BP BHEAD INT S [atlas:bill]

AN ACT Relating to community empowerment; amending RCW 43.63A.700, 43.63A.710, 84.14.010, 84.14.050, 82.60.020, 82.60.040, and 82.62.010; adding new sections to chapter 82.04 RCW; adding a new section to chapter 82.08 RCW; adding a new section to chapter 82.12 RCW; adding a new section to chapter 48.14 RCW; adding a new section to chapter 84.36 RCW; adding a new section to chapter 43.19 RCW; adding a new chapter to Title 43 RCW; adding new chapters to Title 82 RCW; adding a new chapter to Title 74 RCW; creating new sections; recodifying RCW 43.63A.700 and 43.63A.710; and providing expiration dates.

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

NEW SECTION. Sec. 1. (1) The legislature finds that:

(a) There are geographic areas within communities that are characterized by a lack of employment opportunities, by an average income level that is below the median income level for the surrounding community, by a lack of affordable housing, by deteriorating infrastructure, and by a lack of facilities for community services, job training, and education;

(b) Strategies to encourage reinvestment in these areas by assisting local businesses to become stronger and area residents to gain economic power involve a variety of activities and partnerships;

(c) Reinvestment in these areas cannot be accomplished with only governmental resources and require a comprehensive approach that integrates various incentives, programs, and initiatives to meet the economic, physical, and social needs of the area;

(d) Successful reinvestment depends on a local government's ability to coordinate public resources in a cohesive, comprehensive strategy that is designed to leverage long-term private investment in an area;

(e) Reinvestment can strengthen the overall tax base through increased tax revenue from expanded and new business activities and physical property improvement;

(f) Local governments, in cooperation with area residents, can provide leadership as well as planning and coordination of resources and necessary supportive services to address reinvestment in the area; and

(g) It is in the public interest to adopt a targeted approach to revitalization and enlist the resources of all levels of government, the private sector, community-based organizations, and community residents to revitalize an area.

(2) The legislature declares that the purposes of the community empowerment zone act are to:

(a) Encourage reinvestment through strong partnerships and cooperation between all levels of government, community-based organizations, area residents, and the private sector;

(b) Involve the private sector and stimulate private reinvestment through the judicious use of public resources;

(d) Include all levels of government, community individuals, organizations, and private sector in the policy-making process.

PART I ‑- DESIGNATION OF COMMUNITY EMPOWERMENT ZONES

NEW SECTION. Sec. 101. The definitions in this section apply throughout this chapter unless the context clearly requires otherwise.

(1) "Area" means a geographic area within a local government that is described by a close perimeter boundary.

(2) "Community empowerment zone" means an area meeting the requirements of RCW 43.63A.700 (as recodified by this act) and officially designated by the director.

(3) "Department" means the department of community, trade, and economic development.

(4) "Director" means the director of the department of community, trade, and economic development.

(5) "Local government" means a city, code city, town, or county.

Sec. 102. RCW 43.63A.700 and 1994 sp.s. c 7 s 702 are each amended to read as follows:

(1) The department, in cooperation with the department of revenue, the employment security department, and the office of financial management, ((~~shall~~)) may approve applications submitted by local governments for an area's designation as a community empowerment zone under this ((~~section~~)) chapter. The application for designation shall be in the form and manner and contain such information as the department may prescribe, provided that the application ((~~for designation~~)) shall:

(a) Contain information sufficient for the director to determine if the criteria established in RCW 43.63A.710 (as recodified by this act) have been met((.));

(b) Be submitted on behalf of the local government by its chief elected official, or, if none, by the governing body of the local government((.));

(c) Contain a five-year community empowerment plan that ((describes the proposed designated community empowerment zone's community development needs and present a strategy for meeting those needs. The plan shall address the following categories: Housing needs; public infrastructure needs, such as transportation, water, sanitation, energy, and drainage/flood control; other public facilities needs, such as neighborhood facilities or facilities for provision of health, education, recreation, public safety, or other services; community economic development needs, such as commercial/industrial revitalization, job creation and retention considering the unemployment and underemployment of area residents, accessibility to financial resources by area residents and businesses, investment within the area, or other related components of community economic development; and social service needs.

The local government is required to provide a description of its strategy for meeting the needs identified in this subsection (1)(c). As part of the strategy, the local government is required to identify the needs for which specific plans are currently in place and the source of funds expected to be used. For the balance of the area's needs, the local government must identify the source of funds expected to become available during the next two-year period and actions the local government will take to acquire those funds.)) meet the requirements of section 104 of this act; and

(d) Certify that ((~~neighborhood~~)) area residents were given the opportunity to participate in the development of the five-year community empowerment strategy required under ((~~(c) of this subsection~~)) section 104 of this act.

(2) No local government shall submit more than two ((~~neighborhoods~~)) areas to the department for possible designation as a ((~~designated~~)) community empowerment zone under this ((~~section~~)) chapter.

(3)(a) ((~~Within ninety days after January 1, 1994,~~)) The director may designate up to ((~~six designated community empowerment zones~~)) ten areas from among the applications ((~~eligible~~)) submitted for designation as a ((~~designated~~)) community empowerment zone.

(b) The director shall make determinations of ((~~designated~~)) designation as community empowerment zones on the basis of the following factors:

(i) The strength and quality of the local government commitments to meet the needs identified in the five-year community empowerment plan required under ((~~this~~)) section 104 of this act.

(ii) The level of private ((~~commitments by private entities~~)) sector commitment of additional resources and contributions to the ((~~designated community empowerment zone~~)) area.

(iii) The potential for revitalization of the area as a result of designation as a ((~~designated~~)) community empowerment zone.

(iv) Other factors the director deems necessary.

(4) Except as provided in section 105 of this act, an area that was designated a community empowerment zone before January 1, 1996, under this section, automatically and without additional action by the local government continues its designation under this chapter.

(5) The department may not designate additional community empowerment zones after January 1, 2000, but may amend or rescind designations of community empowerment zones in accordance with section 105 of this act.

Sec. 103. RCW 43.63A.710 and 1994 sp.s. c 7 s 703 are each amended to read as follows:

(1) The director may not designate an area as a ((~~designated~~)) community empowerment zone unless that area meets the following requirements:

(a) The area must be designated by the legislative authority of the local government as an area to receive federal, state, and local assistance designed to increase economic, physical, or social activity in the area;

(b) The area must have at least fifty-one percent of the households in the area with incomes at or below eighty percent of the county's median income, adjusted for household size;

(c) The average unemployment rate for the area, for the most recent twelve-month period for which data is available must be at least one hundred twenty percent of the average unemployment rate of the county; and

(d) A five-year community empowerment plan for the area that meets the requirements of ((~~RCW 43.63A.700(1)(c) and as further defined by the director~~)) section 104 of this act must be adopted.

