BILL REQ. #:  H-4089.1 

Read first time 01/20/2004.   Referred to Committee on Finance.

     AN ACT Relating to private business entities supported by state tax preferences; adding a new chapter to Title 82 RCW; and providing an effective date.

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

NEW SECTION.  Sec. 1   The legislature finds that when public funds, through tax preferences, are used to support private enterprise, the public may gain through the creation of new jobs, the diversification of the economy, and by raising living standards. The legislature further finds that such returns on taxpayers' public investments are not automatic and that tax preferences may result in a greater tax burden to those not eligible for public support or may result in a lower return to the public than if the taxes were collected and spent on education, health care, or other critical social services. Therefore, in order to improve the effectiveness of tax preferences for supporting private enterprise and to ensure that they achieve the goal of raising living standards for working families and strengthening the Washington state economy, the legislature finds it necessary for the state and its political subdivisions to collect, analyze, and make publicly available information regarding those tax preferences and to enact eligibility standards and safeguards for their use.

NEW SECTION.  Sec. 2   Unless the context clearly requires otherwise, the definitions in this section apply throughout this chapter.
     (1) Business "tax preference" means an exemption, exclusion, or deduction from the base of a state tax, a credit against a state tax, a deferral of a state tax, or a preferential state tax rate.
     (2) "Full-time permanent job" means a job in which the new employee works for the business at a rate of at least thirty-five hours per week.
     (3) "Part-time" job means a job in which the new employee works for the business at a rate of less than thirty-five hours per week.
     (4) "Temporary job" means a job in which the new employee is hired for a specific duration of time or season.
     (5) "Local hire agreements" means contracting with Washington state registered contractors who employ predominantly Washington state residents.
     (6) "Wage bands" means the following six groupings of wage rates:
     (a) Up to the state minimum wage plus two dollars per hour;
     (b) Between the state minimum wage plus two dollars and one cent to the state minimum wage plus four dollars per hour;
     (c) Between the state minimum wage and four dollars and one cent to the state minimum wage plus six dollars per hour;
     (d) Between the state minimum wage and six dollars and one cent to the state minimum wage plus eight dollars per hour;
     (e) Between the state minimum wage plus eight dollars and one cent to the state minimum wage plus ten dollars per hour;
     (f) Greater than the state minimum wage plus ten dollars and one cent per hour.

NEW SECTION.  Sec. 3   In order for private businesses to qualify for tax preferences, they must comply with the following eligibility standards:
     (1) There must be a net creation of full-time permanent jobs in Washington state by each business receiving tax preferences within two years of receiving the tax preference.
     (2) New jobs created will pay no less than the prevailing wage rate for that industry or the county average wage, whichever is greater.
     (3) Each business must provide employer-paid health benefits at no less than the value of the state's basic health plan, dental coverage, vacation and sick leave, and an ERISA-qualified retirement plan.
     (4) The construction or installation of plant and equipment will be done through local hire agreements, pay the prevailing wage rate, and be covered by project labor agreements where applicable.

NEW SECTION.  Sec. 4   The following information and data, on a business specific basis, shall be reported annually to the department and be made available for public disclosure:
     (1) Each business must submit a statement explaining why it needs the tax preference in order to create new jobs or to fulfill some other public benefit that raises the living standards of Washington workers or strengthens the Washington state economy;
     (2) The number of net new jobs created annually in Washington state as a result of receiving the tax preference broken down by full-time, part-time, and temporary job categories;
     (3) The wages of each new job reported in wage bands;
     (4) A description of the amount and level of employer-provided benefits including health and dental insurance, vacation and sick leave, and retirement benefits;
     (5) The businesses' employment level in states other than Washington and their employment level outsourced to other countries;
     (6) Each business must report the dollar value for each state tax preference it receives over the previous four calendar quarters.

NEW SECTION.  Sec. 5   Business tax preferences shall be subject to the following qualifications:
     (1) All business tax preferences shall clearly state the public purpose and benefit for which they were created.
     (2) All business tax preferences expire in five years or less, except as provided in subsection (3) of this section.
     (3) No individual business may receive a particular tax preference for more than five years unless there are extraordinary circumstances which detail a significant public benefit from extending the tax preference to that business. If the legislature determines that a significant public benefit is derived from the tax preference, it shall amend the expiration date to extend the tax preference for up to five more years.
     (4) Any business that fails to meet the eligibility standards established pursuant to section 4 of this act must immediately repay the value of the tax preference to the department.

NEW SECTION.  Sec. 6   The department will annually collect, analyze, and make available to the legislature and the public, information regarding business tax preferences in the following way:
     (1) The department will create a tax preference disclosure form which will capture, on a business specific basis, the information specified in section 4 of this act and any other information the department deems relevant to help analyze the effectiveness of the tax preference.
     (2) The department will disseminate the tax preference disclosure form to all businesses applying for the tax preference. This form will require each business to immediately submit a statement as described in section 4(1) of this act and to complete the rest of the form and return it to the department by July 1st of each year.
     (3) The department will analyze this data and compile an annual report to the legislature due the first week of each December. This report will include at least the following information:
     (a) The total annual dollar value of business tax preferences by individual tax preference;
     (b) The geographic and industrial distribution of business tax preferences;
     (c) A summary of the data in section 4 of this act;
     (d) An analysis of whether goals of the tax preference are being met.
     (4) All information in the tax preference disclosure forms is deemed not to be proprietary information and therefore shall be made available to the general public by the department upon request.

NEW SECTION.  Sec. 7   The department shall adopt rules to implement this act.

NEW SECTION.  Sec. 8   This act takes effect July 1, 2004.

NEW SECTION.  Sec. 9   Sections 1 through 8 of this act constitute a new chapter in Title 82 RCW.