BILL REQ. #:  H-3510.3 

Read first time 01/23/2006.   Referred to Committee on Technology, Energy & Communications.

     AN ACT Relating to tax incentives for renewable energy; amending RCW 82.16.010 and 82.16.020; adding a new section to chapter 82.08 RCW; adding a new section to chapter 82.12 RCW; adding a new section to chapter 82.29A RCW; adding a new section to chapter 84.36 RCW; adding a new section to chapter 82.16 RCW; adding a new section to chapter 82.32 RCW; creating new sections; and providing an effective date.

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

NEW SECTION.  Sec. 1   It is the intent of the legislature to establish a goal of encouraging the construction and development of renewable energy resource facilities in the state of Washington to meet increasing demand for affordable and reliable electricity.

Sec. 2   RCW 82.16.010 and 1996 c 150 s 1 are each amended to read as follows:
     For the purposes of this chapter, unless otherwise required by the context:
     (1) "Railroad business" means the business of operating any railroad, by whatever power operated, for public use in the conveyance of persons or property for hire. It shall not, however, include any business herein defined as an urban transportation business.
     (2) "Express business" means the business of carrying property for public hire on the line of any common carrier operated in this state, when such common carrier is not owned or leased by the person engaging in such business.
     (3) "Railroad car business" means the business of operating stock cars, furniture cars, refrigerator cars, fruit cars, poultry cars, tank cars, sleeping cars, parlor cars, buffet cars, tourist cars, or any other kinds of cars used for transportation of property or persons upon the line of any railroad operated in this state when such railroad is not owned or leased by the person engaging in such business.
     (4) "Water distribution business" means the business of operating a plant or system for the distribution of water for hire or sale.
     (5) "Light and power business" means the business of operating a plant or system for the generation, production or distribution of electrical energy for hire or sale and/or for the wheeling of electricity for others.
     (6) "Telegraph business" means the business of affording telegraphic communication for hire.
     (7) "Gas distribution business" means the business of operating a plant or system for the production or distribution for hire or sale of gas, whether manufactured or natural.
     (8) "Motor transportation business" means the business (except urban transportation business) of operating any motor propelled vehicle by which persons or property of others are conveyed for hire, and includes, but is not limited to, the operation of any motor propelled vehicle as an auto transportation company (except urban transportation business), common carrier or contract carrier as defined by RCW 81.68.010 and 81.80.010: PROVIDED, That "motor transportation business" shall not mean or include the transportation of logs or other forest products exclusively upon private roads or private highways.
     (9) "Urban transportation business" means the business of operating any vehicle for public use in the conveyance of persons or property for hire, insofar as (a) operating entirely within the corporate limits of any city or town, or within five miles of the corporate limits thereof, or (b) operating entirely within and between cities and towns whose corporate limits are not more than five miles apart or within five miles of the corporate limits of either thereof. Included herein, but without limiting the scope hereof, is the business of operating passenger vehicles of every type and also the business of operating cartage, pickup, or delivery services, including in such services the collection and distribution of property arriving from or destined to a point within or without the state, whether or not such collection or distribution be made by the person performing a local or interstate line-haul of such property.
     (10) "Public service business" means any of the businesses defined in subdivisions (1), (2), (3), (4), (5), (6), (7), (8), and (9) or any business subject to control by the state, or having the powers of eminent domain and the duties incident thereto, or any business hereafter declared by the legislature to be of a public service nature, except telephone business as defined in RCW 82.04.065 and low-level radioactive waste site operating companies as redefined in RCW 81.04.010. It includes, among others, without limiting the scope hereof: Airplane transportation, boom, dock, ferry, pipe line, toll bridge, toll logging road, water transportation and wharf businesses.
     (11) "Tugboat business" means the business of operating tugboats, towboats, wharf boats or similar vessels in the towing or pushing of vessels, barges or rafts for hire.
     (12) "Gross income" means the value proceeding or accruing from the performance of the particular public service or transportation business involved, including operations incidental thereto, but without any deduction on account of the cost of the commodity furnished or sold, the cost of materials used, labor costs, interest, discount, delivery costs, taxes, or any other expense whatsoever paid or accrued and without any deduction on account of losses.
     (13) The meaning attributed, in chapter 82.04 RCW, to the term "tax year," "person," "value proceeding or accruing," "business," "engaging in business," "in this state," "within this state," "cash discount" and "successor" shall apply equally in the provisions of this chapter.
     (14) "Renewable resource facility" means an electric generation facility fueled by: (a) Water; (b) wind; (c) solar energy; (d) geothermal energy; (e) landfill gas; (f) biomass energy based on animal waste or solid organic fuels from wood, forest, or field residues, or dedicated energy crops that do not include wood pieces that have been treated with chemical preservatives such as creosote, pentachlorophenol, or copper-chrome-arsenic; (g) wave or tidal power; (h) gas from sewage treatment facilities; or (i) municipal solid waste.

