S 0447

S‑0447.2 _____________________________________________

SENATE BILL 5096

_____________________________________________

State of Washington 57th Legislature 2001 Regular Session

By Senators T. Sheldon, Sheahan, Gardner, Honeyford, Hargrove, Rasmussen, Costa and Haugen

Read first time 01/10/2001. Referred to Committee on Economic Development & Telecommunications.

_1 AN ACT Relating to tax deferrals in rural counties; and

_2 amending RCW 82.60.010, 82.60.020, 82.60.049, and 82.62.030.

_3 BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF WASHINGTON:

_4 Sec. 1. RCW 82.60.010 and 1985 c 232 s 1 are each amended to read

_5 as follows:

_6 The legislature finds that there are several areas in the state

_7 that are characterized by very high levels of unemployment and

_8 poverty. The ((~~legislative [legislature]~~)) legislature further

_9 finds that economic stagnation is the primary cause of this high

10 unemployment rate and poverty; that new state policies are

11 necessary in order to promote economic stimulation and new

12 employment opportunities in these ((~~distressed~~)) rural areas; and

13 that policies providing incentives for economic growth in these

14 ((~~distressed~~)) rural areas are essential. For these reasons, the

15 legislature hereby establishes a tax deferral program to be

16 effective solely in ((~~distressed~~)) rural areas and under

17 circumstances where the deferred tax payments are for investments

18 or costs that result in the creation of a specified number of

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_1 jobs. The legislature declares that this limited program serves the

_2 vital public purpose of creating employment opportunities and

_3 reducing poverty in the ((~~distressed~~)) rural areas of the state.

_4 Sec. 2. RCW 82.60.020 and 1999 sp.s. c 9 s 2 are each amended to

_5 read as follows:

_6 Unless the context clearly requires otherwise, the definitions

_7 in this section apply throughout this chapter.

_8 (1) "Applicant" means a person applying for a tax deferral

_9 under this chapter.

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

11 (3) "Eligible area" means a rural county ((~~with fewer than one~~

12 ~~hundred persons per square mile as determined annually by the~~

13 ~~office of financial management and published by the department of~~

14 ~~revenue effective for the period July 1st through June 30th~~)) as

15 defined in this section.

16 (4)(a) "Eligible investment project" means an investment

17 project in an eligible area as defined in subsection (3) of this

18 section.

19 (b) The lessor/owner of a qualified building is not eligible

20 for a deferral unless the underlying ownership of the buildings,

21 machinery, and equipment vests exclusively in the same person, or

22 unless the lessor by written contract agrees to pass the economic

23 benefit of the deferral to the lessee in the form of reduced rent

24 payments.

25 (c) "Eligible investment project" does not include any portion

26 of an investment project undertaken by a light and power business

27 as defined in RCW 82.16.010(5), other than that portion of a

28 cogeneration project that is used to generate power for

29 consumption within the manufacturing site of which the

30 cogeneration project is an integral part, or investment projects

31 which have already received deferrals under this chapter.

32 (5) "Investment project" means an investment in qualified

33 buildings or qualified machinery and equipment, including labor

34 and services rendered in the planning, installation, and

35 construction of the project.

36 (6) "Manufacturing" means the same as defined in RCW

37 82.04.120. "Manufacturing" also includes computer programming, the

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_1 production of computer software, and other computer-related

_2 services, and the activities performed by research and development

_3 laboratories and commercial testing laboratories.

_4 (7) "Person" has the meaning given in RCW 82.04.030.

_5 (8) "Qualified buildings" means construction of new structures,

_6 and expansion or renovation of existing structures for the purpose

_7 of increasing floor space or production capacity used for

_8 manufacturing and research and development activities, including

_9 plant offices and warehouses or other facilities for the storage

10 of raw material or finished goods if such facilities are an

11 essential or an integral part of a factory, mill, plant, or

12 laboratory used for manufacturing or research and development. If a

13 building is used partly for manufacturing or research and

14 development and partly for other purposes, the applicable tax

15 deferral shall be determined by apportionment of the costs of

16 construction under rules adopted by the department.

