S-2133

AN ACT Relating to studying the system of state and local taxation of the electricity industry; and creating new sections.

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

NEW SECTION. Sec. 1. The legislature finds that changes have occurred in the electricity industry because of federal deregulation of the wholesale electricity market and the subsequent restructuring by several states of their retail electricity markets. The legislature further finds that such changes impact the electricity industry in the state of Washington and that the extent of those impacts on the taxation of the changing electricity industry are not fully comprehended. The legislature therefore intends to commission a study and report to examine current state and local taxation of the electricity industry in order to receive options for state and local taxes that avoid revenue loss, promote competitive neutrality, and encourage economic development within the electricity industry.

NEW SECTION. Sec. 2. (1) The department of revenue shall conduct a study and prepare a report of current state and local taxation of the electricity industry and options for changes to avoid revenue loss, promote competitive neutrality, and encourage economic development within the electricity industry.

(2) The study shall include an analysis of the following:

(a) Current state and local taxation of the wholesale and retail electricity industry, including tax incidence, rate, base, collection, and allocation of the public utility tax, public utility district privilege tax, sales and use tax, business and occupation tax, property tax, real estate excise tax, and leasehold excise tax;

(b) Trends in the wholesale and retail electricity markets affecting current and future revenue streams, including power imports and exports by in-state and out-of-state suppliers;

(c) The extent to which existing state and local tax laws may be insufficient to protect revenue streams in light of identifiable wholesale and retail market changes;

(d) Whether the tax code is adequate to fairly tax new participants in the market such as brokers, marketers, aggregators, and traders; and

(e) Options for state and local tax laws to protect existing revenue streams, to promote competitive neutrality among wholesale and retail electricity market participants, and to encourage economic development within the electricity industry.

(3) The report shall include recommendations for legislative action to implement the options analyzed in subsection (2)(e) of this section that best accomplish the avoidance of revenue loss, promotion of competitive neutrality, and encouragement of economic development within the electricity industry.

(4) The department shall conduct the study with support from the utilities and transportation commission, the energy division of the department of community, trade, and economic development, and the state auditor. The department shall consult with energy utilities, retail electric customers, local governments, independent power producers, brokers, marketers, traders, other interested parties, and the chairs and ranking minority members of the committees of the senate and the house of representatives with jurisdiction over electricity issues periodically throughout the course of the study, and shall submit its report to the legislature and the governor by December 1, 1999.

(5) All entities subject to current state and local taxes on assets or activities related to the generation, transmission, distribution, or the purchase and sale of electricity shall cooperate with the department in the preparation of the study and the report required by this section, and shall provide all information requested by the department in a timely manner so that the study and report will be as thorough as possible and completed on schedule.