2314-SAMHORCUH3186.3SHB 2314H AMD597By Representative OrcuttFAILED 04/21/2005 Strike everything after the enacting clause and insert thefollowing:"PART ISELFSERVICE LAUNDRYAND DIRECT MAIL DELIVERY CHARGESSec. RCW 82.04.050 and 2004 c 174 s 3 and 2004 c 153 s 407are each reenacted and amended to read as follows: (1) "Sale at retail" or "retail sale" means every sale of tangiblepersonal property (including articles produced, fabricated, orimprinted) to all persons irrespective of the nature of their businessand including, among others, without limiting the scope hereof, personswho install, repair, clean, alter, improve, construct, or decorate realor personal property of or for consumers other than a sale to a personwho presents a resale certificate under RCW 82.04.470 and who: (a) Purchases for the purpose of resale as tangible personalproperty in the regular course of business without intervening use bysuch person, but a purchase for the purpose of resale by a regionaltransit authority under RCW 81.112.300 is not a sale for resale; or (b) Installs, repairs, cleans, alters, imprints, improves,constructs, or decorates real or personal property of or for consumers,if such tangible personal property becomes an ingredient or componentof such real or personal property without intervening use by suchperson; or (c) Purchases for the purpose of consuming the property purchasedin producing for sale a new article of tangible personal property orsubstance, of which such property becomes an ingredient or component oris a chemical used in processing, when the primary purpose of suchchemical is to create a chemical reaction directly through contact withan ingredient of a new article being produced for sale; or 1 (d) Purchases for the purpose of consuming the property purchasedin producing ferrosilicon which is subsequently used in producingmagnesium for sale, if the primary purpose of such property is tocreate a chemical reaction directly through contact with an ingredientof ferrosilicon; or (e) Purchases for the purpose of providing the property toconsumers as part of competitive telephone service, as defined in RCW82.04.065. The term shall include every sale of tangible personalproperty which is used or consumed or to be used or consumed in theperformance of any activity classified as a "sale at retail" or "retailsale" even though such property is resold or utilized as provided in(a), (b), (c), (d), or (e) of this subsection following such use. Theterm also means every sale of tangible personal property to personsengaged in any business which is taxable under RCW 82.04.280 (2) and(7), 82.04.290, and 82.04.2908. (2) The term "sale at retail" or "retail sale" shall include thesale of or charge made for tangible personal property consumed and/orfor labor and services rendered in respect to the following: (a) The installing, repairing, cleaning, altering, imprinting, orimproving of tangible personal property of or for consumers, includingcharges made for the mere use of facilities in respect thereto, butexcluding charges made for the use of ((coinoperated)) selfservicelaundry facilities ((when such facilities are situated in an apartmenthouse, rooming house, or mobile home park for the exclusive use of thetenants thereof)), and also excluding sales of laundry service tononprofit health care facilities, and excluding services rendered inrespect to live animals, birds and insects; (b) The constructing, repairing, decorating, or improving of new orexisting buildings or other structures under, upon, or above realproperty of or for consumers, including the installing or attaching ofany article of tangible personal property therein or thereto, whetheror not such personal property becomes a part of the realty by virtue ofinstallation, and shall also include the sale of services or chargesmade for the clearing of land and the moving of earth excepting themere leveling of land used in commercial farming or agriculture; (c) The charge for labor and services rendered in respect toconstructing, repairing, or improving any structure upon, above, orunder any real property owned by an owner who conveys the property by 2 title, possession, or any other means to the person performing suchconstruction, repair, or improvement for the purpose of performing suchconstruction, repair, or improvement and the property is thenreconveyed by title, possession, or any other means to the originalowner; (d) The sale of or charge made for labor and services rendered inrespect to the cleaning, fumigating, razing or moving of existingbuildings or structures, but shall not include the charge made forjanitorial services; and for purposes of this section the term"janitorial services" shall mean those cleaning and caretaking servicesordinarily performed by commercial janitor service businessesincluding, but not limited to, wall and window washing, floor cleaningand waxing, and the cleaning in place of rugs, drapes and upholstery.The term "janitorial services" does not include painting, papering,repairing, furnace or septic tank cleaning, snow removal orsandblasting; (e) The sale of or charge made for labor and services rendered inrespect to automobile towing and similar automotive transportationservices, but not in respect to those required to report and pay taxesunder chapter 82.16 RCW; (f) The sale of and charge made for the furnishing of lodging andall other services by a hotel, rooming house, tourist court, motel,trailer camp, and the granting of any similar license to use realproperty, as distinguished from the renting or leasing of realproperty, and it shall be presumed that the occupancy of real propertyfor a continuous period of one month or more constitutes a rental orlease of real property and not a mere license to use or enjoy the same.For the purposes of this subsection, it shall be presumed that the saleof and charge made for the furnishing of lodging for a continuousperiod of one month or more to a person is a rental or lease of realproperty and not a mere license to enjoy the same; (g) The sale of or charge made for tangible personal property,labor and services to persons taxable under (a), (b), (c), (d), (e),and (f) of this subsection when such sales or charges are for property,labor and services which are used or consumed in whole or in part bysuch persons in the performance of any activity defined as a "sale atretail" or "retail sale" even though such property, labor and servicesmay be resold after such use or consumption. Nothing contained in this 3 subsection shall be construed to modify subsection (1) of this sectionand nothing contained in subsection (1) of this section shall beconstrued to modify this subsection. (3) The term "sale at retail" or "retail sale" shall include thesale of or charge made for personal, business, or professional servicesincluding amounts designated as interest, rents, fees, admission, andother service emoluments however designated, received by personsengaging in the following business activities: (a) Amusement and recreation services including but not limited togolf, pool, billiards, skating, bowling, ski lifts and tows, day tripsfor sightseeing purposes, and others, when provided to consumers; (b) Abstract, title insurance, and escrow services; (c) Credit bureau services; (d) Automobile parking and storage garage services; (e) Landscape maintenance and horticultural services but excluding(i) horticultural services provided to farmers and (ii) pruning,trimming, repairing, removing, and clearing of trees and brush nearelectric transmission or distribution lines or equipment, if performedby or at the direction of an electric utility; (f) Service charges associated with tickets to professionalsporting events; and (g) The following personal services: Physical fitness services,tanning salon services, tattoo parlor services, steam bath services,turkish bath services, escort services, and dating services. (4)(a) The term shall also include: (i) The renting or leasing of tangible personal property toconsumers; and (ii) Providing tangible personal property along with an operatorfor a fixed or indeterminate period of time. A consideration of thisis that the operator is necessary for the tangible personal property toperform as designed. For the purpose of this subsection (4)(a)(ii), anoperator must do more than maintain, inspect, or set up the tangiblepersonal property. (b) The term shall not include the renting or leasing of tangiblepersonal property where the lease or rental is for the purpose ofsublease or subrent. (5) The term shall also include the providing of telephone service,as defined in RCW 82.04.065, to consumers. 