BILL REQ. #:  H-2295.1 

READ FIRST TIME 03/04/05.   

     AN ACT Relating to property tax exemptions for nonprofit organizations for small business incubators which assist in the creation and expansion of innovative small commercial enterprises; amending RCW 84.36.810; adding new sections to chapter 84.36 RCW; and creating new sections.

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

NEW SECTION.  Sec. 1   The legislature finds that nonprofit organizations and associations engaged in the education and training of people, located in economically disadvantaged areas, who are involved in the creation and expansion of businesses with marketable products and services in a physical location provide many public benefits to the people of the state of Washington. Therefore, the legislature finds that it is in the best interest of the state of Washington to provide a limited property tax exemption for the use of these facilities by certain organizations in order to be self-sustaining for their exempt purposes.

NEW SECTION.  Sec. 2   A new section is added to chapter 84.36 RCW to read as follows:
     (1) The real and personal property owned or used by a nonprofit organization is exempt from property taxes levied for any state purpose if the property is:
     (a) Located in an economically distressed area; and
     (b) Used to provide shared use of equipment and work areas and daily technical resources and daily management support services that enable small startup and emerging businesses to become successful.
     (2) The organization or association must meet all of the additional following conditions:
     (a) The organization is organized and conducted for nonsectarian purposes.
     (b) The organization is qualified for exemption under section 501(c)(3) of the federal internal revenue code.
     (c) The organization is governed by a volunteer board of directors of at least five members.
     (3) In 2010, any nonprofit organization claiming the exemption under subsection (1) of this section must report to the department the number of businesses served by the nonprofit and the types of services provided. Nonprofits failing to report to the department are ineligible for the exemption under subsection (1) of this section. The department shall compile the information and share it with the appropriate committees of the legislature.
     (4) For the purposes of this section, the following definitions apply:
     (a) "Economically distressed area" means a rural county as defined in RCW 82.14.370, a county with a community empowerment zone under RCW 43.31C.020, or a community empowerment zone under RCW 43.31C.020.
     (b) "Emerging business" means a business: (i) That is engaged in activities related to the development of initial product or service offerings, such as prototype development or establishment of initial production or services processes; (ii) which is less than five years old and during the previous fiscal year had gross revenues of no more than two million dollars; or (iii) that is in a growth mode, expanding its operation or its market.
     (c) "Start-up business" means a formal business venture that: (i) Is involved in activities related to the development of initial product or service offerings, such as prototype development or establishment of initial production or services processes; (ii) is less than three years old and during the previous fiscal year, had gross revenues of no more than two million dollars; and (iii) has fewer than twenty employees.
     (5) The exemption expires in 2015.

NEW SECTION.  Sec. 3   A new section is added to chapter 84.36 RCW to read as follows:
     The levy for the state in any year shall be reduced as necessary to prevent exemptions under section 2 of this act resulting in a higher tax rate than would have occurred in the absence of the exemptions in section 2 of this act.

Sec. 4   RCW 84.36.810 and 2003 c 344 s 2 are each amended to read as follows:
     (1)(a) Upon cessation of a use under which an exemption has been granted pursuant to RCW 84.36.030, 84.36.037, 84.36.040, 84.36.041, 84.36.042, 84.36.043, 84.36.046, 84.36.050, 84.36.060, 84.36.550, 84.36.650, 84.36.560, ((and)) 84.36.570, and section 2 of this act, except as provided in (b) of this subsection, the county treasurer shall collect all taxes which would have been paid had the property not been exempt during the three years preceding, or the life of such exemption, if such be less, together with the interest at the same rate and computed in the same way as that upon delinquent property taxes. If the property has been granted an exemption for more than ten consecutive years, taxes and interest shall not be assessed under this section.
     (b) Upon cessation of use by an institution of higher education of property exempt under RCW 84.36.050(2) the county treasurer shall collect all taxes which would have been paid had the property not been exempt during the seven years preceding, or the life of the exemption, whichever is less.
     (2) Subsection (1) of this section applies only when ownership of the property is transferred or when fifty-one percent or more of the area of the property loses its exempt status. The additional tax under subsection (1) of this section shall not be imposed if the cessation of use resulted solely from:
     (a) Transfer to a nonprofit organization, association, or corporation for a use which also qualifies and is granted exemption under this chapter;
     (b) A taking through the exercise of the power of eminent domain, or sale or transfer to an entity having the power of eminent domain in anticipation of the exercise of such power;
     (c) Official action by an agency of the state of Washington or by the county or city within which the property is located which disallows the present use of such property;
     (d) A natural disaster such as a flood, windstorm, earthquake, or other such calamity rather than by virtue of the act of the organization, association, or corporation changing the use of such property;
     (e) Relocation of the activity and use of another location or site except for undeveloped properties of camp facilities exempted under RCW 84.36.030;
     (f) Cancellation of a lease on leased property that had been exempt under this chapter; or
     (g) A change in the exempt portion of a home for the aging under RCW 84.36.041(3), as long as some portion of the home remains exempt.
     (3) Subsections (2)(e) and (f) of this section do not apply to property leased to a state institution of higher education and exempt under RCW 84.36.050(2).

NEW SECTION.  Sec. 5   This act applies to taxes levied for collection in 2006 and thereafter.