BILL REQ. #:  S-4441.1 

Read first time 01/20/2006.   Referred to Committee on International Trade & Economic Development.

     AN ACT Relating to the administration of tax incentive programs; amending RCW 82.62.020, 82.32.545, 82.32.590, 82.32.600, 82.04.4452, 82.32.560, 82.32.570, 82.32.610, 82.32.620, and 82.32.330; reenacting and amending RCW 82.32.330; adding a new chapter to Title 82 RCW; creating new sections; repealing RCW 82.60.010, 82.60.020, 82.60.030, 82.60.040, 82.60.049, 82.60.050, 82.60.060, 82.60.065, 82.60.070, 82.60.080, 82.60.090, 82.60.100, 82.60.110, 82.60.900, 82.60.901, 82.63.005, 82.63.010, 82.63.020, 82.63.030, 82.63.045, 82.63.060, 82.63.070, 82.63.900, 82.74.010, 82.74.020, 82.74.030, 82.74.040, 82.74.050, 82.74.060, and 82.74.070; providing effective dates; providing an expiration date; and declaring an emergency.

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

NEW SECTION.  Sec. 101   (1) The legislature finds that the state's retail sales tax on construction discourages capital investment by new and existing Washington businesses. Without relief from the state's retail sales tax on construction, Washington businesses in certain sectors and areas will be adversely impacted. The legislature recognizes the importance of such businesses for employment and economic development in Washington state.
     (2) In 1985 and 2004, the legislature found that there were several areas in the state that are characterized by very high levels of unemployment and poverty. The legislature further found that economic stagnation was the primary cause of this high unemployment rate and poverty. The legislature reaffirms that policies providing tax incentives for manufacturing and research and development businesses in these distressed areas are essential to promote economic stimulation, economic growth, and new employment opportunities in these distressed areas.
     (3) In 1994 and 2004, the legislature found that high-wage, high-skilled jobs were vital to the economic health of the state's citizens. The legislature reaffirms that high-technology businesses are a vital and growing source of high-wage, high-skilled jobs in this state, and that the high-technology sector is a key component of the state's effort to encourage economic diversification. The legislature found that many high-technology businesses incur significant costs associated with research and development and pilot scale manufacturing many years before a marketable product can be produced, and that current state tax policy discourages the growth of these companies by taxing them long before they become profitable. The legislature reaffirms that stimulating growth of high-technology businesses early in their development cycle, when they are turning ideas into marketable products, will build upon the state's established high-technology base, creating additional research and development jobs and subsequent manufacturing facilities.
     (4) In 2005, the legislature found that the fruit and vegetable processing industry was important to the Washington state economy. The legislature further found that businesses engaged in fruit and vegetable processing are often located in areas in need of economic stimulation and new employment opportunities. The legislature reaffirms that state policies providing tax incentives for economic growth in the fruit and vegetable processing industry are essential.
     (5) For these reasons, the legislature established tax incentive programs to defer retail sales and use tax on investments in buildings and machinery and equipment used by the businesses in this section. To further encourage investments, the legislature subsequently modified the deferral programs to authorize the waiver of the deferred sales and use tax if the business fulfilled certain requirements, to recapture the deferred sales and use tax if the business failed to meet those requirements, and to clarify definitions. These subsequent modifications to the deferral programs have led to inconsistencies between programs that confuse taxpayers and complicate administration. Therefore, the legislature declares that these programs must be consolidated and simplified to ensure that taxpayers receive consistent treatment and benefits under these tax deferral programs.
     (6) The legislature further declares that tax incentives should be subject to the same rigorous requirements for efficiency and accountability as are other expenditure programs, and that tax incentives should therefore be focused to provide the greatest possible return on the state's investment.

