BILL REQ. #:  H-1019.3 

Read first time 02/07/2005.   Referred to Committee on Technology, Energy & Communications.

     AN ACT Relating to improving the state's air quality by encouraging alternative markets for Washington's agricultural industries; amending RCW 19.112.010, 82.12.955, 82.08.955, and 84.36.635; reenacting and amending RCW 82.29A.135 and 82.04.260; adding a new section to chapter 19.112 RCW; and creating a new section.

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

NEW SECTION.  Sec. 1   The legislature finds that emissions from automobiles are a primary source of air quality degradation in the state of Washington. The legislature further finds that motor vehicle fuels, such as ethanol and biodiesel, that are blended with agricultural products burn cleaner and result in cleaner air for the densely populated urban areas of the state. Production of the crops necessary to produce some of the cleaner burning blended fuels could serve as an alternative market for Washington's farm families and economically benefit the rural areas of the state.

NEW SECTION.  Sec. 2   A new section is added to chapter 19.112 RCW to read as follows:
     (1) Unless otherwise provided under subsection (4) of this section, all nondiesel motor fuels offered at retail sale in Washington must contain at least ten percent ethanol by volume.
     (2) Unless otherwise provided under subsection (4) of this section, all diesel motor fuels offered at retail sale in Washington must contain at least two percent biodiesel fuel by volume.
     (3) Motor fuel producers may acquire the ethanol required to satisfy the requirements of this section from any source authorized by state or federal law.
     (4) The director shall authorize the sale of motor fuels that do not meet the requirements of this section if the director determines:
     (a) That sufficient verifiable quantities of competitively priced Washington-produced ethanol are not available to meet the minimum requirements of this section; or
     (b) Any other circumstances occur that would make compliance with this section an undue hardship for the motor fuel manufacturer, distributor, retailer, or consumer.

Sec. 3   RCW 19.112.010 and 1991 c 145 s 1 are each amended to read as follows:
     As used in this chapter:
     (1) "Motor fuel" means any liquid product used for the generation of power in an internal combustion engine used for the propulsion of a motor vehicle upon the highways of this state. Motor fuels containing ethanol may be marketed if either (a) the base motor fuel meets the applicable standards before the addition of the ethanol or (b) the resultant blend meets the applicable standards after the addition of the ethanol.
     (2) "Director" means the director of agriculture.
     (3) "Biodiesel fuel" has the meaning provided in RCW 82.29A.135.

Sec. 4   RCW 82.12.955 and 2003 c 63 s 3 are each amended to read as follows:
     (1) The provisions of this chapter do not apply in respect to the use of machinery and equipment, or to services rendered in respect to installing, repairing, cleaning, altering, or improving of eligible machinery and equipment, or tangible personal property that becomes an ingredient or component of machinery and equipment used directly for the retail sale of a biodiesel or alcohol fuel blend, or the manufacture of ethanol.
     (2) The provisions of this chapter do not apply in respect to the use of fuel delivery vehicles including repair parts and replacement parts and to services rendered in respect to installing, repairing, cleaning, altering, or improving the vehicles if at least seventy-five percent of the fuel distributed by the vehicles is a biodiesel or alcohol fuel blend.
     (3) For the purposes of this section, the definitions in RCW 82.04.4334 and 82.08.955 apply.
     (4) This section expires July 1, 2009.

Sec. 5   RCW 82.29A.135 and 2003 c 339 s 10 and 2003 c 261 s 10 are each reenacted and amended to read as follows:
     (1) For the purposes of this section:
     (a) "Alcohol fuel" means any alcohol made from a product other than petroleum or natural gas, which is used alone or in combination with gasoline or other petroleum products for use as a fuel for motor vehicles, farm implements, and machines or implements of husbandry.
     (b) "Biodiesel feedstock" means oil that is produced from an agricultural crop for the sole purpose of ultimately producing biodiesel fuel.
     (c) "Biodiesel fuel" means a mono alkyl ester of long chain fatty acids derived from vegetable oils or animal fats for use in compression-ignition engines and that meets the requirements of the American society of testing and materials specification D 6751 in effect as of January 1, 2003.
     (d) "Wood biomass fuel" means a pyrolytic liquid fuel or synthesis gas-derived liquid fuel, used in internal combustion engines, and produced from wood, forest, or field residue, or dedicated energy crops that do not include wood pieces that have been treated with chemical preservatives such as creosote, pentachlorophenol, or copper-chroma-arsenic.
     (2)(a) All leasehold interests in buildings, machinery, equipment, and other personal property which is used primarily for the manufacturing of alcohol fuel, wood biomass fuel, ethanol, biodiesel fuel, or biodiesel feedstock, the land upon which this property is located, and land that is reasonably necessary in the manufacturing of alcohol fuel, wood biomass fuel, ethanol, biodiesel fuel, or biodiesel feedstock, but not land necessary for growing of crops, which together comprise a new manufacturing facility or an addition to an existing manufacturing facility, are exempt from leasehold taxes for a period of six years from the date on which the facility or the addition to the existing facility becomes operational.
     (b) For manufacturing facilities which produce products in addition to alcohol fuel, wood biomass fuel, ethanol, biodiesel fuel, or biodiesel feedstock, the amount of the leasehold tax exemption shall be based upon the annual percentage of the total value of all products manufactured that is the value of the alcohol fuel, wood biomass fuel, ethanol, biodiesel fuel, and biodiesel feedstock manufactured.
     (3) Claims for exemptions authorized by this section shall be filed with the department of revenue on forms prescribed by the department of revenue and furnished by the department of revenue. Once filed, the exemption is valid for six years and shall not be renewed. The department of revenue shall verify and approve claims as the department of revenue determines to be justified and in accordance with this section. No claims may be filed after December 31, 2009.
     The department of revenue may promulgate such rules, pursuant to chapter 34.05 RCW, as are necessary to properly administer this section.