(2) The director may establish, by rule, such other requirements as the director may reasonably determine necessary and appropriate to assure that the purposes of this ((~~section~~)) chapter are satisfied.

(3) In determining if an area meets the requirements of this section, the director may consider data provided by the United States bureau of the census from the most recent census or any other reliable data that the director determines to be acceptable for the purposes for which the data is used.

NEW SECTION. Sec. 104. (1) The five-year community empowerment plan required under RCW 43.63A.700 (as recodified by this act) shall contain information that describes the community development needs of the proposed community empowerment zone and present a strategy for meeting those needs. The plan shall address the following categories: (a) Housing needs for all economic segments of the proposed community empowerment zone;

(b) Public infrastructure needs, such as transportation, water, sanitation, energy, and drainage and flood control;

(c) Other public facilities needs, such as neighborhood facilities or facilities for provision of health, education, recreation, public safety, and other services;

(d) Community economic development needs, such as commercial and industrial revitalization, job creation and retention considering the unemployment and underemployment of area residents, accessibility to financial resources by area residents and businesses, investment within the area, and other related components of community economic development; and

(e) Social service needs of residents in the proposed community empowerment zone.

(2) The local government must provide a description of its strategy for meeting the needs identified in subsection (1) of this section. As part of the community empowerment zone strategy, the local government must identify the needs for which specific plans are currently in place and the source of funds expected to be used. For the balance of the area's needs, the local government must identify the source of funds expected to become available during the next two-year period and actions the local government will take to acquire those funds.

(3) The local government must submit an annual progress report, to the department, that details the extent to which the local government is working to meet the needs identified in the five-year community empowerment plan. If applicable, the progress report shall also contain a discussion on the impediments to meeting the needs outlined in the five-year community empowerment plan. The department shall determine the date the annual progress reports are due from each local government.

NEW SECTION. Sec. 105. (1) The terms or conditions of a community empowerment zone approved under this chapter may be amended to:

(a) Alter the boundaries of the community empowerment zone; or

(b) Terminate the designation of a community empowerment zone.

(2)(a) A request for an amendment under subsection (1)(a) of this section may not be in effect until the department issues an amended designation for the community empowerment zone that approves the requested amendment. The local government must promptly file with the department a request for approval that contains information the department deems necessary to evaluate the proposed changes and its impact on the area's designation as a community empowerment zone under RCW 43.63A.710 (as recodified by this act). The local government must hold at least two public hearings on the proposed changes and include the information in its request for an amendment to its community empowerment zone.

(b) The department shall approve or disapprove a proposed amendment to a community empowerment zone within sixty days of its receipt of a request under subsection (1)(a) of this section. The department may not approve changes in a community empowerment zone that are not in conformity with this chapter.

(3)(a) The termination of an area's designation as a community empowerment zone under subsection (1)(b) of this section is not effective until the department issues a finding stating the reasons for the termination. The local government may file an appeal to the department's findings within sixty days of the notice to terminate the area's designation. The department shall notify the local government of the results within thirty days of the filing of the appeal.

(b) A termination of an area's designation as a community empowerment zone shall have no effect on benefits previously extended to individual businesses. The local government may not commit benefits to a business after the effective date of the termination of an area's designation as a community empowerment zone.

NEW SECTION. Sec. 106. The department shall administer this chapter and has the following powers and duties:

(1) To monitor the implementation of chapter . . ., Laws of 1997 (this act) and submit reports evaluating the effectiveness of the program and any suggestions for legislative changes to the governor and legislature by December 1, 1997, and every December 1st thereafter;

(2) To prepare and submit an annual report to the legislature on the progress of the areas designated as community empowerment zones under this chapter;

(3) To provide information and appropriate assistance to persons desiring to locate and operate a business in a community empowerment zone;

(4) To assist local governments in obtaining federal designation as either an empowerment zone or enterprise community;

(5) To work with appropriate state agencies and the department to coordinate the delivery of programs, including but not limited to housing, community and economic development, small business assistance, social service, and employment and training programs which are carried on in a community empowerment zone; and

(6) To develop rules necessary for the administration of this chapter.

NEW SECTION. Sec. 107. The administration of a community empowerment zone is under the jurisdiction of the local government. Each local government shall, by ordinance, designate a community empowerment zone administrator for the area designated as a community empowerment zone that is within its jurisdiction. A community empowerment zone administrator must be an officer or employee of the local government. The community empowerment zone administrator shall be the liaison between the local government, the department, the business community, labor, and community-based organizations within the community empowerment zone.

NEW SECTION. Sec. 108. This chapter may be known and cited as the Washington community empowerment zone act.

PART II ‑- BUSINESS TAX INCENTIVES

Subpart A ‑- Empowerment Zone Hiring and Training Tax Credit

NEW SECTION. Sec. 201. It is the intent of the legislature that the department of social and health services, the employment security department, the work force training and education coordinating board, the department of community, trade, and economic development, and the community and technical colleges work together to market the tax incentive programs established under section 206 of this act.

The goals of the tax incentive program are to give employers incentives to hire and train public assistance recipients that reside in community empowerment zones and to increase the employability of public assistance recipients.

The legislature intends to achieve these goals through the provision of tax incentives in the form of tax credits for persons who agree, in writing, to hire and train recipients of aid to families with dependent children.

The legislature finds that incentives should be targeted by allowing smaller incentives to employers of recipients who have already achieved the higher levels of education and job experience while providing larger incentives for employers of recipients who are less job ready.

NEW SECTION. Sec. 202. The definitions in this section apply throughout this chapter and chapter 74.-- RCW (sections 205 through 210 of this act) unless the context clearly requires otherwise.

(1) "Community empowerment zone" has the meaning given in section 101 of this act.

(2) "Gross annual wages" means salary, wages, tips, and other compensation paid to a qualified employee by an employer claiming the credit under this section during the calendar year for which the credit is claimed.

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

(4) "Qualified employee" and "category 1, 2, or 3 qualified employee" means a person that resides in a community empowerment zone, is certified as such by the department of social and health services, and hired before June 30, 2002. "Qualified employee" does not include a person hired by an employer to replace a striker or locked-out worker.

(5) "Qualified training institution" means a community or technical college, four-year college or university, public or private institution, apprenticeship and training council, or private industry council that has entered into a training plan that provides for the training of a qualified employee of a person claiming the credit under this chapter.