NEW SECTION.  Sec. 102   The definitions in this section apply throughout this chapter unless the context clearly requires otherwise.
     (1) "Applicant" means a person applying for a tax deferral under this chapter.
     (2) "Department" means the department of revenue.
     (3)(a) "Eligible investment project" means an investment project used in qualified activities.
     (i) The lessor or owner of a qualified building is not eligible for a deferral unless the underlying ownership of the buildings, machinery, and equipment vests exclusively in the same person; or
     (ii)(A) The lessee that receives the economic benefit of the deferral agrees in writing with the department to file the complete annual survey under section 106 of this act; and
     (B) The economic benefit of the deferral is passed to the lessee, is no less than the amount of tax deferred by the lessor, and is evidenced by any type of payment, credit, or any other financial arrangement between the lessor or owner of the qualified building and the lessee.
     (b) "Eligible investment project" does not include: (i) 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 (ii) investment projects to replace qualified machinery and equipment that have already received deferrals under this chapter or chapters 82.60, 82.63, or 82.74 RCW.
     (4)(a) "Initiation of construction" means the date that a building permit is issued under the building code adopted under RCW 19.27.031 for:
     (i) Construction of the qualified building, if the underlying ownership of the building vests exclusively with the person receiving the economic benefit of the deferral;
     (ii) Construction of the qualified building, if the economic benefits of the deferral are passed to a lessee as provided in subsection (3)(a)(ii)(B) of this section; or
     (iii) Tenant improvements for a qualified building, if the economic benefits of the deferral are passed to a lessee as provided in subsection (3)(a)(ii)(B) of this section.
     (b) "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.
     (c) If the investment project includes more than one qualified building, initiation of construction applies separately to each qualified building.
     (5) "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.
     (6) "Operationally complete" means that the investment project is capable of being used for its intended purpose as described in the application.
     (7) "Person" has the meaning given in RCW 82.04.030. For the purpose of the qualified activities of high-technology research and development as defined in subsection (8)(b) of this section, "person" also includes state universities as defined in RCW 28B.10.016.
     (8) "Qualified activities" means the activities described in (a), (b), and (c) of this subsection only.
     (a)(i) "Qualified activities" includes manufacturing or research and development in an eligible area.
     (ii) For purposes of (a) of this subsection, the following definitions apply:
     (A) "Eligible area" means a rural county as defined in RCW 82.14.370. "Eligible area" also means a designated community empowerment zone approved under RCW 43.31C.020 or a county containing a community empowerment zone, if, in addition to all other provisions and requirements of this chapter, the applicant establishes that at the time the project is operationally complete:
     (I) The applicant will hire at least one qualified employment position for each seven hundred fifty thousand dollars of investment for which a deferral is requested;
     (II) The positions will be filled by persons who at the time of hire are residents of the community empowerment zone. As used in this subsection (8)(a)(ii)(A), "resident" means the person makes his or her home in the community empowerment zone. A mailing address alone is insufficient to establish that a person is a resident for the purposes of this subsection (8)(a)(ii)(A). The persons must be hired after the date the application is filed with the department; and
     (III) The qualified employment position must be filled by the end of the calendar year following the year in which the project is certified as operationally complete. If a person does not meet the requirements for qualified employment positions by the end of the second calendar year following the year in which the project is certified as operationally complete, all deferred taxes are immediately due. The department shall assess interest, but not penalties, on amounts due under this subsection (8)(a)(ii)(A). The interest shall be assessed at the rate provided for delinquent taxes under chapter 82.32 RCW, retroactively to the date of deferral, and shall accrue until the deferred taxes due are repaid.
     (B) "Manufacturing" means the same as defined in RCW 82.04.120. "Manufacturing" also includes computer programming, the production of computer software, and other computer-related services, and the activities performed by research and development laboratories and commercial testing laboratories.
     (C) "Research and development" means the development, refinement, testing, marketing, and commercialization of a product, service, or process before commercial sales have begun. As used in this subsection (8)(a)(ii)(C), "commercial sales" excludes sales of prototypes or sales for market testing if the total gross receipts from such sales of the product, service, or process do not exceed one million dollars.
     (D) "Qualified employment position" means a permanent full-time employee employed in the eligible investment project during the entire tax year. The term "entire tax year" means a full-time position that is filled for a period of twelve consecutive months. The term "full-time" means at least thirty-five hours a week, four hundred fifty-five hours a quarter, or one thousand eight hundred twenty hours a year.
     (b)(i) "Qualified activities" includes high-technology research and development and pilot scale manufacturing.
     (ii) For purposes of (b) of this subsection, the following definitions apply:
     (A) "Research and development" means activities performed to discover technological information, and technical and nonroutine activities concerned with translating technological information into new or improved products, processes, techniques, formulas, inventions, or software. The term includes exploration of a new use for an existing drug, device, or biological product if the new use requires separate licensing by the federal food and drug administration under chapter 21, C.F.R., as amended. The term does not include adaptation or duplication of existing products where the products are not substantially improved by application of the technology, nor does the term 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.
     (B) "High technology" means technology in the fields of advanced computing, advanced materials, biotechnology, electronic device technology, and environmental technology.
     (C) "Advanced computing" means technologies used in the designing and developing of computing hardware and software, including innovations in designing the full spectrum of hardware from hand-held calculators to super computers, and peripheral equipment.
     (D) "Advanced materials" means materials with engineered properties created through the development of specialized processing and synthesis technology, including ceramics, high value-added metals, electronic materials, composites, polymers, and biomaterials.
     (E) "Biotechnology" means the application of technologies, such as recombinant DNA techniques, biochemistry, molecular and cellular biology, genetics and genetic engineering, cell fusion techniques, and new bioprocesses, using living organisms, or parts of organisms, to produce or modify products, to improve plants or animals, to develop microorganisms for specific uses, to identify targets for small molecule pharmaceutical development, or to transform biological systems into useful processes and products or to develop microorganisms for specific uses.
     (F) "Electronic device technology" means technologies involving microelectronics; semiconductors; electronic equipment and instrumentation; radio frequency, microwave, and millimeter electronics; optical and optic-electrical devices; and data and digital communications and imaging devices.
     (G) "Environmental technology" means assessment and prevention of threats or damage to human health or the environment, environmental cleanup, and the development of alternative energy sources.
     (H) "Pilot scale manufacturing" means design, construction, and testing of preproduction prototypes and models in the fields of biotechnology, advanced computing, electronic device technology, advanced materials, and environmental technology other than for commercial sale. As used in this subsection (8)(b)(ii)(H), "commercial sale" excludes sales of prototypes or sales for market testing if the total gross receipts from such sales of the product, service, or process do not exceed one million dollars.
     (c)(i) "Qualified activities" includes fresh fruit and vegetable processing, cold storage warehousing as related to fresh fruit and vegetable processing, and research and development activities as related to fresh fruit and vegetable processing or cold storage warehousing.
     (ii) For purposes of (c) of this subsection, the following definitions apply:
     (A) "Fresh fruit and vegetable processing" means manufacturing as defined in RCW 82.04.120 which consists of the canning, preserving, freezing, processing, or dehydrating fresh fruits and/or vegetables.
     (B) "Cold storage warehouse" means a storage warehouse owned or operated by a wholesaler or third-party warehouser as those terms are defined in RCW 82.08.820 to store fresh and/or frozen perishable fruits or vegetables, or any combination thereof, at a desired temperature to maintain the quality of the product for orderly marketing.
     (C) "Research and development" has the same meaning as in (a)(ii)(C) of this subsection (8).
     (9)(a) "Qualified buildings" means:
     (i) Construction of new buildings used for qualified activities.
     (ii) Expansion or renovation of existing buildings for the purpose of increasing floor space or production capacity used for qualified activities.
     (iii) Construction of new warehouses, or the expansion or renovation of existing warehouses, used to support qualified activities located at a manufacturing operation or research and development operation.
     (iv) Construction of new offices exclusively occupied by employees of a recipient, or a lessee as provided in subsection (3)(a)(ii) of this section, whose job responsibilities exclusively support qualified activities or employees performing qualified activities. Offices must be located within or adjacent to a qualified building under (a)(i) or (ii) of this subsection. Employees engaged in sales, marketing, and similar activities do not support qualified activities or employees performing qualified activities.
     (v) Construction of new parking facilities located within or adjacent to a qualified building under (a)(i) or (ii) of this subsection. New parking facilities must be constructed under the same tax deferral certificate used to construct, expand, or renovate the building in which the parking facility supports.
     (b) If a qualified building is used partly for qualified activities 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.
     (c) For the purposes of this subsection, the following definitions apply:
     (i) "Warehouse" means a building, structure, or storage yard in which raw materials or finished goods are stored. A warehouse may have more than one storage room and more than one floor.
     (ii) "Manufacturing operation" has the same meaning as in RCW 82.08.02565(2)(d).
     (iii) "Research and development operation" has the same meaning as in RCW 82.08.02565(2)(f).
     (10) "Qualified machinery and equipment" means:
     (a) All industrial and research fixtures, equipment, and support facilities, not otherwise eligible for exemption under RCW 82.08.02565 or 82.12.02565, that are used primarily in qualified activities; and
     (b) Computers; software; data processing equipment; laboratory equipment; 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, that are used primarily in qualified activities.
     (11) "Recipient" means a person receiving a tax deferral under this chapter.

NEW SECTION.  Sec. 103   (1) Application for deferral of taxes under this chapter must be made before the initiation of construction of the qualified buildings or acquisition of qualified machinery or equipment. 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.
     (2) The department shall rule on the application within sixty days. The department shall track, by type of qualified activities, the amount of all deferrals granted under this chapter during each fiscal biennium.

NEW SECTION.  Sec. 104   (1) The department shall issue a sales and use tax deferral certificate for state and local sales and use taxes imposed or authorized under chapters 82.08, 82.12, and 82.14 RCW for the following eligible investment projects.
     (a) Until July 1, 2010, investment projects in the qualified activities described in section 102(8)(a) of this act;
     (b) Until July 1, 2015, investment projects in the qualified activities described in section 102(8)(b) of this act;
     (c) From July 1, 2007, through June 30, 2012, investment projects in the qualified activities described in section 102(8)(c) of this act;
     (2) Use of a sales and use tax deferral certificate by the recipient is deemed a waiver under RCW 82.32.050(3)(c) of the period of limitations under RCW 82.32.050(3) for sales and use taxes deferred under this chapter.

NEW SECTION.  Sec. 105   (1) Except as provided in subsection (2) of this section, section 102(8)(a)(ii)(A)(III) of this act, and section 106 of this act, taxes deferred under this chapter need not be repaid.
     (2) If, on the basis of a survey under section 106 of this act or other information, the department finds that an investment project is not eligible for tax deferral under this chapter, a portion of deferred taxes shall be immediately due and payable according to the following schedule:

