BILL REQ. #:  S-1538.1 

READ FIRST TIME 02/09/09.   

     AN ACT Relating to extending tax incentives for renewable resources, including tidal and wave energy; amending RCW 82.16.110, 82.16.120, 82.16.130, 82.08.02567, 82.12.02567, 82.16.055, 82.04.294, 82.08.965, 82.08.9651, 82.12.9651, and 82.32.535; amending 2006 c 300 s 12 (uncodified); reenacting and amending RCW 82.32.600; adding new sections to chapter 82.04 RCW; adding new sections to chapter 82.08 RCW; adding new sections to chapter 82.12 RCW; adding new sections to chapter 82.16 RCW; adding a new section to chapter 84.36 RCW; creating a new section; providing an effective date; providing expiration dates; and declaring an emergency.

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

NEW SECTION.  Sec. 1   (1) The legislature finds that Washington's growing population and economy will put a strain on energy supplies and threaten the ability of the state to meet its climate policy goals unless specific steps are taken to reduce demand and utilize energy more efficiently. Water heating for domestic and industrial use relies almost entirely on electricity and natural gas and accounts for a significant percentage of the state's electrical and natural gas consumption. Solar water heating systems represent one of the largest untapped electricity and natural gas conservation potential remaining in Washington. The legislature finds that solar water heaters can provide half or more of the hot water needs in the average home, and reduce electric or natural gas consumption with free renewable energy from the sun.
     (2) It is the intent of the legislature to facilitate the installation of solar water heating systems in homes and businesses by providing: (a) A rebate to customers who install solar water heating systems; and (b) a tax credit to the light and power business based on the amount of solar water heating systems installed by their customers. The rebate and tax credit will support energy conservation, save thousands of dollars in home heating costs, and preserve the environment. The legislature finds that the rebate and tax credit has broad application for the installation of solar water heating systems in urban, rural, business, and residential locations, as well as in any climate throughout the state.
     (3) This section expires December 31, 2012.

NEW SECTION.  Sec. 2   A new section is added to chapter 82.04 RCW to read as follows:
     (1) This chapter does not apply to amounts received by a business for installing, repairing, cleaning, altering, or improving solar hot water heating systems that qualify for rebates under section 6 of this act, eligible net metering systems under chapter 80.60 RCW, or renewable energy systems eligible to receive investment cost recovery incentives under RCW 82.16.110.
     (2) This section expires June 30, 2019.

NEW SECTION.  Sec. 3   A new section is added to chapter 82.04 RCW to read as follows:
     (1) In computing the tax imposed under this chapter, a credit is allowed for renewable energy manufacturing expenditures.
     (2) The amount of the credit provided in subsection (1) of this section may not exceed the tax otherwise due under this chapter for the tax reporting period.
     (3) The total amount of credits taken under this section in any year by a person may not exceed five hundred thousand dollars.
     (4) A person may sell or otherwise transfer the economic value of any credit provided in this section for a renewable energy manufacturing expenditure. The buyer is entitled to take a credit equal to seventy percent of the remaining credit that would have otherwise been allowed under this section.
     (5) The definitions in this subsection apply throughout this section:
     (a) "Renewable energy manufacturing expenditures" means expenditures for:
     (i) Land that includes a renewable energy manufacturing facility;
     (ii) Machinery and equipment used in or integral to a renewable energy manufacturing facility; and
     (iii) Tangible personal property and labor and services used in the construction, expansion, or reconstruction of a renewable energy manufacturing facility.
     (b) "Renewable energy manufacturing facility" means a facility used solely for manufacturing solar, wind, geothermal, or bioenergy equipment.
     (6) A person taking the credit under this section must report as required under RCW 82.32.535.
     (7) Credits may be carried forward until used; however, no credit may be earned under this section on or after July 1, 2014.

NEW SECTION.  Sec. 4   A new section is added to chapter 82.08 RCW to read as follows:
     (1) The tax levied by RCW 82.08.020 does not apply to charges made for labor and services rendered in respect to the constructing, reconstructing, or expanding of a renewable energy manufacturing facility, to sales of tangible personal property that will be incorporated as an ingredient or component of such facility during the course of the constructing, reconstructing, or expanding, or to labor and services rendered in respect to installing, during the course of constructing, reconstructing, or expanding, building fixtures not otherwise eligible for the exemption under RCW 82.08.02565(2)(b). The exemption is available only when the buyer provides the seller with an exemption certificate in a form and manner prescribed by the department. The seller must retain a copy of the certificate for the seller's files.
     (2) No application is necessary for the tax exemption. The person is subject to all of the requirements of chapter 82.32 RCW. A person taking the exemption under this section must report as required under RCW 82.32.535.
     (3) "Renewable energy manufacturing facility" has the same meaning as provided in section 3 of this act.
     (4) This section expires July 1, 2014.

