BILL REQ. #:  S-0395.6 

Read first time 01/26/09.   Referred to Committee on Ways & Means.

     AN ACT Relating to adopting the recommendations of the citizen commission for performance measurement of tax preferences to clarify the legislative intent of certain deductions and exemptions; amending RCW 82.04.280, 82.04.280, 84.36.030, 84.36.040, and 84.36.840; amending 2006 c 300 s 12 (uncodified); adding a new section to chapter 82.04 RCW; adding a new section to chapter 84.36 RCW; creating a new section; repealing RCW 84.36.130; providing an effective date; providing a contingent effective date; providing an expiration date; providing a contingent expiration date; and declaring an emergency.

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

Sec. 101   RCW 82.04.280 and 2006 c 300 s 6 are each amended to read as follows:
     Upon every person engaging within this state in the business of: (1) Printing, and of publishing newspapers, periodicals, or magazines; (2) building, repairing or improving 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 or political subdivision of the state or by the United States and which is used or to be used, primarily for foot or vehicular traffic including mass transportation vehicles of any kind and including any readjustment, reconstruction or relocation of the facilities of any public, private or cooperatively owned utility or railroad in the course of such building, repairing or improving, the cost of which readjustment, reconstruction, or relocation, is the responsibility of the public authority whose street, place, road, highway, easement, right-of-way, mass public transportation terminal or parking facility, bridge, tunnel, or trestle is being built, repaired or improved; (3) extracting for hire or processing for hire, except persons taxable as extractors for hire or processors for hire under another section of this chapter; (4) operating a cold storage warehouse or storage warehouse, but not including the rental of cold storage lockers; (5) representing and performing services for fire or casualty insurance companies as an independent resident managing general agent ((licensed under the provisions of RCW 48.05.310)); (6) radio and television broadcasting, excluding network, national and regional advertising computed as a standard deduction ((based on the national average thereof as annually reported by the Federal Communications Commission)), which the department must publish by rule every fifth year by June 30th, or in lieu thereof by itemization by the individual broadcasting station, and excluding that portion of revenue represented by the out-of-state audience computed as a ratio to the station's total audience as measured by the 100 micro-volt signal strength and delivery by wire, if any; (7) engaging in activities which bring a person within the definition of consumer contained in RCW 82.04.190(6); as to such persons, the amount of tax on such business shall be equal to the gross income of the business multiplied by the rate of 0.484 percent.
     As used in this section, "cold storage warehouse" means a storage warehouse used to store fresh and/or frozen perishable fruits or vegetables, meat, seafood, dairy products, or fowl, or any combination thereof, at a desired temperature to maintain the quality of the product for orderly marketing.
     As used in this section, "storage warehouse" means a building or structure, or any part thereof, in which goods, wares, or merchandise are received for storage for compensation, except field warehouses, fruit warehouses, fruit packing plants, warehouses licensed under chapter 22.09 RCW, public garages storing automobiles, railroad freight sheds, docks and wharves, and "self-storage" or "mini storage" facilities whereby customers have direct access to individual storage areas by separate entrance. "Storage warehouse" does not include a building or structure, or that part of such building or structure, in which an activity taxable under RCW 82.04.272 is conducted.
     As used in this section, "periodical or magazine" means a printed publication, other than a newspaper, issued regularly at stated intervals at least once every three months, including any supplement or special edition of the publication.