(6) "Training plan" means a written agreement, signed by a qualified employee, a union or other employee bargaining agreement, a qualified training institution, the department of social and health services or a designee of the department of social and health services, and an employer claiming the credit under this section, that specifies the amount that the employer will pay the qualified training institution for the payment costs for the qualified employee, the learning objectives that will be achieved by the training, and a statement of progressively increasing scale of wages to be paid to the employee during the training plan period, using a wage scale that exceeds federal poverty levels for a family of three.

NEW SECTION. Sec. 203. (1) A person is allowed a credit against the tax due under chapter 82.04 or 82.16 RCW of an amount equal to one hundred twenty percent of the payment made by an employer to a qualified training institution under a training plan for training a qualified employee, subject to the limitations in this section. A person may not receive a credit for the same amount under both chapters 82.04 and 82.16 RCW.

(2) A person claiming the credit shall file an affidavit form prescribed by the department of revenue, that shall include the amount of the credit claimed and additional information as the department of revenue may require.

(3)(a) The tax credit in respect to any qualified employee may not in a calendar year exceed:

(i) The lesser of eight percent of the qualified employee's gross annual wages or one thousand two hundred dollars for a category 1 qualified employee;

(ii) The lesser of sixteen percent of the qualified employee's gross annual wages or two thousand four hundred dollars for a category 2 qualified employee; or

(iii) The lesser of twenty-four percent of the qualified employee's gross annual wages or three thousand six hundred dollars for a category 3 qualified employee.

(b) The office of financial management shall, by December 1, 1997, for calendar year 1998, and by December 1st each year thereafter adjust the payment maximums under subsection (3) of this section to reflect inflation, using the previous calendar year's limit adjusted by an appropriate federal inflationary index reflecting the rate of inflation for the previous year. The department of revenue shall publish the new payment maximums.

(4) The credit in respect to a qualified employee may not be taken:

(a) For more than one year of training in the case of a category 1 qualified employee; or

(b) For more than three years of training in the case of a category 2 or category 3 qualified employee.

(5) The credit shall be taken against taxes due for the same calendar year in which the payment is made to the qualified training institution and must be claimed by the due date of the last tax return for the calendar year in which the payment is made to the qualified training institution.

(6) The department of revenue shall allow accrual of tax credits to a successor employer if the business or firm is sold, assigned, conveyed, or otherwise transferred.

(7) Total credits allowed to all persons claiming credits may not exceed ten million dollars in any biennium.

(8) This section expires December 31, 2005.

NEW SECTION. Sec. 204. Chapter 82.32 RCW applies to the administration of this chapter.

NEW SECTION. Sec. 205. The definitions in section 202 of this act apply throughout this chapter unless the context clearly requires otherwise.

NEW SECTION. Sec. 206. (1) The tax incentive program is hereby established. The department of social and health services may enter into training plans. The department of social and health services shall adopt guidelines for the tax incentive program. The guidelines must include, but are not limited to:

(a) Designation of three categories of eligible aid to families with dependent children recipients. The department of social and health services shall by rule establish criteria for assigning recipients into categories 1, 2, and 3. In establishing the criteria, the department of social and health services shall consider the degree of work experience, training, wage and employment history, and education, with category 1 representing recipients with the highest degree of job readiness;

(b) Selection criteria that includes establishment of a pool of prospective public assistance participants;

(c) A restriction on the total number of employees that an employer may have in the program, except that no more than twenty percent of the employers' employees may participate in the program;

(d) A requirement that the employer participate in the earned income tax credit program; and

(e) Standards regarding length of training plans, requiring the training institution to design the plan length so that it meets accepted training standards for that industry or profession. Training plans may not exceed three years.

(2) Qualified training institutions are accredited for the purposes of this chapter if they meet national standards, standards of the state board for community and technical colleges, or standards of the work force training and education coordinating board.

(3) The department of social and health services may contract with a public or private entity to carry out the department's duties under this chapter. The department of social and health services may withdraw designation of authority to this entity without showing cause.

(4) The department of social and health services shall manage the program so that the total amount of credits by all persons claiming tax credits under chapter 82.-- RCW (sections 201 through 204 of this act) does not exceed ten million dollars in a biennium. The department of social and health services shall enter into contracts with employers on a first-come, first-served basis. The department of social and health services may not enter into contracts if the potential amount of credits by all persons potentially claiming credits will exceed ten million dollars in a biennium.

NEW SECTION. Sec. 207. The department of social and health services, in cooperation with the work force training and education coordinating board, may institute an experimental and control group study under this program. The department of social and health services, in carrying out this study, may select particular recipients or categories of recipients, and is not subject to claims of discrimination for recipients who are not participating in the experimental group, if the selection process is in the furtherance of a valid public purpose.

NEW SECTION. Sec. 208. The department of social and health services, the employment security department, the department of community, trade, and economic development, the work force training and education coordinating board, and the community and technical colleges shall cooperate and coordinate among the existing state and federal assistance and training programs to focus the efforts of enrollees and programs to most effectively achieve results from the various programs.

NEW SECTION. Sec. 209. (1) Training plans may not be entered into after June 30, 2002. Contracts in effect on June 30, 2002, continue in effect according to the terms of the contract.

(2) If the program under this chapter and chapter 82.-- RCW (sections 201 through 204 of this act) is terminated before June 30, 2002, persons eligible for tax credits at the time of the program termination under chapter 82.-- RCW (sections 201 through 204 of this act) shall receive the credits, subject to the limitations in section 203(7) of this act.

NEW SECTION. Sec. 210. The department of social and health services and the department of revenue shall perform an assessment of the results of the tax incentive program created in this chapter and chapter 82.-- RCW (sections 201 through 204 of this act) and deliver a report on the assessment to the governor and legislature by December 1, 2001. The assessment must measure the effect of the tax incentive program on increasing self-sufficiency of public assistance recipients, and other factors the department of social and health services and the department of revenue may select.

Subpart B ‑- New Business Tax Reduction

NEW SECTION. Sec. 211. A new section is added to chapter 82.04 RCW to read as follows:

(1) This chapter does not apply to a new business, with less than fifty employees and located within a community empowerment zone, during the first thirty-six months of operation of the business. During the next twenty-four months of operation of the business, the business is exempt from taxes due under this chapter according to the following schedule:

Year Exemption

4 50%

5 25%

6 0%

The business is not eligible for the exemption under this section after its sixtieth month of operation.

