BILL REQ. #:  H-1860.1 

Read first time 02/28/2003.   Referred to Committee on Trade & Economic Development.

     AN ACT Relating to tax deferrals for community revitalization in distressed communities that stimulate business activity and help retain and create jobs; adding a new chapter to Title 82 RCW; and declaring an emergency.

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

NEW SECTION.  Sec. 1   The legislature recognizes that the state as a whole benefits from investment in distressed communities because it promotes emergency community and economic development. Private investment stimulates business activity and helps retain and create jobs; stimulates the redevelopment of brownfields and blighted areas in the inner city; and promotes efficient redevelopment of industrial, manufacturing, and new land uses. The legislature finds that these activities generate revenue for the state and that it is in the public interest to invest in these projects through tax deferrals against the state sales and use tax to those local governments that can demonstrate the expected returns to the state.

NEW SECTION.  Sec. 2   Unless the context clearly requires otherwise, the definitions in this section apply throughout this chapter.
     (1) "Applicant" means a person applying for a tax deferral under this chapter.
     (2) "Department" means the department of revenue.
     (3)(a) "Investment project" means construction of site preparation, structures, infrastructure, and the acquisition of related machinery and equipment when the structures, machinery, and equipment installations are used in the operation of a community increment area revitalization project, or any identifiable part related to promote community and economic development, due to redevelopment of brownfields and blighted areas in the inner city; promotes private investments that generate revenue for the local and state governments; and is in the public interest to invest in these projects through a state sales and use tax deferral to those local governments that can demonstrate the expected returns to the state.
     (b) The lessor/owner of a structure is not eligible for a deferral unless the underlying ownership of the structures, machinery, and equipment vests exclusively in the same person, or unless the lessor by written contract agrees to pass the economic benefit of the deferral to the lessee in the form of reduced rent payments.
     (c) "Investment project" includes any portion of an increment area investment project undertaken by a light and power business as defined in RCW 82.16.010(5), and that portion of a cogeneration project that is used to generate power for consumption within the increment area of which the cogeneration project is an integral part.
     (d) "Investment project" includes expenditures for historic preservation activities authorized under RCW 35.21.395.
     (e) "Investment project" includes structures or installation of machinery and equipment, including labor and services rendered in the planning, installation, and construction of the project within the increment area.
     (4) "Person" has the meaning given in RCW 82.04.030.
     (5) "Structures" means existing and new edifices such as offices, entertainment facilities, maintenance facilities, cold storage facilities, parking facilities, transportation facilities, infrastructure, and other structures that are an essential or integral part of the increment area investment project. The term also includes corporate offices located within the increment area investment project and includes hotels or motels if such facilities are located within the increment area investment project.
     (6) "Machinery and equipment" means all fixtures, equipment, and support facilities that are an integral and necessary part of the investment project, including buses or other means of vehicular transportation, rolling stock and rail improvements, sky rail, and any fixtures and equipment integral to qualifying structures.
     (7) "Recipient" means a person exempt from tax under section 501(c) of the internal revenue code, receiving a tax deferral under this chapter.
     (8) "Increment area" means the geographic area from which a local government defines an inner city area that qualifies for a distressed community revitalization project under this chapter and:
     (a) Is a site of at least one hundred fifty acres;
     (b) Has at least twenty acres of publicly owned open space used for public park and outdoor community recreational activities adjacent to the increment area;
     (c) Has at least one hundred acres of public land used for recreational golf adjacent to the increment area;
     (d) Has existing standard gauge freight or passenger rail infrastructure developed and servicing it;
     (e) Has existing egress and ingress and is no greater distance than one mile from a state and federal highway system; and
     (f) Is on a site with water rights allowing a wide variety of facilities to be designed around a particular recreational subject or idea.
     (9) "Amusement park" means an entertainment facility within a designated increment area, and is described under subsections (5) and (6) of this section.
     (10) "Cogeneration project" means any investment project related to generating power for consumption within the increment area or any integral part of producing power to distribute into an existing power grid and subject to sale to a light and power business.
     (11) "Improvement costs" means the costs of: (a) Design, planning, acquisition, including land acquisition, site preparation including land clearing, construction, reconstruction, rehabilitation, improvement, and installation of private improvements; (b) demolishing, relocating, maintaining, and operating property pending construction of private improvements; (c) relocating utilities as a result of private improvements; (d) financing private improvements, including interest during construction, legal and other professional services, taxes, insurance, principal and interest costs on general indebtedness issued to finance private improvements, and any necessary reserves for general indebtedness; and (e) administrative expenses and feasibility studies reasonably necessary and related to these costs, including related costs that may have been incurred before authorizing the private improvements and the use of community revitalization financing to fund the costs of the private improvements.