4 (6) The term shall also include the sale of prewritten computersoftware other than a sale to a person who presents a resalecertificate under RCW 82.04.470, regardless of the method of deliveryto the end user, but shall not include custom software or thecustomization of prewritten computer software. (7) The term shall not include the sale of or charge made for laborand services rendered in respect to the building, repairing, orimproving of any street, place, road, highway, easement, right of way,mass public transportation terminal or parking facility, bridge,tunnel, or trestle which is owned by a municipal corporation orpolitical subdivision of the state or by the United States and which isused or to be used primarily for foot or vehicular traffic includingmass transportation vehicles of any kind. (8) The term shall also not include sales of chemical sprays orwashes to persons for the purpose of postharvest treatment of fruit forthe prevention of scald, fungus, mold, or decay, nor shall it includesales of feed, seed, seedlings, fertilizer, agents for enhancedpollination including insects such as bees, and spray materials to:(a) Persons who participate in the federal conservation reserveprogram, the environmental quality incentives program, the wetlandsreserve program, and the wildlife habitat incentives program, or theirsuccessors administered by the United States department of agriculture;(b) farmers for the purpose of producing for sale any agriculturalproduct; and (c) farmers acting under cooperative habitat developmentor access contracts with an organization exempt from federal income taxunder 26 U.S.C. Sec. 501(c)(3) or the Washington state department offish and wildlife to produce or improve wildlife habitat on land thatthe farmer owns or leases. (9) The term shall not include the sale of or charge made for laborand services rendered in respect to the constructing, repairing,decorating, or improving of new or existing buildings or otherstructures under, upon, or above real property of or for the UnitedStates, any instrumentality thereof, or a county or city housingauthority created pursuant to chapter 35.82 RCW, including theinstalling, or attaching of any article of tangible personal propertytherein or thereto, whether or not such personal property becomes apart of the realty by virtue of installation. Nor shall the terminclude the sale of services or charges made for the clearing of land 5 and the moving of earth of or for the United States, anyinstrumentality thereof, or a county or city housing authority. Norshall the term include the sale of services or charges made forcleaning up for the United States, or its instrumentalities,radioactive waste and other byproducts of weapons production andnuclear research and development.Sec. RCW 82.08.010 and 2004 c 153 s 406 are each amended toread as follows: For the purposes of this chapter: (1) "Selling price" includes "sales price." "Sales price" meansthe total amount of consideration, except separately stated tradeinproperty of like kind, including cash, credit, property, and services,for which tangible personal property or services defined as a "retailsale" under RCW 82.04.050 are sold, leased, or rented, valued in money,whether received in money or otherwise. No deduction from the totalamount of consideration is allowed for the following: (a) The seller'scost of the property sold; (b) the cost of materials used, labor orservice cost, interest, losses, all costs of transportation to theseller, all taxes imposed on the seller, and any other expense of theseller; (c) charges by the seller for any services necessary tocomplete the sale, other than delivery and installation charges; (d)delivery charges; (e) installation charges; and (f) the value of exempttangible personal property given to the purchaser where taxable andexempt tangible personal property have been bundled together and soldby the seller as a single product or piece of merchandise. When tangible personal property is rented or leased undercircumstances that the consideration paid does not represent areasonable rental for the use of the articles so rented or leased, the"selling price" shall be determined as nearly as possible according tothe value of such use at the places of use of similar products of likequality and character under such rules as the department may prescribe. "Selling price" or "sales price" does not include: Discounts,including cash, term, or coupons that are not reimbursed by a thirdparty that are allowed by a seller and taken by a purchaser on a sale;interest, financing, and carrying charges from credit extended on thesale of tangible personal property or services, if the amount isseparately stated on the invoice, bill of sale, or similar document 6 given to the purchaser; and any taxes legally imposed directly on theconsumer that are separately stated on the invoice, bill of sale, orsimilar document given to the purchaser; (2) "Seller" means every person, including the state and itsdepartments and institutions, making sales at retail or retail sales toa buyer, purchaser, or consumer, whether as agent, broker, orprincipal, except "seller" does not mean the state and its departmentsand institutions when making sales to the state and its departments andinstitutions; (3) "Buyer," "purchaser," and "consumer" include, without limitingthe scope hereof, every individual, receiver, assignee, trustee inbankruptcy, trust, estate, firm, copartnership, joint venture, club,company, joint stock company, business trust, corporation, association,society, or any group of individuals acting as a unit, whether mutual,cooperative, fraternal, nonprofit, or otherwise, municipal corporation,quasi municipal corporation, and also the state, its departments andinstitutions and all political subdivisions thereof, irrespective ofthe nature of the activities engaged in or functions performed, andalso the United States or any instrumentality thereof; (4) "Delivery charges" means charges by the seller of personalproperty or services for preparation and delivery to a locationdesignated by the purchaser of personal property or services including,but not limited to, transportation, shipping, postage, handling,crating, and packing; (5) "Direct mail" means printed material delivered or distributedby United States mail or other delivery service to a mass audience orto addressees on a mailing list provided by the purchaser or at thedirection of the purchaser when the cost of the items are not billeddirectly to the recipients. "Direct mail" includes tangible personalproperty supplied directly or indirectly by the purchaser to the directmail seller for inclusion in the package containing the printedmaterial. "Direct mail" does not include multiple items of printedmaterial delivered to a single address; (6) The meaning attributed in chapter 82.04 RCW to the terms "taxyear," "taxable year," "person," "company," "sale," "sale at retail,""retail sale," "sale at wholesale," "wholesale," "business," "engagingin business," "cash discount," "successor," "consumer," "in this state" 7 and "within this state" shall apply equally to the provisions of thischapter; (((6))) (7) For the purposes of the taxes imposed under thischapter and under chapter 82.12 RCW, "tangible personal property" meanspersonal property that can be seen, weighed, measured, felt, ortouched, or that is in any other manner perceptible to the senses.Tangible personal property includes electricity, water, gas, steam, andprewritten computer software.NEW SECTION.Sec. A new section is added to chapter 82.04RCW to read as follows: (1) In computing tax there may be deducted from the measure of tax,amounts derived from delivery charges made for the delivery of directmail if the charges are separately stated on an invoice or similarbilling document given to the purchaser. (2) "Delivery charges" and "direct mail" have the same meanings asin RCW 82.08.010.NEW SECTION.Sec. A new section is added to chapter 82.08RCW to read as follows: The tax levied by RCW 82.08.020 does not apply to delivery chargesmade for the delivery of direct mail if the charges are separatelystated on an invoice or similar billing document given to thepurchaser.NEW SECTION.Sec. A new section is added to chapter 82.12RCW to read as follows: (1) The tax levied by this chapter does not apply to the value ofdelivery charges made for the delivery of direct mail if the chargesare separately stated on an invoice or similar billing document givento the purchaser. (2) "Delivery charges" and "direct mail" have the same meanings asin RCW 82.08.010.PART IIBOARDING HOMES 8 NEW SECTION.Sec. A new section is added to chapter 82.04RCW to read as follows: (1) This chapter does not apply to amounts received by a nonprofitboarding home licensed under chapter 18.20 RCW for providing room anddomiciliary care to residents of the boarding home. (2) As used in this section: (a) "Domiciliary care" has the meaning provided in RCW 18.20.020. (b) "Nonprofit boarding home" means a boarding home that isoperated as a religious or charitable organization, is exempt fromfederal income tax under 26 U.S.C. Sec. 501(c)(3), is incorporatedunder chapter 24.03 RCW, is operated as part of a nonprofit hospital,or is operated as part of a public hospital district.Sec. RCW 82.04.2908 and 2004 c 174 s 1 are each amended toread as follows: (1) Upon every person engaging within this state in the business ofproviding room and domiciliary care to residents of a boarding homelicensed under chapter 18.20 RCW, the amount of tax with respect tosuch business shall be equal to the gross income ((from such services))of the business, multiplied by the rate of 0.275 percent. (2) ((If the persons described in subsection (1) of this sectionreceive income from sources other than those described in subsection(1) of this section or provide services other than those named insubsection (1) of this section, that income and those services aresubject to tax as otherwise provided in this chapter. (3))) For the purposes of this section, "domiciliary care" has the((same)) meaning ((as)) provided in RCW 18.20.020.PART IIICOMPREHENSIVE CANCER CENTERSNEW SECTION.Sec. A new section is added to chapter 82.04RCW to read as follows: (1) This chapter does not apply to amounts received by acomprehensive cancer center to the extent the amounts are exempt fromfederal income tax. (2) For the purposes of this section, "comprehensive cancer center"means a cancer center that has written confirmation that it is 9 recognized by the national cancer institute as a