(2) As used in this section:

(a) "Community empowerment zone" has the same meaning as in section 101 of this act; and

(b)(i) "New business" means a business that obtained or was required to obtain a registration certificate under RCW 82.32.030 for the first time during the calendar year for which the exemption is first claimed under this chapter; and

(ii) "New business" does not include:

(A) A business that has been restructured, reorganized, or transferred, unless the majority of the activities to be conducted after restructuring, reorganization, or transferral are significantly different from the activities previously conducted;

(B) A new branch location or other facility except by an existing out-of-state entity first doing business in this state; or

(C) A business that is substantially similar to a business currently operated, or operated within the past five years, by the same principals.

(3) The department may require a new business to certify its status as part of its master business application or with the first tax return claiming exemption under this section.

Subpart C ‑- Sales and Use Tax Exemption on Consumables

NEW SECTION. Sec. 212. A new section is added to chapter 82.08 RCW to read as follows:

(1) The tax levied by RCW 82.08.020 does not apply to sales to a manufacturer or processor for hire, located within a community empowerment zone, of chemicals and materials used directly in a manufacturing operation or research and development operation, but only when the purchaser provides the seller with an exemption certificate in a form and manner prescribed by the department by rule, and the purchaser provides the department with a duplicate of the certificate or a summary of exempt sales as the department may require. The seller shall retain a copy of the certificate for the seller's files.

(2) As used in this section and section 213 of this act:

(a) "Chemicals" means a catalyst, solvent, water, acid, oil, or other additive that physically or chemically interacts or comes in contact with the product and that is an integral and necessary part of the manufacturing, assembling, processing, fabricating, or research and development operation;

(b) "Cogeneration" has the same meaning as in RCW 82.08.02565;

(d) "Machinery and equipment" has the same meaning as in RCW 82.08.02565;

(e) "Manufacturing operation" has the same meaning as in RCW 82.08.02565;

(f) "Materials" means an item of tangible personal property used or consumed in and is necessary and integral to a manufacturing, assembling, processing, fabricating, or research and development operation including, but not limited to lubricating and compounding oils, grease, filtering materials, and refrigerants;

(g) "Research and development operation" has the same meaning as in RCW 82.08.02565; and

(h) "Used directly" has the same meaning as in RCW 82.08.02565.

NEW SECTION. Sec. 213. A new section is added to chapter 82.12 RCW to read as follows:

(1) The provisions of this chapter do not apply in respect to the use by a manufacturer or processor for hire, located within a community empowerment zone, of chemicals and materials used directly in a manufacturing operation or research and development operation, but only when the user provides the department with:

(a) An exemption certificate in a form and manner prescribed by the department within sixty days of the first use of the chemicals and materials in the community empowerment zone; or

(b) An annual summary listing the chemicals and materials by January 31st of the year following the calendar year in which the chemicals and materials are first used in the community empowerment zone.

(2) The definitions in section 212 of this act apply to this section.

Subpart D ‑- International Services Employment Tax Credit

NEW SECTION. Sec. 214. A new section is added to chapter 82.04 RCW to read as follows:

(1) There may be credited against the tax imposed by this chapter, an amount equal to one thousand dollars per qualified employment position, by a business that is:

(a) Located within a community empowerment zone; and

(b) Engaged in the business of providing international services.

(2) In order to claim the credit under this section, at least ten percent of the qualified employment positions must be filled with applicants who reside, at the time of application and for a period of six months after employment, in a community empowerment zone.

(3) A business may not use the tax credit to relocate existing jobs from any jurisdiction in the state to a community empowerment zone.

(4) The annual credit allowed under this section shall be limited to the amount of tax imposed by this chapter.

(5) The department shall keep a running total of all credits granted under this section and section 215 of this act during each fiscal biennium. The department shall not allow any credits that would cause the tabulation for a biennium to exceed five million dollars. If all or part of an application for credit is disallowed under this subsection, the disallowed portion shall be carried over for approval the next biennium. However, the businesses' carryover into the next biennium is only permitted if the tabulation for the next biennium does not exceed five million dollars as of the date on which the department has disallowed the application.

(6) As used in this section:

(a) "Community empowerment zone" has the same meaning as in section 101 of this act;

(b) "International services" means a business that:

(i) Either:

(A) Provides services directly related to the delivery of goods or services outside the United States or directly related to property located outside the United States; or

(B) Provides services to or on behalf of persons residing outside the United States; and

(ii) Is subject to taxation under RCW 48.14.020 or 82.04.290 (1) or (2); and

(c) "Qualified employment position" means a permanent full-time employee employed by the business providing the international service.

NEW SECTION. Sec. 215. A new section is added to chapter 48.14 RCW to read as follows:

(1) There may be credited against the tax imposed under RCW 48.14.020, an amount equal to one thousand dollars per qualified employment position, by a business that is:

(a) Located within a community empowerment zone; and

(b) Engaged in the business of providing international services.

(3) A business may not use the tax credit to relocate existing jobs from any jurisdiction in the state to a community empowerment zone.

(4) The annual credit allowed under this section shall be limited to the amount of tax imposed by this chapter.

(5) The department shall keep a running total of all credits granted under this section and section 214 of this act during each fiscal biennium. The department shall not allow any credits that would cause the tabulation for a biennium to exceed five million dollars. If all or part of an application for credit is disallowed under this subsection, the disallowed portion shall be carried over for approval the next biennium. However, the businesses' carryover into the next biennium is only permitted if the tabulation for the next biennium does not exceed five million dollars as of the date on which the department has disallowed the application.

(6) As used in this section:

(a) "Community empowerment zone" has the same meaning as in section 101 of this act;

(b) "International services" has the same meaning as in section 214 of this act; and

NEW SECTION. Sec. 216. A new section is added to chapter 82.04 RCW to read as follows:

(1) In computing tax there may be deducted from the measure of tax amounts derived from sales to businesses engaged in providing direct international services, if the qualified supportive business is located in a community empowerment zone.

(2) As used in this section:

(a) "Community empowerment zone" has the same meaning as in section 101 of this act;

(b) "International services" has the same meaning as in section 214 of this act; and

(c) "Qualified supportive business" means a business that provides goods or supplies to a business engaged in providing international services.

PART III ‑- COMMUNITY EMPOWERMENT PROJECT FINANCING

Subpart A ‑- Excise Tax Increment Financing

NEW SECTION. Sec. 301. It is the purpose of the legislature with this chapter to provide for the allocation of a portion of state and local retail sales and use taxes for a limited period of time to assist in the financing of needed health and safety improvements, public improvements, and other public investments in community empowerment zones that are needed to encourage private development.

NEW SECTION. Sec. 302. The definitions in this section apply throughout this chapter unless the context clearly requires otherwise.