NEW SECTION.  Sec. 5   A new section is added to chapter 82.12 RCW to read as follows:
     (1) The provisions of this chapter do not apply with respect to the use of labor and services rendered in respect to the constructing, reconstructing, or expanding of a renewable energy manufacturing facility, to tangible personal property that will be incorporated as an ingredient or component of such facility during the course of the constructing, reconstructing, or expanding, or to labor and services rendered in respect to installing, during the course of constructing, reconstructing, or expanding, building fixtures not otherwise eligible for the exemption under RCW 82.08.02565(2)(b).
     (2) A person taking the exemption under this section must report as required under RCW 82.32.535.
     (3) "Renewable energy manufacturing facility" has the same meaning as provided in section 3 of this act.
     (4) This section expires July 1, 2014.

NEW SECTION.  Sec. 6   A new section is added to chapter 82.16 RCW to read as follows:
     (1) Beginning July 1, 2009, a light and power business or gas company may provide a rebate to its retail customers for the costs incurred by such customers in installing solar water heating systems in their home or business. The amount of the rebate must not be more than:
     (a) Fifty percent of the total costs incurred by the customer for solar water heating systems manufactured outside of Washington; and
     (b) Seventy-five percent of the total costs incurred by the customer for solar water heating systems manufactured in Washington.
     (2) In determining the amount of the rebate, a light and power business or gas company must determine a tiered amount based on the efficiency of the solar water heating system.
     (3)(a) No individual, household, business, or local governmental entity is eligible for rebates for more than four thousand dollars per calendar year.
     (b) For solar water heating systems manufactured in Washington, no individual, household, business, or local governmental entity is eligible for rebates for more than five thousand dollars per calendar year.
     (4) In no event may the total amount of such rebates for each light and power business or gas company, during any calendar year, exceed the amount of the tax credit provided under section 7 of this act.
     (5) For the purposes of this act, a solar water heating system must, at a minimum, have a solar rating and certification corporation (SRCC) certification as of July 1, 2009.
     (6) This section expires December 31, 2012.

NEW SECTION.  Sec. 7   A new section is added to chapter 82.16 RCW to read as follows:
     (1) Each light and power business or gas company must be allowed a credit against taxes due under this chapter in an amount up to fifty percent of rebates made in any calendar year under section 6 of this act.
     (2) The credit must be taken in a form and manner as required by the department.
     (3) The credit under this section for the calendar year may not exceed twenty-five one-hundredths of one percent of the businesses' taxable power sales due under RCW 82.16.020(1)(b) or fifty thousand dollars, whichever is greater.
     (4) The credit may not exceed the tax that would otherwise be due under this chapter.
     (5) Refunds may not be granted in the place of credits.
     (6) Expenditures not used to earn a credit in one calendar fiscal year may not be used to earn a credit in subsequent years, except that this limitation does not apply to expenditures made between January 1, 2009, and July 1, 2009, which expenditures may be used to earn a credit through December 31, 2009.
     (7) The total amount of credits that may be used in any calendar year may not exceed one million dollars in any calendar year. If requests for the credit in section 6 of this act exceed the total amount of credits available, the credits must be reduced proportionally.
     (8) This section expires December 31, 2012.

NEW SECTION.  Sec. 8   A new section is added to chapter 84.36 RCW to read as follows:
     (1) Property equipped with solar energy systems for the purpose of heating, cooling, or generating electrical energy is exempt from ad valorem taxation in an amount that equals any positive amount obtained by subtracting the real market value of the property, as if it were not equipped with such systems, from the real market value of the property so equipped.
     (2) This section applies to tax years beginning prior to July 1, 2020.
     (3) This section does not apply to property used by a light and power business for the generation of electricity.