Sec. 102   RCW 82.04.280 and 2006 c 300 s 7 are each amended to read as follows:
     Upon every person engaging within this state in the business of: (1) Printing, and of publishing newspapers, periodicals, or magazines; (2) building, repairing or improving 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 or political subdivision of the state or by the United States and which is used or to be used, primarily for foot or vehicular traffic including mass transportation vehicles of any kind and including any readjustment, reconstruction or relocation of the facilities of any public, private or cooperatively owned utility or railroad in the course of such building, repairing or improving, the cost of which readjustment, reconstruction, or relocation, is the responsibility of the public authority whose street, place, road, highway, easement, right-of-way, mass public transportation terminal or parking facility, bridge, tunnel, or trestle is being built, repaired or improved; (3) extracting for hire or processing for hire, except persons taxable as extractors for hire or processors for hire under another section of this chapter; (4) operating a cold storage warehouse or storage warehouse, but not including the rental of cold storage lockers; (5) representing and performing services for fire or casualty insurance companies as an independent resident managing general agent ((licensed under the provisions of RCW 48.05.310)); (6) radio and television broadcasting, excluding network, national and regional advertising computed as a standard deduction ((based on the national average thereof as annually reported by the Federal Communications Commission)), which the department must publish by rule every fifth year by June 30th, or in lieu thereof by itemization by the individual broadcasting station, and excluding that portion of revenue represented by the out-of-state audience computed as a ratio to the station's total audience as measured by the 100 micro-volt signal strength and delivery by wire, if any; (7) engaging in activities which bring a person within the definition of consumer contained in RCW 82.04.190(6); as to such persons, the amount of tax on such business shall be equal to the gross income of the business multiplied by the rate of 0.484 percent.
     As used in this section, "cold storage warehouse" means a storage warehouse used to store fresh and/or frozen perishable fruits or vegetables, meat, seafood, dairy products, or fowl, or any combination thereof, at a desired temperature to maintain the quality of the product for orderly marketing.
     As used in this section, "storage warehouse" means a building or structure, or any part thereof, in which goods, wares, or merchandise are received for storage for compensation, except field warehouses, fruit warehouses, fruit packing plants, warehouses licensed under chapter 22.09 RCW, public garages storing automobiles, railroad freight sheds, docks and wharves, and "self-storage" or "mini storage" facilities whereby customers have direct access to individual storage areas by separate entrance. "Storage warehouse" does not include a building or structure, or that part of such building or structure, in which an activity taxable under RCW 82.04.272 is conducted.
     As used in this section, "periodical or magazine" means a printed publication, other than a newspaper, issued regularly at stated intervals at least once every three months, including any supplement or special edition of the publication.

NEW SECTION.  Sec. 103   A new section is added to chapter 82.04 RCW to read as follows:
     For the standard deduction in RCW 82.04.280(6), the department must study radio and television broadcasting, excluding network, national and regional advertising to establish the standard deduction representing the out-of-state audience computed as a ratio. The department must complete the study using the best available information. This study must be completed by August 1, 2009, and the standard deduction must be published by rule by December 1, 2009. The study must be repeated every fifth year thereafter by March 30th and the rule must be published every fifth year by September 30th.

