BILL REQ. #:  Z-1085.1 

Read first time 01/19/10.   Referred to Committee on Economic Development, Trade & Innovation.

     AN ACT Relating to providing tax incentives for manufacturers of electronic testing and measurement devices; amending RCW 82.32.620, 82.32.590, and 82.32.600; reenacting and amending RCW 82.04.440; adding new sections to chapter 82.04 RCW; providing an effective date; providing an expiration date.

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

NEW SECTION.  Sec. 1   A new section is added to chapter 82.04 RCW to read as follows:
     (1) Upon every eligible person engaging within this state in the business of manufacturing electronic testing or measurement devices, as to such persons the amount of tax with respect to such business is equal to the value of the product manufactured, multiplied by the rate of 0.2904 percent.
     (2) In addition to all other requirements under this title, a person claiming the tax rate under this section must report as required under RCW 82.32.620.
     (3) For purposes of this section, "eligible person" means a person whose value of electronic testing and measurement devices manufactured in this state exceeded three hundred million dollars in the calendar year immediately preceding the calendar year of the tax reporting period for which the tax rate provided in this section is claimed.

NEW SECTION.  Sec. 2   A new section is added to chapter 82.04 RCW to read as follows:
     (1) In computing the tax imposed under this chapter, a person eligible to report under section 1 of this act is allowed a credit for property taxes paid during the calendar year on buildings, the land upon which the buildings are located, and machinery and equipment, if the land, buildings, and machinery and equipment are used primarily for the manufacturing of electronic testing or measurement devices. The total credit allowed under this section for a person is limited to four hundred thousand dollars in a calendar year.
     (2) A credit earned during one calendar year may be carried over to be credited against taxes incurred in the subsequent calendar year but may not be carried over a second year. No refunds may be granted for credits under this section.
     (3) In addition to all other requirements under this title, a person claiming the credit under this section must report as required under RCW 82.32.620.
     (4) No credit may be claimed for property taxes due and payable before July 1, 2010.
     (5) Notwithstanding the expiration date of this section, credit accrued under this section before July 1, 2020, may be claimed on or after July 1, 2020. However, no credit earned under this section between January 1, 2020, and July 1, 2020, may be claimed after December 31, 2021.

NEW SECTION.  Sec. 3   A new section is added to chapter 82.04 RCW to read as follows:
     (1) Subject to the requirements and limits in this section, eligible businesses are entitled to a credit against the tax due under this chapter. The credit equals four thousand dollars for each new qualified employment position with annual wages and benefits greater than fifty thousand dollars that is created by the eligible business on or after July 1, 2010, and filled for at least twelve consecutive months.
     (2) Eligible businesses claiming a credit under this section must increase employment in an eligible area by at least one hundred new qualified employment positions between July 1, 2010, and July 1, 2011.
     (3)(a) A credit under this section is earned when the new qualified employment position is filled.
     (b) New qualified employment positions filled by existing employees are eligible for the credit under this section only if the position vacated by the existing employee is filled by a new hire.
     (c) Once a new qualified employment position has been filled, a position does not cease to be a new qualified employment position solely due to periods in which the position goes vacant, as long as:
     (i) The cumulative period of any vacancies in that position is not more than one hundred twenty days in the twelve consecutive month period for which the position must be filled; and
     (ii) During a vacancy, the employer is training or actively recruiting a replacement permanent, full-time employee for the position.
     (4)(a) The credit may be claimed against any tax liability incurred under this chapter after the credit is earned.
     (b) For credit earned under this section before July 1, 2011, a person may claim the credit before the person has met the requirement in subsection (2) of this section. However, a person that does not meet the requirement in subsection (2) of this section and who has claimed a credit under this section must repay the amount of the credit as provided in subsection (10) of this section.
     (c) The credit must be claimed on a return filed electronically with the department using the department's online tax filing service. The credit may be carried over until used. No refunds may be granted for credits under this section.
     (5) No application is necessary for the credit. The eligible business must keep records necessary for the department to verify eligibility under this section.
     (6) Credits are available on a first in-time basis. The department must disallow any credit, or portion of a credit, that would cause the total amount of credit claimed under this section during any fiscal year to exceed five hundred thousand dollars. If this limitation is reached, the department must provide written notice to any person who has claimed tax credits in excess of the five hundred thousand dollar limitation in this subsection. The notice must indicate the amount of tax due and provide that the tax be paid within thirty days from the date of such notice. The department may not assess any penalties or interest on the amount due in the notice. However, if the full amount of tax due is not paid by the due date, the department must assess penalties and interest as provided in chapter 82.32 RCW on the amount of unpaid tax. Interest must be assessed retroactively to the date the tax credit was claimed and accrues until the amount of tax due is paid.
     (7) No credit may be earned before July 1, 2010.
     (8) The employment security department must provide to the department such information needed by the department to verify eligibility under this section.
     (9) No eligible business may claim more than five hundred thousand dollars of total credit under this section.
     (10) An eligible business must repay the amount of credit claimed under this section in excess of the limit in subsection (9) of this section. An eligible business must also repay any credit claimed under this section if the eligible business did not meet all of the requirements of this section. Applicable penalties and interest as provided in chapter 82.32 RCW apply to amounts due as provided in this subsection.
     (11) Notwithstanding the expiration date of this section, credit accrued under this section before July 1, 2020, may be claimed on or after July 1, 2020.
     (12) For purposes of this section, the following definitions apply:
     (a) "Eligible area" means any county other than a rural county as defined in RCW 82.14.370 or a county that contains a community empowerment zone designated under chapter 43.31C RCW.
     (b) "Eligible business" means a business taxable under section 1 of this act.
     (c) "New qualified employment position" means a permanent, full-time employment position that did not previously exist. For purposes of this subsection, "full time" means a normal work week of at least thirty-five hours.