Sec. 3   RCW 82.16.020 and 1996 c 150 s 2 are each amended to read as follows:
     (1) There is levied and there shall be collected from every person a tax for the act or privilege of engaging within this state in any one or more of the businesses herein mentioned. The tax shall be equal to the gross income of the business, multiplied by the rate set out after the business, as follows:
     (a) Express, sewerage collection, and telegraph businesses: Three and six-tenths percent;
     (b) Light and power business: Three and sixty-two one-hundredths percent except, for income from the sale of electricity produced at a renewable resource facility, two and two-tenths percent;
     (c) Gas distribution business: Three and six-tenths percent;
     (d) Urban transportation business: Six-tenths of one percent;
     (e) Vessels under sixty-five feet in length, except tugboats, operating upon the waters within the state: Six-tenths of one percent;
     (f) Motor transportation, railroad, railroad car, and tugboat businesses, and all public service businesses other than ones mentioned above: One and eight-tenths of one percent;
     (g) Water distribution business: Four and seven-tenths percent.
     (2) An additional tax is imposed equal to the rate specified in RCW 82.02.030 multiplied by the tax payable under subsection (1) of this section.
     (3) Twenty percent of the moneys collected under subsection (1) of this section on water distribution businesses and sixty percent of the moneys collected under subsection (1) of this section on sewerage collection businesses shall be deposited in the public works assistance account created in RCW 43.155.050.

NEW SECTION.  Sec. 4   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 charges made for labor and services rendered in respect to the constructing of new renewable resource facilities, to sales of tangible personal property that will be incorporated as an ingredient or component of such facilities during the course of the constructing, or to labor and services rendered in respect to installing, during the course of constructing, building fixtures. 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) No application is necessary for the tax exemption in this section. A person taking the exemption under this section is subject to all the requirements of chapter 82.32 RCW. In addition, the person must report as required in section 9 of this act.
     (3) The exemption in this section only applies to buildings, or parts of buildings, that are used exclusively in the production of electricity.
     (4) For the purposes of this section, "renewable resource facility" has the meaning provided in RCW 82.16.010.

NEW SECTION.  Sec. 5   A new section is added to chapter 82.12 RCW to read as follows:
     (1) The provisions of this chapter do not apply with respect to the use of tangible personal property that will be incorporated as an ingredient or component of new renewable resource facilities, during the course of constructing such facilities, or to labor and services rendered in respect to installing, during the course of constructing, building fixtures.
     (2) The eligibility requirements, conditions, and definitions in section 4 of this act apply to this section.
     (3) For the purposes of this section, "renewable resource facility" has the meaning provided in RCW 82.16.010.

NEW SECTION.  Sec. 6   A new section is added to chapter 82.29A RCW to read as follows:
     (1) All leasehold interests in renewable resource facilities exempt from tax under sections 4 and 5 of this act and used exclusively for the production of electricity are exempt from tax under this chapter. A person taking the credit under section 8 of this act is not eligible for the exemption under this section.
     (2) In addition to all other requirements under this title, a person taking the exemption under this section must report as required in section 9 of this act.
     (3) For the purposes of this section, "renewable resource facility" has the meaning provided in RCW 82.16.010.