Sec. 201   RCW 84.36.030 and 2006 c 305 s 1 are each amended to read as follows:
     The following real and personal property ((shall be)) are exempt from taxation:
     (1)(a) Property owned by nonprofit organizations or associations, organized and conducted for nonsectarian purposes, which ((shall be)) is used for character-building, benevolent, protective or rehabilitative social services directed at persons of all ages, including the housing and care for children.
     (b) The sale of donated merchandise ((shall)) may not be considered a commercial use of the property under this section if the proceeds are devoted to the furtherance of the purposes of the selling organization or association as specified in this subsection (1).
     (c) In a county with a population of less than twenty thousand, the rental or use of property, owned by a nonprofit organization or association described in (a) of this subsection, by a person, group, or organization in one of the following ways ((shall)) may not nullify the exemption:
     (i) The property may be rented or used for pecuniary gain or for business activities or by individuals, groups, and organizations for private purposes if the rental or use:
     (A) Does not exceed fifteen days each assessment year;
     (B) No comparable private for-profit facility exists within ten miles of the property that could be used for the same purpose for which the property is loaned or rented; and
     (C) All income from the rental or use of the exempt property is used for capital improvements to the exempt property, maintenance and operation of the exempt property, or for exempt purposes; or
     (ii) The property is rented or used by a nonprofit community group or other nonprofit organization that might not qualify for exemption if it owned the property as long as the rental or use of the property:
     (A) Does not exceed fifteen days each assessment year;
     (B) Does not result in pecuniary gain;
     (C) Does not involve business activities;
     (D) Is always for the general public good; and
     (E) All income from the rental or use of the exempt property is used for capital improvements to the exempt property, maintenance and operation of the exempt property, or for exempt purposes.
     (2) Property owned by any nonprofit church, denomination, group of churches, or an organization or association, the membership of which is comprised solely of churches or their qualified representatives, which is utilized as a camp facility if used for organized and supervised recreational activities and church purposes as related to such camp facilities. The exemption provided by this ((paragraph shall apply)) subsection applies to a maximum of two hundred acres of any such camp as selected by the church, including buildings and other improvements thereon.
     (3) Property, including buildings and improvements required for the maintenance and safeguarding of such property, owned by nonprofit organizations or associations engaged in character building of boys and girls under eighteen years of age, and used for such purposes and uses, provided such purposes and uses are for the general public good((: PROVIDED, That)). However, if existing charters provide that organizations or associations, which would otherwise qualify under the provisions of this ((paragraph)) subsection, serve boys and girls up to the age of twenty-one years, then such organizations or associations ((shall be)) are deemed qualified pursuant to this section.
     (4)(a) Property owned by all organizations and societies of veterans of any war of the United States, recognized as such by the department of defense, which ((shall)) have national charters, and which ((shall)) have for their general purposes and objects the preservation of the memories and associations incident to their war service and the consecration of the efforts of their members to mutual helpfulness and to patriotic and community service to state and nation. To be exempt such property must be used in such manner as may be reasonably necessary to carry out the purposes and objects of such societies.
     (b) The use of the property for pecuniary gain or for business activities, except as provided in this subsection (4), nullifies the exemption otherwise available for the property for the assessment year. The exemption is not nullified by:
     (i) The collection of rent or donations if the amount is reasonable and does not exceed maintenance and operation expenses.
     (ii) Fund-raising activities conducted by a nonprofit organization.
     (iii) The use of the property for pecuniary gain for periods of not more than fifteen days in a year.
     (c) An inadvertent use of the property in a manner inconsistent with the purpose for which exemption is granted, if the inadvertent use is not part of a pattern of use. A pattern of use is presumed when an inadvertent use is repeated in the same assessment year or in two or more successive assessment years.
     (5) Property owned by all corporations, incorporated under any act of congress, whose principal purposes are to furnish volunteer aid to members of the armed forces of the United States and also to carry on a system of national and international relief and to apply the same in mitigating the sufferings caused by pestilence, famine, fire, floods, and other national calamities and to devise and carry on measures for preventing the same.
     (6) Property owned by nonprofit organizations exempt from federal income tax under section 501(c)(3) of the internal revenue code of ((1954)) 1986, as amended, that are guarantee agencies under the federal guaranteed student loan program or that issue debt to provide or acquire student loans.
     (7) To be exempt under this section, the property must be used exclusively for the purposes for which exemption is granted, except as provided in RCW 84.36.805.
     (8) For the purposes of this section, "general public good" means members of the community derive a benefit from the rental or use of the property by the nonprofit community group or organization.

Sec. 202   RCW 84.36.040 and 2001 c 126 s 1 are each amended to read as follows:
     (1) The real and personal property used by nonprofit (a) day care centers as defined pursuant to RCW 74.15.020; (b) free public libraries; (c) ((orphanages and orphan asylums; (d))) homes for the sick or infirm; (((e))) (d) hospitals for the sick; and (((f))) (e) outpatient dialysis facilities, which are used for the purposes of such organizations ((shall be)) are exempt from taxation((: PROVIDED, That)). However, the benefit of the exemption inures to the user.
     (2) The real and personal property leased to and used by a hospital, owned and operated by a public hospital district established under chapter 70.44 RCW, for hospital purposes is exempt from taxation. The benefit of the exemption must inure to the user.
     (3) To be exempt under this section, the property must be used exclusively for the purposes for which exemption is granted, except as provided in RCW 84.36.805.

