided in subsection (2) of this section, the department shall issue a sales and use tax deferral 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.

(2) No certificate may be issued for an investment project that has already received a deferral under chapter 82.60 or 82.61 RCW or this chapter.

NEW SECTION. Sec. 5. (1) A recipient shall begin paying taxes deferred under this chapter on December 31st of the first calendar year after the date certified by the department as the date on which the investment project has been operationally completed, or on December 31st of the third calendar year after the certificate was granted, whichever is sooner. Subsequent annual payments shall be due on December 31st of the following four years with amounts of payment scheduled as follows:

Repayment Year % of Deferred Tax Repaid

1 10%

2 15%

3 20%

4 25%

5 30%

(2) The department may authorize an accelerated repayment schedule upon request of the recipient.

(3) Interest may not be charged on taxes deferred under this chapter for the period of deferral, although all other penalties and interest applicable to delinquent excise taxes may be assessed and imposed for delinquent payments under this chapter. The debt for deferred taxes will not be extinguished by insolvency or other failure of the recipient.

NEW SECTION. Sec. 6. Sections 1 through 5 of this act shall constitute a new chapter in Title 82 RCW.

NEW SECTION. Sec. 7. This act shall take effect July 1, 1996.