BILL REQ. #:  S-0763.3 

Read first time 02/06/09.   Referred to Committee on Ways & Means.

     AN ACT Relating to adopting the recommendations of the citizen commission for performance measurement of tax preferences; amending RCW 82.04.330, 82.04.410, 82.16.010, 82.16.020, 82.04.4282, and 82.16.050; creating a new section; repealing RCW 82.04.350, 82.08.0261, and 82.08.0257; providing an effective date; and declaring an emergency.

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

Sec. 101   RCW 82.04.330 and 2001 c 118 s 3 are each amended to read as follows:
     This chapter ((shall)) does not apply to amounts under two hundred thousand dollars derived by any farmer that sells any agricultural product at wholesale or to any farmer who grows, raises, or produces agricultural products owned by others, such as custom feed operations. This exemption ((shall)) does not apply to any person selling such products at retail or to any person selling manufactured substances or articles.
     This chapter ((shall)) also does not apply to any persons who participate in the federal conservation reserve program or its successor administered by the United States department of agriculture with respect to land enrolled in that program.

Sec. 102   RCW 82.04.410 and 1967 ex.s. c 149 s 15 are each amended to read as follows:
     This chapter ((shall)) does not apply to amounts under two hundred thousand dollars derived by persons engaged in the production and sale of hatching eggs or poultry for use in the production for sale of poultry or poultry products.

Sec. 201   RCW 82.16.010 and 2007 c 6 s 1023 are each amended to read as follows:
     For the purposes of this chapter, unless otherwise required by the context:
     (1) "Railroad business" means the business of operating any railroad, by whatever power operated, for public use in the conveyance of persons or property for hire. It ((shall)) does not, however, include any business herein defined as ((an urban)) a transportation business.
     (2) "Express business" means the business of carrying property for public hire on the line of any common carrier operated in this state, when such common carrier is not owned or leased by the person engaging in such business.
     (3) "Railroad car business" means the business of operating stock cars, furniture cars, refrigerator cars, fruit cars, poultry cars, tank cars, sleeping cars, parlor cars, buffet cars, tourist cars, or any other kinds of cars used for transportation of property or persons upon the line of any railroad operated in this state when such railroad is not owned or leased by the person engaging in such business.
     (4) "Water distribution business" means the business of operating a plant or system for the distribution of water for hire or sale.
     (5) "Light and power business" means the business of operating a plant or system for the generation, production or distribution of electrical energy for hire or sale and/or for the wheeling of electricity for others.
     (6) "Telegraph business" means the business of affording telegraphic communication for hire.
     (7) "Gas distribution business" means the business of operating a plant or system for the production or distribution for hire or sale of gas, whether manufactured or natural.
     (8) "((Motor)) Transportation business" means the business (((except urban transportation business))) of operating any motor propelled vehicle by which persons or property of others are conveyed for hire, and includes, but is not limited to, the operation of any motor propelled vehicle as an auto transportation company (((except urban transportation business))), common carrier or contract carrier as defined by RCW 81.68.010 and 81.80.010((: PROVIDED, That)). However, "((motor)) transportation business" ((shall)) does not mean or include the transportation of logs or other forest products exclusively upon private roads or private highways.
     (((9) "Urban)) "Transportation business" also means the business of operating any vehicle for public use in the conveyance of persons or property for hire((, insofar as (a) operating entirely within the corporate limits of any city or town, or within five miles of the corporate limits thereof, or (b) operating entirely within and between cities and towns whose corporate limits are not more than five miles apart or within five miles of the corporate limits of either thereof)). Included herein, but without limiting the scope hereof, is the business of operating passenger vehicles of every type and also the business of operating cartage, pickup, or delivery services, including in such services the collection and distribution of property arriving from or destined to a point within or without the state, whether or not such collection or distribution be made by the person performing a local or interstate line-haul of such property.
     (((10))) (9)(a) "Public service business" means any of the businesses defined in subsections (1), (2), (3), (4), (5), (6), (7), and (8)((, and (9))) of this section or any business subject to control by the state, or having the powers of eminent domain and the duties incident thereto, or any business hereafter declared by the legislature to be of a public service nature, except telephone business and low- level radioactive waste site operating companies as redefined in RCW 81.04.010. It includes, among others, without limiting the scope hereof: Airplane transportation, boom, dock, ferry, pipe line, toll bridge, toll logging road, water transportation and wharf businesses.
     (b) The definitions in this subsection (((10))) (9)(b) apply throughout this subsection (((10))) (9).
     (i) "Competitive telephone service" has the same meaning as in RCW 82.04.065.
     (ii) "Network telephone service" means the providing by any person of access to a telephone network, telephone network switching service, toll service, or coin telephone services, or the providing of telephonic, video, data, or similar communication or transmission for hire, via a telephone network, toll line or channel, cable, microwave, or similar communication or transmission system. "Network telephone service" includes the provision of transmission to and from the site of an internet provider via a telephone network, toll line or channel, cable, microwave, or similar communication or transmission system. "Network telephone service" does not include the providing of competitive telephone service, the providing of cable television service, the providing of broadcast services by radio or television stations, nor the provision of internet service as defined in RCW 82.04.297, including the reception of dial-in connection, provided at the site of the internet service provider.
     (iii) "Telephone business" means the business of providing network telephone service. It includes cooperative or farmer line telephone companies or associations operating an exchange.
     (iv) "Telephone service" means competitive telephone service or network telephone service, or both, as defined in (b)(i) and (ii) of this subsection.
     (((11))) (10) "Tugboat business" means the business of operating tugboats, towboats, wharf boats or similar vessels in the towing or pushing of vessels, barges or rafts for hire.
     (((12))) (11) "Gross income" means the value proceeding or accruing from the performance of the particular public service or transportation business involved, including operations incidental thereto, but without any deduction on account of the cost of the commodity furnished or sold, the cost of materials used, labor costs, interest, discount, delivery costs, taxes, or any other expense whatsoever paid or accrued and without any deduction on account of losses.
     (((13))) (12) The meaning attributed, in chapter 82.04 RCW, to the term "tax year," "person," "value proceeding or accruing," "business," "engaging in business," "in this state," "within this state," "cash discount" and "successor" shall apply equally in the provisions of this chapter.