Sec. 9   RCW 82.16.110 and 2005 c 300 s 2 are each amended to read as follows:
     The definitions in this section apply throughout this chapter unless the context clearly requires otherwise.
     (1)(a) "Community solar project" means:
     (i) A solar energy system owned by local individuals, households, nonprofit organizations, or nonutility businesses that is placed on the property owned by a cooperating local governmental entity; or
     (ii) A utility-owned solar energy system that is voluntarily funded by the utility's ratepayers where, in exchange for their financial support, the utility gives contributors a payment or credit on their utility bill for the value of the electricity produced by the project.
     (b) For the purposes of "community solar project" as defined in (a) of this subsection:
     (i) "Nonprofit organization" means an organization exempt from taxation under Title 26 U.S.C. Sec. 501(c)(3) of the federal internal revenue code of 1986, as amended, as of January 1, 2009; and
     (ii) "Utility" means a light and power business.
     (2) "Customer-generated electricity" means the alternating current electricity that is generated from a renewable energy system located on an individual's, businesses', or local government's real property that is also provided electricity generated by a light and power business. Except for community solar projects, a system located on a leasehold interest does not qualify under this definition. "Customer-generated electricity" does not include electricity generated by a light and power business with greater than one thousand megawatt hours of annual sales or a gas distribution business.
     (((2))) (3) "Economic development kilowatt-hour" means the actual kilowatt-hour measurement of customer-generated electricity multiplied by the appropriate economic development factor.
     (((3))) (4) "Local governmental entity" means any unit of local government of this state including, but not limited to, counties, cities, towns, municipal corporations, quasi-municipal corporations, special purpose districts, and school districts.
     (5) "Photovoltaic cell" means a device that converts light directly into electricity without moving parts.
     (((4))) (6) "Renewable energy system" means a solar energy system, an anaerobic digester as defined in RCW 82.08.900, or a wind generator used for producing electricity.
     (((5))) (7) "Solar energy system" means any device or combination of devices or elements that rely upon direct sunlight as an energy source for use in the generation of electricity.
     (((6))) (8) "Solar inverter" means the device used to convert direct current to alternating current in a photovoltaic cell system.
     (((7))) (9) "Solar module" means the smallest nondivisible self-contained physical structure housing interconnected photovoltaic cells and providing a single direct current electrical output.
     (((8) "Standards for interconnection to the electric distribution system" means technical, engineering, operational, safety, and procedural requirements for interconnection to the electric distribution system of a light and power business.))

Sec. 10   RCW 82.16.120 and 2007 c 111 s 101 are each amended to read as follows:
     (1) Any individual, business, or local governmental entity, not in the light and power business or in the gas distribution business, may apply to the light and power business serving the situs of the system, each fiscal year beginning on July 1, 2005, for an investment cost recovery incentive for each kilowatt-hour from a customer-generated electricity renewable energy system ((installed on its property that is not interconnected to the electric distribution system)). No incentive may be paid for kilowatt-hours generated before July 1, 2005, or after June 30, ((2014)) 2024.
     (2) ((When light and power businesses serving eighty percent of the total customer load in the state adopt uniform standards for interconnection to the electric distribution system, any individual, business, or local governmental entity, not in the light and power business or in the gas distribution business, may apply to the light and power business serving the situs of the system, each fiscal year, for an investment cost recovery incentive for each kilowatt-hour from a customer-generated electricity renewable energy system installed on its property that is not interconnected to the electric distribution system and from a customer-generated electricity renewable energy system installed on its property that is interconnected to the electric distribution system. Uniform standards for interconnection to the electric distribution system means those standards established by light and power businesses that have ninety percent of total requirements the same. No incentive may be paid for kilowatt-hours generated before July 1, 2005, or after June 30, 2014.
     (3)))(a) Before submitting for the first time the application for the incentive allowed under subsection (4) of this section, the applicant shall submit to the department of revenue and to the climate and rural energy development center at the Washington State University, established under RCW 28B.30.642, a certification in a form and manner prescribed by the department that includes, but is not limited to, the following information:
     (i) The name and address of the applicant and location of the renewable energy system;
     (ii) The applicant's tax registration number;
     (iii) That the electricity produced by the applicant meets the definition of "customer-generated electricity" and that the renewable energy system produces electricity with:
     (A) Any solar inverters and solar modules manufactured in Washington state;
     (B) A wind generator powered by blades manufactured in Washington state;
     (C) A solar inverter manufactured in Washington state;