Sec. 4   RCW 82.04.440 and 2006 c 300 s 8 and 2006 c 84 s 6 are each reenacted and amended to read as follows:
     (1) Every person engaged in activities that are subject to tax under two or more provisions of RCW 82.04.230 through 82.04.298, inclusive, shall be taxable under each provision applicable to those activities.
     (2) Persons taxable under RCW 82.04.2909(2), 82.04.250, 82.04.270, 82.04.294(2), or 82.04.260 (1)(c), (4), (11), or (12) with respect to selling products in this state, including those persons who are also taxable under RCW 82.04.261, shall be allowed a credit against those taxes for any (a) manufacturing taxes paid with respect to the manufacturing of products so sold in this state, and/or (b) extracting taxes paid with respect to the extracting of products so sold in this state or ingredients of products so sold in this state. Extracting taxes taken as credit under subsection (3) of this section may also be taken under this subsection, if otherwise allowable under this subsection. The amount of the credit shall not exceed the tax liability arising under this chapter with respect to the sale of those products.
     (3) Persons taxable as manufacturers under RCW 82.04.240 or 82.04.260 (1)(b) or (12), including those persons who are also taxable under RCW 82.04.261, shall be allowed a credit against those taxes for any extracting taxes paid with respect to extracting the ingredients of the products so manufactured in this state. The amount of the credit shall not exceed the tax liability arising under this chapter with respect to the manufacturing of those products.
     (4) Persons taxable under RCW 82.04.230, 82.04.240, section 1 of this act, 82.04.2909(1), 82.04.294(1), 82.04.2404, or 82.04.260 (1), (2), (4), (11), or (12), including those persons who are also taxable under RCW 82.04.261, with respect to extracting or manufacturing products in this state shall be allowed a credit against those taxes for any (i) gross receipts taxes paid to another state with respect to the sales of the products so extracted or manufactured in this state, (ii) manufacturing taxes paid with respect to the manufacturing of products using ingredients so extracted in this state, or (iii) manufacturing taxes paid with respect to manufacturing activities completed in another state for products so manufactured in this state. The amount of the credit shall not exceed the tax liability arising under this chapter with respect to the extraction or manufacturing of those products.
     (5) For the purpose of this section:
     (a) "Gross receipts tax" means a tax:
     (i) Which is imposed on or measured by the gross volume of business, in terms of gross receipts or in other terms, and in the determination of which the deductions allowed would not constitute the tax an income tax or value added tax; and
     (ii) Which is also not, pursuant to law or custom, separately stated from the sales price.
     (b) "State" means (i) the state of Washington, (ii) a state of the United States other than Washington, or any political subdivision of such other state, (iii) the District of Columbia, and (iv) any foreign country or political subdivision thereof.
     (c) "Manufacturing tax" means a gross receipts tax imposed on the act or privilege of engaging in business as a manufacturer, and includes (i) the taxes imposed in RCW 82.04.240, 82.04.2404, 82.04.2909(1), 82.04.260 (1), (2), (4), (11), and (12), and 82.04.294(1); (ii) the tax imposed under RCW 82.04.261 on persons who are engaged in business as a manufacturer; and (iii) similar gross receipts taxes paid to other states.
     (d) "Extracting tax" means a gross receipts tax imposed on the act or privilege of engaging in business as an extractor, and includes (i) the tax imposed on extractors in RCW 82.04.230 and 82.04.260(12); (ii) the tax imposed under RCW 82.04.261 on persons who are engaged in business as an extractor; and (iii) similar gross receipts taxes paid to other states.
     (e) "Business", "manufacturer", "extractor", and other terms used in this section have the meanings given in RCW 82.04.020 through 82.04.212, notwithstanding the use of those terms in the context of describing taxes imposed by other states.