Sec. 203   RCW 84.36.840 and 2007 c 111 s 305 are each amended to read as follows:
     (1) In order to determine whether organizations, associations, corporations, or institutions, except those exempted under RCW 84.36.020 and 84.36.030, are exempt from property taxes, and before the exemption ((shall be)) is allowed for any year, the superintendent or manager or other proper officer of the organization, association, corporation, or institution claiming exemption from taxation ((shall)) must file with the department of revenue a statement certifying that the income and the receipts thereof, including donations to it, have been applied to the actual expenses of operating and maintaining it, or for its capital expenditures, and to no other purpose. This report ((shall)) must also include a statement of the receipts and disbursements of the exempt organization, association, corporation, or institution.
     (2) Educational institutions claiming exemption under RCW 84.36.050 ((shall)) must also file a list of all property claimed to be exempt, the purpose for which it is used, the revenue derived from it for the preceding year, the use to which the revenue was applied, the number of students who attended the school or college, the total revenues of the institution with the source from which they were derived, and the purposes to which the revenues were applied, listing the items of such revenues and expenditures in detail.
     (3) Nonprofit homes for the sick or infirm and nonprofit hospitals for the sick claiming exemptions under RCW 84.36.040(1) (c) and (d) must also file on an annual basis: (a) The assessed value of the exempt property and amount of property tax exempted; and (b) data with the department of revenue identifying the charity care provided. If required to file a cost report to the department of social and health services, pursuant to RCW 74.46.040, a nonprofit home for the sick or infirm must file a copy of the report with the department of revenue. If required to report to the department of health, pursuant to RCW 43.70.052, a nonprofit hospital for the sick must file the same charity care data required by RCW 43.70.052(1) with the department of revenue.
     (4) The reports required under subsections (1) ((and)), (2), and (3) of this section may be submitted electronically, in a format provided or approved by the department, or mailed to the department. The reports ((shall)) must be submitted on or before March 31st of each year. The department ((shall)) must remove the tax exemption from the property of any organization, association, corporation, or institution that does not file the required report with the department on or before the due date. However, the department ((shall)) must allow a reasonable extension of time for filing upon receipt of a written request on or before the required filing date and for good cause shown therein.

NEW SECTION.  Sec. 204   A new section is added to chapter 84.36 RCW to read as follows:
     (1)(a) During calendar year 2014, the joint legislative audit and review committee must study the charity care provided from 2003 to 2013 by nonprofit homes for the sick or infirm and nonprofit hospitals for the sick claiming exemptions under RCW 84.36.040(1) (c) and (d).
     (b) The department of revenue and the department of health must provide the committee with any data within its purview that the committee considers necessary to conduct the review. By December 1, 2014, the joint legislative audit and review committee must report to the legislature the results of its review.
     (2) As part of its review under subsection (1) of this section, the committee must study and report to the legislature on:
     (a) Charity care provided by nonprofit homes for the sick or infirm compared with the amount provided by for-profit homes for the sick;
     (b) Charity care provided by nonprofit hospitals for the sick compared with the amount provided by for-profit hospitals for the sick;
     (c) The annual property tax savings of nonprofits claiming exemptions under RCW 84.36.040(1) (c) and (d);
     (d) The annual estimated property tax shift from nonprofits claiming exemptions under RCW 84.36.040(1) (c) and (d) by county;
     (e) Options for the measurement of noncompensated care and debt to include as charity care for future reports and studies;
     (f) Any other recommendations the committee may have to improve the provision of charity care by homes for the sick or infirm and hospitals by modifying property tax preferences; and
     (g) Any other factors that the committee considers necessary to properly evaluate the exemption.
     (3) This section expires January 1, 2015.

NEW SECTION.  Sec. 301   RCW 84.36.130 (Airport property in this state for smaller airports belonging to municipalities of adjoining states) and 1998 c 201 s 1 & 1961 c 15 s 84.36.130 are each repealed.

NEW SECTION.  Sec. 401   Part headings used in this act are not any part of the law.

Sec. 402   2006 c 300 s 12 (uncodified) is amended to read as follows:
     (1)(a) ((This act and)) Section 102, chapter . . ., Laws of 2009 (section 102 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. 403   (1) Section 103 of this act is necessary for the immediate preservation of the public peace, health, or safety, or support of the state government and its existing public institutions, and takes effect July 1, 2009.
     (2) Section 102 of this act takes effect if the contingency in section 502 of this act occurs.

NEW SECTION.  Sec. 404   Section 101 of this act expires on the date that section 102 of this act takes effect.