BP BHEAD INT H [Atlas:Generic]

AN ACT Relating to the taxation of coal-fired thermal electric generating facilities placed in operation before July 1, 1975; adding a new section to chapter 82.08 RCW; adding a new section to chapter 82.12 RCW; adding a new section to chapter 82.16 RCW; creating new sections; and declaring an emergency.

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

NEW SECTION. Sec. 1. When establishing policies that are designed to achieve the greatest reductions in industrial emissions, the legislature recognizes that state tax policy often serves as a disincentive to encouraging the maximum investment in technological solutions. Sales and use taxes on pollution control equipment effectively reduce the amount of capital that might otherwise be invested in additional pollution reduction measures. Property tax requirements on new pollution control technologies also serve as an additional business expense penalty against utilities who might be willing to commit greater capital to achieve higher emissions reductions.

Finally, tax policies might also lead to economic disparities between alternative solutions that can lead to the selection of strategies that might not be in the best interest of Washington state residents. The sales and use taxes on coal places Washington state coal mining operations at an economic disadvantage with coal suppliers located outside the state. Reductions in employment at Washington state's coal mining industry could have serious impacts on local government revenues and the local economies.

It is the purpose of this legislation to provide an adjustment that will offset the present disincentives of existing tax policy and encourage the greatest reduction in air pollution emissions at coal-fired generating plants while minimizing the potential adverse impacts on the state and local economies.

NEW SECTION. Sec. 2. A new section is added to chapter 82.08 RCW to read as follows:

(1) For the purposes of this section, "air pollution control facilities" mean any treatment works, control devices and disposal systems, machinery, equipment, structures, property, property improvements, and accessories, that are installed or acquired for the primary purpose of reducing, controlling, or disposing of industrial waste that, if released to the outdoor atmosphere, could cause air pollution, or that are required to meet regulatory requirements applicable to their construction, installation, or operation.

(2) The tax levied by RCW 82.08.020 does not apply to:

(a) Sales of tangible personal property to a light and power business, as defined in RCW 82.16.010, for construction or installation of air pollution control facilities at a thermal electric generation facility; or

(b) Sales of, cost of, or charges made for labor and services performed in respect to the construction or installation of air pollution control facilities.

(3) The exemption provided under this section applies only to sales, costs, or charges:

(a) Incurred for air pollution control facilities constructed or installed after the effective date of this act and used in a thermal electric generation facility placed in operation before July 1, 1975;

(b) If the air pollution control facilities are constructed or installed to meet applicable regulatory requirements established under state or federal law, including the Washington clean air act, chapter 70.94 RCW; and

(c) For which the purchaser provides the seller with an exemption certificate, signed by the purchaser or purchaser's agent, that includes a description of items or services for which payment is made, the amount of the payment, and such additional information as the department reasonably may require.

(4) This section does not apply to sales of tangible personal property purchased or to sales of, costs of, or charges made for labor and services used for maintenance or repairs of pollution control equipment.

NEW SECTION. Sec. 3. A new section is added to chapter 82.12 RCW to read as follows:

(2) The provisions of this chapter do not apply in respect to the use of air pollution control facilities installed and used by a light and power business, as defined in RCW 82.16.010, in generating electric power.

(3) The exemption provided under this section applies only to air pollution control facilities that are:

(a) Constructed or installed after the effective date of this act and used in a thermal electric generation facility placed in operation before July 1, 1975; and

(b) Constructed or installed to meet applicable regulatory requirements established under state or federal law, including the Washington clean air act, chapter 70.94 RCW.

(4) This section does not apply to the use of tangible personal property for maintenance or repairs of the pollution control equipment.

NEW SECTION. Sec. 4. A new section is added to chapter 82.16 RCW to read as follows:

(1) Light and power businesses engaged in the generation of electric energy at thermal electric generating facilities placed in operation before July 1, 1975, and that are subject to taxation under this chapter, shall be allowed a tax credit equal to the amount of sales and use taxes paid on coal used by the facility in generating electricity plus the amount of property taxes paid and associated with new air pollution control facilities constructed after the effective date of this act.

(2) The credit shall be taken against taxes due for the same calendar year in which the amounts, for which the credit is claimed, were paid on sales, use, or property taxes by the light and power business.

(3) This credit remains effective only if the light and power business using or consuming the coal makes a timely demonstration to the department of revenue that it is making reasonable progress to install air pollution control facilities to meet applicable regulatory requirements established under state or federal law, including the Washington clean air act, chapter 70.94 RCW. The demonstration shall be deemed timely if made within eighteen months after the final determination of the regulatory requirements. Evidence of reasonable progress may include contracts to purchase pollution control equipment or contracts for construction of air pollution control facilities.

(4) If a light and power business fails to make the demonstration required in subsection (3) of this section, the light and power business shall return to the state all tax revenues equal to the tax credits that have been allowed before the time of revocation, including interest at an annualized rate of six percent.

(5) For the purposes of this section, "air pollution control facilities" mean any treatment works, control devices and disposal systems, machinery, equipment, structures, property, property improvements, and accessories, that are installed or acquired for the primary purpose of reducing, controlling, or disposing of industrial waste that, if released to the outdoor atmosphere, could cause air pollution, or that are required to meet regulatory requirements applicable to their construction, installation, or operation.

NEW SECTION. Sec. 5. The department of revenue may adopt rules to implement this act.

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 immediately.