S 1027

S‑1027.1 _____________________________________________

SENATE BILL 5469

_____________________________________________

State of Washington 57th Legislature 2001 Regular Session

By Senator T. Sheldon

Read first time 01/24/2001. Referred to Committee on Economic Development & Telecommunications.

_1 AN ACT Relating to tax deferrals in rural counties and

_2 community empowerment zones; and amending RCW 82.60.010,

_3 82.60.020, 82.60.049, 82.62.010, 82.62.030, and 82.62.045.

_4 BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF WASHINGTON:

_5 Sec. 1. RCW 82.60.010 and 1985 c 232 s 1 are each amended to read

_6 as follows:

_7 The legislature finds that there are several areas in the state

_8 that are characterized by very high levels of unemployment and

_9 poverty. The ((~~legislative [legislature]~~)) legislature further

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

11 unemployment rate and poverty; that new state policies are

12 necessary in order to promote economic stimulation and new

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

14 that policies providing incentives for economic growth in these

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

16 legislature hereby establishes a tax deferral program to be

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

18 circumstances where the deferred tax payments are for investments

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_1 or costs that result in the creation of a specified number of

_2 jobs. The legislature declares that this limited program serves the

_3 vital public purpose of creating employment opportunities and

_4 reducing poverty in the ((~~distressed~~)) rural areas of the state.

_5 Sec. 2. RCW 82.60.020 and 1999 sp.s. c 9 s 2 are each amended to

_6 read as follows:

_7 Unless the context clearly requires otherwise, the definitions

_8 in this section apply throughout this chapter.

_9 (1) "Applicant" means a person applying for a tax deferral

10 under this chapter.

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

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

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

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

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

16 defined in this section or a designated community empowerment zone

17 approved under RCW 43.31C.020.

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

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

20 section.

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

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

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

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

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

26 payments.

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

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

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

30 cogeneration project that is used to generate power for

31 consumption within the manufacturing site of which the

32 cogeneration project is an integral part, or investment projects

33 which have already received deferrals under this chapter.

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

35 buildings or qualified machinery and equipment, including labor

36 and services rendered in the planning, installation, and

37 construction of the project.

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_1 (6) "Manufacturing" means the same as defined in RCW

_2 82.04.120. "Manufacturing" also includes computer programming, the

_3 production of computer software, and other computer-related

_4 services, and the activities performed by research and development

_5 laboratories and commercial testing laboratories.

_6 (7) "Person" has the meaning given in RCW 82.04.030.

_7 (8) "Qualified buildings" means construction of new structures,

_8 and expansion or renovation of existing structures for the purpose

_9 of increasing floor space or production capacity used for

10 manufacturing and research and development activities, including

11 plant offices and warehouses or other facilities for the storage

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

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

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

15 building is used partly for manufacturing or research and

16 development and partly for other purposes, the applicable tax

17 deferral shall be determined by apportionment of the costs of

18 construction under rules adopted by the department.

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

20 industrial and research fixtures, equipment, and support

21 facilities that are an integral and necessary part of a

22 manufacturing or research and development operation. "Qualified

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

24 processing equipment; laboratory equipment; manufacturing

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

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

27 used to control or operate the machinery.

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

29 this chapter.

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

31 refinement, testing, marketing, and commercialization of a

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

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

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

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

36 one million dollars.

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

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_1 persons per square mile as determined annually by the office of

_2 financial management and published by the department of revenue

_3 effective for the period July 1st through June 30th.

_4 Sec. 3. RCW 82.60.049 and 2000 c 106 s 8 are each amended to read

_5 as follows:

_6 (1) For the purposes of this section:

_7 (a) "Eligible area" also means a county containing a designated

_8 community empowerment zone approved under RCW ((~~43.63A.700 or a~~

_9 ~~county containing a community empowerment zone~~)) 43.31C.020.

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

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

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

13 employee employed in the eligible investment project during the

14 entire year.

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

16 department shall issue a sales and use tax deferral certificate

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

18 82.12, and 82.14 RCW, on each eligible investment project that is

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

20 the time the project is operationally complete:

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

22 position for each seven hundred fifty thousand dollars of

23 investment on which a deferral is requested; and

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

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

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

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

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

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

30 the application is filed with the department.

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

32 chapter apply to applicants eligible under this section.

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

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

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

36 requirements for qualified employment positions by the end of the

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_1 second calendar year following the year in which the project is

_2 certified as operationally complete, all deferred taxes are

_3 immediately due.

_4 Sec. 4. RCW 82.62.010 and 1999 sp.s. c 9 s 3 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 credit under

_9 this chapter.

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

11 (3) "Eligible area" means ((~~an area~~)) a rural county as defined

12 in RCW 82.60.020.

13 (4)(a) "Eligible business project" means manufacturing or

14 research and development activities which are conducted by an

15 applicant in an eligible area at a specific facility, provided the

16 applicant's average full-time qualified employment positions at

17 the specific facility will be at least fifteen percent greater in

18 the year for which the credit is being sought than the applicant's

19 average full-time qualified employment positions at the same

20 facility in the immediately preceding year.

21 (b) "Eligible business project" does not include any portion of

22 a business project undertaken by a light and power business as

23 defined in RCW 82.16.010(5) or that portion of a business project

24 creating qualified full-time employment positions outside an

25 eligible area or those recipients of a sales tax deferral under

26 chapter 82.61 RCW.

27 (5) "Manufacturing" means the same as defined in RCW

28 82.04.120. "Manufacturing" also includes computer programming, the

29 production of computer software, and other computer-related

30 services, and the activities performed by research and development

31 laboratories and commercial testing laboratories.

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

33 (7) "Qualified employment position" means a permanent full-time

34 employee employed in the eligible business project during the

35 entire tax year.

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

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_1 (9) "Recipient" means a person receiving tax credits under this

_2 chapter.

_3 (10) "Research and development" means the development,

_4 refinement, testing, marketing, and commercialization of a

_5 product, service, or process before commercial sales have begun.

_6 As used in this subsection, "commercial sales" excludes sales of

_7 prototypes or sales for market testing if the total gross receipts

_8 from such sales of the product, service, or process do not exceed

_9 one million dollars.

10 Sec. 5. RCW 82.62.030 and 1999 c 164 s 306 are each amended to

11 read as follows:

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

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

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

15 employment position with wages and benefits greater than forty

16 thousand dollars annually that is directly created in an eligible

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

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

19 forty thousand dollars annually that is directly created in an

20 eligible business.

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

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

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

24 exceed seven million five hundred thousand dollars in any fiscal

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

26 under this subsection, the disallowed portion shall be carried

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

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

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

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

31 disallowed the application.

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

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

34 rural county or designated community empowerment zone, approved

35 under RCW 43.31C.020, or displace existing jobs by changing sites

36 within a single county.

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_1 (4) No recipient may receive a tax credit on taxes which have

_2 not been paid during the taxable year.

_3 Sec. 6. RCW 82.62.045 and 1999 c 164 s 307 are each amended to

_4 read as follows:

_5 (1) For the purposes of this section "eligible area" also means

_6 a designated community empowerment zone approved under RCW

_7 ((~~43.63A.700~~)) 43.31C.020.

_8 (2) An eligible business project located within an eligible

_9 area as defined in this section qualifies for a credit under this

10 chapter for those employees who at the time of hire are residents

11 of the community empowerment zone in which the project is located,

12 if the fifteen percent threshold is met. As used in this

13 subsection, "resident" means the person makes his or her home in

14 the community empowerment zone. A mailing address alone is

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

16 purposes of this section.

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

18 chapter apply to applicants eligible under this section.

‑‑‑ END ‑‑‑

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