Sec. 202   RCW 82.16.020 and 1996 c 150 s 2 are each amended to read as follows:
     (1) There is levied and there shall be collected from every person a tax for the act or privilege of engaging within this state in any one or more of the businesses herein mentioned. The tax shall be equal to the gross income of the business, multiplied by the rate set out after the business, as follows:
     (a) Express, sewerage collection, and telegraph businesses: Three and six-tenths percent;
     (b) Light and power business: Three and sixty-two one-hundredths percent;
     (c) Gas distribution business: Three and six-tenths percent;
     (d) ((Urban transportation business: Six-tenths of one percent;
     (e) Vessels under sixty-five feet in length, except tugboats, operating upon the waters within the state: Six-tenths of one percent;
     (f) Motor)) Transportation, railroad, railroad car, and tugboat businesses, and all public service businesses other than ones mentioned above: One and ((eight-tenths)) seventy-five hundredths of one percent;
     (((g))) (e) Water distribution business: Four and seven-tenths percent.
     (2) An additional tax is imposed on the act or privilege of engaging within this state in any one or more of the businesses mentioned in subsection (1)(a) through (c), and (e) of this section equal to the rate specified in RCW 82.02.030 multiplied by the tax payable under subsection (1) of this section.
     (3) Twenty percent of the moneys collected under subsection (1) of this section on water distribution businesses and sixty percent of the moneys collected under subsection (1) of this section on sewerage collection businesses shall be deposited in the public works assistance account created in RCW 43.155.050.

Sec. 301   RCW 82.04.4282 and 1994 c 124 s 3 are each amended to read as follows:
     In computing tax there may be deducted from the measure of tax amounts derived from bona fide (1) dues and initiation fees paid to nonprofit organizations exempt from the federal income tax under Title 26 U.S.C. Sec. 501(c)(3), (c)(4), (c)(5), (c)(6), (c)(8), (c)(10), or (c)(19) of the federal internal revenue code, as amended as of January 1, 2009, (2) ((dues, (3))) contributions, (((4))) (3) donations, (((5))) (4) tuition fees, (((6))) (5) charges made by a nonprofit trade or professional organization for attending or occupying space at a trade show, convention, or educational seminar sponsored by the nonprofit trade or professional organization, which trade show, convention, or educational seminar is not open to the general public, (((7))) (6) charges made for operation of privately operated kindergartens, and (((8))) (7) endowment funds. This section shall not be construed to exempt any person, association, or society from tax liability upon selling tangible personal property or upon providing facilities or services for which a special charge is made to members or others. If dues are in exchange for any significant amount of goods or services rendered by the recipient thereof to members without any additional charge to the member, or if the dues are graduated upon the amount of goods or services rendered, the value of such goods or services shall not be considered as a deduction under this section.