(1) "Community empowerment project" means:

(a) Health and safety improvements authorized to be publicly financed under chapter 35.80 or 35.81 RCW;

(b) Publicly owned or leased facilities in a community empowerment zone that the local government has authority to provide; and

(i) Providing professional management, planning, and promotion within the community empowerment zone, including the management and promotion of retail trade activities in the community empowerment zone;

(ii) Providing funds to mitigate the negative impacts on a community empowerment zone caused by the siting of a major publicly financed facility;

(iii) Providing maintenance and security for common or public areas in the community empowerment zone; or

(iv) Historic preservation activities authorized under RCW 35.21.395.

(2) "Community empowerment project costs" mean: Costs of design, planning, acquisition, site preparation, construction, reconstruction, rehabilitation, improvement, operation, and installation of the community empowerment project; costs of relocation, maintenance, and operation of property pending construction of the community empowerment project; costs of financing, including interest during construction, legal and other professional services, taxes, and insurance; costs of apportioning the taxes and complying with this chapter and other applicable law; and administrative costs reasonably necessary and related to these costs.

(3) "Community empowerment project ordinance" means the ordinance passed under section 304 of this act.

(4) "Community empowerment zone" has the same meaning as in section 101 of this act, and is the geographic area from which excise taxes are to be appropriated to finance community empowerment projects.

(5) "Excise taxes" mean: (a) Retail sales taxes levied under chapter 82.08 RCW; (b) local retail sales taxes levied under chapter 82.14 RCW, except those taxes levied under RCW 82.14.360; and (c) use taxes levied under chapter 82.12 RCW.

(6) "Local government" means a city, code city, or county.

(7) "Ordinance" means an appropriate method of taking legislative action by a local government.

(8) "Tax allocation revenues" mean those tax revenues allocated to a local government under this chapter.

(9) "Taxing district" means a governmental entity that levies an excise tax that is collected within a community empowerment zone.

NEW SECTION. Sec. 303. (1) Only community empowerment projects that are determined by the legislative authority of the local government to meet the following criteria are eligible to be financed under this chapter:

(a) The community empowerment project: (i) Will address a health or safety problem; (ii) will mitigate the negative impacts caused by the siting of a major publicly financed facility; or (iii) is likely to increase the sales and activities of businesses subject to excise taxes located within the community empowerment zone; and

(b) Private development that is anticipated to occur within the community empowerment zone as a result of the community empowerment project is consistent with an existing comprehensive land use plan, approved growth policies of the jurisdiction within which it is located, and the five-year community empowerment plan required under RCW 43.63A.700 (as recodified by this act).

(2) Apportionment of excise tax revenues to finance the community empowerment project is subject to the following limitations:

(a) A community empowerment zone may not be established that includes a geographic area with a previously established apportionment district which has outstanding bonds payable in whole or in part from tax allocation revenues; and

(b) Only excise taxes may be appropriated under this chapter.

(3) A community empowerment project may be undertaken and coordinated with other programs or efforts undertaken by the local government or others and may be funded in whole or in part from sources other than those provided under this chapter.

NEW SECTION. Sec. 304. In order to secure an allocation of excise taxes to finance a community empowerment project, the local government shall:

(1) Propose by ordinance a plan for the community empowerment project that includes a description of the contemplated community empowerment project, the estimated cost of the community empowerment project, the boundaries of the community empowerment zone, the estimated period during which tax revenue apportionment is contemplated, and ways in which the local government plans to use tax allocation revenues to finance the community empowerment project;

(2) At least fifteen days in advance of a public hearing at which the ordinance is first considered, deliver notice of the hearing to the county treasurer and the state treasurer. The notice shall include a map or drawing showing the location of the contemplated community empowerment project and the boundaries of the community empowerment zone, a brief description of the community empowerment project, the estimated cost of the community empowerment project, the anticipated increase in sales and business activity subject to excise taxes within the community empowerment zone for so long as apportionment is proposed, the location of the local government's principal business office where it will maintain information concerning the community empowerment project for public inspection, and the date and place of the hearing;

(3) At the time and place fixed for the hearing under subsection (2) of this section and at such times to which the hearing may be adjourned, receive and consider all statements and materials as may be submitted, and objections and letters filed before and within ten days after the hearing;

(4) Within one hundred twenty days after completion of the public hearing, pass an ordinance establishing authorization of the collection of excise tax within the community empowerment zone and authorization of the proposed community empowerment project, including any modifications that in the local government's opinion the hearing indicated should be made, that includes a description of the community empowerment project, the estimated cost of the community empowerment project, the portion of the estimated cost of the community empowerment project to be paid from tax allocation revenues, the estimated time during which the excise taxes are to be apportioned, the date when the apportionment of excise taxes will commence, and a finding that the community empowerment project meets the conditions of section 303 of this act.

NEW SECTION. Sec. 305. (1) Upon the date established in the ordinance, but not sooner than the first day of the calendar year following the passage of the ordinance, the excise taxes levied upon the sales and business activities within the community empowerment zone subject to taxation shall be divided as follows:

(a) That portion of excise taxes collected for a taxing district in each year within a community empowerment zone which is equal to the taxes collected for such taxing district within the community empowerment zone in the year preceding the formation of the apportionment, shall be allocated to and paid to the taxing district; and

(b) That portion of the excise taxes collected for a taxing district in each year within a community empowerment zone that is in excess of the excise tax collected in the year preceding the formation of the apportionment district shall be allocated as follows:

(i) Fifty percent shall be paid to the local government, or the local government's designated agent, until all community empowerment project costs to be paid from the tax allocation revenues have been paid; and

(ii) Fifty percent shall be allocated to the respective taxing districts in proportion to their excise tax levies due for the year in which the funds are returned.

(2) The apportionment of excise taxes under this section shall cease when the tax allocation revenues are no longer necessary or obligated to pay community empowerment project costs or to pay principal and interest on bonds issued to finance community empowerment project costs to which tax allocation revenues are pledged. At the time of termination of the apportionment, any excess money and any earnings held by the local government shall be distributed to the taxing districts that were subject to the allocation in proportion to their excise tax receipts due for the year in which the funds are returned.

(3) The amount of excise taxes determined to be collected in the year preceding the formation of the community empowerment zone shall be adjusted upward to reflect increases in the rate of taxation.

NEW SECTION. Sec. 306. (1) Tax allocation revenues may be applied as follows:

(a) To pay community empowerment project costs;

(b) To pay into bond funds established to pay the principal and interest on general obligation bonds issued to finance a community empowerment project that is specified in the ordinance and constructed following the establishment of the community empowerment zone; or

(2) Tax allocation revenues may be pledged to the payment of bonds issued to finance a community empowerment project.

NEW SECTION. Sec. 307. This chapter supplements and neither restricts nor limits any powers that the state or a municipal corporation might otherwise have under laws of this state.