comprehensive cancercenter and that qualifies as an exempt organization under 26 U.S.C.Sec. 501(c)(3) as existing on the effective date of this section.NEW SECTION.Sec. A new section is added to chapter 82.08RCW to read as follows: (1) The tax levied by RCW 82.08.020 does not apply to the sale ofmedical supplies, chemicals, or materials to a comprehensive cancercenter. The exemption in this section does not apply to the sale ofconstruction materials, office equipment, building equipment,administrative supplies, or vehicles. (2) For the purposes of this section, the following definitionsapply: (a) "Comprehensive cancer center" has the meaning provided insection 301 of this act. (b) "Chemical" means any catalyst, solvent, water, acid, oil, orother additive that physically or chemically interacts with blood,bone, or tissue. (c) "Materials" means any item of tangible personal property,including, but not limited to, bags, packs, collecting sets, filteringmaterials, testing reagents, antisera, and refrigerants used orconsumed in performing research on, procuring, testing, processing,storing, packaging, distributing, or using blood, bone, or tissue. (d) "Research" means basic and applied research that has as itsobjective the design, development, refinement, testing, marketing, orcommercialization of a product, service, or process. (e) "Medical supplies" means any item of tangible personalproperty, including any repair and replacement parts for such tangiblepersonal property, used by a comprehensive cancer center for thepurpose of performing research on, procuring, testing, processing,storing, packaging, distributing, or using blood, bone, or tissue. Theterm includes tangible personal property used to: (i) Provide preparatory treatment of blood, bone, or tissue; (ii) Control, guide, measure, tune, verify, align, regulate, test,or physically support blood, bone, or tissue; and (iii) Protect the health and safety of employees or others presentduring research on, procuring, testing, processing, storing, packaging,distributing, or using blood, bone, or tissue. 10 NEW SECTION.Sec. A new section is added to chapter 82.12RCW to read as follows: (1) The provisions of this chapter do not apply in respect to theuse of medical supplies, chemicals, or materials by a comprehensivecancer center. The exemption in this section does not apply to the useof construction materials, office equipment, building equipment,administrative supplies, or vehicles. (2) The definitions in sections 301 and 302 of this act apply tothis section.PART IVCOMMERCIAL AIRPLANE MANUFACTURINGSec. RCW 82.04.4463 and 2003 2nd sp.s. c 1 s 15 are eachamended to read as follows: (1) In computing the tax imposed under this chapter, a credit isallowed for property taxes paid during the calendar year. (2) The credit is equal to: (a)(i) Property taxes paid on new buildings, and land upon whichthis property is located, built after December 1, 2003, and usedexclusively in manufacturing commercial airplanes or components of suchairplanes; or (ii) Property taxes attributable to an increase in assessed valuedue to the renovation or expansion, after December 1, 2003, of abuilding used exclusively in manufacturing commercial airplanes orcomponents of such airplanes; and (b) An amount equal to property taxes paid on machinery andequipment exempt under RCW 82.08.02565 or 82.12.02565 ((used inmanufacturing commercial airplanes or components of such airplanes))and acquired after December 1, 2003, multiplied by a fraction. Thenumerator of the fraction is the total taxable amount subject to thetax imposed under RCW 82.04.260(13) and the denominator of the fractionis the total taxable amount subject to the tax imposed under allmanufacturing classifications in chapter 82.04 RCW, required to bereported on the person's returns for the calendar year before thecalendar year in which the credit under this section is earned. Nocredit is available under this subsection (2)(b) if either thenumerator or the denominator of the fraction is zero. If the fraction 11 is greater than or equal to ninetenths, then the fraction is roundedto one. For purposes of this subsection, "returns" means the combinedexcise tax returns for the calendar year. (3) For the purposes of this section, "commercial passengerairplane" and "component" have the meanings given in RCW 82.32.550. (4) A person taking the credit under this section is subject to allthe requirements of chapter 82.32 RCW. In addition, the person mustreport as required under RCW 82.32.545. A credit earned during onecalendar year may be carried over to be credited against taxes incurredin a subsequent calendar year, but may not be carried over a secondyear. No refunds may be granted for credits under this section. (5) In addition to all other requirements under this title, aperson taking the credit under this section must report as requiredunder RCW 82.32.545. (6) This section expires July 1, 2024.PART VAMPHITHEATERSSec. RCW 82.29A.130 and 1999 c 165 s 21 are each amended toread as follows: The following leasehold interests shall be exempt from taxesimposed pursuant to RCW 82.29A.030 and 82.29A.040: (1) All leasehold interests constituting a part of the operatingproperties of any public utility which is assessed and taxed as apublic utility pursuant to chapter 84.12 RCW. (2) All leasehold interests in facilities owned or used by aschool, college or university which leasehold provides housing forstudents and which is otherwise exempt from taxation under provisionsof RCW 84.36.010 and 84.36.050. (3) All leasehold interests of subsidized housing where the feeownership of such property is vested in the government of the UnitedStates, or the state of Washington or any political subdivision thereofbut only if income qualification exists for such housing. (4) All leasehold interests used for fair purposes of a nonprofitfair association that sponsors or conducts a fair or fairs whichreceive support from revenues collected pursuant to RCW 67.16.100 andallocated by the director of the department of agriculture where the 12 fee ownership of such property is vested in the government of theUnited States, the state of Washington or any of its politicalsubdivisions: PROVIDED, That this exemption shall not apply to theleasehold interest of any sublessee of such nonprofit fair associationif such leasehold interest would be taxable if it were the primarylease. (5) All leasehold interests in any property of any public entityused as a residence by an employee of that public entity who isrequired as a condition of employment to live in the publicly ownedproperty. (6) All leasehold interests held by enrolled Indians of lands ownedor held by any Indian or Indian tribe where the fee ownership of suchproperty is vested in or held in trust by the United States and whichare not subleased to other than to a lessee which would qualifypursuant to this chapter, RCW 84.36.451 and 84.40.175. (7) All leasehold interests in any real property of any Indian orIndian tribe, band, or community that is held in trust by the UnitedStates or is subject to a restriction against alienation imposed by theUnited States: PROVIDED, That this exemption shall apply only where itis determined that contract rent paid is greater than or equal toninety percent of fair market rental, to be determined by thedepartment of revenue using the same criteria used to establish taxablerent in RCW 82.29A.020(2)(b). (8) All leasehold interests for which annual taxable rent is lessthan two hundred fifty dollars per year. For purposes of thissubsection leasehold interests held by the same lessee in contiguousproperties owned by the same lessor shall be deemed a single leaseholdinterest. (9) All leasehold interests which give use or possession of theleased property for a continuous period of less than thirty days:PROVIDED, That for purposes of this subsection, successive leases orlease renewals giving substantially continuous use of possession of thesame property to the same lessee shall be deemed a single leaseholdinterest: PROVIDED FURTHER, That no leasehold interest shall be deemedto give use or possession for a period of less than thirty days solelyby virtue of the reservation by the public lessor of the right to usethe property or to allow third parties to use the property on anoccasional, temporary basis. 13 (10) All leasehold interests under monthtomonth leases inresidential units rented for residential purposes of the lessee pendingdestruction or removal for the purpose of constructing a public highwayor building. (11) All leasehold interests in any publicly owned real or personalproperty to the extent such leasehold interests arises solely by virtueof a contract for public improvements or work executed under the publicworks statutes of this state or of the United States between the publicowner of the property and a contractor. (12) All leasehold interests that give use or possession of stateadult correctional facilities for the purposes of operatingcorrectional industries under RCW 72.09.100. (13) All leasehold interests used to provide organized andsupervised recreational activities for disabled persons of all ages ina camp facility and for public recreational purposes by a nonprofitorganization, association, or corporation that would be exempt fromproperty tax under RCW 84.36.030(1) if it owned the property. If thepublicly owned property is used for any taxable purpose, the leaseholdexcise taxes set forth in RCW 82.29A.030 and 82.29A.040 shall beimposed and shall be apportioned accordingly. (14) All leasehold interests in the public or entertainment areasof a baseball stadium with natural turf and a retractable roof orcanopy that is in a county with a population of over one million, thathas a seating capacity of over forty thousand, and that is constructedon or after January 1, 1995. "Public or entertainment areas" includeticket sales areas, ramps and stairs, lobbies and concourses, parkingareas, concession areas, restaurants, hospitality and stadium clubareas, kitchens or other work areas primarily servicing other public orentertainment areas, public rest room areas, press and media areas,control booths, broadcast and production areas, retail sales areas,museum and exhibit areas, scoreboards or other public displays, storageareas, loading, staging, and servicing areas, seating areas and suites,the playing field, and any other areas to which the public has accessor which are used for the production of the entertainment event orother public usage, and any other personal property used for thesepurposes. "Public or entertainment areas" does not include lockerrooms or private offices exclusively used by the lessee. 