[atlas:bill]

AN ACT Relating to tax credits for advanced telecommunications and information services infrastructure improvements in rural areas; amending RCW 43.160.010, 43.160.020, and 43.160.050; adding a new section to chapter 43.160 RCW; adding new sections to chapter 82.04 RCW; adding a new section to chapter 82.16 RCW; and providing expiration dates.

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

Sec. 1. RCW 43.160.010 and 1996 c 51 s 1 are each amended to read as follows:

(1) The legislature finds that it is the public policy of the state of Washington to direct financial resources toward the fostering of economic development through the stimulation of investment and job opportunities and the retention of sustainable existing employment for the general welfare of the inhabitants of the state. Reducing unemployment and reducing the time citizens remain jobless is important for the economic welfare of the state. A valuable means of fostering economic development is the construction of public facilities which contribute to the stability and growth of the state's economic base. Strengthening the economic base through issuance of industrial development bonds, whether single or umbrella, further serves to reduce unemployment. Consolidating issues of industrial development bonds when feasible to reduce costs additionally advances the state's purpose to improve economic vitality. Expenditures made for these purposes as authorized in this chapter are declared to be in the public interest, and constitute a proper use of public funds.

Economic development is also increasingly dependent upon the existence of an advanced telecommunications and information infrastructure. For a healthy economy, businesses located in rural locations need access to advanced telecommunications and information services at rates and standards of quality that are reasonably comparable to rates and standards of quality that are offered in urban areas. Public policy should provide incentives to encourage private investment in advanced telecommunications and information infrastructure so that the benefits of competition in telecommunications, advanced telecommunications, and information services reach not only urban areas but also other areas of the state on a reasonably comparable and timely basis.

A community economic revitalization board is needed which shall aid the development of economic opportunities. The general objectives of the board should include:

(a) Strengthening the economies of areas of the state which have experienced or are expected to experience chronically high unemployment rates or below average growth in their economies;

(b) Encouraging the diversification of the economies of the state and regions within the state in order to provide greater seasonal and cyclical stability of income and employment;

(d) Encouraging new economic development or expansions to maximize employment;

(e) Encouraging the retention of viable existing firms and employment; ((~~and~~))

(f) Providing incentives for expansion of employment opportunities for groups of state residents that have been less successful relative to other groups in efforts to gain permanent employment; and

(g) Encouraging private investment through tax incentives to facilitate the construction of an advanced telecommunications and information infrastructure in rural locations.

(2) The legislature also finds that the state's economic development efforts can be enhanced by, in certain instances, providing funds to improve state highways in the vicinity of new industries considering locating in this state or existing industries that are considering significant expansion.

(a) The legislature finds it desirable to provide a process whereby the need for diverse public works improvements necessitated by planned economic development can be addressed in a timely fashion and with coordination among all responsible governmental entities.

(b) It is the intent of the legislature to create an economic development account within the motor vehicle fund from which expenditures can be made by the department of transportation for state highway improvements necessitated by planned economic development. All such improvements must first be approved by the state transportation commission and the community economic revitalization board in accordance with the procedures established by RCW 43.160.074 and 47.01.280. It is further the intent of the legislature that such improvements not jeopardize any other planned highway construction projects. The improvements are intended to be of limited size and cost, and to include such items as additional turn lanes, signalization, illumination, and safety improvements.

(3) The legislature also finds that the state's economic development efforts can be enhanced by providing funds to improve markets for those recyclable materials representing a large fraction of the waste stream. The legislature finds that public facilities which result in private construction of processing or remanufacturing facilities for recyclable materials are eligible for consideration from the board.

(4) The legislature finds that sharing economic growth state-wide is important to the welfare of the state. Rural natural resource impact areas do not share in the economic vitality of the Puget Sound region. Infrastructure is one of several ingredients that are critical for economic development. Rural natural resource impact areas generally lack the infrastructure necessary to diversify and revitalize their economies. It is, therefore, the intent of the legislature to increase the availability of funds to help provide infrastructure to rural natural resource impact areas.

Sec. 2. RCW 43.160.020 and 1997 c 367 s 8 are each amended to read as follows:

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

(1) "Advanced telecommunications provider" means any person, corporation, partnership, or association that operates equipment and facilities capable of distributing digital communications signals for the transmission of voice, data, image, and other video over distance for either self use or the provision of such services to others.

(2) "Board" means the community economic revitalization board.

((~~(2)~~)) (3) "Bond" means any bond, note, debenture, interim certificate, or other evidence of financial indebtedness issued by the board pursuant to this chapter.

((~~(3)~~)) (4) "Department" means the department of community, trade, and economic development.