Sec. 401   RCW 82.16.050 and 2007 c 330 s 1 are each amended to read as follows:
     In computing tax there may be deducted from the gross income the following items:
     (1) Amounts derived by municipally owned or operated public service businesses, directly from taxes levied for the support or maintenance thereof. This subsection may not be construed to exempt service charges which are spread on the property tax rolls and collected as taxes;
     (2) Amounts derived from the sale of commodities to persons in the same public service business as the seller, for resale as such within this state. This deduction is allowed only with respect to water distribution, gas distribution or other public service businesses which furnish water, gas or any other commodity in the performance of public service businesses;
     (3) Amounts actually paid by a taxpayer to another person taxable under this chapter as the latter's portion of the consideration due for services furnished jointly by both, if the total amount has been credited to and appears in the gross income reported for tax by the former;
     (4) The amount of cash discount actually taken by the purchaser or customer;
     (5) The amount of bad debts, as that term is used in 26 U.S.C. Sec. 166, as amended or renumbered as of January 1, 2003, on which tax was previously paid under this chapter;
     (6) Amounts derived from business which the state is prohibited from taxing under the Constitution of this state or the Constitution or laws of the United States;
     (7) Amounts derived from the distribution of water through an irrigation system, for ((irrigation)) agricultural purposes;
     (8) Amounts derived from the transportation of commodities from points of origin in this state to final destination outside this state, or from points of origin outside this state to final destination in this state, with respect to which the carrier grants to the shipper the privilege of stopping the shipment in transit at some point in this state for the purpose of storing, manufacturing, milling, or other processing, and thereafter forwards the same commodity, or its equivalent, in the same or converted form, under a through freight rate from point of origin to final destination;
     (9) Amounts derived from the transportation of commodities from points of origin in the state to an export elevator, wharf, dock or ship side on tidewater or its navigable tributaries to be forwarded, without intervening transportation, by vessel, in their original form, to interstate or foreign destinations. No deduction is allowed under this subsection when the point of origin and the point of delivery to the export elevator, wharf, dock, or ship side are located within the corporate limits of the same city or town;
     (10) Amounts derived from the transportation of agricultural commodities, not including manufactured substances or articles, from points of origin in the state to interim storage facilities in this state for transshipment, without intervening transportation, to an export elevator, wharf, dock, or ship side on tidewater or its navigable tributaries to be forwarded, without intervening transportation, by vessel, in their original form, to interstate or foreign destinations. If agricultural commodities are transshipped from interim storage facilities in this state to storage facilities at a port on tidewater or its navigable tributaries, the same agricultural commodity dealer must operate both the interim storage facilities and the storage facilities at the port.
     (a) The deduction under this subsection is available only when the person claiming the deduction obtains a certificate from the agricultural commodity dealer operating the interim storage facilities, in a form and manner prescribed by the department, certifying that:
     (i) More than ninety-six percent of all of the type of agricultural commodity delivered by the person claiming the deduction under this subsection and delivered by all other persons to the dealer's interim storage facilities during the preceding calendar year was shipped by vessel in original form to interstate or foreign destinations; and
     (ii) Any of the agricultural commodity that is transshipped to ports on tidewater or its navigable tributaries will be received at storage facilities operated by the same agricultural commodity dealer and will be shipped from such facilities, without intervening transportation, by vessel, in their original form, to interstate or foreign destinations.
     (b) As used in this subsection, "agricultural commodity" has the same meaning as agricultural product in RCW 82.04.213;
     (11) Amounts derived from the production, sale, or transfer of electrical energy for resale within or outside the state or for consumption outside the state;
     (12) Amounts derived from the distribution of water by a nonprofit water association and used for capital improvements by that nonprofit water association;
     (13) Amounts paid by a sewerage collection business taxable under RCW 82.16.020(1)(a) to a person taxable under chapter 82.04 RCW for the treatment or disposal of sewage;
     (14) Amounts derived from fees or charges imposed on persons for transit services provided by a public transportation agency. For the purposes of this subsection, "public transportation agency" means a municipality, as defined in RCW 35.58.272, and urban public transportation systems, as defined in RCW 47.04.082. Public transportation agencies shall spend an amount equal to the reduction in tax provided by this tax deduction solely to adjust routes to improve access for citizens using food banks and senior citizen services or to extend or add new routes to assist low-income citizens and seniors.

NEW SECTION.  Sec. 501   The following acts or parts of acts are each repealed:
     (1) RCW 82.04.350 (Exemptions -- Racing) and 2005 c 369 s 7 & 1961 c 15 s 82.04.350;
     (2) RCW 82.08.0261 (Exemptions -- Sales of personal property for use connected with private or common carriers in interstate or foreign commerce) and 1980 c 37 s 28; and
     (3) RCW 82.08.0257 (Exemptions -- Auction sales of tangible personal property used in farming) and 1980 c 37 s 25.

NEW SECTION.  Sec. 501   Part headings used in this act are not any part of the law.

NEW SECTION.  Sec. 502   Sections 201 and 202 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 July 1, 2009.