14 (15) All leasehold interests in the public or entertainment areasof a stadium and exhibition center, as defined in RCW 36.102.010, thatis constructed on or after January 1, 1998. For the purposes of thissubsection, "public or entertainment areas" has the same meaning as insubsection (14) of this section, and includes exhibition areas. (16) All leasehold interests in public facilities districts, asprovided in chapter 36.100 or 35.57 RCW. (17) All leasehold interests in the public or entertainment areasof an amphitheater if a private entity is responsible for one hundredpercent of the cost of constructing the amphitheater which is notreimbursed by the public owner, both the public owner and the privatelessee sponsor events at the facility on a regular basis, the lessee isresponsible under the lease or agreement to operate and maintain thefacility, and the amphitheater has a seating capacity of over seventeenthousand reserved and general admission seats and is in a county witha population of over three hundred fifty thousand, but less than fourhundred twentyfive thousand. For the purposes of this subsection,"public or entertainment areas" include box offices or other ticketsales areas, entrance gates, ramps and stairs, lobbies and concourses,parking areas, concession areas, restaurants, hospitality areas,kitchens or other work areas primarily servicing other public orentertainment areas, public rest room areas, press and media areas,control booths, broadcast and production areas, retail sales areas,museum and exhibit areas, scoreboards or other public displays, storageareas, loading, staging, and servicing areas, seating areas includinglawn seating areas and suites, stages, and any other areas to which thepublic has access or which are used for the production of theentertainment event or other public usage, and any other personalproperty used for these purposes. "Public or entertainment areas" doesnot include office areas used predominately by the lessee.PART VIHISTORIC AUTOMOBILE MUSEUMNEW SECTION.Sec. A new section is added to chapter 82.32RCW to read as follows: (1) The governing board of a nonprofit organization, corporation,or association may apply for deferral of taxes on an eligible project. 15 Application shall be made to the department in a form and mannerprescribed by the department. The application shall containinformation regarding the location of the project, estimated or actualcosts of the project, time schedules for completion and operation ofthe project, and other information required by the department. Thedepartment shall rule on the application within sixty days. Allapplications for the tax deferral under this section must be receivedno later than December 31, 2008. (2) The department shall issue a sales and use tax deferralcertificate for state and local sales and use taxes due under chapters82.08, 82.12, and 82.14 RCW on each eligible project. (3) The nonprofit organization, corporation, or association shallbegin paying the deferred taxes in the fifth year after the datecertified by the department as the date on which the eligible projectis operationally complete. The first payment is due on December 31stof the fifth calendar year after such certified date, with subsequentannual payments due on December 31st of the following nine years. Eachpayment shall equal ten percent of the deferred tax. (4) The department may authorize an accelerated repayment scheduleupon request of the nonprofit organization, corporation, orassociation. (5) Except as provided in subsection (6) of this section, interestshall not be charged on any taxes deferred under this section for theperiod of deferral. The debt for deferred taxes is not extinguished byinsolvency or other failure of the nonprofit organization, corporation,or association. (6) If the project is not operationally complete within fivecalendar years from issuance of the tax deferral or if at any time thedepartment finds that the project is not eligible for tax deferralunder this section, the amount of deferred taxes outstanding for theproject shall be immediately due and payable. If deferred taxes mustbe repaid under this subsection, the department shall assess interest,but not penalties, on amounts due under this subsection. Interestshall be assessed at the rate provided for delinquent taxes under thischapter, retroactively to the date of deferral, and shall accrue untilthe deferred taxes due are repaid. (7) Applications and any other information received by the 16 department of revenue under this section are not confidential under RCW82.32.330. This chapter applies to the administration of this section. (8) This section applies to taxable eligible project activity thatoccurs on or after July 1, 2007. (9) The following definitions apply to this section: (a) "Eligible project" means a project that is used primarily fora historic automobile museum. (b) "Historic automobile museum" means a facility owned andoperated by a nonprofit organization, corporation, or association thatis used to maintain and exhibit to the public a collection of at leastfive hundred motor vehicles. (c) "Nonprofit organization, corporation, or association" means anorganization, corporation, or association exempt from tax under section501(c) (3), (4), or (10) of the federal internal revenue code (26U.S.C. Sec. 501(c) (3), (4), or (10)). (d) "Project" means the construction of new structures, theacquisition and installation of fixtures that are permanently affixedto and become a physical part of those structures, and sitepreparation. For purposes of this subsection, structures do notinclude parking facilities used for motor vehicles that are not ondisplay or part of the museum collection. (e) "Site preparation" includes soil testing, site clearing andgrading, demolition, or any other related activities that are initiatedbefore construction. Site preparation does not include landscapingservices or landscaping materials.PART VIINURSING HOMESSec. RCW 82.71.020 and 2003 1st sp.s. c 16 s 2 are eachamended to read as follows: (1) In addition to any other tax, a quality maintenance fee isimposed on every operator of a nonexempt nursing facility in thisstate. The quality maintenance fee shall be: (a) Six dollars and fifty cents per patient day through June 30,2005; (b) Five dollars and twentyfive cents per patient day for theperiod July 1, 2005, through June 30, 2007; 17 (c) Three dollars per patient day for the period July 1, 2007,through June 30, 2009; and (d) One dollar and fifty cents per patient day for the period July1, 2009, through June 30, 2011. (2) Each operator of a nonexempt nursing facility shall file areturn with the department on a monthly basis. The return shallinclude the following: (a) The number of patient days for nonexempt nursing facilitiesoperated by that person in that month; and (b) Remittance of the nonexempt nursing facility operator's qualitymaintenance fee for that month. (3) This section expires July 1, 2011.Sec. 2003 1st sp.s. c 16 s 6 (uncodified) is amended to readas follows: (1) ((Sections 1 through 5 of this act)) RCW 82.71.010, 82.71.020,82.71.030, 74.46.091, and 74.46.535 shall expire on the effective datethat federal medicaid matching funds are substantially reduced or thata federal sanction is imposed due to the quality maintenance fee under((section 2 of this act)) RCW 82.71.020, as such date is certified bythe secretary of social and health services. (2) The expiration of ((sections 1 through 5 of this act)) RCW82.71.010, 82.71.020, 82.71.030, 74.46.091, and 74.46.535 shall not beconstrued as affecting any existing right acquired or liability orobligation incurred under those sections or under any rule or orderadopted under those sections, nor as affecting any proceedinginstituted under those sections.PART VIIICOMMERCIAL DISTRICT REVITALIZATIONNEW SECTION.Sec. (1) The legislature finds: (a) The continued economic vitality of downtown and neighborhoodcommercial districts in our state's cities is essential to communitypreservation, social cohesion, and economic growth; (b) In recent years there has been a deterioration of downtown andneighborhood commercial districts in both rural and urban communities 18 due to a shifting population base, changes in the marketplace, andgreater competition from suburban shopping malls, discount centers, andbusiness transacted through the internet; (c) This decline has eroded the ability of businesses and propertyowners to renovate and enhance their commercial and residentialproperties; and (d) Business owners in these districts need to maintain their localeconomies in order to provide goods and services to adjacent residents,to provide employment opportunities, to avoid disinvestment andeconomic dislocations, and to develop and sustain downtown andneighborhood commercial district revitalization programs to addressthese problems. (2) It is the intent of the legislature to establish a program to: (a) Work in partnership with these organizations; (b) Provide technical assistance and training to local governments,business organizations, downtown and neighborhood commercial districtorganizations, and business and property owners to accomplish communityand economic revitalization and development of business districts; and (c) Certify a downtown or neighborhood commercial districtorganization's use of available tax incentives.NEW SECTION.Sec. Unless the context clearly requiresotherwise, the definitions in this section apply throughout thischapter. (1) "Applicant" means a person applying for a tax credit under thischapter. (2) "Contribution" means cash contributions. (3) "Department" means the department of revenue. (4) "Person" has the meaning given in RCW 82.04.030. (5) "Program" means a nonprofit organization under internal revenuecode sections 501(c)(3) or 501(c)(6), with the sole mission ofrevitalizing a downtown or neighborhood commercial district area, thatis designated by the department of community, trade, and economicdevelopment as described in sections 808 through 812 of this act. (6) "Main street trust fund" means the department of community,trade, and economic development's main street trust fund account undersection 812 of this act. 19 NEW SECTION.Sec. (1) Application for tax credits under thischapter must be made to the department before making a contribution toa program or the main street trust fund. The application shall be madeto the department in a form and manner prescribed by the department.The application shall contain information regarding the proposed amountof contribution to a program or the main street trust fund, and otherinformation required by the department to determine eligibility underthis act. The department shall rule on the application within fortyfive days. Applications shall be approved on a firstcome basis. (2) The person must make the contribution described in the approvedapplication by the end of the calendar year in which the application isapproved to claim a credit allowed under section 804 of this act. (3) The department shall not accept any applications before January1, 2006.NEW SECTION.Sec. (1) Subject to the limitations in thischapter, a credit is allowed against the tax imposed by chapters 82.04and 82.16 RCW for approved contributions that are made by a person toa program or the main street trust fund. (2) The credit allowed under this section is limited to an amountequal to: (a) Seventyfive percent of the approved contribution made by aperson to a program; or (b) Fifty percent of the approved contribution made by a person tothe main street trust fund. (3) The department may not approve credit with respect to a programin a city or town with a population of one hundred ninety thousandpersons or more. (4) The department shall keep a running total of all creditsapproved under this chapter for each calendar year. The departmentshall not approve any credits under this section that would cause thetotal amount of approved credits statewide to exceed one million fivehundred thousand dollars in any calendar year. (5) The total credits allowed under this chapter for contributionsmade to each program may not exceed one hundred thousand dollars in acalendar year. The total credits allowed under this chapter for aperson may not exceed two hundred fifty thousand dollars in a calendaryear. 20 (6) The credit may be claimed against any tax due under chapters82.04 and 82.16 RCW only in the calendar year immediately following thecalendar year in which the credit was approved by the department andthe contribution was made to the program or the main street trust fund.Credits may not be carried over to subsequent years. No refunds may begranted for credits under this chapter. (7) The total amount of the credit claimed in any calendar year bya person may not exceed the lesser amount of the approved credit, orseventyfive percent of the amount of the contribution that is made bythe person to a program and fifty percent of the amount of thecontribution that is made by the person to the main street trust fund,in the prior calendar year.NEW SECTION.Sec. To claim a credit under this chapter, aperson must electronically file with the department all returns, forms,and other information the department requires in an electronic formatas provided or approved by the department. Any return, form, orinformation required to be filed in an electronic format under thissection is not filed until received by the department in an electronicformat. As used in this subsection, "returns" has the same meaning as"return" in RCW 82.32.050.NEW SECTION.Sec. The department of community, trade, andeconomic development shall provide information to the department toadminister this chapter, including a list of designated programs thatshall be updated as necessary.NEW SECTION.Sec. Chapter 82.32 RCW applies to theadministration of this chapter.NEW SECTION.Sec. The definitions in this section applythroughout this chapter unless the context clearly requires otherwise. (1) "Area" means a geographic area within a local government thatis described by a closed perimeter boundary. (2) "Department" means the department of community, trade, andeconomic development. (3) "Director" means the director of the department of community,trade, and economic development. 21 (4) "Local government" means a city, code city, or town. (5) "Qualified levels of participation" means a local downtown orneighborhood commercial district revitalization program that has beendesignated by the department.NEW SECTION.Sec. The Washington main street program iscreated within the department. In order to implement the Washingtonmain street program, the department shall: (1) Provide technical assistance to businesses, property owners,organizations, and local governments undertaking a comprehensivedowntown or neighborhood commercial district revitalization initiativeand management strategy. Technical assistance may include, but is notlimited to, initial site evaluations and assessments, training forlocal programs, training for local program staff, site visits andassessments by technical specialists, local program design assistanceand evaluation, and continued local program onsite assistance; (2) To the extent funds are made available, provide financialassistance to local governments or local organizations to assist ininitial downtown or neighborhood commercial district revitalizationprogram startup costs, specialized training, specific projectfeasibility studies, market studies, and design assistance; (3) Develop objective criteria for selecting recipients ofassistance under subsections (1) and (2) of this section, which shallinclude priority for downtown or neighborhood commercial districtrevitalization programs located in a rural county as defined in RCW43.160.020(12), and provide for designation of local programs undersection 810 of this act; (4) Operate the Washington main street program in accordance withthe plan developed by the department, in consultation with theWashington main street advisory committee created under section 811 ofthis act; and (5) Consider other factors the department deems necessary for theimplementation of this chapter.NEW SECTION.Sec. (1) The department shall adopt criteriafor the designation of local downtown or neighborhood commercialdistrict revitalization programs and official local main streetprograms. In establishing the criteria, the department shall consider: 22 (a) The degree of interest and commitment to comprehensive downtownor neighborhood commercial district revitalization and, whereapplicable, historic preservation by both the public and privatesectors; (b) The evidence of potential private sector investment in thedowntown or neighborhood commercial district; (c) Where applicable, a downtown or neighborhood commercialdistrict with sufficient historic fabric to become a foundation for anenhanced community image; (d) The capacity of the organization to undertake a comprehensiveprogram and the financial commitment to implement a longterm downtownor neighborhood commercial district revitalization program thatincludes a commitment to employ a professional program manager andmaintain a sufficient operating budget; (e) The department's existing downtown revitalization program'stier system; (f) The national main street center's criteria for designatingofficial main street cities; and (g) Other factors the department deems necessary for thedesignation of a local program. (2) The department shall designate local downtown or neighborhoodcommercial district revitalization programs and official local mainstreet programs. The programs shall be limited to three categories ofdesignation, one of which shall be the main street level. (3) Section 802 of this act does not apply to any local downtown orneighborhood commercial district revitalization program unless theboundaries of the program have been identified and approved by thedepartment. The boundaries of a local downtown or neighborhoodcommercial district revitalization program are typically defined usingthe pedestrian core of a traditional commercial district. (4) The department may not designate a local downtown