2090-S

AN ACT Relating to taxation of gasohol; reenacting and amending RCW 46.68.090 and 82.36.2251; adding a new section to chapter 225, Laws of 1994; creating new sections; providing effective dates; and declaring an emergency.

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

NEW SECTION. Sec. 1. A new section to read as follows is added to chapter 225, Laws of 1994, as section 1.5 thereof, to appear between sections 1 and 2, if that act is submitted to a vote of the people under the operation of section 3 thereof:

The gasohol exemption and credit was created in 1980 to help in-state producers of alcohol. The legislature finds that, for the following reasons, the gasohol exemption and credit granted to motor fuel distributors is not in the best interest of the citizens of the state of Washington:

(1) The federal Clean Air Act requires the use of gasohol or other oxygenated fuels in King, Pierce, Snohomish, Clark, and Spokane counties during fall and winter months, thereby diminishing the need to provide incentives to alcohol producers;

(2) The federal government also provides a fuel tax exemption of up to 5.4 cents per gallon of gasohol;

(3) If continued, the state exemption will cost the state about thirty million dollars per year, the equivalent of a one-cent gasoline tax;

(4) Only three of the seventeen alcohol producers certified to benefit from the exemption in 1993 are located in Washington;

(5) Over ninety percent of the alcohol qualifying for the exemption is provided by out-of-state firms, including several from outside the country;

(6) Gas tax revenue lost because of the exemption is badly needed for state, city, and county transportation projects.

NEW SECTION. Sec. 2. For the reasons enumerated in section 1 of this act, the legislature repealed the tax exemption and credit benefiting gasohol producers by passing ESHB 2326 in 1994. The legislature's position is that section 1 of ESHB 2326, which is the portion of the bill that repealed the tax exemption enjoyed by foreign and domestic companies producing gasohol, is not subject to the requirements of section 13, chapter 2, Laws of 1994 (commonly known as section 13 of I-601) because, among other reasons, existing law RCW 43.135.020(2) excludes highway trust fund revenue from its provisions.

The legislature hereby provides a refund system to be used in lieu of the gasohol tax exemption and credit. Refunds will be disbursed only if an appellate or supreme court of this state invalidates section 1 of ESHB 2326 and the people reject the measure at the November general election.

Sec. 3. RCW 46.68.090 and 1994 c 225 s 2 and 1994 c 179 s 3 are each reenacted and amended to read as follows:

(1) All moneys that have accrued or may accrue to the motor vehicle fund from the motor vehicle fuel tax and special fuel tax shall be first expended for the following purposes:

(a) For payment of refunds of motor vehicle fuel tax and special fuel tax that has been paid and is refundable as provided by law;

(b) For payment of amounts to be expended pursuant to appropriations for the administrative expenses of the offices of state treasurer, state auditor, and the department of licensing of the state of Washington in the administration of the motor vehicle fuel tax and the special fuel tax, which sums shall be distributed monthly;

(c) From April 1, 1992, through March 31, 1996, for distribution to the transfer relief account, hereby created in the motor vehicle fund, an amount not to exceed three hundred twenty-five one-thousandths of one percent;

(d) For distribution to the rural arterial trust account in the motor vehicle fund, an amount as provided in RCW 82.36.025(2) and 46.68.095(3);

(e) For distribution to the urban arterial trust account in the motor vehicle fund, an amount as provided in RCW 46.68.100(4) and 82.36.025(3);

(f) For distribution to the transportation improvement account in the motor vehicle fund, an amount as provided in RCW 46.68.095(1);

(g) For distribution to the special category C account, hereby created in the motor vehicle fund, an amount as provided in RCW 46.68.095(2);

(h) For distribution to the county arterial preservation account, hereby created in the motor vehicle fund, an amount as provided in RCW 46.68.095(4);

(i) For distribution to the motor vehicle fund to be allocated to cities and towns as provided in RCW 46.68.110, an amount as provided in RCW 46.68.095(5);

(j) For distribution to the motor vehicle fund to be allocated to counties as provided in RCW 46.68.120, an amount as provided in RCW 46.68.095(6);

(k) For expenditure for highway purposes of the state as defined in RCW 46.68.130, an amount as provided in RCW 82.36.025(4) and 46.68.095(7);

(l) From July 1, ((~~1994~~)) 1995, through ((~~June 30~~)) December 31, 1995, for distribution to the gasohol exemption holding account, hereby created in the motor vehicle fund, an amount equal to ((~~five and thirty-four~~)) three and thirty-five one-hundredths of one percent of the amount available prior to distributions provided under (a) through (k) of this subsection, ((~~to be used only for highway construction~~)) to be used for refunds, if any are required. If no refunds are required, or if funds remain after payment of refunds, the remaining money shall be used for highway purposes only after legislative appropriation;

(m) For distribution to the small city account, hereby created in the motor vehicle fund, an amount as provided for in RCW 46.68.095(1), 46.68.100(9), and 82.36.025(3).

(2) The amount accruing to the motor vehicle fund by virtue of the motor vehicle fuel tax and the special fuel tax and remaining after payments, distributions, and expenditures as provided in this section shall, for the purposes of this chapter, be referred to as the "net tax amount."

Sec. 4. RCW 82.36.2251 and 1993 c 268 s 2 are each reenacted and amended to read as follows:

(1) In lieu of the former tax exemption and credit, a distributor is eligible for a refund of the motor fuel tax paid under this chapter on alcohol of any proof that is sold in this state for use as fuel in motor vehicles, farm implements and machines, or implements of husbandry ((~~is exempt from the motor vehicle fuel tax under this chapter~~)) if such alcohol was manufactured by a company that has been verified by the department as having sold less than eight million gallons of alcohol for use as motor fuel in the prior calendar year.

(2) In addition, a tax ((~~credit~~)) refund of sixty percent of the tax rate imposed by RCW 82.36.025 shall be given for every gallon of alcohol receiving ((~~the exemption~~)) a refund under subsection (1) of this section and used in an alcohol-gasoline blend which contains at least nine and one-half percent or more by volume of alcohol: PROVIDED, That in no case may the tax ((~~credit~~)) refund claimed be greater than the tax due on the gasoline portion of the blended fuel: AND PROVIDED FURTHER, That no refunds may be issued to distributors who fail to remit taxes owed under this chapter.

(3) Any tax refunds provided under this section must be made from the gasohol exemption holding account, created under RCW 46.68.090(1)(l).

(4) No refunds authorized under this section may be provided until 1994 c 225 is rejected by the people at a November general election.

(5) The state shall not provide refunds for any taxes collected as a result of the repeal of RCW 82.36.2251, effective May 1, 1994, through March 27, 1995.

((~~(3)~~)) (6) This section shall expire on December 31, 1999.

NEW SECTION. Sec. 5. If section 1, chapter 225, Laws of 1994 is upheld by order of the court of appeals or the supreme court of this state, this act is null and void.

NEW SECTION. Sec. 6. 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 takes effect March 28, 1995, except for section 2 of this act, which takes effect July 1, 1995.