NEW SECTION.  Sec. 106   (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) Recipients for deferral of taxes under this chapter and persons subject to this chapter by reason of section 110 of this act shall file a complete annual survey with the department. If the economic benefits of the deferral are passed to a lessee as provided in section 102(3)(a)(ii)(B) of this act, the lessee shall agree to file the annual survey and the applicant is not required to file the annual survey. The annual survey is due by April 30th of the year following the calendar year in which the investment project is certified by the department as having been operationally complete and the seven succeeding calendar years. The department may extend the due date for timely filing annual surveys under this section as provided in RCW 82.32.590. The annual survey shall include the amount of tax deferred, the number of new products or research projects by general classification, and the number of trademarks, patents, and copyrights associated with activities at the investment project. The survey shall also include the following information for employment positions in Washington:
     (a) The number of total employment positions;
     (b) Full-time, part-time, and temporary employment positions as a percent of total employment;
     (c) The number of employment positions according to the following wage bands: Less than thirty thousand dollars; thirty thousand dollars or greater, but less than sixty thousand dollars; and sixty thousand dollars or greater. A wage band containing fewer than three individuals may be combined with another wage band; and
     (d) The number of employment positions that have employer-provided medical, dental, and retirement benefits, by each of the wage bands.
     (3) The department may request additional information necessary to measure the results of the deferral program, to be submitted at the same time as the survey.
     (4)(a) If a recipient of the deferral fails to file a complete annual survey required under this subsection by the date due or any extension under RCW 82.32.590, the portion of deferred taxes that need not be repaid for the previous calendar year according to the schedule in section 105 of this act shall be immediately due and payable. If the economic benefits of the deferral are passed to a lessee as provided in section 102(3)(a)(ii)(B) of this act, the lessee is responsible for payment to the extent the lessee has received the economic benefit. The department shall assess interest, but not penalties, on the deferred taxes payable under this subsection. The interest shall be assessed at the rate provided for delinquent excise taxes under chapter 82.32 RCW, retroactively to the date of deferral, and shall accrue until the deferred taxes are repaid.
     (b) A recipient who must repay deferred taxes under section 105 of this act because the department has found that an investment project is used for purposes other than qualified activities is no longer required to file annual surveys under this section beginning on the date an investment project is used for nonqualified activities.
     (5) For purposes of this section, "complete annual survey" means a survey that is filed on a form or in a format required by the department by the due date and substantially responds to all survey questions to enable the department to provide summary statistics and to study the effectiveness of the tax deferral program.
     (6) All information collected under this section, except the amount of the total tax deferred, is deemed taxpayer information under RCW 82.32.330. Information on the amount of tax deferred is not subject to the confidentiality provisions of RCW 82.32.330 and may be disclosed to the public upon request. If the amount of the total tax deferred as reported on the survey is different than the amount actually deferred or otherwise allowed by the department, the amount actually deferred or allowed may be disclosed.
     (7) The department shall use the information from this section to prepare summary descriptive statistics by category. No fewer than three taxpayers shall be included in any category. The department shall report these statistics to the legislature each year by September 1st.
     (8) The department shall use the information to study the tax deferral program authorized under this chapter. The department shall report to the legislature by December 1, 2009, December 1, 2011, and December 1, 2013. The reports shall measure the effect of the program on job creation, job retention, net jobs for Washington residents, company growth, diversification of the state's economy, cluster dynamics, and such other factors as the department selects.
     (9) A person who is subject to the requirements in RCW 82.32.535, 82.32.545, 82.32.560, or 82.32.570 is not required to file a complete annual survey under this section if the person timely files the annual report required by RCW 82.32.535, 82.32.545, 82.32.560, or 82.32.570.

NEW SECTION.  Sec. 107   Chapter 82.32 RCW applies to the administration of this chapter.

NEW SECTION.  Sec. 108   Applications received by the department under this chapter are not subject to the confidentiality provisions of RCW 82.32.330 and may be disclosed to the public upon request.

NEW SECTION.  Sec. 109   The employment security department shall make, and certify to the department of revenue, all determinations of employment and wages as requested by the department under this chapter.

NEW SECTION.  Sec. 110   Persons who have received a sales and use tax deferral certificate from the department under chapter 82.60, 82.63, or 82.74 RCW are subject to the provisions of chapter 82.-- RCW (sections 101 through 110 of this act). This act does not apply to, or authorize refunds for, investment projects that are not eligible as of December 31, 2006, for tax deferrals granted under chapter 82.60 or 82.63 RCW before January 1, 2007.

NEW SECTION.  Sec. 111   Sections 101 through 110 of this act constitute a new chapter in Title 82 RCW.

NEW SECTION.  Sec. 112   The following acts or parts of acts are each repealed:
     (1) RCW 82.60.010 (Legislative findings and declaration) and 1985 c 232 s 1;
     (2) RCW 82.60.020 (Definitions) and 2004 c 25 s 3, 1999 sp.s. c 9 s 2, 1999 c 164 s 301, 1996 c 290 s 4, & 1995 1st sp.s. c 3 s 5;
     (3) RCW 82.60.030 (Application for deferral -- Contents) and 1994 sp.s. c 1 s 2 & 1985 c 232 s 3;
     (4) RCW 82.60.040 (Issuance of tax deferral certificate) and 2004 c 25 s 4, 1999 c 164 s 302, 1997 c 156 s 5, 1995 1st sp.s. c 3 s 6, 1994 sp.s. c 1 s 3, 1986 c 116 s 13, & 1985 c 232 s 4;
     (5) RCW 82.60.049 (Additional eligible projects) and 2004 c 25 s 5, 2000 c 106 s 8, & 1999 c 164 s 304;
     (6) RCW 82.60.050 (Expiration of RCW 82.60.030 and 82.60.040) and 2004 c 25 s 6, 1994 sp.s. c 1 s 7, 1993 sp.s. c 25 s 404, 1988 c 41 s 5, & 1985 c 232 s 10;
     (7) RCW 82.60.060 (Repayment schedule) and 2000 c 106 s 5 & 1985 c 232 s 5;
     (8) RCW 82.60.065 (Tax deferral on construction labor and investment projects -- Repayment forgiven) and 1995 1st sp.s. c 3 s 8, 1994 sp.s. c 1 s 6, & 1986 c 116 s 14;
     (9) RCW 82.60.070 (Annual survey by recipients -- Assessment of taxes, interest) and 2004 c 25 s 7, 1999 c 164 s 303, 1995 1st sp.s. c 3 s 9, 1994 sp.s. c 1 s 5, & 1985 c 232 s 6;
     (10) RCW 82.60.080 (Employment and wage determinations) and 2000 c 106 s 6 & 1985 c 232 s 7;
     (11) RCW 82.60.090 (Applicability of general administrative provisions) and 1985 c 232 s 8;
     (12) RCW 82.60.100 (Applications, reports, and information subject to disclosure) and 1987 c 49 s 1;
     (13) RCW 82.60.110 (Competing projects -- Impact study) and 1998 c 245 s 169 & 1994 sp.s. c 1 s 8;
     (14) RCW 82.60.900 (Effective date, applicability -- 1985 c 232) and 1985 c 232 s 11;
     (15) RCW 82.60.901 (Effective date -- 1994 sp.s. c 1) and 1994 sp.s. c 1 s 10;
     (16) RCW 82.63.005 (Findings -- Intent to create a contract) and 2004 c 2 s 1 & 1994 sp.s. c 5 s 1;
     (17) RCW 82.63.010 (Definitions) and 2004 c 2 s 3, 1995 1st sp.s. c 3 s 12, & 1994 sp.s. c 5 s 3;
     (18) RCW 82.63.020 (Application -- Annual survey--Reports) and 2004 c 2 s 4 & 1994 sp.s. c 5 s 4;
     (19) RCW 82.63.030 (Sales and use tax deferral certificate--Eligible investment projects and pilot scale manufacturing) and 2004 c 2 s 5 & 1994 sp.s. c 5 s 5;
     (20) RCW 82.63.045 (Repayment not required -- Repayment schedule for unqualified investment project -- Exceptions) and 2004 c 2 s 6, 2000 c 106 s 10, & 1995 1st sp.s. c 3 s 13;
     (21) RCW 82.63.060 (Administration) and 1994 sp.s. c 5 s 8;
     (22) RCW 82.63.070 (Public disclosure) and 2004 c 2 s 7 & 1994 sp.s. c 5 s 9;
     (23) RCW 82.63.900 (Effective date -- 1994 sp.s. c 5) and 1994 sp.s. c 5 s 12;
     (24) RCW 82.74.010 (Definitions) and 2005 c 513 s 4;
     (25) RCW 82.74.020 (Application for tax deferral) and 2005 c 513 s 5;
     (26) RCW 82.74.030 (Issuance of certificate) and 2005 c 513 s 6;
     (27) RCW 82.74.040 (Annual survey) and 2005 c 513 s 7;
     (28) RCW 82.74.050 (Repayment of deferred taxes) and 2005 c 513 s 8;
     (29) RCW 82.74.060 (Application of chapter 82.32 RCW) and 2005 c 513 s 9; and
     (30) RCW 82.74.070 (Confidentiality of applications) and 2005 c 513 s 10.