orneighborhood commercial district revitalization program or officiallocal main street program if the program is undertaken by a localgovernment with a population of one hundred ninety thousand persons ormore.NEW SECTION.Sec. (1) The Washington main street advisory 23 committee is created within the department. The members of theadvisory committee are appointed by the director and consist of: (a) The director, or the director's designee, who shall serve aschair; (b) Two representatives from local governments; (c) Five representatives from existing local main street programsor downtown and neighborhood commercial district programs including acombination of staff, property owners, and business owners; and (d) One representative from the Washington trust for historicpreservation. (2) The department shall develop a plan for the Washington mainstreet program, in consultation with the Washington main streetadvisory committee. The plan must describe: (a) The objectives and strategies of the Washington main streetprogram; (b) How the Washington main street program will be coordinated withexisting federal, state, local, and private sector business developmentand historic preservation efforts; (c) The means by which private investment will be solicited andemployed; (d) The methods of selecting and providing assistance toparticipating local programs; and (e) A means to solicit private contributions for state and localoperations of the Washington main street program.NEW SECTION.Sec. The Washington main street trust fundaccount is created in the state treasury. All receipts from privatecontributions, federal funds, legislative appropriations, and fees forservices, if levied, must be deposited into the account. Expendituresfrom the account may be used only for the operation of the Washingtonmain street program.PART IXHIGH TECHNOLOGY BUSINESSESNEW SECTION.Sec. A new section is added to chapter 82.32RCW to read as follows: (1) If the department finds that the failure of a taxpayer to file 24 an annual survey under RCW 82.04.4452 by the due date was the result ofcircumstances beyond the control of the taxpayer, the department shallextend the time for filing the survey. Such extension shall be for aperiod of thirty days from the date the department issues its writtennotification to the taxpayer that it qualifies for an extension underthis section. The department may grant additional extensions as itdeems proper. (2) In making a determination whether the failure of a taxpayer tofile an annual survey by the due date was the result of circumstancesbeyond the control of the taxpayer, the department shall be guided byrules adopted by the department for the waiver or cancellation ofpenalties when the underpayment or untimely payment of any tax was dueto circumstances beyond the control of the taxpayer.NEW SECTION.Sec. A new section is added to chapter 82.32RCW to read as follows: (1) Persons required to file surveys under RCW 82.04.4452 mustelectronically file with the department all surveys, returns, and anyother forms or information the department requires in an electronicformat as provided or approved by the department, unless the departmentgrants relief under subsection (2) of this section. As used in thissection, "returns" has the same meaning as "return" in RCW 82.32.050. (2) Upon request, the department may relieve a person of theobligations in subsection (1) of this section if the person's taxeshave been reduced a cumulative total of less than one thousand dollarsfrom all of the credits, exemptions, or preferential business andoccupation tax rates, for which a person is required to file an annualsurvey 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 mustcomply with subsection (1) of this section by the date provided in thenotice. (4) Any survey, return, or any other form or information requiredto be filed in an electronic format under subsection (1) of thissection is not filed until received by the department in an electronicformat. 25 Sec. RCW 82.04.4452 and 2004 c 2 s 2 are each amended to readas follows: (1) In computing the tax imposed under this chapter, a credit isallowed for each person whose research and development spending duringthe year in which the credit is claimed exceeds 0.92 percent of theperson'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 anddevelopment expenditures of a person or eighty percent of amountsreceived by a person other than a public educational or researchinstitution in compensation for the conduct of qualified research anddevelopment; (b) Subtract 0.92 percent of the person's taxable amount from theamount determined under (a) of this subsection; (c) Multiply the amount determined under (b) of this subsection by((the rate provided in RCW 82.04.260(3) in the case of a nonprofitcorporation or nonprofit association engaging within this state inresearch and development, and the person's average tax rate for everyother person)) the following: (i) For the period June 10, 2004, through December 31, 2006, theperson's average tax rate for the calendar year for which the credit isclaimed; (ii) For the calendar year ending December 31, 2007, the greater ofthe person's average tax rate for that calendar year or 0.75 percent; (iii) For the calendar year ending December 31, 2008, the greaterof 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 ofthe 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 reportingperiod is less than annual, the person may use an estimated average taxrate for the calendar year for which the credit is claimed by using theperson's average tax rate for each reporting period. A person who usesan estimated average tax rate must make an adjustment to the totalcredit claimed for the calendar year using the person's actual averagetax rate for the calendar year when the person files its last returnfor the calendar year for which the credit is claimed. 26 (3) Any person entitled to the credit provided in subsection (2) ofthis section as a result of qualified research and developmentconducted under contract may assign all or any portion of the credit tothe person contracting for the performance of the qualified researchand development. (4) The credit, including any credit assigned to a person undersubsection (3) of this section, shall be ((taken)) claimed againsttaxes due for the same calendar year in which the qualified researchand development expenditures are incurred. The credit, including anycredit assigned to a person under subsection (3) of this section, foreach calendar year shall not exceed the lesser of two million dollarsor the amount of tax otherwise due under this chapter for the calendaryear. (5) For any person ((taking)) claiming the credit, including anycredit assigned to a person under subsection (3) of this section, whoseresearch and development spending during the calendar year in which thecredit is claimed fails to exceed 0.92 percent of the person's taxableamount during the same calendar year ((shall be liable for payment ofthe additional)) or who is otherwise ineligible, the department shalldeclare the taxes ((represented by the amount of)) against which thecredit ((taken together with)) was claimed to be immediately due andpayable. The department shall assess interest, but not penalties, onthe taxes against which the credit was claimed. Interest shall be((due)) assessed at the rate provided for delinquent excise taxes underchapter 82.32 RCW, retroactively to the date the credit was ((takenuntil the taxes are paid)) claimed, and shall accrue until the taxesagainst which the credit was claimed are repaid. Any credit assignedto a person under subsection (3) of this section that is disallowed asa result of this section may be ((taken)) claimed by the person whoperformed the qualified research and development subject to thelimitations set forth in subsection (4) of this section. (6) ((Any person claiming the credit, and any person assigning acredit as provided in subsection (3) of this section, shall file anannual report in a form prescribed by the department which shallinclude the amount of the credit claimed, the qualified research anddevelopment expenditures during the calendar year for which the creditis claimed, and the taxable amount during the calendar year for which 27 the credit is claimed, and such additional information as thedepartment may prescribe. The report is due by March 31st followingany year a credit is taken. (7)))(a) The legislature finds that accountability andeffectiveness are important aspects of setting tax policy. In order tomake policy choices regarding the best use of limited state resourcesthe legislature needs information on how a tax incentive is used. (b) A person claiming the credit shall ((agree to)) file a complete((an)) annual survey with the department. ((The annual survey is inaddition to the annual report due under subsection (6) of thissection.)) The survey is due by March 31st following any year in whicha credit is ((taken)) claimed. The department may extend the due datefor timely filing of annual surveys under this section as provided insection 901 of this act. The survey shall include the amount of thetax credit ((taken)) claimed, the qualified research and developmentexpenditures during the calendar year for which the credit is claimed,the taxable amount during the calendar year for which the credit isclaimed, the number of new products or research projects by generalclassification, ((and)) the number of trademarks, patents, andcopyrights associated with the research and development activities forwhich a credit was ((taken)) claimed, and whether the credit has beenassigned under subsection (3) of this section and who assigned thecredit. The survey shall also include the following information foremployment positions in Washington: (i) The number of total employment positions; (ii) Fulltime, parttime, and temporary employment positions as apercent of total employment; (iii) The number of employment positions according to the followingwage bands: Less than thirty thousand dollars; thirty thousand dollarsor greater, but less than sixty thousand dollars; and sixty thousanddollars or greater. A wage band containing fewer than threeindividuals may be combined with another wage band; and (iv) The number of employment positions that have employerprovidedmedical, dental, and retirement benefits, by each of the wage bands. (c) The department may request additional information necessary tomeasure the results of the tax credit program, to be submitted at thesame time as the survey. 