((~~(4)~~)) (5) "Financial institution" means any bank, savings and loan association, credit union, development credit corporation, insurance company, investment company, trust company, savings institution, or other financial institution approved by the board and maintaining an office in the state.

((~~(5)~~)) (6) "Incumbent local exchange carrier" as defined in 47 U.S.C. Sec. 251(h)(1), means, with respect to an area, the local exchange carrier that:

(a) On February 8, 1996, provided telephone exchange service in such area; and

(b)(i) On February 8, 1996, was deemed to be a member of the exchange carrier association pursuant to section 69.601(b) of the federal communications commission's regulations (47 C.F.R. 69.601(b)); or

(ii) Is a person or entity that, on or after February 8, 1996, became a successor or assign of a member described in (b)(i) of this subsection.

(7) "Incumbent local exchange carrier's service area" means those telephone exchange areas for which the incumbent local exchange carrier had rate tariffs in effect and maps on file with the utilities and transportation commission on January 1, 1999.

(8) "Industrial development facilities" means "industrial development facilities" as defined in RCW 39.84.020.

((~~(6)~~)) (9) "Industrial development revenue bonds" means tax-exempt revenue bonds used to fund industrial development facilities.

((~~(7)~~)) (10) "Local government" or "political subdivision" means any port district, county, city, town, special purpose district, and any other municipal corporations or quasi-municipal corporations in the state providing for public facilities under this chapter.

((~~(8)~~)) (11) "Rural location" means a telephone exchange area with ten thousand or fewer access lines.

(12) "Sponsor" means any of the following entities which customarily provide service or otherwise aid in industrial or other financing and are approved as a sponsor by the board: A bank, trust company, savings bank, investment bank, national banking association, savings and loan association, building and loan association, credit union, insurance company, or any other financial institution, governmental agency, or holding company of any entity specified in this subsection.

((~~(9)~~)) (13) "Telecommunications infrastructure improvement" means the construction or upgrade of real property or tangible personal property used to distribute digital communications signals for the transmission of voice, data, image, and video over distance. It includes, but is not limited to, activities such as the laying of fiber optic cable, the construction of terrestrial facilities to support digital communications by satellite, and the construction of towers and other facilities to support digital communications through nonwireline technologies.

(14) "Umbrella bonds" means industrial development revenue bonds from which the proceeds are loaned, transferred, or otherwise made available to two or more users under this chapter.

((~~(10)~~)) (15) "User" means one or more persons acting as lessee, purchaser, mortgagor, or borrower under a financing document and receiving or applying to receive revenues from bonds issued under this chapter.

((~~(11)~~)) (16) "Public facilities" means bridges, roads, domestic and industrial water, sanitary sewer, storm sewer, railroad, electricity, natural gas, buildings or structures, and port facilities.

((~~(12)~~)) (17) "Rural natural resources impact area" means:

(a) A nonmetropolitan county, as defined by the 1990 decennial census, that meets three of the five criteria set forth in subsection ((~~(13)~~)) (18) of this section;

(b) A nonmetropolitan county with a population of less than forty thousand in the 1990 decennial census, that meets two of the five criteria as set forth in subsection ((~~(13)~~)) (18) of this section; or

(c) A nonurbanized area, as defined by the 1990 decennial census, that is located in a metropolitan county that meets three of the five criteria set forth in subsection ((~~(13)~~)) (18) of this section.

((~~(13)~~)) (18) For the purposes of designating rural natural resources impact areas, the following criteria shall be considered:

(a) A lumber and wood products employment location quotient at or above the state average;

(b) A commercial salmon fishing employment location quotient at or above the state average;

(d) Projected or actual direct commercial salmon fishing job losses of one hundred positions or more; and

(e) An unemployment rate twenty percent or more above the state average. The counties that meet these criteria shall be determined by the employment security department for the most recent year for which data is available. For the purposes of administration of programs under this chapter, the United States post office five-digit zip code delivery areas will be used to determine residence status for eligibility purposes. For the purpose of this definition, a zip code delivery area of which any part is ten miles or more from an urbanized area is considered nonurbanized. A zip code totally surrounded by zip codes qualifying as nonurbanized under this definition is also considered nonurbanized. The office of financial management shall make available a zip code listing of the areas to all agencies and organizations providing services under this chapter.

Sec. 3. RCW 43.160.050 and 1996 c 51 s 4 are each amended to read as follows:

The board may:

(1) Adopt bylaws for the regulation of its affairs and the conduct of its business.

(2) Adopt an official seal and alter the seal at its pleasure.

(3) Utilize the services of other governmental agencies.

(4) Accept from any federal agency loans or grants for the planning or financing of any project and enter into an agreement with the agency respecting the loans or grants.

