AN ACT Relating to
business and occupation tax of international investment management companies;
amending RCW 82.04.2201 and 82.04.290; adding a new section to chapter 82.04
RCW; providing an effective date; and declaring an emergency.
BE IT ENACTED BY THE
LEGISLATURE OF THE STATE OF WASHINGTON:
NEW SECTION. Sec.
1. A new section is added
to chapter 82.04 RCW to read as follows:
For purposes of RCW
82.04.290(3):
(1) A person is engaged
in the business of providing international investment management services, if:
(a) Such person is
engaged primarily in the business of providing investment management services;
and
(b) At least ten
percent of the gross income of such person is derived from providing investment
management services to any of the following: (i) Persons or collective
investment funds residing outside the United States; or (ii) persons or
collective investment funds with at least ten percent of their investments
located outside the United States.
(2) "Investment
management services" means investment research, investment consulting,
portfolio management, fund administration, fund distribution, investment
transactions, or related investment services.
(3) "Collective
investment fund" includes:
(a) A mutual fund or
other regulated investment company, as defined in section 851(a) of the
internal revenue code of 1986, as amended;
(b) An "investment
company," as that term is used in section 3(a) of the Investment Company
Act of 1940, as well as any entity that would be an investment company for this
purpose but for the exemptions contained in section 3(c)(1) or (11);
(c) An "employee
benefit plan," which includes any plan, trust, commingled employee benefit
trust, or custodial arrangement that is subject to the Employee Retirement
Income Security Act of 1974, as amended, 29 U.S.C. Sec. 1001 et seq., or that
is described in sections 125, 401, 403, 408, 457, and 501(c)(9) and (17)
through (23) of the internal revenue code of 1986, as amended, or a similar
plan maintained by a state or local government, or a plan, trust, or custodial
arrangement established to self-insure benefits required by federal, state, or
local law;
(d) A fund maintained
by a tax-exempt organization, as defined in section 501(c)(3) of the internal
revenue code of 1986, as amended, for operating, quasi-endowment, or endowment
purposes;
(e) Funds that are
established for the benefit of such tax-exempt organizations, such as
charitable remainder trusts, charitable lead trusts, charitable annuity trusts,
or other similar trusts; or
(f) Collective
investment funds similar to those described in (a) through (e) of this
subsection created under the laws of a foreign jurisdiction.
(4) Investments are
located outside the United States if the underlying assets in which the
investment constitutes a beneficial interest reside or are created, issued or
held outside the United States.
Sec. 2. RCW 82.04.2201 and 1994
sp.s. c 10 s 1 are each amended to read as follows:
There is levied and
shall be collected for the period July 1, 1993, through June 30, 1997, from
every person for the act or privilege of engaging in business activities, as a
part of the tax imposed under RCW 82.04.220 through 82.04.280 and 82.04.290 (3)
and (4), except RCW 82.04.250(1) and 82.04.260(15), an additional tax
equal to 4.5 percent multiplied by the tax payable under those sections.
To facilitate
collection of these additional taxes, the department of revenue is authorized
to adjust the basic rates of persons to which this section applies in such
manner as to reflect the amount to the nearest one-thousandth of one percent of
the additional tax hereby imposed, adjusting ten-thousandths equal to or
greater than five ten-thousandths to the greater thousandth.
Sec. 3. RCW 82.04.290 and 1993
sp.s. c 25 s 203 are each amended to read as follows:
(1) Upon every person
engaging within this state in the business of providing selected business
services other than or in addition to those enumerated in RCW 82.04.250 or
82.04.270; as to such persons the amount of tax on account of such activities
shall be equal to the gross income of the business multiplied by the rate of
2.5 percent.
(2) Upon every person
engaging within this state in banking, loan, security, investment management,
investment advisory, or other financial businesses, other than or in
addition to those enumerated in subsection (3) of this section; as to such
persons, the amount of the tax with respect to such business shall be equal to
the gross income of the business, multiplied by the rate of 1.70 percent.
(3) Upon every
person engaging within this state in the business of providing international
investment management services, as to such persons, the amount of tax with
respect to such business shall be equal to the gross income or gross proceeds
of sales of the business multiplied by a rate of 0.275 percent.
(4) Upon every
person engaging within this state in any business activity other than or in
addition to those enumerated in RCW 82.04.230, 82.04.240, 82.04.250, 82.04.255,
82.04.260, 82.04.270, and 82.04.280, and subsections (1) ((and)),
(2), and (3) of this section; as to such persons the amount of tax on
account of such activities shall be equal to the gross income of the business
multiplied by the rate of 2.0 percent. This section includes, among others,
and without limiting the scope hereof (whether or not title to materials used
in the performance of such business passes to another by accession, confusion
or other than by outright sale), persons engaged in the business of rendering
any type of service which does not constitute a "sale at retail" or a
"sale at wholesale." The value of advertising, demonstration, and
promotional supplies and materials furnished to an agent by his principal or
supplier to be used for informational, educational and promotional purposes
shall not be considered a part of the agent's remuneration or commission and
shall not be subject to taxation under this section.
NEW SECTION. Sec.
4. 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.