28 (d)(i) All information collected under this subsection, except theamount of the tax credit ((taken)) claimed, is deemed taxpayerinformation under RCW 82.32.330 ((and is not disclosable)).Information on the amount of tax credit ((taken)) claimed is notsubject to the confidentiality provisions of RCW 82.32.330 and may bedisclosed to the public upon request, except ((that)) as provided inthis subsection (6)(d). If the amount of the tax credit as reported onthe survey is different than the amount actually claimed on thetaxpayer's tax returns or otherwise allowed by the department, theamount actually claimed or allowed may be disclosed. (ii) Persons ((taking)) for whom the actual amount of the taxcredit claimed on the taxpayer's returns or otherwise allowed by thedepartment is less than ten thousand dollars ((of credit)) during theperiod covered by the survey may request the department to treat thetax credit amount as confidential under RCW 82.32.330. (e) If a person fails to file a complete ((the)) annual surveyrequired under this subsection with the department by the due date orany extension under section 901 of this act, the person entitled to thecredit provided in subsection (2) of this section is not eligible to((take)) claim or assign the credit provided in subsection (2) of thissection in the year the person failed to timely file a complete ((the))survey. (((8))) (7) The department shall use the information fromsubsection (((7))) (6) of this section to prepare summary descriptivestatistics by category. No fewer than three taxpayers shall beincluded in any category. The department shall report these statisticsto the legislature each year by September 1st. (((9))) (8) The department shall use the information fromsubsection (((7))) (6) of this section to study the tax credit programauthorized under this section. The department shall report to thelegislature by December 1, 2009, and December 1, 2013. The reportsshall measure the effect of the program on job creation, the number ofjobs created for Washington residents, company growth, the introductionof new products, the diversification of the state's economy, growth inresearch and development investment, the movement of firms or theconsolidation of firms' operations into the state, and such otherfactors as the department selects. (((10))) (9) For the purpose of this section: 29 (a) "Average tax rate" means a person's total tax liability underthis chapter for the ((reporting period)) calendar year for which thecredit is claimed divided by the taxpayer's total taxable ((income))amount under this chapter for the ((reporting period)) calendar yearfor which the credit is claimed. (b) "Qualified research and development expenditures" meansoperating expenses, including wages, compensation of a proprietor or apartner in a partnership as determined under rules adopted by thedepartment, benefits, supplies, and computer expenses, directlyincurred in qualified research and development by a person claiming thecredit provided in this section. The term does not include amountspaid to a person other than a public educational or researchinstitution to conduct qualified research and development. Nor doesthe term include capital costs and overhead, such as expenses for land,structures, or depreciable property. (c) "Qualified research and development" shall have the samemeaning as in RCW 82.63.010. (d) "Research and development spending" means qualified researchand development expenditures plus eighty percent of amounts paid to aperson other than a public educational or research institution toconduct qualified research and development. (e) "Taxable amount" means the taxable amount subject to the taximposed in this chapter required to be reported on the person'scombined excise tax returns ((during)) for the calendar year ((in)) forwhich the credit is claimed, less any taxable amount for which a creditis allowed under RCW 82.04.440. (((11))) (10) This section expires January 1, 2015.NEW SECTION.Sec. (1) A person who owes additional tax as aresult of section 903(9)(a), chapter ..., Laws of 2005 (section903(9)(a) of this act) is liable for interest, but not penalties asprovided in RCW 82.32.090 (1) and (2), if the entire additional taxliability is paid in full to the department of revenue before January1, 2006. Interest shall be assessed at the rate provided fordelinquent excise taxes under chapter 82.32 RCW, retroactively to thedate the credit was claimed, and shall accrue until the additional taxis repaid. 30 (2) Persons who fail to repay the full amount of additional taxowed as a result of section 903(9)(a), chapter ..., Laws of 2005(section 903(9)(a) of this act) before January 1, 2006, are subject toall applicable penalties and interest as provided in chapter 82.32 RCWon the additional tax owing after December 31, 2005. (3) This section expires December 31, 2010.PART XESTATESSec. RCW 83.100. and 2005 c ... (ESB 6096) s 4 are eachamended to read as follows: (1) For the purposes of determining the Washington taxable estate,a deduction is allowed from the federal taxable estate for ((the valueof qualified real property and the value of any tangible personalproperty used primarily for farming purposes conducted on the qualifiedreal property, reduced by any amounts allowable as a deduction inrespect of the qualified real property and tangible personal propertyunder section 2053(a)(4) of the Internal Revenue Code, if the decedentwas at the time of his or her death a citizen or resident of the UnitedStates. For the purposes of determining the deduction amount, thevalue of property is its value as used to determine the value of thegross estate)): (a) The value of qualified real property reduced by any amountsallowable as a deduction in respect of the qualified real property andtangible personal property under section 2053(a)(4) of the internalrevenue code, if the decedent was at the time of his or her death acitizen or resident of the United States. (b) The value of any tangible personal property used by thedecedent or a member of the decedent's family for a qualified use onthe date of the decedent's death, reduced by any amounts allowable asa deduction in respect of the tangible personal property under section2053(a)(4) of the internal revenue code, if all of the requirements ofsubsection (10)(f)(i)(A) of this section are met and the decedent wasat the time of his or her death a citizen or resident of the UnitedStates. (c) The value of real property that is not deductible under (a) ofthis subsection solely by reason of subsection (10)(f)(i)(B) of this 31 section, reduced by any amounts allowable as a deduction in respect ofthe qualified real property and tangible personal property undersection 2053(a)(4) of the internal revenue code, if the requirements ofsubsection (10)(f)(i)(C) of this section are met with respect to theproperty and the decedent was at the time of his or her death a citizenor resident of the United States. (2) Property shall be considered to have been acquired from or tohave passed from the decedent if: (a) The property is so considered under section 1014(b) of theInternal Revenue Code; (b) The property is acquired by any person from the estate; or (c) The property is acquired by any person from a trust, to theextent the property is includible in the gross estate of the decedent. (3) If the decedent and the decedent's surviving spouse at any timeheld qualified real property as community property, the interest of thesurviving spouse in the property shall be taken into account under thissection to the extent necessary to provide a result under this sectionwith respect to the property which is consistent with the result whichwould have obtained under this section if the property had not beencommunity property. (4) In the case of any qualified woodland, the value of treesgrowing on the woodland may be deducted if otherwise qualified underthis section. (5) If property is qualified real property with respect to adecedent, hereinafter in this subsection referred to as the "firstdecedent," and the property was acquired from or passed from the firstdecedent to the surviving spouse of the first decedent, activemanagement of the farm by the surviving spouse shall be treated asmaterial participation by the surviving spouse in the operation of thefarm. (6) Property owned indirectly by the decedent may qualify for adeduction under this section if owned through an interest in acorporation, partnership, or trust as the terms corporation,partnership, or trust are used in section 2032A(g) of the InternalRevenue Code. In order to qualify for a deduction under thissubsection, the interest, in addition to meeting