NEW SECTION. Sec. 308. This chapter may be known and cited as the community empowerment zone financing act.

Subpart B ‑- Tax Credits for Contributions

NEW SECTION. Sec. 309. The legislature intends with this chapter to promote the channeling of private financial assistance into community empowerment zones by creating a tax incentive for contributions made to nonprofit organizations undertaking community empowerment assistance activities.

NEW SECTION. Sec. 310. The definitions in this section apply throughout this chapter unless the context clearly requires otherwise.

(1) "Affordable housing" has the same meaning as in RCW 43.185A.010.

(2) "Business firm" means an incorporated or unincorporated business entity authorized to do business in the state of Washington and subject to the state's business and occupation taxes levied in chapter 82.04 RCW.

(3) "Community empowerment assistance" means furnishing financial assistance, labor, material, or technical assistance to aid in the provision of affordable housing, community services, crime prevention, education, and job training activities in a community empowerment zone.

(4) "Community empowerment zone" has the same meaning as in section 101 of this act.

(5) "Community service" means any type of counseling and advice, emergency assistance, or medical care furnished to individuals or groups in the community empowerment zone.

(6) "Crime prevention" means an activity that aids in the reduction of crime in the community empowerment zone.

(7) "Education" means any type of scholastic instruction or scholarship assistance to any person who resides in a community empowerment zone that enables that person to prepare for better employment opportunities.

(8) "Job training" means any type of instruction to a person who resides in a community empowerment zone that enables that person to acquire vocational skills to become employable or seek a higher grade of employment.

(9) "Nonprofit organization" means a public or private nonprofit organization that: (a) Is organized under federal, state, or local laws; (b) has no part of its net earnings inuring to the benefit of any member, founder, contributor, or individual; and (c) has among its purposes significant activities related to community empowerment assistance activities in a community empowerment zone. The term also includes a public housing authority created under RCW 35.82.030 and a public corporation created under RCW 35.21.730.

(10) "Recipient" means the person or business firm receiving tax credits under this chapter.

(11) "Tax year" or "taxable year" means either the calendar year or the taxpayer's fiscal year if permission is obtained from the department to use a fiscal year instead of the calendar year.

NEW SECTION. Sec. 311. The department shall establish a program to provide tax credits to business firms making contributions to nonprofit organizations that are undertaking community empowerment assistance activities. The tax credits may be used as a credit against any of the taxes imposed on the business firm under chapter 82.04 RCW.

NEW SECTION. Sec. 312. (1) Application for tax credits under this chapter must be made before the actual contribution to the community empowerment assistance activity is made. The application shall be made to the department of community, trade, and economic development in a form and manner prescribed by the department of revenue and the department of community, trade, and economic development.

(2) The department of community, trade, and economic development shall transmit a copy of the completed application for tax credits to the department of revenue, with the department of community, trade, and economic development's recommendations, within ten working days after receipt of the application. Within thirty days after receipt of the completed application from the department of community, trade, and economic development, the department of revenue shall determine the amount of tax credits to be allocated to the business firm. The department of revenue shall notify the department of community, trade, and economic development of its decision within ten days.

(3) The department of revenue, in consultation with the department of community, trade, and economic development, shall adopt rules specifying the administrative procedures applicable to applicants for tax credits, the form and manner in which the applications shall be filed, and the information to be contained therein. The rules shall apply to administrative procedure before both the department and the department of community, trade, and economic development.

NEW SECTION. Sec. 313. In order to qualify for the tax credits in section 311 of this act, the community empowerment assistance activity must meet the following requirements:

(1) The community empowerment assistance activity must be located in a community empowerment zone;

(2) At least seventy percent of the benefits of community empowerment assistance activity must be targeted to residents of the community empowerment zone; and

(3) The business firm's contribution must be made to a nonprofit organization that is undertaking approved community empowerment assistance activities.

NEW SECTION. Sec. 314. (1) A tax credit under this chapter for community empowerment assistance activities may not be issued after December 31, 2005.

(2) The department shall grant a credit against the tax due under chapter 82.04 RCW of an amount equal to seventy-five percent of the approved amount contributed by the business firm for eligible community empowerment assistance activities during the taxable year.

(3) The tax credit approved under this section shall be taken at a rate of twenty percent per year for the five immediately succeeding taxable years beginning with the taxable year in which the contribution was made.

(4) The department shall keep a running total of all tax credits granted under this chapter during each fiscal biennium. The department shall not allow any credits that would cause the tabulation for a biennium to exceed ten million dollars. If all or part of an application for credit is disallowed under this subsection, the disallowed portion shall be carried over for approval the next biennium.

(5) A tax credit may not be granted to a bank, bank and trust company, insurance company, trust company, national bank, savings association, or savings and loan association for activities that are a part of its normal course of business.

(6) A tax credit may not be granted to a business firm for an amount contributed of less than two hundred fifty dollars.

NEW SECTION. Sec. 315. Applications and other information received by the department under this chapter is not confidential and is subject to disclosure.

NEW SECTION. Sec. 316. This chapter may be known and cited as the community empowerment assistance act.

PART IV ‑- PROPERTY TAX PROVISIONS

Subpart A ‑- Tax Exemptions for Commercial Property

NEW SECTION. Sec. 401. A new section is added to chapter 84.36 RCW to read as follows:

(1) A physical improvement to qualified buildings upon real property, that are located in a community empowerment zone, is exempt from taxation for the ten assessment years after the completion of the improvement. A taxpayer desiring to obtain the exemption granted by this section must file notice of its intent to construct the qualified buildings before the construction, expansion, or renovation being made on forms prescribed by the department and furnished to the taxpayer by the county assessor. This assessment cannot be claimed more than once in a fifteen-year period.

(2) The department of revenue shall adopt such rules as are necessary to properly administer this section.

(3) As used in this section:

(a) "Community empowerment zone" has the same meaning as in section 101 of this act; and

(b) "Qualified buildings" means construction of new structures, and expansion or renovation of existing structures for the purpose of increasing floor space or production capacity used in manufacturing and research and development as defined in RCW 82.60.020 and qualified research and development as defined in RCW 82.63.010.

Subpart B ‑- Tax Exemptions for Multiunit Dwellings

Sec. 402. RCW 84.14.010 and 1995 c 375 s 3 are each amended to read as follows:

Unless the context clearly requires otherwise, the definitions in this section apply throughout this chapter.

(1) "City" means: (a) A city or town with a population of at least one hundred fifty thousand located in a county planning under the growth management act; or (b) a city or town with a community empowerment zone.