Sec. 201   RCW 82.62.020 and 1986 c 116 s 16 are each amended to read as follows:
     Application for tax credits under this chapter must be made ((before)) within ninety consecutive days after the actual hiring of qualified employment positions. 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 business project, the applicant's average employment, if any, at the facility 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.

Sec. 301   RCW 82.32.545 and 2003 2nd sp.s. c 1 s 16 are each amended 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 reports taxes under RCW 82.04.260(((13))) (11) or who claims an exemption or credit under RCW 82.04.4461, 82.08.980, 82.12.980, 82.29A.137, 84.36.655, and 82.04.4463 shall make an annual report to the department detailing employment, wages, and employer-provided health and retirement benefits per job at the manufacturing 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 first report filed under this subsection shall include employment, wage, and benefit information for the twelve-month period immediately before first use of a preferential tax rate under RCW 82.04.260(((13))) (11), or tax exemption or credit under RCW 82.04.4461, 82.08.980, 82.12.980, 82.29A.137, 84.36.655, and 82.04.4463. The report is due by ((March 31st)) April 30th following any year in which a preferential tax rate under RCW 82.04.260(((13))) (11) is used, or tax exemption or credit under RCW 82.04.4461, 82.08.980, 82.12.980, 82.29A.137, 84.36.655, and 82.04.4463 is taken. The department may extend the due date for timely filing annual reports under this section as provided in RCW 82.32.590. 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 or any extension under RCW 82.32.590, the department shall declare the amount of taxes exempted or credited, or reduced in the case of the preferential business and occupation tax rate, 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, 2023, 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 chapter 1, Laws of 2003 2nd sp. sess. in regard to keeping Washington competitive. The report shall measure the effect of chapter 1, Laws of 2003 2nd sp. sess. on job retention, net jobs created for Washington residents, company growth, diversification of the state's economy, cluster dynamics, and other factors as the committees select. The reports shall include a discussion of principles to apply in evaluating whether the legislature should reenact any or all of the tax preferences in chapter 1, Laws of 2003 2nd sp. sess.

Sec. 302   RCW 82.32.590 and 2005 c 514 s 1001 are each amended to read as follows:
     (1) If the department finds that the failure of a taxpayer to file an annual survey or annual report under RCW 82.04.4452, 82.32.545, 82.32.560, 82.32.570, 82.32.610, 82.32.620, or section 106 of this act, by the due date was the result of circumstances beyond the control of the taxpayer, the department shall extend the time for filing the survey or report. Such extension shall be for a period of thirty days from the date the department issues its written notification to the taxpayer that it qualifies for an extension under this section. The department may grant additional extensions as it deems proper.
     (2) In making a determination whether the failure of a taxpayer to file an annual survey or annual report by the due date was the result of circumstances beyond the control of the taxpayer, the department shall be guided by rules adopted by the department for the waiver or cancellation of penalties when the underpayment or untimely payment of any tax was due to circumstances beyond the control of the taxpayer.

Sec. 303   RCW 82.32.600 and 2005 c 514 s 1002 are each amended to read as follows:
     (1) Persons required to file annual surveys or annual reports under RCW 82.04.4452, 82.32.545, 82.32.560, 82.32.570, 82.32.610, 82.32.620, or section 106 of this act, must electronically file with the department all surveys, reports, returns, and any other forms or information the department requires in an electronic format as provided or approved by the department((, unless the department grants relief under subsection (2) of this section)). As used in this section, "returns" has the same meaning as "return" in RCW 82.32.050.
     (2) ((Upon request, the department may relieve a person of the obligations in subsection (1) of this section if the person's taxes have been reduced a cumulative total of less than one thousand dollars from all of the credits, exemptions, or preferential business and occupation tax rates, for which a person is required to file an annual survey under RCW 82.04.4452, 82.32.535, 82.32.545, 82.32.570, 82.32.560, 82.60.070, or 82.63.020.
     (3) Persons who no longer qualify for relief under subsection (2) of this section will be notified in writing by the department and must comply with subsection (1) of this section by the date provided in the notice.
     (4))) Any survey, report, return, or any other form or information required to be filed in an electronic format under subsection (1) of this section is not filed until received by the department in an electronic format.
     (3) The department may waive the electronic filing requirement in subsection (1) of this section for good cause shown.

Sec. 304   RCW 82.04.4452 and 2005 c 514 s 1003 are each amended to read as follows:
     (1) In computing the tax imposed under this chapter, a credit is allowed for each person whose research and development spending during the year in which the credit is claimed exceeds 0.92 percent of the person's taxable amount during the same calendar year.
     (2) The credit shall be calculated as follows:
     (a) Determine the greater of the amount of qualified research and development expenditures of a person or eighty percent of amounts received by a person other than a public educational or research institution in compensation for the conduct of qualified research and development;
     (b) Subtract 0.92 percent of the person's taxable amount from the amount determined under (a) of this subsection;
     (c) Multiply the amount determined under (b) of this subsection by the following:
     (i) For the period June 10, 2004, through December 31, 2006, the person's average tax rate for the calendar year for which the credit is claimed;
     (ii) For the calendar year ending December 31, 2007, the greater of the person's average tax rate for that calendar year or 0.75 percent;
     (iii) For the calendar year ending December 31, 2008, the greater of the person's average tax rate for that calendar year or 1.0 percent;
     (iv) For the calendar year ending December 31, 2009, the greater of the person's average tax rate for that calendar year or 1.25 percent;
     (v) For the calendar year ending December 31, 2010, and thereafter, 1.50 percent.
     For purposes of calculating the credit, if a person's reporting period is less than annual, the person may use an estimated average tax rate for the calendar year for which the credit is claimed by using the person's average tax rate for each reporting period. A person who uses an estimated average tax rate must make an adjustment to the total credit claimed for the calendar year using the person's actual average tax rate for the calendar year when the person files its last return for the calendar year for which the credit is claimed.
     (3) Any person entitled to the credit provided in subsection (2) of this section as a result of qualified research and development conducted under contract may assign all or any portion of the credit to the person contracting for the performance of the qualified research and development.
     (4) The credit, including any credit assigned to a person under subsection (3) of this section, shall be claimed against taxes due for the same calendar year in which the qualified research and development expenditures are incurred. The credit, including any credit assigned to a person under subsection (3) of this section, for each calendar year shall not exceed the lesser of two million dollars or the amount of tax otherwise due under this chapter for the calendar year.
     (5) For any person claiming the credit, including any credit assigned to a person under subsection (3) of this section, whose research and development spending during the calendar year in which the credit is claimed fails to exceed 0.92 percent of the person's taxable amount during the same calendar year or who is otherwise ineligible, the department shall declare the taxes against which the credit was claimed to be immediately due and payable. The department shall assess interest, but not penalties, on the taxes against which the credit was claimed. Interest shall be assessed at the rate provided for delinquent excise taxes under chapter 82.32 RCW, retroactively to the date the credit was claimed, and shall accrue until the taxes against which the credit was claimed are repaid. Any credit assigned to a person under subsection (3) of this section that is disallowed as a result of this section may be claimed by the person who performed the qualified research and development subject to the limitations set forth in subsection (4) of this section.
     (6)(a) 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.
     (b) A person claiming the credit shall file a complete annual survey with the department. The survey is due by ((March 31st)) April 30th following any year in which a credit is claimed. The department may extend the due date for timely filing of annual surveys under this section as provided in RCW 82.32.590. The survey shall include the amount of the tax credit claimed, the qualified research and development expenditures during the calendar year for which the credit is claimed, the taxable amount during the calendar year for which the credit is claimed, the number of new products or research projects by general classification, the number of trademarks, patents, and copyrights associated with the research and development activities for which a credit was claimed, and whether the credit has been assigned under subsection (3) of this section and who assigned the credit. The survey shall also include the following information for employment positions in Washington:
     (i) The number of total employment positions;
     (ii) Full-time, part-time, and temporary employment positions as a percent of total employment;
     (iii) The number of employment positions according to the following wage bands: Less than thirty thousand dollars; thirty thousand dollars or greater, but less than sixty thousand dollars; and sixty thousand dollars or greater. A wage band containing fewer than three individuals may be combined with another wage band; and
     (iv) The number of employment positions that have employer-provided medical, dental, and retirement benefits, by each of the wage bands.
     (c) The department may request additional information necessary to measure the results of the tax credit program, to be submitted at the same time as the survey.
     (d)(i) All information collected under this subsection, except the amount of the tax credit claimed, is deemed taxpayer information under RCW 82.32.330. Information on the amount of tax credit claimed is not subject to the confidentiality provisions of RCW 82.32.330 and may be disclosed to the public upon request, except as provided in this subsection (6)(d). If the amount of the tax credit as reported on the survey is different than the amount actually claimed on the taxpayer's tax returns or otherwise allowed by the department, the amount actually claimed or allowed may be disclosed.
     (ii) Persons for whom the actual amount of the tax credit claimed on the taxpayer's returns or otherwise allowed by the department is less than ten thousand dollars during the period covered by the survey may request the department to treat the tax credit amount as confidential under RCW 82.32.330.
     (e) If a person fails to file a complete annual survey required under this subsection with the department by the due date or any extension under RCW 82.32.590, the person entitled to the credit provided in subsection (2) of this section is not eligible to claim or assign the credit provided in subsection (2) of this section in the year the person failed to timely file a complete survey.
     (7) The department shall use the information from subsection (6) of this section to prepare summary descriptive statistics by category. No fewer than three taxpayers shall be included in any category. The department shall report these statistics to the legislature each year by September 1st.
     (8) The department shall use the information from subsection (6) of this section to study the tax credit program authorized under this section. The department shall report to the legislature by December 1, 2009, and December 1, 2013. The reports shall measure the effect of the program on job creation, ((the number of)) job retention, net jobs ((created)) for Washington residents, company growth, ((the introduction of new products,)) the diversification of the state's economy, ((growth in research and development investment, the movement of firms or the consolidation of firms' operations into the state)) cluster dynamics, and such other factors as the department selects.
     (9) For the purpose of this section:
     (a) "Average tax rate" means a person's total tax liability under this chapter for the calendar year for which the credit is claimed divided by the taxpayer's total taxable amount under this chapter for the calendar year for which the credit is claimed.
     (b) "Complete annual survey" means a survey that is filed on a form or in a format required by the department by the due date, or any extension under RCW 82.32.590, and substantially responds to all survey questions to enable the department to provide summary statistics and to study the effectiveness of the tax credit.
     (c) "Qualified research and development expenditures" means operating expenses, including wages, compensation of a proprietor or a partner in a partnership as determined under rules adopted by the department, benefits, supplies, and computer expenses, directly incurred in qualified research and 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 research and development. Nor does the term include capital costs and overhead, such as expenses for land, structures, or depreciable property.
     (((c))) (d) "Qualified research and development" shall have the same meaning as high technology research and development in ((RCW 82.63.010)) section 102(8)(b) of this act.
     (((d))) (e) "Research and development spending" means qualified research and development expenditures plus eighty percent of amounts paid to a person other than a public educational or research institution to conduct qualified research and development.
     (((e))) (f) "Taxable amount" means the taxable amount subject to the tax imposed in this chapter required to be reported on the person's combined excise 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.
     (10) This section expires January 1, 2015.