Sec. 6   RCW 82.08.955 and 2003 c 63 s 2 are each amended to read as follows:
     (1) The tax levied by RCW 82.08.020 does not apply to sales of machinery and equipment, or to services rendered in respect to constructing structures, installing, constructing, repairing, cleaning, decorating, altering, or improving of structures or machinery and equipment, or to sales of tangible personal property that becomes an ingredient or component of structures or machinery and equipment, if the machinery, equipment, or structure is used directly for the retail sale of a biodiesel or alcohol fuel blend, or for the manufacture of ethanol. Structures and machinery and equipment that are used for the retail sale of a biodiesel or alcohol fuel blend, or for the manufacture of ethanol, and for other purposes are exempt only on the portion used directly for the retail sale of a biodiesel or alcohol fuel blend.
     (2) The tax levied by RCW 82.08.020 does not apply to sales of fuel delivery vehicles or to sales of or charges made for labor and services rendered in respect to installing, repairing, cleaning, altering, or improving the vehicles including repair parts and replacement parts if at least seventy-five percent of the fuel distributed by the vehicles is a biodiesel or alcohol fuel blend.
     (3) A person taking the exemption under this section must keep records necessary for the department to verify eligibility under this section. The exemption is available only when the buyer provides the seller with an exemption certificate in a form and manner prescribed by the department. The seller shall retain a copy of the certificate for the seller's files.
     (4) For the purposes of this section, the definitions in RCW 82.04.4334 and this subsection apply.
     (a) "Alcohol fuel blend" means fuel that contains at least eighty-five percent alcohol fuel by volume.
     (b) "Biodiesel blend" means fuel that contains at least twenty percent biodiesel fuel by volume.
     (c) "Machinery and equipment" means industrial fixtures, devices, and support facilities and tangible personal property that becomes an ingredient or component thereof, including repair parts and replacement parts that are integral and necessary for the delivery of biodiesel or alcohol fuel blends into the fuel tank of a motor vehicle.
     (5) This section expires July 1, 2009.

Sec. 7   RCW 84.36.635 and 2003 c 261 s 9 are each amended to read as follows:
     (1) For the purposes of this section:
     (a) "Alcohol fuel" means any alcohol made from a product other than petroleum or natural gas, which is used alone or in combination with gasoline or other petroleum products for use as a fuel for motor vehicles, farm implements, and machines or implements of husbandry.
     (b) "Biodiesel feedstock" means oil that is produced from an agricultural crop for the sole purpose of ultimately producing biodiesel fuel.
     (c) "Biodiesel fuel" means a mono alkyl ester of long chain fatty acids derived from vegetable oils or animal fats for use in compression-ignition engines and that meets the requirements of the American society of testing and materials specification D 6751 in effect as of January 1, 2003.
     (2)(a) All buildings, machinery, equipment, and other personal property which is used primarily for the manufacturing of alcohol fuel, ethanol, biodiesel fuel, or biodiesel feedstock, the land upon which this property is located, and land that is reasonably necessary in the manufacturing of alcohol fuel, ethanol, biodiesel fuel, or biodiesel feedstock, but not land necessary for growing of crops, which together comprise a new manufacturing facility or an addition to an existing manufacturing facility, are exempt from property taxation for the six assessment years following the date on which the facility or the addition to the existing facility becomes operational.
     (b) For manufacturing facilities which produce products in addition to alcohol fuel, ethanol, biodiesel fuel, or biodiesel feedstock, the amount of the property tax exemption shall be based upon the annual percentage of the total value of all products manufactured that is the value of the alcohol fuel, ethanol, biodiesel fuel, and biodiesel feedstock manufactured.
     (3) Claims for exemptions authorized by this section shall be filed with the county assessor on forms prescribed by the department of revenue and furnished by the assessor. Once filed, the exemption is valid for six years and shall not be renewed. The assessor shall verify and approve claims as the assessor determines to be justified and in accordance with this section. No claims may be filed after December 31, 2009.
     The department of revenue may ((promulgate)) adopt such rules, pursuant to chapter 34.05 RCW, as necessary to properly administer this section.

