BILL REQ. #:  H-4140.1 

Prefiled 01/08/10. Read first time 01/11/10.   Referred to Committee on Finance.

     AN ACT Relating to tax preferences and the public interest; and amending RCW 43.136.011 and 43.136.055.

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

Sec. 1   RCW 43.136.011 and 2006 c 197 s 1 are each amended to read as follows:
     (1) The legislature finds that scarce public resources, including tax preferences, are regularly used to promote state and local economic development. The legislature finds that tax preferences should be subject to the same rigorous requirements for efficiency and accountability as are other expenditure programs. In addition, the businesses benefiting from these exemptions, deductions, credits, deferrals, subsidies, and preferential rates, should be expected in return to demonstrate a certain level of commitment to our communities and citizens.
     (2) The legislature recognizes that tax preferences are enacted to meet objectives which are determined to be in the public interest. However, some tax preferences may not be efficient or equitable tools for the achievement of current public policy objectives. Given the changing nature of the economy and tax structures of other states, the legislature finds that periodic performance audits of tax preferences are needed to measure the public good created in the state by such preferences and to determine if their continued existence will serve the public interest.

Sec. 2   RCW 43.136.055 and 2006 c 197 s 5 are each amended to read as follows:
     (1) The joint legislative audit and review committee shall review tax preferences according to the schedule developed under RCW 43.136.045. The committee shall consider, but not be limited to, the following factors in the review:
     (a) The classes of individuals, types of organizations, or types of industries whose state tax liabilities are directly affected by the tax preference;
     (b) Public policy objectives that might provide a justification for the tax preference, including but not limited to the legislative history, any legislative intent, or the extent to which the tax preference encourages business growth or relocation into this state, promotes growth or retention of high wage jobs, ((or)) provides employment opportunities for the existing state workforce, increases tax receipts, helps stabilize and strengthen communities or otherwise provides a positive return on the state's investment of resources;
     (c) Evidence that the existence of the tax preference has contributed to the achievement of any of the public policy objectives;
     (d) The extent to which continuation of the tax preference might contribute to any of the public policy objectives;
     (e) The extent to which the tax preference may provide unintended benefits to an individual, organization, or industry other than those the legislature intended;
     (f) The extent to which terminating the tax preference may have negative effects on the category of taxpayers that currently benefit from the tax preference, and the extent to which resulting higher taxes may have negative effects on employment and the economy;
     (g) The feasibility of modifying the tax preference to provide for adjustment or recapture of the tax benefits of the tax preference if the objectives are not fulfilled;
     (h) Fiscal impacts of the tax preference, including past impacts and expected future impacts if it is continued. For the purposes of this subsection, "fiscal impact" includes an analysis of the general effects of the tax preference on the overall state economy, including, but not limited to, the effects of the tax preference on the consumption and expenditures of persons and businesses within the state;
     (i) The extent to which termination of the tax preference would affect the distribution of liability for payment of state taxes;
     (j) Consideration of similar tax preferences adopted in other states, and potential public policy benefits that might be gained by incorporating corresponding provisions in Washington.
     (2) For each tax preference, the committee shall provide a recommendation as to whether the tax preference should be continued without modification, modified, scheduled for sunset review at a future date, or terminated immediately. The committee may recommend accountability standards for the future review of a tax preference.