the other tests forqualification under this section, must qualify under section 6166(b)(1)of the Internal Revenue Code as an interest in a closely held business 32 on the date of the decedent's death and for sufficient other time,combined with periods of direct ownership, to equal at least five yearsof the eightyear period preceding the death. (7)(a) If, on the date of the decedent's death, the requirements ofsubsection (10)(f)(i)(C)(II) of this section with respect to thedecedent for any property are not met, and the decedent (i) wasreceiving old age benefits under Title II of the social security actfor a continuous period ending on such date, or (ii) was disabled fora continuous period ending on this date, then subsection(10)(f)(i)(C)(II) of this section shall be applied with respect to theproperty by substituting "the date on which the longer of suchcontinuous periods began" for "the date of the decedent's death" insubsection (10)(f)(i)(C) of this section. (b) For the purposes of (a) of this subsection, an individual shallbe disabled if the individual has a mental or physical impairment whichrenders that individual unable to materially participate in theoperation of the farm. (8) Property may be deducted under this section whether or notspecial valuation is elected under section 2032A of the InternalRevenue Code on the federal return. For the purposes of determiningthe deduction under this section, the value of property is its value asused to determine the value of the gross estate. (9)(a) In the case of any qualified replacement property, anyperiod during which there was ownership, qualified use, or materialparticipation with respect to the replaced property by the decedent orany member of the decedent's family shall be treated as a period duringwhich there was ownership, use, or material participation, as the casemay be, with respect to the qualified replacement property. (b) Subsection (9)(a) of this section shall not apply to the extentthat the fair market value of the qualified replacement property, as ofthe date of its acquisition, exceeds the fair market value of thereplaced property, as of the date of its disposition. (c) For the purposes of this subsection (9), the followingdefinitions apply: (i) "Qualified replacement property" means any real property: (A) Which is acquired in an exchange which qualifies under section1031 of the Internal Revenue Code; or 33 (B) The acquisition of which results in the nonrecognition of gainunder section 1033 of the Internal Revenue Code. The term "qualified replacement property" only includes propertywhich is used for the same qualified use as the replaced property wasbeing used before the exchange. (ii) "Replaced property" means the property was: (A) Transferred in the exchange which qualifies under section 1031of the Internal Revenue Code; or (B) Compulsorily or involuntarily converted within the meaning ofsection 1033 of the Internal Revenue Code. (10) For the purposes of this section, the following definitionsapply: (a) "Active management" means the making of the managementdecisions of a farm, other than the daily operating decisions. (b) "Farm" includes stock, dairy, poultry, fruit, furbearinganimal, and truck farms; plantations; ranches; nurseries; ranges;greenhouses or other similar structures used primarily for the raisingof agricultural or horticultural commodities; and orchards andwoodlands. (c) "Farming purposes" means: (i) Cultivating the soil or raising or harvesting any agriculturalor horticultural commodity, including the raising, shearing, feeding,caring for, training, and management of animals on a farm; (ii) Handling, drying, packing, grading, or storing on a farm anyagricultural or horticultural commodity in its unmanufactured state,but only if the owner, tenant, or operator of the farm regularlyproduces more than onehalf of the commodity so treated; and (iii)(A) The planting, cultivating, caring for, or cutting oftrees; or (B) The preparation, other than milling, of trees for market. (d) "Member of the family" means, with respect to any individual,only: (i) An ancestor of the individual; (ii) The spouse of the individual; (iii) A lineal descendant of the individual, of the individual'sspouse, or of a parent of the individual; or (iv) The spouse of any lineal descendant described in (d)(iii) ofthis subsection. 34 For the purposes of this subsection (10)(d), a legally adoptedchild of an individual shall be treated as the child of such individualby blood. (e) "Qualified heir" means, with respect to any property, a memberof the decedent's family who acquired property, or to whom propertypassed, from the decedent. (f)(i) "Qualified real property" means real property which wasacquired from or passed from the decedent to a qualified heir of thedecedent and which, on the date of the decedent's death, was being usedfor a qualified use by the decedent or a member of the decedent'sfamily, but only if: (A) Fifty percent or more of the adjusted value of the gross estateconsists of the adjusted value of real or personal property which: (I) On the date of the decedent's death, was being used for aqualified use by the decedent or a member of the decedent's family; and (II) Was acquired from or passed from the decedent to a qualifiedheir of the decedent; (B) Twentyfive percent or more of the adjusted value of the grossestate consists of the adjusted value of real property which meets therequirements of (f)(i)(A)(II) and (f)(i)(C) of this subsection; and (C) During the eightyear period ending on the date of thedecedent's death there have been periods aggregating five years or moreduring which: (I) The real property was owned by the decedent or a member of thedecedent's family and used for a qualified use by the decedent or amember of the decedent's family; and (II) There was material participation by the decedent or a memberof the decedent's family in the operation of the farm. For thepurposes of this subsection (f)(i)(C)(II), material participation shallbe determined in a manner similar to the manner used for purposes ofsection 1402(a)(1) of the Internal Revenue Code. (ii) For the purposes of this subsection, the term "adjusted value"means: (A) In the case of the gross estate, the value of the gross estate,determined without regard to any special valuation under section 2032Aof the Internal Revenue Code, reduced by any amounts allowable as adeduction under section 2053(a)(4) of the Internal Revenue Code; or 35 (B) In the case of any real or personal property, the value of theproperty for purposes of chapter 11 of the Internal Revenue Code,determined without regard to any special valuation under section 2032Aof the Internal Revenue Code, reduced by any amounts allowable as adeduction in respect of such property under section 2053(a)(4) of theInternal Revenue Code. (g) "Qualified use" means the property is used as a farm forfarming purposes. In the case of real property which meets therequirements of (f)(i)(C) of this subsection, residential buildings andrelated improvements on the real property occupied on a regular basisby the owner or lessee of the real property or by persons employed bythe owner or lessee for the purpose of operating or maintaining thereal property, and roads, buildings, and other structures andimprovements functionally related to the qualified use shall be treatedas real property devoted to the qualified use. For tangible personalproperty eligible for a deduction under subsection (1)(b) of thissection, "qualified use" means the property is used primarily forfarming purposes on a farm. (h) "Qualified woodland" means any real property which: (i) Is used in timber operations; and (ii) Is an identifiable area of land such as an acre or other areafor which records are normally maintained in conducting timberoperations. (i) "Timber operations" means: (i) The planting, cultivating, caring for, or cutting of trees; or (ii) The preparation, other than milling, of trees for market.PART XIMISCELLANEOUSNEW SECTION.Sec. Part headings used in this act are notany part of the law.NEW SECTION.Sec. Except as otherwise specifically providedin this act, this act is necessary for the immediate preservation ofthe public peace, health, or safety, or support of the state governmentand its existing public institutions, and takes effect July 1, 2005. 36 NEW SECTION.Sec. Sections 102 through 105, 901, 903, 904,1001, 1110, and 1111 of this act are necessary for the immediatepreservation of the public peace, health, or safety, or support of thestate government and its existing public institutions, and take effectimmediately.NEW SECTION.Sec. Sections 401 and 902 of this act takeeffect January 1, 2006.NEW SECTION.Sec. Section 601 of this act takes effect July1, 2007.NEW SECTION.Sec. Sections 801 and 808 through 812 of thisact constitute a new chapter in Title 43 RCW.NEW SECTION.Sec. Sections 802 through 807 of this actconstitute a new chapter in Title 82 RCW.NEW SECTION.Sec. If any provision of this act or itsapplication to any person or circumstance is held invalid, theremainder of the act or the application of the provision to otherpersons or circumstances is not affected.NEW SECTION.Sec. Sections 801 through 812 of this act maybe known and cited as the Washington main street act.NEW SECTION.Sec. Section 903 of this act appliesretroactively to June 10, 2004.NEW SECTION.Sec. Section 901 of this act appliesretroactively to annual surveys required under RCW 82.04.4452 that aredue after December 31, 2004. Correct the title.Removes all tax increases. Leaves in all exemptions, 37 deductions, and credits.--- END --- 38