(2) "Community empowerment zone" has the same meaning as in section 101 of this act.

(3) "Governing authority" means the local legislative authority of a city having jurisdiction over the property for which an exemption may be applied for under this chapter.

((~~(3)~~)) (4) "Growth management act" means chapter 36.70A RCW.

((~~(4)~~)) (5) "Multiple-unit housing" means a building having four or more dwelling units not designed or used as transient accommodations and not including hotels and motels. Multifamily units may result from new construction or rehabilitated or conversion of vacant, underutilized, or substandard buildings to multifamily housing.

((~~(5)~~)) (6) "Owner" means the property owner of record.

((~~(6)~~)) (7) "Permanent residential occupancy" means multiunit housing that provides either rental or owner occupancy on a nontransient basis. This includes owner-occupied or rental accommodation that is leased for a period of at least one month. This excludes hotels and motels that predominately offer rental accommodation on a daily or weekly basis.

((~~(7)~~)) (8) "Rehabilitation improvements" means modifications to existing structures, that are vacant for twelve months or longer, that are made to achieve a condition of substantial compliance with existing building codes or modification to existing occupied structures which increase the number of multifamily housing units.

((~~(8)~~)) (9) "Residential targeted area" means an area within an urban center that has been designated by the governing authority as a residential targeted area in accordance with this chapter.

((~~(9)~~)) (10) "Substantial compliance" means compliance with local building or housing code requirements that are typically required for rehabilitation as opposed to new construction.

((~~(10)~~)) (11)(a) "Urban center" means a compact identifiable district where urban residents may obtain a variety of products and services. An urban center must contain:

((~~(a)~~)) (i) Several existing or previous, or both, business establishments that may include but are not limited to shops, offices, banks, restaurants, governmental agencies;

((~~(b)~~)) (ii) Adequate public facilities including streets, sidewalks, lighting, transit, domestic water, and sanitary sewer systems; and

((~~(c)~~)) (iii) A mixture of uses and activities that may include housing, recreation, and cultural activities in association with either commercial or office, or both, use.

(b) "Urban center" includes an area designated as a community empowerment zone.

Sec. 403. RCW 84.14.050 and 1995 c 375 s 8 are each amended to read as follows:

An owner of property seeking tax incentives under this chapter must complete the following procedures:

(1) In the case of rehabilitation or where demolition or new construction is required, the owner shall secure from the governing authority or duly authorized agent, before commencement of rehabilitation improvements or new construction, verification of property noncompliance with applicable building and housing codes;

(2) In the case of new and rehabilitated multifamily housing, the owner shall apply to the city on forms adopted by the governing authority. The application must contain the following:

(a) Information setting forth the grounds supporting the requested exemption including information indicated on the application form or in the guidelines;

(b) A description of the project and site plan, including the floor plan of units and other information requested;

(c) A statement that the applicant is aware of the potential tax liability involved when the property ceases to be eligible for the incentive provided under this chapter;

(3) The applicant must verify the application by oath or affirmation; and

(4) The application must be made on or before April 1 of each year, and must be accompanied by the application fee, if any, required under RCW ((~~84.14.070~~)) 84.14.080. The governing authority may permit the applicant to revise an application before final action by the governing authority.

PART V ‑- OTHER PROVISIONS

NEW SECTION. Sec. 501. A new section is added to chapter 43.19 RCW to read as follows:

(1) An amount not less than ten percent of the total amount expended by state agencies, departments, and the legislature for the purchase of goods and services on an annual basis shall be expended for the purchase of goods and services from small businesses located in community empowerment zones. The department of general administration shall adopt administrative rules to implement this section.

(2) As used in this section:

(a) "Community empowerment zone" has the same meaning as in section 101 of this act; and

(b) "Small business" means an entity subject to taxation under chapter 82.04 RCW and that has less than fifty full-time employees. The term "small business" also includes a consortium of two or more small businesses.

PART VI ‑- TECHNICAL PROVISIONS

Sec. 601. RCW 82.60.020 and 1996 c 290 s 4 are each amended to read as follows:

Unless the context clearly requires otherwise, the definitions in this section apply throughout this chapter.

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

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

(3) "Eligible area" means: (a) A county in which the average level of unemployment for the three years before the year in which an application is filed under this chapter exceeds the average state unemployment for those years by twenty percent; (b) a county that has a median household income that is less than seventy-five percent of the state median household income for the previous three years; (c) a metropolitan statistical area, as defined by the office of federal statistical policy and standards, United States department of commerce, in which the average level of unemployment for the calendar year immediately preceding the year in which an application is filed under this chapter exceeds the average state unemployment for such calendar year by twenty percent; (d) a designated community empowerment zone approved under RCW 43.63A.700 (as recodified by this act) or a county containing such a community empowerment zone; (e) a town with a population of less than twelve hundred persons in those counties that are not covered under (a) of this subsection that are timber impact areas as defined in RCW 43.31.601; (f) a county designated by the governor as an eligible area under RCW 82.60.047; or (g) a county that is contiguous to a county that qualifies as an eligible area under (a) or (f) of this subsection.

(4)(a) "Eligible investment project" means:

(i) An investment project in an eligible area as defined in subsection (3)(a), (b), (c), (e), or (f) of this section; or

(ii) That portion of an investment project in an eligible area as defined in subsection (3)(d) or (g) of this section which is directly utilized to create at least one new full-time qualified employment position for each three hundred thousand dollars of investment on which a deferral is requested in an application approved before July 1, 1994, and for each seven hundred fifty thousand dollars of investment on which a deferral is requested in an application approved after June 30, 1994.

(b) The lessor/owner of a qualified building is not eligible for a deferral unless the underlying ownership of the buildings, machinery, and equipment vests exclusively in the same person, or unless the lessor by written contract agrees to pass the economic benefit of the deferral to the lessee in the form of reduced rent payments.

(i) The department shall consider the entire investment project, including any investment in machinery and equipment that otherwise qualifies for exemption under RCW 82.08.02565 or 82.12.02565, for purposes of determining the portion of the investment project that qualifies for deferral as an eligible investment project; and

(ii) The number of new full-time qualified employment positions created by an investment project shall be deemed to be reduced by the number of full-time employment positions maintained by the recipient in any other community in this state that are displaced as a result of the investment project.

(d) "Eligible investment project" does not include any portion of an investment project undertaken by a light and power business as defined in RCW 82.16.010(5), other than that portion of a cogeneration project that is used to generate power for consumption within the manufacturing site of which the cogeneration project is an integral part, or investment projects which have already received deferrals under this chapter.

(5) "Investment project" means an investment in qualified buildings or qualified machinery and equipment, including labor and services rendered in the planning, installation, and construction of the project.