Sec. 8   RCW 82.04.260 and 2003 2nd sp.s. c 1 s 4 and 2003 2nd sp.s. c 1 s 3 are each reenacted and amended to read as follows:
     (1) Upon every person engaging within this state in the business of manufacturing:
     (a) Wheat into flour, barley into pearl barley, soybeans into soybean oil, canola into canola oil, canola meal, or canola byproducts, or sunflower seeds into sunflower oil; as to such persons the amount of tax with respect to such business shall be equal to the value of the flour, pearl barley, oil, canola meal, or canola byproduct manufactured, multiplied by the rate of 0.138 percent;
     (b) Seafood products which remain in a raw, raw frozen, or raw salted state at the completion of the manufacturing by that person; as to such persons the amount of tax with respect to such business shall be equal to the value of the products manufactured, multiplied by the rate of 0.138 percent;
     (c) By canning, preserving, freezing, processing, or dehydrating fresh fruits and vegetables, or selling at wholesale fresh fruits and vegetables canned, preserved, frozen, processed, or dehydrated by the seller and sold to purchasers who transport in the ordinary course of business the goods out of this state; as to such persons the amount of tax with respect to such business shall be equal to the value of the products canned, preserved, frozen, processed, or dehydrated multiplied by the rate of 0.138 percent. As proof of sale to a person who transports in the ordinary course of business goods out of this state, the seller shall annually provide a statement in a form prescribed by the department and retain the statement as a business record;
     (d) Dairy products that as of September 20, 2001, are identified in 21 C.F.R., chapter 1, parts 131, 133, and 135, including byproducts from the manufacturing of the dairy products such as whey and casein; or selling the same to purchasers who transport in the ordinary course of business the goods out of state; as to such persons the tax imposed shall be equal to the value of the products manufactured multiplied by the rate of 0.138 percent. As proof of sale to a person who transports in the ordinary course of business goods out of this state, the seller shall annually provide a statement in a form prescribed by the department and retain the statement as a business record;
     (e) Alcohol fuel, biodiesel fuel, or biodiesel feedstock, as those terms are defined in RCW 82.29A.135, or ethanol; as to such persons the amount of tax with respect to the business shall be equal to the value of alcohol fuel, ethanol, biodiesel fuel, or biodiesel feedstock manufactured, multiplied by the rate of 0.138 percent. This subsection (1)(e) expires July 1, 2009; and
     (f) Alcohol fuel or wood biomass fuel, as those terms are defined in RCW 82.29A.135; as to such persons the amount of tax with respect to the business shall be equal to the value of alcohol fuel or wood biomass fuel manufactured, multiplied by the rate of 0.138 percent.
     (2) Upon every person engaging within this state in the business of splitting or processing dried peas; as to such persons the amount of tax with respect to such business shall be equal to the value of the peas split or processed, multiplied by the rate of 0.138 percent.
     (3) Upon every nonprofit corporation and nonprofit association engaging within this state in research and development, as to such corporations and associations, the amount of tax with respect to such activities shall be equal to the gross income derived from such activities multiplied by the rate of 0.484 percent.
     (4) Upon every person engaging within this state in the business of slaughtering, breaking and/or processing perishable meat products and/or selling the same at wholesale only and not at retail; as to such persons the tax imposed shall be equal to the gross proceeds derived from such sales multiplied by the rate of 0.138 percent.
     (5) Upon every person engaging within this state in the business of making sales, at retail or wholesale, of nuclear fuel assemblies manufactured by that person, as to such persons the amount of tax with respect to such business shall be equal to the gross proceeds of sales of the assemblies multiplied by the rate of 0.275 percent.
     (6) Upon every person engaging within this state in the business of manufacturing nuclear fuel assemblies, as to such persons the amount of tax with respect to such business shall be equal to the value of the products manufactured multiplied by the rate of 0.275 percent.
     (7) Upon every person engaging within this state in the business of acting as a travel agent or tour operator; as to such persons the amount of the tax with respect to such activities shall be equal to the gross income derived from such activities multiplied by the rate of 0.275 percent.
     (8) Upon every person engaging within this state in business as an international steamship agent, international customs house broker, international freight forwarder, vessel and/or cargo charter broker in foreign commerce, and/or international air cargo agent; as to such persons the amount of the tax with respect to only international activities shall be equal to the gross income derived from such activities multiplied by the rate of 0.275 percent.