NEW SECTION.  Sec. 3   Application for deferral of taxes under this chapter must be made before initiation of the construction of the increment area investment project or acquisition of equipment or machinery. Application shall be made to the department in a form and manner prescribed by the department. The application shall contain information regarding the location of the increment area investment project, estimated or actual costs, time schedules for completion and operation, and other information required by the department. The department shall rule on the application within sixty days. An applicant may apply for a separate deferral for each identifiable part of a project, such as the amusement park, the infrastructure, structures, machinery and equipment, the retail stores, the restaurants, the parking facilities, and the hotels. Each separate deferral need not overcome the initiation of construction threshold as long as the initial construction of the project was begun before January 1, 2006.

NEW SECTION.  Sec. 4   (1) Except as provided in subsection (2) of this section, taxes deferred under this chapter must be repaid.
     (2) If, on the basis of a report under section 5 of this act or other information, the department finds that an investment project is used for purposes other than an approved private investment project at any time during the calendar year in which the investment project is certified by the department as being operationally complete, or at any time during any of the four succeeding calendar years, a portion of deferred taxes is immediately due according to the following schedule:

NEW SECTION.  Sec. 5   Each recipient of a deferral granted under this chapter shall submit a report to the department on December 31st of the year in which the investment project is certified by the department as being operationally complete, and on December 31st of each of the seven succeeding calendar years. The report shall contain information, as required by the department, from which the department may determine whether the recipient is meeting the requirements of this chapter.

NEW SECTION.  Sec. 6   Each recipient of a deferral granted under this chapter shall distribute taxes to a local government located within the county where the investment project is developed according to the schedule in this section.

NEW SECTION.  Sec. 7   (1) The tax levied by RCW 82.08.020 shall not apply to sales to an increment area amusement park development, or to increment area sales of or charges made for labor and services rendered in respect to installing, repairing, cleaning, altering, or improving the machinery and equipment, but only when the purchaser provides the seller with an exemption certificate in a form and manner prescribed by the department by rule. The seller shall retain a copy of the certificate for the seller's files.
     (2) For purposes of this section:
     (a) "Machinery and equipment" with regard to the increment area does not include:
     (i) Hand-powered tools;
     (ii) Property with a useful life of less than one year;
     (iii) Buildings, other than machinery and equipment that is permanently affixed to or becomes a physical part of a building; and
     (iv) Building fixtures that are not integral to the investment project operation and amusement park.
     (b) "Manufacturing" means the portion of a cogeneration project that is used to generate power for consumption within the increment area site of which the cogeneration project is an integral part. The term includes the production of electricity by a light and power business as defined in RCW 82.16.010. The term includes the preparation of food products on the premises of a person selling food products at retail within the increment area.
     (c) "Cogeneration" means the simultaneous generation of electrical energy and low-grade heat from the same fuel or other energy fuels.

NEW SECTION.  Sec. 8   If any provision of this act or its application to any person or circumstance is held invalid, the remainder of the act or the application of the provision to other persons or circumstances is not affected.

NEW SECTION.  Sec. 9   This act is necessary for the immediate preservation of the public peace, health, or safety, or support of the state government and its existing public institutions, and takes effect immediately.

NEW SECTION.  Sec. 10   Sections 1 through 9 of this act constitute a new chapter in Title 82 RCW.