BILL REQ. #:  Z-0470.6 

Read first time 02/11/2005.   Referred to Committee on Finance.

     AN ACT Relating to providing excise tax relief for nonmanufacturing aerospace businesses; adding a new section to chapter 82.08 RCW; adding a new section to chapter 82.12 RCW; adding a new section to chapter 82.04 RCW; providing an effective date; providing expiration dates; and declaring an emergency.

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

NEW SECTION.  Sec. 1   A new section is added to chapter 82.08 RCW to read as follows:
     (1) The tax levied by RCW 82.08.020 does not apply to sales of computer hardware, computer peripherals, or software, not otherwise eligible for exemption under RCW 82.08.02565 or 82.08.975, used primarily in the development, design, and engineering of commercial airplanes or components of such airplanes, or to sales of or charges made for labor and services rendered in respect to installing the computer hardware, computer peripherals, or software. 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.
     (2) As used in this section:
     (a) "Commercial airplane" and "component" have the meanings given in RCW 82.32.550.
     (b) "Peripherals" includes keyboards, monitors, mouse devices, and other accessories that operate outside of the computer, excluding cables, conduit, wiring, and other similar property.
     (3) This section expires July 1, 2024.

NEW SECTION.  Sec. 2   A new section is added to chapter 82.12 RCW to read as follows:
     (1) The provisions of this chapter do not apply in respect to the use of computer hardware, computer peripherals, or software, not otherwise eligible for exemption under RCW 82.12.02565 or 82.12.975, used primarily in the development, design, and engineering of commercial airplanes or components of such airplanes, or to the use of labor and services rendered in respect to installing the computer hardware, computer peripherals, or software.
     (2) As used in this section:
     (a) "Commercial airplane" and "component" have the meanings given in RCW 82.32.550.
     (b) "Peripherals" includes keyboards, monitors, mouse devices, and other accessories that operate outside of the computer, excluding cables, conduit, wiring, and other similar property.
     (3) This section expires July 1, 2024.

NEW SECTION.  Sec. 3   A new section is added to chapter 82.04 RCW to read as follows:
     (1) In computing the tax imposed under this chapter, a credit is allowed for each person for qualified preproduction development expenditures occurring after the effective date of this section.
     (2) The credit is equal to the amount of qualified preproduction development expenditures of a person, multiplied by the rate of 1.5 percent.
     (3) The credit shall be taken against taxes due for the same calendar year in which the qualified preproduction development expenditures are incurred. Credits may not be carried over. The credit for each calendar year shall not exceed the amount of tax otherwise due under this chapter for the calendar year. Refunds may not be granted in the place of a credit.
     (4) Any person entitled to the credit provided in subsection (2) of this section as a result of qualified preproduction development conducted under contract may assign all or any portion of the credit to the person contracting for the performance of the qualified preproduction development.
     (5) Any person claiming the credit shall file an annual report in a form prescribed by the department that shall include the amount of the credit claimed, an estimate of the anticipated preproduction development expenditures during the calendar year for which the credit is claimed, an estimate of the taxable amount for the calendar year for which the credit is claimed, and any additional information the department may require.
     (6) The following definitions apply throughout this section:
     (a) "Aeronautics" means the study of flight and the science of building and operating commercial aircraft.
     (b) "Preproduction development" means research, design, and engineering activities performed in relation to the development of a product, product line, model, or model derivative, including prototype development, testing, and certification. The term includes the discovery of technological information, the translating of technological information into new or improved products, processes, techniques, formulas, or inventions, and the adaptation of existing products and models into new products or new models, or derivatives of products or models. The term does not include manufacturing activities or other production-oriented activities. The term does not include surveys and studies, social science and humanities research, market research or testing, quality control, sale promotion and service, computer software developed for internal use, and research in areas such as improved style, taste, and seasonal design.
     (c) "Qualified preproduction development" means preproduction development performed within this state in the field of aeronautics.
     (d) "Qualified preproduction development expenditures" means operating expenses, including wages, compensation of a proprietor or a partner in a partnership as determined by the department, benefits, supplies, and computer expenses, directly incurred in qualified preproduction development by a person claiming the credit provided in this section. The term does not include amounts paid to a person other than a public educational or research institution to conduct qualified preproduction development. The term does not include capital costs and overhead, such as expenses for land, structures, or depreciable property.
     (e) "Taxable amount" means the taxable amount subject to the tax imposed in this chapter required to be reported on the person's tax returns for the calendar year for which the credit is claimed, less any taxable amount for which a credit is allowed under RCW 82.04.440.
     (7) Credit may not be claimed for expenditures for which a credit is claimed under RCW 82.04.4452 or 82.04.4461.
     (8) This section expires July 1, 2024.

NEW SECTION.  Sec. 4   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 July 1, 2005.