Sec. 305   RCW 82.32.560 and 2004 c 240 s 2 are each amended to read as follows:
     (1) For the purposes of this section, "electrolytic processing business tax exemption" means the exemption ((and preferential tax rate under)) in RCW 82.16.0421.
     (2) 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 to evaluate whether the stated goals of legislation were achieved.
     (3) The goals of the electrolytic processing business tax exemption are:
     (a) To retain family wage jobs by enabling electrolytic processing businesses to maintain production of chlor-alkali and sodium chlorate at a level that will preserve at least seventy-five percent of the jobs that were on the payroll effective January 1, 2004; and
     (b) To allow the electrolytic processing industries to continue production in this state through 2011 so that the industries will be positioned to preserve and create new jobs when the anticipated reduction of energy costs occur.
     (4)(a) A person who receives the benefit of an electrolytic processing business tax exemption shall make an annual report to the department detailing employment, wages, and employer-provided health and retirement benefits per job at the manufacturing site. The report is due by ((March 31st)) April 30th following any year in which a tax exemption is claimed or used. The department may extend the due date for timely filing annual reports under this section as provided in RCW 82.32.590. The report shall not include names of employees. The report shall detail employment by the total number of full-time, part-time, and temporary positions. The report shall indicate the quantity of product produced at the plant during the time period covered by the 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 a tax exemption. Employment reports shall include data for actual levels of employment and identification of the number of jobs affected by any employment reductions that have been publicly announced at the time of the report. Information in a report under this section 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 or any extension under RCW 82.32.590, the department shall declare the amount of taxes exempted for that year to be immediately due and payable. Public utility 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.
     (5) By December 1, 2007, and by December 1, 2010, 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 the tax incentive under RCW 82.16.0421. The report shall measure the effect of the incentive on job retention for Washington residents, and other factors as the committees select. The report shall also discuss expected trends or changes to electricity prices as they affect the industries that benefit from the incentives.

Sec. 306   RCW 82.32.570 and 2004 c 24 s 14 are each amended to read as follows:
     (1) For the purposes of this section, "smelter tax incentive" means the preferential tax rate under RCW 82.04.2909, or an exemption or credit under RCW 82.04.4481, 82.08.805, 82.12.805, or 82.12.022(5).
     (2) 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 to evaluate whether the stated goals of legislation were achieved.
     (3) The goals of the smelter tax incentives are to retain family-wage jobs in rural areas by:
     (a) Enabling the aluminum industry to maintain production of aluminum at a level that will preserve at least 75 percent of the jobs that were on the payroll effective January 1, 2004, as adjusted for employment reductions publicly announced before November 30, 2003; and
     (b) Allowing the aluminum industry to continue producing aluminum in this state through 2006 so that the industry will be positioned to preserve and create new jobs when the anticipated reduction of energy costs occurs.
     (4)(a) An aluminum smelter receiving the benefit of a smelter tax incentive shall make an annual report to the department detailing employment, wages, and employer-provided health and retirement benefits per job at the manufacturing site. The report is due by ((March 31st)) April 30th following any year in which a tax incentive is claimed or used. The department may extend the due date for timely filing annual reports under this section as provided in RCW 82.32.590. The report shall not include names of employees. The report shall detail employment by the total number of full-time, part-time, and temporary positions. The report shall indicate the quantity of aluminum smelted at the plant during the time period covered by the 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 a tax incentive. Employment reports shall include data for actual levels of employment and identification of the number of jobs affected by any employment reductions that have been publicly announced at the time of the report. Information in a report under this section 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 or any extension under RCW 82.32.590, the department shall declare the amount of taxes exempted or credited, or reduced in the case of the preferential business and occupation tax rate, 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.
     (5) By December 1, 2005, and by December 1, 2006, 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 the smelter tax incentives and, by December 1, 2010, on the effectiveness of the incentives under RCW 82.04.4482 and 82.16.0498. The reports shall measure the effect of the tax incentives on job retention for Washington residents and any other factors the committees may select.