     (D) A solar module manufactured in Washington state; or
     (E) Solar or wind equipment manufactured outside of Washington state;
     (iv) That the electricity can be transformed or transmitted for entry into or operation in parallel with electricity transmission and distribution systems;
     (v) The date that the renewable energy system received its final electrical permit from the applicable local jurisdiction.
     (b) Within thirty days of receipt of the certification the department of revenue shall notify the applicant by mail, or electronically as provided in RCW 82.32.135, whether the renewable energy system qualifies for an incentive under this section. The department may consult with the climate and rural energy development center to determine eligibility for the incentive. System certifications and the information contained therein are subject to disclosure under RCW 82.32.330(3)(m).
     (((4))) (3)(a) By August 1st of each year application for the incentive shall be made to the light and power business serving the situs of the system by certification in a form and manner prescribed by the department that includes, but is not limited to, the following information:
     (i) The name and address of the applicant and location of the renewable energy system;
     (ii) The applicant's tax registration number;
     (iii) The date of the notification from the department of revenue stating that the renewable energy system is eligible for the incentives under this section;
     (iv) A statement of the amount of kilowatt-hours generated by the renewable energy system in the prior fiscal year.
     (b) Within sixty days of receipt of the incentive certification the light and power business serving the situs of the system shall notify the applicant in writing whether the incentive payment will be authorized or denied. The business may consult with the climate and rural energy development center to determine eligibility for the incentive payment. Incentive certifications and the information contained therein are subject to disclosure under RCW 82.32.330(3)(m).
     (c)(i) Persons receiving incentive payments shall keep and preserve, for a period of five years, suitable records as may be necessary to determine the amount of incentive applied for and received. Such records shall be open for examination at any time upon notice by the light and power business that made the payment or by the department. If upon examination of any records or from other information obtained by the business or department it appears that an incentive has been paid in an amount that exceeds the correct amount of incentive payable, the business may assess against the person for the amount found to have been paid in excess of the correct amount of incentive payable and shall add thereto interest on the amount. Interest shall be assessed in the manner that the department assesses interest upon delinquent tax under RCW 82.32.050.
     (ii) If it appears that the amount of incentive paid is less than the correct amount of incentive payable the business may authorize additional payment.
     (((5))) (4) Except for community solar projects, the investment cost recovery incentive may be paid fifteen cents per economic development kilowatt-hour unless requests exceed the amount authorized for credit to the participating light and power business. For community solar projects, the investment cost recovery incentive may be paid thirty cents per economic development kilowatt-hour unless requests exceed the amount authorized for credit to the participating light and power business. For the purposes of this section, the rate paid for the investment cost recovery incentive may be multiplied by the following factors:
     (a) For customer-generated electricity produced using solar modules manufactured in Washington state, two and four-tenths;
     (b) For customer-generated electricity produced using a solar or a wind generator equipped with an inverter manufactured in Washington state, one and two-tenths;
     (c) For customer-generated electricity produced using an anaerobic digester, or by other solar equipment or using a wind generator equipped with blades manufactured in Washington state, one; and
     (d) For all other customer-generated electricity produced by wind, eight-tenths.
     (((6))) (5) No individual, household, business, or local governmental entity is eligible for incentives provided under subsection (4) of this section for more than ((two)) five thousand dollars per year. Each applicant in a community solar project is eligible for up to five thousand dollars per year.
     (6) The investment cost recovery incentive may be paid fifty-four cents per kilowatt-hour generated by a commercial or industrial customer consuming at least one-half of the electricity generated in its commercial or industrial activities at the site of the generation. No incentive provided under this subsection may exceed twenty thousand dollars per utility revenue meter per year. A person claiming an incentive payment under this subsection is not eligible for the incentive provided under subsection (5) of this section for the same calendar year.
     (7) If requests for the investment cost recovery incentive exceed the amount of funds available for credit to the participating light and power business, the incentive payments shall be reduced proportionately.
     (8) The climate and rural energy development center at Washington State University energy program may establish guidelines and standards for technologies that are identified as Washington manufactured and therefore most beneficial to the state's environment.
     (9) The environmental attributes of the renewable energy system belong to the applicant, and do not transfer to the state or the light and power business upon receipt of the investment cost recovery incentive.