Sec. 5   RCW 82.32.620 and 2005 c 301 s 4 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 82.04.294 ((shall)) or section 1 of this act or who claims a credit under section 2 or 3 of this act must 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)) may 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 82.04.294 or section 1 of this act or a credit under section 2 or 3 of this act. The report is due by March 31st following any year in which a preferential tax rate under RCW 82.04.294 or section 1 of this act or a credit under section 2 or 3 of this act is used. The department may extend the due date of the report as provided in RCW 82.32.590. This information is not subject to the confidentiality provisions of RCW 82.32.330.
     (b) If a person fails to submit an annual report under (a) of this subsection, the department ((shall)) must declare the amount of taxes reduced for the previous calendar year to be immediately due and payable. Excise taxes payable under this subsection are subject to interest, but not penalties, at the rate provided for delinquent taxes, as provided under this chapter. The department ((shall)) must assess interest, retroactively to the date the preferential tax rate under RCW 82.04.294 or section 1 of this act or a credit under section 2 or 3 of this act, was used. The interest ((shall)) must be assessed at the rate provided for delinquent excise taxes under this chapter, and ((shall)) accrues until the taxes for which the preferential tax rate or credit was used are repaid. This information is not subject to the confidentiality provisions of RCW 82.32.330.

Sec. 6   RCW 82.32.590 and 2009 c 461 s 7 are each amended to read as follows:
     (1) If the department finds that the failure of a taxpayer to file an annual survey or annual report under RCW 82.04.4452, 82.32.5351, 82.32.650, 82.32.630, 82.32.620, 82.32.610, 82.82.020, 82.32.632, or 82.74.040 by the due date was the result of circumstances beyond the control of the taxpayer, the department shall extend the time for filing the survey or report. Such extension shall be for a period of thirty days from the date the department issues its written notification to the taxpayer that it qualifies for an extension under this section. The department may grant additional extensions as it deems proper.
     (2) In making a determination whether the failure of a taxpayer to file an annual survey or annual report by the due date was the result of circumstances beyond the control of the taxpayer, the department shall be guided by rules adopted by the department for the waiver or cancellation of penalties when the underpayment or untimely payment of any tax was due to circumstances beyond the control of the taxpayer.

Sec. 7   RCW 82.32.600 and 2009 c 461 s 8 are each amended to read as follows:
     (1) Persons required to file annual surveys or annual reports under RCW 82.04.4452, 82.32.5351, 82.32.545, 82.32.610, 82.32.620, 82.32.630, 82.82.020, 82.32.632, 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. 8   If any provision of this act or its application to any person or circumstance is held invalid, the remainder of the act or the application of the provision to other persons or circumstances is not affected.

NEW SECTION.  Sec. 9   This act takes effect July 1, 2010.

NEW SECTION.  Sec. 10   This act expires July 1, 2020.