Sec. 307   RCW 82.32.610 and 2005 c 513 s 3 are each amended 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) Each person claiming a tax exemption under RCW 82.04.4266 shall report information to the department by filing a complete annual survey. The survey is due by ((March 31st)) April 30th of the year following any calendar year in which a tax exemption under RCW 82.04.4266 is taken. The department may extend the due date for timely filing annual reports under this section as provided in RCW 82.32.590. The survey shall include the amount of tax exemption taken. The survey shall also include the following information for employment positions in Washington:
     (a) The number of total employment positions;
     (b) Full-time, part-time, and temporary employment positions as a percent of total employment;
     (c) The number of employment positions according to the following wage bands: Less than thirty thousand dollars; thirty thousand dollars or greater, but less than sixty thousand dollars; and sixty thousand dollars or greater. A wage band containing fewer than three individuals may be combined with another wage band; and
     (d) The number of employment positions that have employer-provided medical, dental, and retirement benefits, by each of the wage bands.
     The first survey filed under this subsection shall also include information for the twelve-month period immediately before first use of a tax incentive.
     (3) The department may request additional information necessary to measure the results of the exemption program, to be submitted at the same time as the survey.
     (4) All information collected under this section, except the amount of the tax exemption taken, is deemed taxpayer information under RCW 82.32.330. Information on the amount of tax exemption taken is not subject to the confidentiality provisions of RCW 82.32.330.
     (5) If a person fails to submit an annual survey under subsection (2) of this section by the due date of the report or any extension under RCW 82.32.590, the department shall declare the amount of taxes exempted for the previous calendar year to be immediately due and payable. The department shall assess interest, but not penalties, on the amounts due under this section. The amount due shall be calculated using a rate of 0.138 percent. The interest shall be assessed at the rate provided for delinquent taxes under this chapter, retroactively to the date the exemption was claimed, and shall accrue until the taxes for which the exemption was claimed are repaid. This information is not subject to the confidentiality provisions of RCW 82.32.330.
     (6) The department shall use the information from this section to prepare summary descriptive statistics by category. No fewer than three taxpayers shall be included in any category. The department shall report these statistics to the legislature each year by September 1st.
     (7) The department shall study the tax exemption authorized in RCW 82.04.4266. The department shall submit a report to the finance committee of the house of representatives and the ways and means committee of the senate by December 1, 2011. The report shall measure the effect of the exemption on job creation, job retention, net jobs for Washington residents, company growth, ((the movement of firms or the consolidation of firms' operations into the state)) diversification of the state's economy, cluster dynamics, and such other factors as the department selects.

Sec. 308   RCW 82.32.620 and 2005 c 301 s 4 are each amended 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 reports taxes under RCW 82.04.294 shall make an annual report to the department detailing employment, wages, and employer-provided health and retirement benefits per job at the manufacturing 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 first report filed under this subsection shall include employment, wage, and benefit information for the twelve-month period immediately before first use of a preferential tax rate under RCW 82.04.294. The report is due by ((March 31st)) April 30th following any year in which a preferential tax rate under RCW 82.04.294 is used. The department may extend the due date for timely filing annual reports under this section as provided in RCW 82.32.590. This information is not subject to the confidentiality provisions of RCW 82.32.330.
     (b) If a person fails to submit an annual report under (a) of this subsection, the department shall declare the amount of taxes reduced for the previous calendar year to be immediately due and payable. Excise taxes payable under this subsection are subject to interest, but not penalties, at the rate provided for delinquent taxes, as provided under this chapter. The department shall assess interest, retroactively to the date the preferential tax rate under RCW 82.04.294, was used. The interest shall be assessed at the rate provided for delinquent excise taxes under this chapter, and shall accrue until the taxes for which the preferential tax rate was used are repaid. This information is not subject to the confidentiality provisions of RCW 82.32.330.

Sec. 309   RCW 82.32.330 and 2005 c 326 s 1 are each amended to read as follows:
     (1) For purposes of this section:
     (a) "Disclose" means to make known to any person in any manner whatever a return or tax information;
     (b) "Return" means a tax or information return or claim for refund required by, or provided for or permitted under, the laws of this state which is filed with the department of revenue by, on behalf of, or with respect to a person, and any amendment or supplement thereto, including supporting schedules, attachments, or lists that are supplemental to, or part of, the return so filed;
     (c) "Tax information" means (i) a taxpayer's identity, (ii) the nature, source, or amount of the taxpayer's income, payments, receipts, deductions, exemptions, credits, assets, liabilities, net worth, tax liability deficiencies, overassessments, or tax payments, whether taken from the taxpayer's books and records or any other source, (iii) whether the taxpayer's return was, is being, or will be examined or subject to other investigation or processing, (iv) a part of a written determination that is not designated as a precedent and disclosed pursuant to RCW 82.32.410, or a background file document relating to a written determination, and (v) other data received by, recorded by, prepared by, furnished to, or collected by the department of revenue with respect to the determination of the existence, or possible existence, of liability, or the amount thereof, of a person under the laws of this state for a tax, penalty, interest, fine, forfeiture, or other imposition, or offense: PROVIDED, That data, material, or documents that do not disclose information related to a specific or identifiable taxpayer do not constitute tax information under this section. Except as provided by RCW 82.32.410, nothing in this chapter shall require any person possessing data, material, or documents made confidential and privileged by this section to delete information from such data, material, or documents so as to permit its disclosure;
     (d) "State agency" means every Washington state office, department, division, bureau, board, commission, or other state agency;
     (e) "Taxpayer identity" means the taxpayer's name, address, telephone number, registration number, or any combination thereof, or any other information disclosing the identity of the taxpayer; and
     (f) "Department" means the department of revenue or its officer, agent, employee, or representative.
     (2) Returns and tax information shall be confidential and privileged, and except as authorized by this section, neither the department of revenue nor any other person may disclose any return or tax information.
     (3) This section does not prohibit the department of revenue from:
     (a) Disclosing such return or tax information in a civil or criminal judicial proceeding or an administrative proceeding:
     (i) In respect of any tax imposed under the laws of this state if the taxpayer or its officer or other person liable under Title 82 RCW is a party in the proceeding; or
     (ii) In which the taxpayer about whom such return or tax information is sought and another state agency are adverse parties in the proceeding;
     (b) Disclosing, subject to such requirements and conditions as the director shall prescribe by rules adopted pursuant to chapter 34.05 RCW, such return or tax information regarding a taxpayer to such taxpayer or to such person or persons as that taxpayer may designate in a request for, or consent to, such disclosure, or to any other person, at the taxpayer's request, to the extent necessary to comply with a request for information or assistance made by the taxpayer to such other person: PROVIDED, That tax information not received from the taxpayer shall not be so disclosed if the director determines that such disclosure would compromise any investigation or litigation by any federal, state, or local government agency in connection with the civil or criminal liability of the taxpayer or another person, or that such disclosure would identify a confidential informant, or that such disclosure is contrary to any agreement entered into by the department that provides for the reciprocal exchange of information with other government agencies which agreement requires confidentiality with respect to such information unless such information is required to be disclosed to the taxpayer by the order of any court;