Sec. 11   RCW 82.16.130 and 2005 c 300 s 4 are each amended to read as follows:
     (1) A light and power business shall be allowed a credit against taxes due under this chapter in an amount equal to investment cost recovery incentive payments made in any fiscal year under RCW 82.16.120. The credit shall be taken in a form and manner as required by the department. The credit under this section for the fiscal year shall not exceed ((twenty-five one-hundredths of)) one percent of the businesses' taxable power sales due under RCW 82.16.020(1)(b) or ((twenty-five)) one-hundred thousand dollars, whichever is greater. Incentive payments to participants in a utility-owned community solar project as defined in RCW 82.16.110(1)(a)(ii) may only account for up to twenty-five percent of the total allowable credit. The credit may not exceed the tax that would otherwise be due under this chapter. Refunds shall not be granted in the place of credits. Expenditures not used to earn a credit in one fiscal year may not be used to earn a credit in subsequent years.
     (2) For any business that has claimed credit for amounts that exceed the correct amount of the incentive payable under RCW 82.16.120, the amount of tax against which credit was claimed for the excess payments shall 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.
     (3) The right to earn tax credits under this section expires June 30, ((2015)) 2024. Credits may not be claimed after June 30, ((2016)) 2025.

Sec. 12   RCW 82.08.02567 and 2004 c 152 s 1 are each amended to read as follows:
     (1) The tax levied by RCW 82.08.020 shall not apply to sales of machinery and equipment used directly in generating electricity using fuel cells, ((wind,)) biomass resources, sun, solar thermal electric technology, tidal or wave energy, geothermal resources, black liquors derived from algae and other sources, anaerobic digestion, technology that converts otherwise lost energy from exhaust heat, or landfill gas as the principal source of power, or to sales of or charges made for labor and services rendered in respect to installing such machinery and equipment, but only if the purchaser develops with such machinery, equipment, and labor a facility capable of generating not less than two hundred watts of electricity and provides the seller with an exemption certificate in a form and manner prescribed by the department. The seller shall retain a copy of the certificate for the seller's files.
     (2) For purposes of this section and RCW 82.12.02567:
     (a) "Landfill gas" means biomass fuel of the type qualified for federal tax credits under 26 U.S.C. Sec. 29 collected from a landfill. "Landfill" means a landfill as defined under RCW 70.95.030;
     (b) "Machinery and equipment" means industrial fixtures, devices, and support facilities that are integral and necessary to the generation of electricity using fuel cells, wind, sun, or landfill gas as the principal source of power;
     (c) "Machinery and equipment" does not include: (i) Hand-powered tools; (ii) property with a useful life of less than one year; (iii) repair parts required to restore machinery and equipment to normal working order; (iv) replacement parts that do not increase productivity, improve efficiency, or extend the useful life of machinery and equipment; (v) buildings; or (vi) building fixtures that are not integral and necessary to the generation of electricity that are permanently affixed to and become a physical part of a building;
     (d) Machinery and equipment is "used directly" in generating electricity with fuel cells or by wind energy, solar energy, or landfill gas power if it provides any part of the process that captures the energy of the wind, sun, or landfill gas, converts that energy to electricity, and stores, transforms, or transmits that electricity for entry into or operation in parallel with electric transmission and distribution systems;
     (e) "Fuel cell" means an electrochemical reaction that generates electricity by combining atoms of hydrogen and oxygen in the presence of a catalyst.
     (3) This section expires June 30, ((2009)) 2019.

Sec. 13   RCW 82.12.02567 and 2004 c 152 s 2 are each amended to read as follows:
     (1) The provisions of this chapter shall not apply with respect to machinery and equipment used directly in generating not less than two hundred watts of electricity using fuel cells, ((wind,)) biomass resources, sun, solar thermal electric technology, tidal or wave energy, geothermal resources, black liquors derived from algae and other sources, anaerobic digestion, technology that converts otherwise lost energy from exhaust heat, or landfill gas as the principal source of power, or to the use of labor and services rendered in respect to installing such machinery and equipment.
     (2) The definitions in RCW 82.08.02567 apply to this section.
     (3) This section expires June 30, ((2009)) 2019.

Sec. 14   RCW 82.16.055 and 1980 c 149 s 3 are each amended to read as follows:
     (1) In computing tax under this chapter there shall be deducted from the gross income:
     (a) An amount equal to the cost of production at the plant for consumption within the state of Washington of:
     (i) Electrical energy produced or generated from cogeneration ((as defined in RCW 82.35.020)); and
     (ii) Electrical energy or gas produced or generated from renewable energy resources such as solar energy, tidal or wave energy, geothermal resources, black liquors derived from algae and other sources, anaerobic digestion, wind energy, hydroelectric energy, geothermal energy, wood, wood wastes, municipal wastes, agricultural products and wastes, and end-use waste heat; and
     (b) Those amounts expended to improve consumers' efficiency of energy end use or to otherwise reduce the use of electrical energy or gas by the consumer.
     (2)(a) Unless provided otherwise in (b) of this subsection, this section applies only to new facilities for the production or generation of energy from cogeneration or renewable energy resources or measures to improve the efficiency of energy end use on which construction or installation is begun after June 12, 1980, and before January 1, 1990. Deductions under subsection (1)(a) of this section for new facilities under this subsection (2)(a) are allowed for a period not to exceed thirty years after the project is placed in operation.
     (b) This section applies to new facilities for the production and generation of energy from tidal and wave energy, black liquors derived from algae and other sources, anaerobic digestion, and from geothermal resources, on which construction or installation is begun after January 1, 2009, and before January 1, 2019. Deductions under subsection (1)(a) of this section for new facilities under this subsection (2)(b) are allowed for a period not to exceed ten years after the project is placed in operation.
     (3) ((Deductions under subsection (1)(a) of this section shall be allowed for a period not to exceed thirty years after the project is placed in operation.
     (4) Measures or projects encouraged under this section shall at the time they are placed in service be reasonably expected to save, produce, or generate energy at a total incremental system cost per unit of energy delivered to end use which is less than or equal to the incremental system cost per unit of energy delivered to end use from similarly available conventional energy resources which utilize nuclear energy or fossil fuels and which the gas or electric utility could acquire to meet energy demand in the same time period.
     (5))) The department ((of revenue)), after consultation with the utilities and transportation commission ((in the case of investor-owned utilities)) and the governing bodies of locally regulated utilities, shall determine the eligibility of individual projects and measures for deductions under this section.

