6460-S

AN ACT Relating to public utility tax credits for water conservation activities; adding new sections to chapter 82.16 RCW; creating a new section; and providing an effective date.

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

NEW SECTION. Sec. 1. As stated in RCW 90.54.020 and 90.54.180, it is the fundamental water policy of this state to encourage the conservation of water, particularly where conservation may provide a new source of supply for future water needs, and to provide incentives for conservation and water use efficiency. The legislature recognizes that the conservation of water requires action by water suppliers and water users. Water suppliers conserve water through maintenance and upgrading of the supply system and through increased efficiency in delivery. Water users conserve water through changes in the way water is used and applied. Although many water utilities are engaged in conservation activities and projects, the legislature finds that many water distribution businesses need additional encouragement and incentive to undertake conservation activities. Therefore it is the intent of the legislature to grant a public utility tax credit to qualifying businesses undertaking certain water conservation projects and activities.

NEW SECTION. Sec. 2. A new section is added to chapter 82.16 RCW to read as follows:

The following definitions apply to section 3 of this act, unless the context clearly requires otherwise.

(1) "Consumer-related water conservation activities" means those water conservation activities and projects as defined in subsection (4) of this section that reduce water demand and that are undertaken by customers of water distribution businesses.

(2) "Quantifiable savings" means reductions in demand that persist over several years and can be verified using accepted evaluation methods. Accepted evaluation methods include metering, engineering analysis, statistical analysis of billed consumption, historical evidence, accepted industry standards, and customer surveys.

(3) "Tangible measures" means equipment, hardware, or fixtures that last three years or longer.

(4) "Water conservation activities" means activities and projects undertaken in existing water supply systems to reduce waste or loss of water, to conserve water, or to increase system or water use efficiency, such as: Repair or replacement of leaking pipes; lining of ditches or storage facilities; installation, repair, or upgrade of water metering devices; retrofitting of customer water fixtures and devices, such as low-flow toilets and showerheads; and other like activities and measures. "Water conservation activities" does not include changes in behavior or routine, such as lawn watering restrictions or curtailment of car washing, and does not include expansion of water supply systems to increase system capacity or to service new customers.

NEW SECTION. Sec. 3. A new section is added to chapter 82.16 RCW to read as follows:

(1)(a) Subject to preapproval under subsection (3) of this section, a water distribution business is allowed a credit against taxes imposed in RCW 82.16.020 (1)(g) and (2) equal to amounts rebated to or otherwise expended for customers for actual consumer-related water conservation activities. Rebates to or other expenditures for customers for individual activities or measures that are not tangible measures and do not have quantifiable savings are not eligible for a tax credit under this subsection.

(b) A water distribution business may not take a credit of more than one hundred fifty thousand dollars in any calendar year under this subsection (1). A water distribution business may carry forward rebates and other expenditures made in excess of the annual credit limit, but not for rebates or other expenditures made beyond June 30, 1999, and the amount carried forward may not be used to exceed the one hundred fifty thousand dollar annual credit limit in any one year. Rebates and other expenditures made after June 30, 1999, do not qualify for the credit under this section.

(i) During the fiscal year ending June 30, 1997, four million dollars;

(ii) During the fiscal year ending June 30, 1998, three million dollars; and

(iii) During the fiscal year ending June 30, 1999, three million dollars.

(2)(a) Subject to preapproval under subsection (3) of this section, a water distribution business that has annual gross income from its water distribution business of three million dollars or less is allowed a credit against taxes imposed in RCW 82.16.020 (1)(g) and (2) equal to amounts expended for capital construction for water conservation activities other than consumer-related water conservation activities. A water distribution business shall use calendar year 1995 income to determine eligibility based on annual gross income.

(b) The department of revenue shall not allow a water distribution business a total credit under this subsection (2) of more than one hundred fifty thousand dollars during any calendar year. A water distribution business may carry forward expenditures made in excess of the annual credit limit, but not for expenditures made beyond June 30, 2006, and the carried-forward expenditure may not be used to exceed the one hundred fifty thousand dollar annual credit limit. Expenditures made after June 30, 1999, qualify for the credit under this section only if the expenditure was approved before June 30, 1999.

(c) The total credits taken by all water distribution businesses under this subsection (2) shall not exceed the following amounts:

(i) During the fiscal year ending June 30, 1997, nine million dollars;

(ii) During the fiscal year ending June 30, 1998, seven million dollars;

(iii) During the fiscal year ending June 30, 1999, seven million dollars; and

(iv) During all subsequent fiscal years, nine million dollars each fiscal year.

(3)(a) The departments of revenue and health shall jointly administer a preapproval process, track the availability of individual credits, and determine if the limitations under subsections (1) and (2) of this section have been reached. Duties shall be shared as follows: The department of revenue is responsible for fiscal and revenue matters and the department of health is responsible for water efficiency and use matters. If it is determined that the limitations for a year under subsection (1)(c) or (2)(c) of this section will be exceeded or have been reached, the departments may approve qualifying expenditures and rebates, but the water distribution business shall carry the credits forward, subject to the requirements of subsection (1)(b) or (2)(b) of this section. For water distribution businesses required by the department of health to have a water system plan, only those activities and projects identified in such a plan, a plan amendment, or a separate conservation plan, and approved by the department of health are eligible for a credit under this section.

(b) As part of the preapproval process, a water distribution business must complete a credit certificate. The credit certificate shall be in substantially the following form:

The undersigned hereby certifies that it intends to expend during [period of time] . . . . . . dollars for conservation activities as defined in section 2 of this act; that administrative or program expenses are not included in this amount; and that the expenditures and conservation activities will be undertaken after July 1, 1996.

DATED......... 199. By..............................

(Title - Officer or agent)

Address.........................

................................

Department of Revenue Registration No.

.........................

Approve:

......................................

Authorized agents of departments of revenue and health

(c) The departments of revenue and health shall approve or deny requests for the certification within sixty days of receipt unless additional time is agreed to. The departments may require the water distribution business to submit supporting documents such as plans, bids, contracts, and other like documents. If the certification is denied the water distribution business may request a review of the decision. The departments shall jointly review the decision and submit the results of the review to the water distribution business in writing within thirty days.

(4) A water distribution business may not receive credits for amounts related to administration of the credits under this section or administration of a conservation program.

(5) The credit taken by any water distribution business under this section for each calendar year may not exceed the amount of tax that would otherwise be due under RCW 82.16.020(1)(g) for that calendar year.

(6) Credit may not be received for amounts expended before the effective date of this act.

(7) The departments shall not accept new applications after June 30, 1999. Credits may not be received after June 30, 1999, for rebates or other expenditures as allowed in subsection (1) of this section, and after June 30, 2006, for expenditures as allowed in subsection (2) of this section.

(8) A water distribution business may not receive a credit under this section if the business takes or expects to take a tax credit or deduction under other provisions of this chapter or any other section or chapter of the Revised Code of Washington for the same expenditure or activity.

(9) If credits are taken but the taxpayer was not eligible for the credit or if expenditures were not actually made but credit was taken, the taxes for which credit was taken are immediately due. The due date of the taxes is the date the credit was taken. The department shall assess interest at the rate provided for delinquent taxes retroactively to the date the credit was taken.

(10) The amount of credits claimed shall be taken by the taxpayer on their regular combined excise tax return for their regular assigned tax reporting period. The amount of credit taken should be filled in on the front of the return form, with a copy of the credit approval letter attached to the return.

(11) Neither the department of health nor the department of revenue, nor both, need adopt rules to implement this section, but the departments may develop appropriate guidelines or policies.

NEW SECTION. Sec. 4. This act shall take effect July 1, 1996.