     (c) Disclosing the name of a taxpayer with a deficiency greater than five thousand dollars and against whom a warrant under RCW 82.32.210 has been either issued or filed and remains outstanding for a period of at least ten working days. The department shall not be required to disclose any information under this subsection if a taxpayer: (i) Has been issued a tax assessment; (ii) has been issued a warrant that has not been filed; and (iii) has entered a deferred payment arrangement with the department of revenue and is making payments upon such deficiency that will fully satisfy the indebtedness within twelve months;
     (d) Disclosing the name of a taxpayer with a deficiency greater than five thousand dollars and against whom a warrant under RCW 82.32.210 has been filed with a court of record and remains outstanding;
     (e) Publishing statistics so classified as to prevent the identification of particular returns or reports or items thereof;
     (f) Disclosing such return or tax information, for official purposes only, to the governor or attorney general, or to any state agency, or to any committee or subcommittee of the legislature dealing with matters of taxation, revenue, trade, commerce, the control of industry or the professions;
     (g) Permitting the department of revenue's records to be audited and examined by the proper state officer, his or her agents and employees;
     (h) Disclosing any such return or tax information to a peace officer as defined in RCW 9A.04.110 or county prosecuting attorney, for official purposes. The disclosure may be made only in response to a search warrant, subpoena, or other court order, unless the disclosure is for the purpose of criminal tax enforcement. A peace officer or county prosecuting attorney who receives the return or tax information may disclose that return or tax information only for use in the investigation and a related court proceeding, or in the court proceeding for which the return or tax information originally was sought;
     (i) Disclosing any such return or tax information to the proper officer of the internal revenue service of the United States, the Canadian government or provincial governments of Canada, or to the proper officer of the tax department of any state or city or town or county, for official purposes, but only if the statutes of the United States, Canada or its provincial governments, or of such other state or city or town or county, as the case may be, grants substantially similar privileges to the proper officers of this state;
     (j) Disclosing any such return or tax information to the Department of Justice, including the Bureau of Alcohol, Tobacco ((and)), Firearms ((of the Department of the Treasury)) and Explosives within the Department of Justice, the Department of Defense, the Immigration and Customs Enforcement and the Customs and Border Protection agencies of the United States ((Customs Service)) Department of Homeland Security, the Coast Guard of the United States, and the United States Department of Transportation, or any authorized representative thereof, for official purposes;
     (k) Publishing or otherwise disclosing the text of a written determination designated by the director as a precedent pursuant to RCW 82.32.410;
     (l) Disclosing, in a manner that is not associated with other tax information, the taxpayer name, entity type, business address, mailing address, revenue tax registration numbers, North American industry classification system or standard industrial classification code of a taxpayer, and the dates of opening and closing of business. This subsection shall not be construed as giving authority to the department to give, sell, or provide access to any list of taxpayers for any commercial purpose;
     (m) Disclosing such return or tax information that is also maintained by another Washington state or local governmental agency as a public record available for inspection and copying under the provisions of chapter 42.17 RCW or is a document maintained by a court of record not otherwise prohibited from disclosure;
     (n) Disclosing such return or tax information to the United States department of agriculture for the limited purpose of investigating food stamp fraud by retailers;
     (o) Disclosing to a financial institution, escrow company, or title company, in connection with specific real property that is the subject of a real estate transaction, current amounts due the department for a filed tax warrant, judgment, or lien against the real property;
     (p) Disclosing to a person against whom the department has asserted liability as a successor under RCW 82.32.140 return or tax information pertaining to the specific business of the taxpayer to which the person has succeeded; ((or))
     (q) Disclosing such return or tax information in the possession of the department relating to the administration or enforcement of the real estate excise tax imposed under chapter 82.45 RCW, including information regarding transactions exempt or otherwise not subject to tax; or
     (r) Disclosing the least amount of return or tax information necessary for the reports of the effectiveness of tax incentive programs when the number of taxpayers included in the reports or any part of the reports cannot be classified to prevent the identification of taxpayers or particular returns, reports, tax information, or items in the possession of the department.
     (4)(a) The department may disclose return or taxpayer information to a person under investigation or during any court or administrative proceeding against a person under investigation as provided in this subsection (4). The disclosure must be in connection with the department's official duties relating to an audit, collection activity, or a civil or criminal investigation. The disclosure may occur only when the person under investigation and the person in possession of data, materials, or documents are parties to the return or tax information to be disclosed. The department may disclose return or tax information such as invoices, contracts, bills, statements, resale or exemption certificates, or checks. However, the department may not disclose general ledgers, sales or cash receipt journals, check registers, accounts receivable/payable ledgers, general journals, financial statements, expert's workpapers, income tax returns, state tax returns, tax return workpapers, or other similar data, materials, or documents.
     (b) Before disclosure of any tax return or tax information under this subsection (4), the department shall, through written correspondence, inform the person in possession of the data, materials, or documents to be disclosed. The correspondence shall clearly identify the data, materials, or documents to be disclosed. The department may not disclose any tax return or tax information under this subsection (4) until the time period allowed in (c) of this subsection has expired or until the court has ruled on any challenge brought under (c) of this subsection.
     (c) The person in possession of the data, materials, or documents to be disclosed by the department has twenty days from the receipt of the written request required under (b) of this subsection to petition the superior court of the county in which the petitioner resides for injunctive relief. The court shall limit or deny the request of the department if the court determines that:
     (i) The data, materials, or documents sought for disclosure are cumulative or duplicative, or are obtainable from some other source that is more convenient, less burdensome, or less expensive;
     (ii) The production of the data, materials, or documents sought would be unduly burdensome or expensive, taking into account the needs of the department, the amount in controversy, limitations on the petitioner's resources, and the importance of the issues at stake; or
     (iii) The data, materials, or documents sought for disclosure contain trade secret information that, if disclosed, could harm the petitioner.
     (d) The department shall reimburse reasonable expenses for the production of data, materials, or documents incurred by the person in possession of the data, materials, or documents to be disclosed.
     (e) Requesting information under (b) of this subsection that may indicate that a taxpayer is under investigation does not constitute a disclosure of tax return or tax information under this section.
     (5) Any person acquiring knowledge of any return or tax information in the course of his or her employment with the department of revenue and any person acquiring knowledge of any return or tax information as provided under subsection (3)(f), (g), (h), (i), (j), or (n) of this section, who discloses any such return or tax information to another person not entitled to knowledge of such return or tax information under the provisions of this section, is guilty of a misdemeanor. If the person guilty of such violation is an officer or employee of the state, such person shall forfeit such office or employment and shall be incapable of holding any public office or employment in this state for a period of two years thereafter.