     (9) Upon every person engaging within this state in the business of stevedoring and associated activities pertinent to the movement of goods and commodities in waterborne interstate or foreign commerce; as to such persons the amount of tax with respect to such business shall be equal to the gross proceeds derived from such activities multiplied by the rate of 0.275 percent. Persons subject to taxation under this subsection shall be exempt from payment of taxes imposed by chapter 82.16 RCW for that portion of their business subject to taxation under this subsection. Stevedoring and associated activities pertinent to the conduct of goods and commodities in waterborne interstate or foreign commerce are defined as all activities of a labor, service or transportation nature whereby cargo may be loaded or unloaded to or from vessels or barges, passing over, onto or under a wharf, pier, or similar structure; cargo may be moved to a warehouse or similar holding or storage yard or area to await further movement in import or export or may move to a consolidation freight station and be stuffed, unstuffed, containerized, separated or otherwise segregated or aggregated for delivery or loaded on any mode of transportation for delivery to its consignee. Specific activities included in this definition are: Wharfage, handling, loading, unloading, moving of cargo to a convenient place of delivery to the consignee or a convenient place for further movement to export mode; documentation services in connection with the receipt, delivery, checking, care, custody and control of cargo required in the transfer of cargo; imported automobile handling prior to delivery to consignee; terminal stevedoring and incidental vessel services, including but not limited to plugging and unplugging refrigerator service to containers, trailers, and other refrigerated cargo receptacles, and securing ship hatch covers.
     (10) Upon every person engaging within this state in the business of disposing of low-level waste, as defined in RCW 43.145.010; as to such persons the amount of the tax with respect to such business shall be equal to the gross income of the business, excluding any fees imposed under chapter 43.200 RCW, multiplied by the rate of 3.3 percent.
     If the gross income of the taxpayer is attributable to activities both within and without this state, the gross income attributable to this state shall be determined in accordance with the methods of apportionment required under RCW 82.04.460.
     (11) Upon every person engaging within this state as an insurance agent, insurance broker, or insurance solicitor licensed under chapter 48.17 RCW; as to such persons, the amount of the tax with respect to such licensed activities shall be equal to the gross income of such business multiplied by the rate of 0.484 percent.
     (12) Upon every person engaging within this state in business as a hospital, as defined in chapter 70.41 RCW, that is operated as a nonprofit corporation or by the state or any of its political subdivisions, as to such persons, the amount of tax with respect to such activities shall be equal to the gross income of the business multiplied by the rate of 0.75 percent through June 30, 1995, and 1.5 percent thereafter. The moneys collected under this subsection shall be deposited in the health services account created under RCW 43.72.900.
     (13)(a) Beginning October 1, 2005, upon every person engaging within this state in the business of manufacturing commercial airplanes, or components of such airplanes, as to such persons the amount of tax with respect to such business shall, in the case of manufacturers, be equal to the value of the product manufactured, or in the case of processors for hire, be equal to the gross income of the business, multiplied by the rate of:
     (i) 0.4235 percent from October 1, 2005, through the later of June 30, 2007, or the day preceding the date final assembly of a superefficient airplane begins in Washington state, as determined under RCW 82.32.550; and
     (ii) 0.2904 percent beginning on the later of July 1, 2007, or the date final assembly of a superefficient airplane begins in Washington state, as determined under RCW 82.32.550.
     (b) Beginning October 1, 2005, upon every person engaging within this state in the business of making sales, at retail or wholesale, of commercial airplanes, or components of such airplanes, manufactured by that person, as to such persons the amount of tax with respect to such business shall be equal to the gross proceeds of sales of the airplanes or components multiplied by the rate of:
     (i) 0.4235 percent from October 1, 2005, through the later of June 30, 2007, or the day preceding the date final assembly of a superefficient airplane begins in Washington state, as determined under RCW 82.32.550; and
     (ii) 0.2904 percent beginning on the later of July 1, 2007, or the date final assembly of a superefficient airplane begins in Washington state, as determined under RCW 82.32.550.
     (c) For the purposes of this subsection (13), "commercial airplane," "component," and "final assembly of a superefficient airplane" have the meanings given in RCW 82.32.550.
     (d) In addition to all other requirements under this title, a person eligible for the tax rate under this subsection (13) must report as required under RCW 82.32.545.
     (e) This subsection (13) does not apply after the earlier of: July 1, 2024; or December 31, 2007, if assembly of a superefficient airplane does not begin by December 31, 2007, as determined under RCW 82.32.550.