17 (9) "Qualified machinery and equipment" means all new

18 industrial and research fixtures, equipment, and support

19 facilities that are an integral and necessary part of a

20 manufacturing or research and development operation. "Qualified

21 machinery and equipment" includes: Computers; software; data

22 processing equipment; laboratory equipment; manufacturing

23 components such as belts, pulleys, shafts, and moving parts;

24 molds, tools, and dies; operating structures; and all equipment

25 used to control or operate the machinery.

26 (10) "Recipient" means a person receiving a tax deferral under

27 this chapter.

28 (11) "Research and development" means the development,

29 refinement, testing, marketing, and commercialization of a

30 product, service, or process before commercial sales have begun.

31 As used in this subsection, "commercial sales" excludes sales of

32 prototypes or sales for market testing if the total gross receipts

33 from such sales of the product, service, or process do not exceed

34 one million dollars.

35 (12) "Rural county" means a county with fewer than one hundred

36 persons per square mile as determined annually by the office of

37 financial management and published by the department of revenue

38 effective for the period July 1st through June 30th.

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_1 Sec. 3. RCW 82.60.049 and 2000 c 106 s 8 are each amended to read

_2 as follows:

_3 (1) For the purposes of this section:

_4 (a) "Eligible area" also means a designated community

_5 empowerment zone approved under RCW ((~~43.63A.700 or a county~~

_6 ~~containing a community empowerment zone~~)) 43.31C.020.

_7 (b) "Eligible investment project" also means an investment

_8 project in an eligible area as defined in this section.

_9 (c) "Qualified employment position" means a permanent full-time

10 employee employed in the eligible investment project during the

11 entire year.

12 (2) In addition to the provisions of RCW 82.60.040, the

13 department shall issue a sales and use tax deferral certificate

14 for state and local sales and use taxes due under chapters 82.08,

15 82.12, and 82.14 RCW, on each eligible investment project that is

16 located in an eligible area, if the applicant establishes that at

17 the time the project is operationally complete:

18 (a) The applicant will hire at least one qualified employment

19 position for each seven hundred fifty thousand dollars of

20 investment on which a deferral is requested; and

21 (b) The positions will be filled by persons who at the time of

22 hire are residents of the community empowerment zone. As used in

23 this subsection, "resident" means the person makes his or her home

24 in the community empowerment zone. A mailing address alone is

25 insufficient to establish that a person is a resident for the

26 purposes of this section. The persons must be hired after the date

27 the application is filed with the department.

28 (3) All other provisions and eligibility requirements of this

29 chapter apply to applicants eligible under this section.

30 (4) The qualified employment position must be filled by the end

31 of the calendar year following the year in which the project is

32 certified as operationally complete. If a person does not meet the

33 requirements for qualified employment positions by the end of the

34 second calendar year following the year in which the project is

35 certified as operationally complete, all deferred taxes are

36 immediately due.

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_1 Sec. 4. RCW 82.62.030 and 1999 c 164 s 306 are each amended to

_2 read as follows:

_3 (1) A person shall be allowed a credit against the tax due

_4 under chapter 82.04 RCW as provided in this section. The credit

_5 shall equal: (a) Four thousand dollars for each qualified

_6 employment position with wages and benefits greater than forty

_7 thousand dollars annually that is directly created in an eligible

_8 business and (b) two thousand dollars for each qualified

_9 employment position with wages and benefits less than or equal to

10 forty thousand dollars annually that is directly created in an

11 eligible business.

12 (2) The department shall keep a running total of all credits

13 granted under this chapter during each fiscal year. The department

14 shall not allow any credits which would cause the tabulation to

15 exceed seven million five hundred thousand dollars in any fiscal

16 year. If all or part of an application for credit is disallowed

17 under this subsection, the disallowed portion shall be carried

18 over for approval the next fiscal year. However, the applicant's

19 carryover into the next fiscal year is only permitted if the

20 tabulation for the next fiscal year does not exceed the cap for

21 that fiscal year as of the date on which the department has

22 disallowed the application.

23 (3) No recipient may use the tax credits to decertify a union

24 or to displace existing jobs in ((~~any community in the state~~)) a

25 community empowerment zone, as defined in RCW 43.31C.020, or

26 displace existing jobs by changing sites within a single county.

27 (4) No recipient may receive a tax credit on taxes which have

28 not been paid during the taxable year.

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