NEW SECTION.  Sec. 7   A new section is added to chapter 84.36 RCW to read as follows:
     (1) All buildings, machinery, equipment, and other personal property of a lessee of a renewable resource facility exempt from tax under sections 4 and 5 of this act are exempt from property taxation if the buildings, machinery, equipment, and other personal property are used exclusively for the production of electricity. A person taking the credit under section 8 of this act is not eligible for the exemption under this section.
     (2) In addition to all other requirements under this title, a person taking the exemption under this section must report as required in section 9 of this act.
     (3) Claims for exemption authorized by this section shall be filed with the county assessor on forms prescribed by the department and furnished by the assessor. The assessor shall verify and approve claims as the assessor determines to be justified and in accordance with this section. The department may adopt rules, under the provisions of chapter 34.05 RCW, as necessary to properly administer this section.
     (4) For the purposes of this section, "renewable resource facility" has the meaning provided in RCW 82.16.010.

NEW SECTION.  Sec. 8   A new section is added to chapter 82.16 RCW to read as follows:
     (1) In computing the tax imposed under this chapter, a credit is allowed for property taxes paid during the calendar year.
     (2) The credit is equal to:
     (a)(i) Property taxes paid on new renewable resource facilities, and land upon which this property is located, built after July 1, 2006, and used exclusively for the production of electricity; or
     (ii) Property taxes attributable to an increase in assessed value of the property described in (a)(i) of this subsection due to the renovation or expansion, after July 1, 2006, of a renewable resource facility and the renovation or expansion is used exclusively for the production of electricity; and
     (b) Property taxes paid on machinery and equipment used at a new renewable resource facility, used for the production of electricity, and acquired after July 1, 2006.
     (3) A person taking the credit under this section is subject to all the requirements of chapter 82.32 RCW. A credit earned during one calendar year may be carried over to be credited against taxes incurred in a subsequent calendar year, but may not be carried over a second year. No refunds may be granted for credits under this section.
     (4) In addition to all other requirements under this title, a person taking the credit under this section must report as required in section 9 of this act.

NEW SECTION.  Sec. 9   A new section is added to chapter 82.32 RCW to read as follows:
     (1) The legislature finds that accountability and effectiveness are important aspects of setting tax policy. In order to make policy choices regarding the best use of limited state resources the legislature needs information on how a tax incentive is used.
     (2)(a) A person who claims the preferential tax rate under RCW 82.16.020 or an exemption or credit under sections 4 through 8 of this act shall make an annual report to the department detailing employment, wages, and employer-provided health and retirement benefits per job at the site. The report shall not include names of employees. The report shall also detail employment by the total number of full-time, part-time, and temporary positions. The report shall also specify the number of kilowatt-hours produced at the renewable resource facility and the production cost per kilowatt-hour at the facility for the twelve month period covered in the annual report. The first report filed under this subsection shall include employment, wage, and benefit information for the twelve-month period immediately before first use of the preferential tax rate under RCW 82.16.020 or an exemption or credit under sections 4 through 8 of this act. The first report filed under this subsection shall also include information about the size, location, fuel type, and generating capacity for the renewable resource facility. The report is due by March 31st following any year in which the preferential tax rate under RCW 82.16.020 or an exemption or credit under sections 4 through 8 of this act is taken. This information is not subject to the confidentiality provisions of RCW 82.32.330 and may be disclosed to the public upon request.
     (b) If a person fails to submit an annual report under (a) of this subsection by the due date of the report, the department shall declare the amount of taxes exempted or credited for that year to be immediately due and payable. Excise taxes payable under this subsection are subject to interest but not penalties, as provided under this chapter. This information is not subject to the confidentiality provisions of RCW 82.32.330 and may be disclosed to the public upon request.
     (3) By November 1, 2010, and by November 1, 2015, the fiscal committees of the house of representatives and the senate, in consultation with the department, shall report to the legislature on the effectiveness of this act in regard to promoting the construction and development of facilities that produce electricity using renewable resources.
     (4) For the purposes of this section, "renewable resource facility" has the meaning provided in RCW 82.16.010.

NEW SECTION.  Sec. 10   Section 7 of this act applies to taxes levied for collection in 2007 and thereafter.

NEW SECTION.  Sec. 11   This act takes effect July 1, 2006.