S‑0447.2   _____________________________________________






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.




_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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