Sec. 310   RCW 82.32.330 and 2005 c 326 s 1 and 2005 c 274 s 361 are each reenacted and amended to read as follows:
     (1) For purposes of this section:
     (a) "Disclose" means to make known to any person in any manner whatever a return or tax information;
     (b) "Return" means a tax or information return or claim for refund required by, or provided for or permitted under, the laws of this state which is filed with the department of revenue by, on behalf of, or with respect to a person, and any amendment or supplement thereto, including supporting schedules, attachments, or lists that are supplemental to, or part of, the return so filed;
     (c) "Tax information" means (i) a taxpayer's identity, (ii) the nature, source, or amount of the taxpayer's income, payments, receipts, deductions, exemptions, credits, assets, liabilities, net worth, tax liability deficiencies, overassessments, or tax payments, whether taken from the taxpayer's books and records or any other source, (iii) whether the taxpayer's return was, is being, or will be examined or subject to other investigation or processing, (iv) a part of a written determination that is not designated as a precedent and disclosed pursuant to RCW 82.32.410, or a background file document relating to a written determination, and (v) other data received by, recorded by, prepared by, furnished to, or collected by the department of revenue with respect to the determination of the existence, or possible existence, of liability, or the amount thereof, of a person under the laws of this state for a tax, penalty, interest, fine, forfeiture, or other imposition, or offense: PROVIDED, That data, material, or documents that do not disclose information related to a specific or identifiable taxpayer do not constitute tax information under this section. Except as provided by RCW 82.32.410, nothing in this chapter shall require any person possessing data, material, or documents made confidential and privileged by this section to delete information from such data, material, or documents so as to permit its disclosure;
     (d) "State agency" means every Washington state office, department, division, bureau, board, commission, or other state agency;
     (e) "Taxpayer identity" means the taxpayer's name, address, telephone number, registration number, or any combination thereof, or any other information disclosing the identity of the taxpayer; and
     (f) "Department" means the department of revenue or its officer, agent, employee, or representative.
     (2) Returns and tax information shall be confidential and privileged, and except as authorized by this section, neither the department of revenue nor any other person may disclose any return or tax information.
     (3) This section does not prohibit the department of revenue from:
     (a) Disclosing such return or tax information in a civil or criminal judicial proceeding or an administrative proceeding:
     (i) In respect of any tax imposed under the laws of this state if the taxpayer or its officer or other person liable under Title 82 RCW is a party in the proceeding; or
     (ii) In which the taxpayer about whom such return or tax information is sought and another state agency are adverse parties in the proceeding;
     (b) Disclosing, subject to such requirements and conditions as the director shall prescribe by rules adopted pursuant to chapter 34.05 RCW, such return or tax information regarding a taxpayer to such taxpayer or to such person or persons as that taxpayer may designate in a request for, or consent to, such disclosure, or to any other person, at the taxpayer's request, to the extent necessary to comply with a request for information or assistance made by the taxpayer to such other person: PROVIDED, That tax information not received from the taxpayer shall not be so disclosed if the director determines that such disclosure would compromise any investigation or litigation by any federal, state, or local government agency in connection with the civil or criminal liability of the taxpayer or another person, or that such disclosure would identify a confidential informant, or that such disclosure is contrary to any agreement entered into by the department that provides for the reciprocal exchange of information with other government agencies which agreement requires confidentiality with respect to such information unless such information is required to be disclosed to the taxpayer by the order of any court;
     (c) Disclosing the name of a taxpayer with a deficiency greater than five thousand dollars and against whom a warrant under RCW 82.32.210 has been either issued or filed and remains outstanding for a period of at least ten working days. The department shall not be required to disclose any information under this subsection if a taxpayer: (i) Has been issued a tax assessment; (ii) has been issued a warrant that has not been filed; and (iii) has entered a deferred payment arrangement with the department of revenue and is making payments upon such deficiency that will fully satisfy the indebtedness within twelve months;
     (d) Disclosing the name of a taxpayer with a deficiency greater than five thousand dollars and against whom a warrant under RCW 82.32.210 has been filed with a court of record and remains outstanding;
     (e) Publishing statistics so classified as to prevent the identification of particular returns or reports or items thereof;
     (f) Disclosing such return or tax information, for official purposes only, to the governor or attorney general, or to any state agency, or to any committee or subcommittee of the legislature dealing with matters of taxation, revenue, trade, commerce, the control of industry or the professions;
     (g) Permitting the department of revenue's records to be audited and examined by the proper state officer, his or her agents and employees;
     (h) Disclosing any such return or tax information to a peace officer as defined in RCW 9A.04.110 or county prosecuting attorney, for official purposes. The disclosure may be made only in response to a search warrant, subpoena, or other court order, unless the disclosure is for the purpose of criminal tax enforcement. A peace officer or county prosecuting attorney who receives the return or tax information may disclose that return or tax information only for use in the investigation and a related court proceeding, or in the court proceeding for which the return or tax information originally was sought;
     (i) Disclosing any such return or tax information to the proper officer of the internal revenue service of the United States, the Canadian government or provincial governments of Canada, or to the proper officer of the tax department of any state or city or town or county, for official purposes, but only if the statutes of the United States, Canada or its provincial governments, or of such other state or city or town or county, as the case may be, grants substantially similar privileges to the proper officers of this state;
     (j) Disclosing any such return or tax information to the Department of Justice, including the Bureau of Alcohol, Tobacco ((and)), Firearms ((of the Department of the Treasury)) and Explosives within the Department of Justice, the Department of Defense, the Immigration and Customs Enforcement and the Customs and Border Protection agencies of the United States ((Customs Service)) Department of Homeland Security, the Coast Guard of the United States, and the United States Department of Transportation, or any authorized representative thereof, for official purposes;
     (k) Publishing or otherwise disclosing the text of a written determination designated by the director as a precedent pursuant to RCW 82.32.410;
     (l) Disclosing, in a manner that is not associated with other tax information, the taxpayer name, entity type, business address, mailing address, revenue tax registration numbers, North American industry classification system or standard industrial classification code of a taxpayer, and the dates of opening and closing of business. This subsection shall not be construed as giving authority to the department to give, sell, or provide access to any list of taxpayers for any commercial purpose;
     (m) Disclosing such return or tax information that is also maintained by another Washington state or local governmental agency as a public record available for inspection and copying under the provisions of chapter 42.56 RCW or is a document maintained by a court of record not otherwise prohibited from disclosure;
     (n) Disclosing such return or tax information to the United States department of agriculture for the limited purpose of investigating food stamp fraud by retailers;
     (o) Disclosing to a financial institution, escrow company, or title company, in connection with specific real property that is the subject of a real estate transaction, current amounts due the department for a filed tax warrant, judgment, or lien against the real property;
     (p) Disclosing to a person against whom the department has asserted liability as a successor under RCW 82.32.140 return or tax information pertaining to the specific business of the taxpayer to which the person has succeeded; ((or))
     (q) Disclosing such return or tax information in the possession of the department relating to the administration or enforcement of the real estate excise tax imposed under chapter 82.45 RCW, including information regarding transactions exempt or otherwise not subject to tax; or
     (r) Disclosing the least amount of return or tax information necessary for the reports of the effectiveness of tax incentive programs when the number of taxpayers included in the reports or any part of the reports cannot be classified to prevent the identification of taxpayers or particular returns, reports, tax information, or items in the possession of the department.
     (4)(a) The department may disclose return or taxpayer information to a person under investigation or during any court or administrative proceeding against a person under investigation as provided in this subsection (4). The disclosure must be in connection with the department's official duties relating to an audit, collection activity, or a civil or criminal investigation. The disclosure may occur only when the person under investigation and the person in possession of data, materials, or documents are parties to the return or tax information to be disclosed. The department may disclose return or tax information such as invoices, contracts, bills, statements, resale or exemption certificates, or checks. However, the department may not disclose general ledgers, sales or cash receipt journals, check registers, accounts receivable/payable ledgers, general journals, financial statements, expert's workpapers, income tax returns, state tax returns, tax return workpapers, or other similar data, materials, or documents.
     (b) Before disclosure of any tax return or tax information under this subsection (4), the department shall, through written correspondence, inform the person in possession of the data, materials, or documents to be disclosed. The correspondence shall clearly identify the data, materials, or documents to be disclosed. The department may not disclose any tax return or tax information under this subsection (4) until the time period allowed in (c) of this subsection has expired or until the court has ruled on any challenge brought under (c) of this subsection.
     (c) The person in possession of the data, materials, or documents to be disclosed by the department has twenty days from the receipt of the written request required under (b) of this subsection to petition the superior court of the county in which the petitioner resides for injunctive relief. The court shall limit or deny the request of the department if the court determines that:
     (i) The data, materials, or documents sought for disclosure are cumulative or duplicative, or are obtainable from some other source that is more convenient, less burdensome, or less expensive;
     (ii) The production of the data, materials, or documents sought would be unduly burdensome or expensive, taking into account the needs of the department, the amount in controversy, limitations on the petitioner's resources, and the importance of the issues at stake; or
     (iii) The data, materials, or documents sought for disclosure contain trade secret information that, if disclosed, could harm the petitioner.
     (d) The department shall reimburse reasonable expenses for the production of data, materials, or documents incurred by the person in possession of the data, materials, or documents to be disclosed.
     (e) Requesting information under (b) of this subsection that may indicate that a taxpayer is under investigation does not constitute a disclosure of tax return or tax information under this section.
     (5) Any person acquiring knowledge of any return or tax information in the course of his or her employment with the department of revenue and any person acquiring knowledge of any return or tax information as provided under subsection (3)(f), (g), (h), (i), (j), or (n) of this section, who discloses any such return or tax information to another person not entitled to knowledge of such return or tax information under the provisions of this section, is guilty of a misdemeanor. If the person guilty of such violation is an officer or employee of the state, such person shall forfeit such office or employment and shall be incapable of holding any public office or employment in this state for a period of two years thereafter.

NEW SECTION.  Sec. 401   Except as provided in section 110 of this act, the repealed sections in section 112 of this act do not affect any rights, liabilities, obligations, or proceedings, incurred or instituted under those repealed sections or rules or orders adopted by the department of revenue pursuant to those repealed sections prior to the effective date of section 112 of this act.

NEW SECTION.  Sec. 402   (1) Sections 101 through 112 and 201 of this act take effect January 1, 2007.
     (2) Sections 301 through 309 of this act are necessary for the immediate preservation of the public peace, health, or safety, or support of the state government and its existing public institutions, and take effect immediately.
     (3) Section 310 of this act takes effect July 1, 2006.

NEW SECTION.  Sec. 403   Section 309 of this act expires July 1, 2006.

NEW SECTION.  Sec. 404   Part headings used in this act are not part of the law.

NEW SECTION.  Sec. 405   If any provision of this act or its application to any person or circumstance is held invalid, the remainder of the act or the application of the provision to other persons or circumstances is not affected.