(6) "Manufacturing" means all activities of a commercial or industrial nature wherein labor or skill is applied, by hand or machinery, to materials so that as a result thereof a new, different, or useful substance or article of tangible personal property is produced for sale or commercial or industrial use and shall include the production or fabrication of specially made or custom made articles. "Manufacturing" also includes computer programming, the production of computer software, and other computer-related services, and the activities performed by research and development laboratories and commercial testing laboratories.

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

(8) "Qualified buildings" means construction of new structures, and expansion or renovation of existing structures for the purpose of increasing floor space or production capacity used for manufacturing and research and development activities, including plant offices and warehouses or other facilities for the storage of raw material or finished goods if such facilities are an essential or an integral part of a factory, mill, plant, or laboratory used for manufacturing or research and development. If a building is used partly for manufacturing or research and development and partly for other purposes, the applicable tax deferral shall be determined by apportionment of the costs of construction under rules adopted by the department.

(9) "Qualified employment position" means a permanent full-time employee employed in the eligible investment project during the entire tax year.

(10) "Qualified machinery and equipment" means all new industrial and research fixtures, equipment, and support facilities that are an integral and necessary part of a manufacturing or research and development operation. "Qualified machinery and equipment" includes: Computers; software; data processing equipment; laboratory equipment; manufacturing components such as belts, pulleys, shafts, and moving parts; molds, tools, and dies; operating structures; and all equipment used to control or operate the machinery.

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

(12) "Research and development" means the development, refinement, testing, marketing, and commercialization of a product, service, or process before commercial sales have begun. As used in this subsection, "commercial sales" excludes sales of prototypes or sales for market testing if the total gross receipts from such sales of the product, service, or process do not exceed one million dollars.

Sec. 602. RCW 82.60.040 and 1995 1st sp.s. c 3 s 6 are each amended to read as follows:

(1) 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 that:

(a) Is located in an eligible area as defined in RCW 82.60.020(3)(a), ((~~(b)~~)) (c), ((~~(d), or~~)) (e), or (f);

(b) Is located in an eligible area as defined in RCW 82.60.020(3)((~~(f)~~)) (g) if seventy-five percent of the new qualified employment positions are to be filled by residents of a contiguous county that is an eligible area as defined in RCW 82.60.020(3)(a) or ((~~(e)~~)) (f); or

(c) Is located in an eligible area as defined in RCW 82.60.020(3)((~~(c)~~)) (d) if seventy-five percent of the new qualified employment positions are to be filled by residents of a designated community empowerment zone approved under RCW 43.63A.700 (as recodified by this act) located within the county in which the eligible investment project is located.

(2) The department shall keep a running total of all deferrals granted under this chapter during each fiscal biennium.

Sec. 603. RCW 82.62.010 and 1996 c 290 s 5 are each amended to read as follows:

Unless the context clearly requires otherwise, the definitions in this section apply throughout this chapter.

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

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

(3) "Eligible area" means: (a) A county in which the average level of unemployment for the three years before the year in which an application is filed under this chapter exceeds the average state unemployment for those years by twenty percent; (b) a county that has a median household income that is less than seventy-five percent of the state median household income for the previous three years; (c) a metropolitan statistical area, as defined by the office of federal statistical policy and standards, United States department of commerce, in which the average level of unemployment for the calendar year immediately preceding the year in which an application is filed under this chapter exceeds the average state unemployment for such calendar year by twenty percent; (d) a designated community empowerment zone approved under RCW 43.63A.700 (as recodified by this act); or (e) subcounty areas in those counties that are not covered under (a) of this subsection that are timber impact areas as defined in RCW 43.31.601.

(4)(a) "Eligible business project" means manufacturing or research and development activities which are conducted by an applicant in an eligible area at a specific facility, provided the applicant's average full-time qualified employment positions at the specific facility will be at least fifteen percent greater in the year for which the credit is being sought than the applicant's average full-time qualified employment positions at the same facility in the immediately preceding year.

(b) "Eligible business project" does not include any portion of a business project undertaken by a light and power business as defined in RCW 82.16.010(5) or that portion of a business project creating qualified full-time employment positions outside an eligible area or those recipients of a sales tax deferral under chapter 82.61 RCW.

(5) "Manufacturing" means all activities of a commercial or industrial nature wherein labor or skill is applied, by hand or machinery, to materials so that as a result thereof a new, different, or useful substance or article of tangible personal property is produced for sale or commercial or industrial use and shall include the production or fabrication of specially made or custom made articles. "Manufacturing" also includes computer programming, the production of computer software, and other computer-related services, and the activities performed by research and development laboratories and commercial testing laboratories.

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

(7) "Qualified employment position" means a permanent full-time employee employed in the eligible business project during the entire tax year.

(8) "Tax year" means the calendar year in which taxes are due.

(9) "Recipient" means a person receiving tax credits under this chapter.

(10) "Research and development" means the development, refinement, testing, marketing, and commercialization of a product, service, or process before commercial sales have begun. As used in this subsection, "commercial sales" excludes sales of prototypes or sales for market testing if the total gross receipts from such sales of the product, service, or process do not exceed one million dollars.

NEW SECTION. Sec. 604. (1) Sections 1, 101, and 104 through 108 of this act constitute a new chapter in Title 43 RCW.

(2) Sections 201 through 204 of this act constitute a new chapter in Title 82 RCW.

(3) Sections 205 through 210 of this act constitute a new chapter in Title 74 RCW.

(4) Sections 301 through 308 of this act constitute a new chapter in Title 82 RCW.

(5) Sections 309 through 316 of this act constitute a new chapter in Title 82 RCW.

NEW SECTION. Sec. 605. RCW 43.63A.700 and 43.63A.710, as amended by this act, are each recodified as sections in chapter 43.-- RCW (sections 1, 101, and 104 through 108 of this act).

NEW SECTION. Sec. 606. If any part of this act is found to be in conflict with federal requirements that are a prescribed condition to the allocation of federal funds to the state, the conflicting part of this act is inoperative solely to the extent of the conflict and with respect to the agencies directly affected, and this finding does not affect the operation of the remainder of this act in its application to the agencies concerned. Rules adopted under this act must meet federal requirements that are a necessary condition to the receipt of federal funds by the state.

NEW SECTION. Sec. 607. If any provision of this act or its application to any person or circumstance is held invalid, the remainder of the act or the application of the provision to other persons or circumstances is not affected.

NEW SECTION. Sec. 608. Part and subpart headings used in this act are not any part of the law.

NEW SECTION. Sec. 609. Section 602 of this act expires July 1, 2004.