(5) Conduct examinations and investigations and take testimony at public hearings of any matter material for its information that will assist in determinations related to the exercise of the board's lawful powers.

(6) Accept any gifts, grants, or loans of funds, property, or financial or other aid in any form from any other source on any terms and conditions which are not in conflict with this chapter.

(7) Exercise all the powers of a public corporation under chapter 39.84 RCW.

(8) Invest any funds received in connection with industrial development revenue bond financing not required for immediate use, as the board considers appropriate, subject to any agreements with owners of bonds.

(9) Arrange for lines of credit for industrial development revenue bonds from and enter into participation agreements with any financial institution.

(10) Issue industrial development revenue bonds in one or more series for the purpose of defraying the cost of acquiring or improving any industrial development facility or facilities and securing the payment of the bonds as provided in this chapter.

(11) Enter into agreements or other transactions with and accept grants and the cooperation of any governmental agency in furtherance of this chapter.

(12) Sell, purchase, or insure loans to finance the costs of industrial development facilities.

(13) Service, contract, and pay for the servicing of loans for industrial development facilities.

(14) Provide financial analysis and technical assistance for industrial development facilities when the board reasonably considers it appropriate.

(15) Collect, with respect to industrial development revenue bonds, reasonable interest, fees, and charges for making and servicing its lease agreements, loan agreements, mortgage loans, notes, bonds, commitments, and other evidences of indebtedness. Interest, fees, and charges are limited to the amounts required to pay the costs of the board, including operating and administrative expenses and reasonable allowances for losses that may be incurred.

(16) Procure insurance or guarantees from any party as allowable under law, including a governmental agency, against any loss in connection with its lease agreements, loan agreements, mortgage loans, and other assets or property.

(17) Provide guidance and direction in facilitating the development of an advanced telecommunications and information infrastructure in rural locations by reviewing and ranking tax credit applications and recommending certain applications for approval to the department of revenue.

(18) Adopt rules under chapter 34.05 RCW as necessary to carry out the purposes of this chapter.

((~~(18)~~)) (19) Do all acts and things necessary or convenient to carry out the powers expressly granted or implied under this chapter.

NEW SECTION. Sec. 4. A new section is added to chapter 43.160 RCW to read as follows:

(1) The community economic revitalization board shall establish and administer a telecommunications infrastructure tax credits program in coordination with the department of revenue.

(2) Under this telecommunications infrastructure tax credits program, the board shall review applications for business and occupation and public utility tax credits on a competitive basis, in accordance with criteria in subsection (5) of this section.

(3) The board shall recommend to the department of revenue which tax credit applications should be approved, provided that each year the total amount of tax credits recommended for approval does not exceed the available amount of tax credits computed under section 5 of this act. Each year the board shall forward to the department of revenue a list of the telecommunications infrastructure tax credits recommended for approval.

(4) The department of revenue shall approve applications for these telecommunications infrastructure tax credits as provided in section 5 of this act.

(5) Criteria for evaluating and ranking tax credit applications is as follows:

(a) The number of jobs to be created or retained as a result of a telecommunications infrastructure improvement in a rural location;

(b) Comparability between rates generally charged for advanced telecommunications and information services in urban and other low-cost locations of the state to the rates that that tax credit applicant indicates it will charge customers in the rural location where the infrastructure improvement is to be made, if the applicant will provide advanced telecommunications and information services to others;

(c) The size of the telecommunications bandwidth that will be made available to consumers in a rural location as a result of the telecommunications infrastructure improvement;

(d) The amount of money that an applicant will spend from its own funds, in excess of the expenditure amount for which a tax credit application is made, to make a telecommunications infrastructure improvement in a rural location; and

(e) The geographical distribution of the tax credits to be recommended for approval.

(6) The board shall take steps to inform business and residential consumers located in rural locations and advanced telecommunications providers will be informed about the business and occupation tax credits available on a competitive basis for telecommunications infrastructure improvements made in rural locations.

(7) The board shall allow a joint tax credit application to be submitted under this section when two or more advanced telecommunications providers intend to jointly construct a telecommunications infrastructure improvement.

(8) A tax credit applicant must attach to the application a list of the businesses that have requested advanced telecommunications and information services which cannot be supported by the existing telecommunications infrastructure located in the area where the telecommunications infrastructure improvement is to be made. The list shall indicate for each business the number of jobs expected to be created or retained as a result of the telecommunications infrastructure improvement.

(9) No more than fifteen percent of tax credits recommended for approval in any one year shall be for telecommunications infrastructure projects located in the same county.

(10) No more than fifteen percent of the tax credits recommended for approval in any one year shall be for telecommunications infrastructure projects to be constructed by the same advanced telecommunications provider or its affiliates.