Sec. 15   RCW 82.04.294 and 2007 c 54 s 8 are each amended to read as follows:
     (1)(a) Beginning October 1, 2005, upon every person engaging within this state in the business of manufacturing solar energy systems using photovoltaic modules, or of manufacturing solar grade silicon to be used exclusively in components of such systems; as to such persons the amount of tax with respect to such business shall, in the case of manufacturers, be equal to the value of the product manufactured, or in the case of processors for hire, be equal to the gross income of the business, multiplied by the rate of 0.2904 percent.
     (b) Beginning October 1, 2009, upon every person engaging within this state in the business of manufacturing solar energy systems using photovoltaic modules, or of manufacturing solar grade silicon, silicon solar wafers, silicon solar cells, thin film solar devices, or compound semiconductor solar wafers to be used exclusively in components of such systems; as to such persons the amount of tax with respect to such business is, in the case of manufacturers, equal to the value of the product manufactured, or in the case of processors for hire, equal to the gross income of the business, multiplied by the rate of 0.275 percent.
     (2)(a) Beginning October 1, 2005, upon every person engaging within this state in the business of making sales at wholesale of solar energy systems using photovoltaic modules, or of solar grade silicon to be used exclusively in components of such systems, manufactured by that person; as to such persons the amount of tax with respect to such business shall be equal to the gross proceeds of sales of the solar energy systems using photovoltaic modules, or of the solar grade silicon to be used exclusively in components of such systems, multiplied by the rate of 0.2904 percent.
     (b) Beginning October 1, 2009, upon every person engaging within this state in the business of making sales at wholesale of solar energy systems using photovoltaic modules, or of solar grade silicon, silicon solar wafers, silicon solar cells, thin film solar devices, or compound semiconductor solar wafers to be used exclusively in components of such systems, manufactured by that person; as to such persons the amount of tax with respect to such business is equal to the gross proceeds of sales of the solar energy systems using photovoltaic modules, or of the solar grade silicon to be used exclusively in components of such systems, multiplied by the rate of 0.275 percent.
     (3) Beginning October 1, 2009, silicon solar wafers, silicon solar cells, thin film solar devices, or compound semiconductor solar wafers are "semiconductor materials" for the purposes of RCW 82.08.965, 82.08.9651, 82.12.965, and 82.12.9651.
     (4) The definitions in this subsection apply throughout this section.
     (a) "Compound semiconductor solar wafers" means a semiconductor solar wafer composed of elements from two or more different groups of the periodic table.
     (b) "Module" means the smallest nondivisible self-contained physical structure housing interconnected photovoltaic cells and providing a single direct current electrical output.
     (((b))) (c) "Photovoltaic cell" means a device that converts light directly into electricity without moving parts.
     (((c))) (d) "Silicon solar cells" means a photovoltaic cell manufactured from a silicon solar wafer.
     (e) "Silicon solar wafers" means a silicon wafer manufactured for solar conversion purposes.
     (f) "Solar energy system" means any device or combination of devices or elements that rely upon direct sunlight as an energy source for use in the generation of electricity.
     (((d))) (g) "Solar grade silicon" means high-purity silicon used exclusively in components of solar energy systems using photovoltaic modules to capture direct sunlight. "Solar grade silicon" does not include silicon used in semiconductors.
     (((4))) (h) "Thin film solar devices" means a nonparticipating substrate on which various semiconducting materials are deposited to produce a photovoltaic cell that is used to generate electricity.
     (5) This section expires June 30, 2014.

