BILL REQ. #:  H-0452.2 

Read first time 01/28/2005.   Referred to Committee on Economic Development, Agriculture & Trade.

     AN ACT Relating to sales and use tax relief for qualifying small businesses constructing manufacturing facilities; amending RCW 82.60.030; 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   Unless the context clearly requires otherwise, the definitions in this section apply throughout this chapter.
     (1) "Applicant" means a qualified small business applying for a tax deferral under this chapter.
     (2) "Department" means the department of revenue.
     (3) "Eligible investment project" means an investment project by a qualified small business as defined in this section.
     (4) "Employee" means a full-time, part-time, or temporary employee covered by Title 50 RCW for whom the small business is making contributions.
     (5) "Full-time employee" means a person whose employer requires them to work thirty-five hours per week, four hundred fifty-five hours a quarter, or one thousand eight hundred twenty hours a year.
     (6) "Health care plan" means any "employee welfare benefit plan" as defined by the employee retirement income security act of 1974, 29 U.S.C. Sec. 1001 et seq. and any "health plan" or "health benefit plan" as defined in RCW 48.43.005, funded or established by an employer for the purpose of providing for its employees or their beneficiaries, through the purchase of insurance or otherwise, health care services. For purposes of this subsection "health care services" means services offered or provided by health care facilities and health care providers relating to the prevention, cure, or treatment of illness, injury, or disease.
     (7) "Initiation of construction" means the date that a building permit is issued under the building code adopted under RCW 19.27.031. Initiation of construction does not include soil testing, site clearing and grading, site preparation, or any other related activities that are initiated before the issuance of a building permit for the construction of the foundation of the building. If the investment project involves more than one qualified building, initiation of construction shall apply separately to each qualified building.
     (8) "Investment project" means an investment in qualified buildings or qualified machinery and equipment, including labor and services rendered in the planning, installation, and construction of the project. An investment project does not include any portion of an investment project undertaken by a light and power business as defined in RCW 82.16.010(5), other than that portion of a cogeneration project that is used to generate power for consumption within the manufacturing site of which the cogeneration project is an integral part, or investment projects which have already received deferrals under this chapter.
     (9) "Manufacturing" means the same as defined in RCW 82.04.120.
     (10) "Operationally complete" means that the investment project is capable of being used for its intended purpose as described in the application.
     (11) "Qualified buildings" means construction of new structures including parking facilities, and expansion or renovation of existing structures, for the purpose of increasing floor space or production capacity used for manufacturing, including plant offices and warehouses or other facilities for the storage of raw material or finished goods if such facilities are an essential or an integral part of a factory, mill, or plant, used for manufacturing. If a building is used partly for manufacturing and partly for other purposes, the applicable tax deferral shall be determined by apportionment of the costs of construction under rules adopted by the department.
     (12) "Qualified machinery and equipment" means all new industrial fixtures, equipment, and support facilities that are an integral and necessary part of a manufacturing operation. "Qualified machinery and equipment" includes manufacturing components such as belts, pulleys, shafts, and moving parts; molds, tools, and dies; operating structures; and all equipment used to control or operate the machinery.
     (13) "Qualified small business" means a small business that:
     (a) Pays all of its employees a wage of at least one and one-half times the state's minimum wage as it exists at the time the department certifies that the investment project is operationally complete; and
     (b) Offers a health care plan to all of its full-time employees.
     (14) "Recipient" means a qualified small business receiving a tax deferral under this chapter.
     (15) "Small business" means a "person" as defined in RCW 82.04.030 that does not exceed the following employment levels:
     (a) Fifty or fewer employees at the time of application and at the time the department certifies that the investment project is operationally complete;
     (b) One hundred or fewer employees at the end of the first calendar year following the year in which the department certifies that the investment project is operationally complete;
     (c) Two hundred or fewer employees at the end of the second calendar year following the year in which the department certifies that the investment project is operationally complete; or
     (d) Four hundred or fewer employees at the end of the third calendar year following the year in which the department certifies that the investment project is operationally complete.

NEW SECTION.  Sec. 2   Application for deferral of taxes under this chapter must be made before initiation of the construction of the investment project or acquisition of equipment or machinery. The 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 investment project, the applicant's average employment in the state for the prior year, estimated or actual new employment related to the project, estimated or actual wages of employees related to the 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.

NEW SECTION.  Sec. 3   (1) The department shall issue a sales and use tax deferral certificate for state and local sales and use taxes due under chapters 82.08, 82.12, and 82.14 RCW on each eligible investment project.
     (2) The department shall keep a running total of all deferrals granted under this chapter during each fiscal biennium.

NEW SECTION.  Sec. 4   (1) Except as provided in subsections (2) and (3) of this section, taxes deferred under this chapter need not be repaid.
     (2) Each recipient shall submit an annual report to the department by March 31st following the year in which the eligible investment project was certified as operationally complete, and on March 31st of the three succeeding calendar years. The annual 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. If the recipient fails to submit a report or submits an inadequate report, the department may declare the amount of deferred taxes outstanding to be immediately due and payable.
     (3) If, on the basis of an annual report under subsection (2) of this section or other information, the department finds that an investment project is used for purposes other than manufacturing or that the recipient is no longer a qualified small business at any time during the calendar year in which the investment project is certified by the department as having been operationally completed, or at any time during any of the three succeeding calendar years, a portion of deferred taxes shall be immediately due and payable according to the following schedule:

NEW SECTION.  Sec. 5   If a recipient must pay deferred tax under section 4(3) of this act because the recipient is no longer a qualified small business, the department shall issue a deferral certificate under chapter 82.60 RCW for the deferred taxes outstanding if the investment project is an eligible investment project as defined in RCW 82.60.020 or 82.60.049.

Sec. 6   RCW 82.60.030 and 1994 sp.s. c 1 s 2 are each amended to read as follows:
     (1) Except as provided in subsection (2) of this section, application for deferral of taxes under this chapter must be made before initiation of the construction of the investment project or acquisition of equipment or machinery. The 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 investment project, the applicant's average employment in the state for the prior year, estimated or actual new employment related to the project, estimated or actual wages of employees related to the 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.
     (2) An application for deferral of taxes under this chapter is not required to issue a deferral certificate for investment projects under section 5 of this act.

NEW SECTION.  Sec. 7   The employment security department shall make, and certify to the department of revenue, all determinations of employment as requested by the department under this chapter.

NEW SECTION.  Sec. 8   Chapter 82.32 RCW applies to the administration of this chapter.

NEW SECTION.  Sec. 9   Applications, reports, and any other information received by the department under this chapter shall not be confidential under RCW 82.32.330.

NEW SECTION.  Sec. 10   Taxes shall not be deferred under this act prior to July 1, 2005.

NEW SECTION.  Sec. 11   Sections 1 through 5 and 7 through 10 and 12 of this act constitute a new chapter in Title 82 RCW.

NEW SECTION.  Sec. 12   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.