(11) The board may recommend for approval a tax credit application submitted by an incumbent local exchange carrier if the application proposes to construct a telecommunications infrastructure improvement in a rural location that is located outside of an incumbent local exchange carrier's service area. The board may not recommend approval for any tax credit application submitted by an incumbent local exchange carrier if the application proposes to construct a telecommunications infrastructure improvement in a rural location that is located inside of an incumbent local exchange carrier's service area.

(12) This section expires December 31, 2005.

NEW SECTION. Sec. 5. A new section is added to chapter 82.04 RCW to read as follows:

For purposes of the telecommunications infrastructure tax credits program established in section 4 of this act, each calendar year the available amount of tax credits shall be determined as follows:

(1) In Washington the average rate of growth in gross revenues for telephone businesses during calendar years 1992 through 1996 was seven percent. For purposes of this section, seven percent shall be the base growth rate.

(2) Every October the department of revenue shall:

(a) Compute total tax paid under this chapter by businesses in North American industry classification system code 5133 for the last two calendar years. If at any time the United States office of management and budget or a successor agency should change or replace the present North American industry classification code system, the department of revenue shall use the code system issued by the office of management and budget or its successor agency to determine the code corresponding to the one listed in this definition;

(b) Compute the rate of growth that occurred in taxes paid under this chapter by telecommunications businesses by subtracting total taxes paid from two calendar years ago from last calendar year's total taxes paid and then dividing this amount by total taxes paid from two calendar years ago;

(c) Compare the growth rate computed under (b) of this subsection to the base growth rate. If the rate of growth computed under (b) of this subsection exceeds the base growth rate, then the department of revenue shall subtract the base growth rate from the growth rate computed under (b) of this subsection and multiply this amount against total taxes paid by telecommunications businesses for the last calendar year. The product of this calculation or thirty million dollars, whichever is less, shall be the amount of tax credits available for the calendar year beginning on January 1st for the telecommunications infrastructure tax credits program;

(d) If the rate of growth computed under (b) of this subsection is less than the base growth rate, then no moneys shall be available for tax credits; and

(e) By October 15th of each year the department of revenue shall inform the community economic revitalization board of the amount of tax credits available for the telecommunications infrastructure tax credits program.

(3) This section expires December 31, 2005.

NEW SECTION. Sec. 6. A new section is added to chapter 82.04 RCW to read as follows:

(1)(a) An advanced telecommunications provider is allowed a credit against tax due under this chapter for expenses incurred in constructing telecommunications infrastructure improvements in rural locations if the credit has been approved by the department. A credit approved by the department under subsection (2) of this section may be claimed over a three-year period but may not exceed the amount of tax that would otherwise be due under this chapter during the three-year period. A credit unused at the end of the three-year period shall expire. Refunds may not be claimed in place of credits. If a person has used a credit approved under this section for tax under chapter 82.16 RCW, that same credit cannot be used against tax under this chapter.

(b) The definitions in this subsection apply throughout this section unless the context clearly requires otherwise.

(i) "Advanced telecommunications provider" is as defined in RCW 43.160.020(1).

(ii) "Expenses" means amounts spent for materials that become part of the telecommunications infrastructure improvement being constructed and charges for labor and services rendered in constructing the telecommunications infrastructure improvement.

(iii) "Rural location" is as defined in RCW 43.160.020(11).

(iv) "Telecommunications infrastructure improvement" is as defined in RCW 43.160.020(13).

(2) The department shall approve a tax credit application if the community economic revitalization board has forwarded and recommended the tax credit application for approval to the department as provided in section 4 of this act.

(3)(a) A person who fails to meet the following requirements must repay a tax credit and is subject to interest assessed at the rate provided for delinquent excise taxes, retroactively to the date of the tax credit, which shall accrue until the tax for which the credit has been used is repaid:

(i) Construct a telecommunications infrastructure improvement in accordance with the specifications for bandwidth, rates, and other criteria that the person stated the improvement would meet in the tax credit application; or

(ii) Complete the telecommunications infrastructure improvement within three years of the tax credit application being approved by the department.

(b) The community economic revitalization board shall inform the department of revenue in writing when tax credit recipient has failed to comply with (a) of this subsection.

(4) This section expires December 31, 2005.

NEW SECTION. Sec. 7. A new section is added to chapter 82.16 RCW to read as follows:

(1) An advanced telecommunications provider is allowed a credit against tax due under this chapter for expenses incurred in constructing telecommunications infrastructure improvements in rural locations if the credit has been approved by the department. A credit shall be claimed in the same manner as provided for credits under section 6 of this act. Credits under this section are subject to the same conditions and limitations as credits under section 6 of this act.

(2) This section expires December 31, 2005.