Sec. 16   RCW 82.08.965 and 2003 c 149 s 5 are each amended to read as follows:
     (1) The tax levied by RCW 82.08.020 ((shall)) does not apply to charges made for labor and services rendered in respect to the constructing of new buildings used for the manufacturing of semiconductor materials, to sales of tangible personal property that will be incorporated as an ingredient or component of such buildings during the course of the constructing, or to labor and services rendered in respect to installing, during the course of constructing, building fixtures not otherwise eligible for the exemption under RCW 82.08.02565(2)(b). The exemption is available only when the buyer provides the seller with an exemption certificate in a form and manner prescribed by the department. The seller shall retain a copy of the certificate for the seller's files.
     (2) To be eligible under this section the manufacturer or processor for hire must meet the following requirements for an eight-year period, such period beginning the day the new building commences commercial production, or a portion of tax otherwise due shall be immediately due and payable pursuant to subsection (3) of this section:
     (a) The manufacturer or processor for hire must maintain at least seventy-five percent of full employment at the new building for which the exemption under this section is claimed.
     (b) Before commencing commercial production at a new facility the manufacturer or processor for hire must meet with the department to review projected employment levels in the new buildings. The department, using information provided by the taxpayer, shall make a determination of the number of positions that would be filled at full employment. This number shall be used throughout the eight-year period to determine whether any tax is to be repaid. This information is not subject to the confidentiality provisions of RCW 82.32.330 and may be disclosed to the public upon request.
     (c) In those situations where a production building in existence on the effective date of this section will be phased out of operation during which time employment at the new building at the same site is increased, the manufacturer or processor for hire shall maintain seventy-five percent of full employment at the manufacturing site overall.
     (d) No application is necessary for the tax exemption. The person is subject to all the requirements of chapter 82.32 RCW. A person taking the exemption under this section must report as required under RCW 82.32.535.
     (3) If the employment requirement is not met for any one calendar year, one-eighth of the exempt sales and use taxes shall be due and payable by April 1st of the following year. The department shall assess interest to the date the tax was imposed, but not penalties, on the taxes for which the person is not eligible.
     (4) The exemption applies to new buildings, or parts of buildings, that are used exclusively in the manufacturing of semiconductor materials, including the storage of raw materials and finished product.
     (5) For the purposes of this section:
     (a) "Commencement of commercial production" is deemed to have occurred when the equipment and process qualifications in the new building are completed and production for sale has begun; and
     (b) "Full employment" is the number of positions required for full capacity production at the new building, for positions such as line workers, engineers, and technicians.
     (c) "Semiconductor materials" has the same meaning as provided in RCW 82.04.240(2) and 82.04.294(3).
     (6) No exemption may be taken after twelve years after the effective date of this act, however all of the eligibility criteria and limitations are applicable to any exemptions claimed before that date.
     (7) This section expires twelve years after the effective date of this act.

Sec. 17   RCW 82.08.9651 and 2006 c 84 s 3 are each amended to read as follows:
     (1) The tax levied by RCW 82.08.020 shall not apply to sales of gases and chemicals used by a manufacturer or processor for hire in the production of semiconductor materials. This exemption is limited to gases and chemicals used in the production process to grow the product, deposit or grow permanent or sacrificial layers on the product, to etch or remove material from the product, to anneal the product, to immerse the product, to clean the product, and other such uses whereby the gases and chemicals come into direct contact with the product during the production process, or uses of gases and chemicals to clean the chambers and other like equipment in which such processing takes place. For the purposes of this section, "semiconductor materials" has the meaning provided in RCW 82.04.2404 and 82.04.294(3).
     (2) A person taking the exemption under this section must report under RCW 82.32.5351. No application is necessary for the tax exemption. The person is subject to all of the requirements of chapter 82.32 RCW.
     (3) This section expires twelve years after December 1, 2006.

Sec. 18   RCW 82.12.9651 and 2006 c 84 s 4 are each amended to read as follows:
     (1) The provisions of this chapter do not apply with respect to the use of gases and chemicals used by a manufacturer or processor for hire in the production of semiconductor materials. This exemption is limited to gases and chemicals used in the production process to grow the product, deposit or grow permanent or sacrificial layers on the product, to etch or remove material from the product, to anneal the product, to immerse the product, to clean the product, and other such uses whereby the gases and chemicals come into direct contact with the product during the production process, or uses of gases and chemicals to clean the chambers and other like equipment in which such processing takes place. For purposes of this section, "semiconductor materials" has the meaning provided in RCW 82.04.2404 and 82.04.294(3).
     (2) A person taking the exemption under this section must report under RCW 82.32.5351. No application is necessary for the tax exemption. The person is subject to all of the requirements of chapter 82.32 RCW.
     (3) This section expires twelve years after December 1, 2006.

Sec. 19   RCW 82.32.535 and 2003 c 149 s 11 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 82.04.240(2) or who claims an exemption or credit under RCW 82.04.426, 82.08.965, 82.12.965, 82.08.970, 82.12.970, sections 3 through 5 of this act, 82.04.448, or 84.36.645, 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 82.04.240(2), or tax exemption or credit under RCW 82.04.426, 82.08.965, 82.12.965, 82.08.970, 82.12.970, sections 3 through 5 of this act, 82.04.448, or 84.36.645. The report is due by March 31st following any year in which a preferential tax rate under RCW 82.04.240(2) is used, or tax exemption or credit under RCW 82.04.426, 82.08.965, 82.12.965, 82.08.970, 82.12.970, sections 3 through 5 of this act, 82.04.448, or 84.36.645 is taken. This information is not subject to the confidentiality provisions of RCW 82.32.330 and may be disclosed to the public upon request.
     (b) If a person fails to submit an annual report under (a) of this subsection the department shall declare the amount of taxes exempted or credited for that year to be immediately due and payable. Excise taxes payable under this subsection are subject to interest, 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 1st of the year occurring five years after the effective date of this act, and November 1st of the year occurring eleven years after the effective date of this act, 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 149, Laws of 2003 in regard to keeping Washington competitive. The report shall measure the effect of chapter 149, Laws of 2003 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 149, Laws of 2003.

Sec. 20   RCW 82.32.600 and 2008 c 81 s 14 and 2008 c 15 s 8 are each reenacted and amended to read as follows:
     (1) Persons required to file annual surveys or annual reports under RCW 82.04.4452, 82.32.535, 82.32.5351, 82.32.545, 82.32.610, 82.32.630, 82.82.020, or 82.74.040 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. As used in this section, "returns" has the same meaning as "return" in RCW 82.32.050.
     (2) 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.

NEW SECTION.  Sec. 21   A new section is added to chapter 82.08 RCW to read as follows:
     (1) A qualifying utility is entitled to a rebate of tax paid under RCW 82.08.020 by it or any other person on machinery and equipment used directly in generating electricity using wind as the principal source of power, and sales of or charges made for labor and services rendered in respect to installing such machinery and equipment, but only if such machinery and equipment is part of a facility capable of generating at least two hundred watts of electricity and such facility is owned or operated by the qualifying utility at the time the rebate is claimed under subsection (2) of this section.
     (2) A qualifying utility may claim one-quarter of the rebate in the calendar year in which the facility becomes operational and one-quarter of the rebate in each successive calendar year. A qualifying utility may claim the rebate by taking a credit against the tax levied under RCW 82.16.020 or by filing a refund request with the department. The rebate amount will not include interest.
     (3)(a) "Qualifying utility" has the same meaning as provided in RCW 19.285.030.
     (b) The definitions in RCW 82.08.02567 apply to this section.

NEW SECTION.  Sec. 22   A new section is added to chapter 82.12 RCW to read as follows:
     (1) A qualifying utility is entitled to a rebate of tax paid under this chapter by it or any other person on machinery and equipment used directly in generating electricity using wind as the principal source of power, and sales of or charges made for labor and services rendered in respect to installing such machinery and equipment, but only if such machinery and equipment is part of a facility capable of generating at least two hundred watts of electricity and such facility is owned or operated by the qualifying utility at the time the rebate is claimed under subsection (2) of this section.
     (2) A qualifying utility may claim one-quarter of the rebate in the calendar year in which the facility becomes operational and one-quarter of the rebate in each successive calendar year. A qualifying utility may claim the rebate by taking a credit against the tax levied under RCW 82.16.020 or by filing a refund request with the department. The rebate amount will not include interest.
     (3) "Qualifying utility" has the same meaning as provided in RCW 19.285.030. The definitions in RCW 82.08.02567 apply to this section.

Sec. 23   2006 c 300 s 12 (uncodified) is amended to read as follows:
     (1)(a) ((This act and)) Sections 16 and 19, chapter . . ., Laws of 2009 (sections 16 and 19 of this act), section 7, chapter 300, Laws of 2006, and section 4, chapter 149, Laws of 2003 are contingent upon the siting and commercial operation of a significant semiconductor microchip fabrication facility in the state of Washington.
     (b) For the purposes of this section:
     (i) "Commercial operation" means the same as "commencement of commercial production" as used in RCW 82.08.965.
     (ii) "Semiconductor microchip fabrication" means "manufacturing semiconductor microchips" as defined in RCW 82.04.426.
     (iii) "Significant" means the combined investment of new buildings and new machinery and equipment in the buildings, at the commencement of commercial production, will be at least one billion dollars.
     (2) ((This act)) Chapter 149, Laws of 2003 takes effect the first day of the month in which a contract for the construction of a significant semiconductor fabrication facility is signed, as determined by the director of the department of revenue.
     (3)(a) The department of revenue ((shall)) must provide notice of the effective date of this act to affected taxpayers, the legislature, and others as deemed appropriate by the department.
     (b) If, after making a determination that a contract has been signed and ((this act)) chapter 149, Laws of 2003 is effective, the department discovers that commencement of commercial production did not take place within three years of the date the contract was signed, the department ((shall)) must make a determination that ((this act)) chapter 149, Laws of 2003 is no longer effective, and all taxes that would have been otherwise due ((shall be)) are deemed deferred taxes and are immediately assessed and payable from any person reporting tax under RCW 82.04.240(2) or claiming an exemption or credit under section 2 or 5 through 10 ((of this act)), chapter 149, Laws of 2003. The department is not authorized to make a second determination regarding the effective date of ((this act)) chapter 149, Laws of 2003.

NEW SECTION.  Sec. 24   Sections 12 and 13 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 June 30, 2009.