BILL REQ. #:  H-3308.4 

Read first time 01/17/12.   Referred to Committee on Ways & Means.

     AN ACT Relating to establishing a state tax on capital gains; amending RCW 82.03.130 and 82.03.140; adding a new chapter to Title 82 RCW; and prescribing penalties.

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

NEW SECTION.  Sec. 1   The definitions in this section apply throughout this title unless the context clearly requires otherwise. Any term used in this title has the same meaning as when used in a comparable context in the internal revenue code unless provided otherwise.
     (1) "Capital gains" means the gain derived from the sale or exchange of capital assets as reported on federal tax form 1040 or 1041.
     (2) "Department" means the state department of revenue.
     (3) "Individual" means a natural person.
     (4) "Internal revenue code" means the United States internal revenue code of 1986 and amendments thereto, as existing and in effect on January 1, 2013, or such subsequent date as the department may provide by rule consistent with the purpose of this section.
     (5) "Person" means an individual, fiduciary of a resident estate, or fiduciary of a resident trust.
     (6) "Resident" means an individual who:
     (a) Has resided in this state for the entire taxable year; or
     (b) Is domiciled in this state unless the individual:
     (i) Maintains no permanent place of abode in this state; and
     (ii) Does maintain a permanent place of abode elsewhere; and
     (iii) Spends in the aggregate not more than thirty days in the taxable year in this state; or
     (c) Is not domiciled in this state, but maintains a permanent place of abode in this state and spends in the aggregate more than one hundred eighty-three days of the taxable year in this state unless the individual establishes to the satisfaction of the director of revenue that the individual is in the state only for temporary or transitory purposes; or
     (d) Claims the state of Washington as the individual's tax home for federal income tax purposes.
     (7) "Resident estate" means an estate of which a personal representative was appointed by a Washington court or an estate administered in this state.
     (8) "Resident trust" means a trust whose situs, as determined by RCW 11.96A.030, is within the state of Washington.
     (9) "Taxable year" means the taxpayer's taxable year as defined under the internal revenue code.
     (10) "Taxpayer" means an individual, the fiduciary of a resident estate, or the fiduciary of a resident trust receiving capital gains subject to tax under this title.

NEW SECTION.  Sec. 2   (1) Beginning on or after January 1, 2013, a tax is hereby imposed on the privilege of selling or otherwise voluntarily exchanging capital assets. The tax equals five percent multiplied by the capital gains for each taxable year of resident individuals, resident estates, and resident trusts, as provided in this section.
     (2) For resident individuals, all capital gains must be apportioned and allocated to this state.
     (3) The following threshold deductions are allowed in determining the tax under subsection (1) of this section:
     (a) Ten thousand dollars for a joint return; and
     (b) Five thousand dollars for any return that is not a joint return, including tax returns for resident estates and resident trusts.
     (4) If capital gains of a resident estate or resident trust passes through to the federal income tax return of a beneficiary of the estate or trust, the amount may be deducted for purposes of the tax imposed under subsection (1) of this section.
     (5) Capital gains derived from the sale or exchange of a person's primary residence may be deducted for purposes of the tax imposed under subsection (1) of this section.
     (6) Capital gains derived from an exchange resulting from condemnation proceedings by any state, federal, or local government may be deducted for purposes of the tax imposed under subsection (1) of this section.
     (7) The tax imposed under subsection (1) of this section is never less than zero.

NEW SECTION.  Sec. 3   (1) Any individual who knowingly attempts to evade the tax imposed under this title or payment thereof is guilty of a class C felony as provided in chapter 9A.20 RCW.
     (2) Any individual who knowingly fails to pay tax, make returns, keep records, or supply information, as required under this title, is guilty of a gross misdemeanor as provided in chapter 9A.20 RCW.

NEW SECTION.  Sec. 4   (1) All taxpayers must file with the department, on forms prescribed by the department, a capital gains tax return for each taxable year. A person owing no tax for a taxable year is not required to file a return for that year. Each person required to file a return under this title must, without assessment, notice, or demand, pay any tax due thereon to the department on or before the date fixed for the filing of the return.
     (2) The department may by rule require that certain taxpayers file, on forms prescribed by the department, informational returns for any period.
     (3) For resident estates, the administrator, executor, or other individual responsible for the administration of the estate, is required to file the capital gains tax return.
     (4) For resident trusts, the trustee or other individual responsible for the administration of the trust, is required to file the capital gains tax return.

NEW SECTION.  Sec. 5   The due date of a return required to be filed with the department is the due date of the federal income tax return or informational return for federal income tax purposes, except as otherwise required by the department. The department may grant extensions of times by which returns required to be filed by this title may be submitted. The department may grant extensions of time to pay tax with regard to taxes imposed by this title. Interest at the rate as specified in RCW 82.32.050 must accrue during any extension period and the interest and penalty provisions of chapter 82.32 RCW apply to late payments and deficiencies.

NEW SECTION.  Sec. 6   (1) If the federal income tax liabilities of both spouses are determined on a joint federal return for the taxable year, they must file a joint return under this title.
     (2) If neither spouse is required to file a federal income tax return for the taxable year, a joint return is required to be filed under this title under the same conditions under which a joint return may be filed for purposes of the federal income tax.
     (3) Except as provided in subsection (5) of this section, if the federal income tax liability of either spouse is determined on a separate federal return for the taxable year, they must file separate returns under this title.
     (4) In any case in which a joint return is filed under this section, the liability of the husband and wife or partners is joint and several, unless the spouse or partner is relieved of liability under section 6013 of the internal revenue code.
     (5) Partners in a state registered domestic partnership may file a joint return under this title.

NEW SECTION.  Sec. 7   (1) Every person required to pay the tax imposed under this title must keep records, render statements, make returns, file reports, and perform other acts as the department requires by rule. Each return must be made under penalty of perjury and on forms prescribed by the department. The department may require other statements and reports be made under penalty of perjury and on forms prescribed by the department. The department may require any taxpayer to furnish to the department a correct copy of any return or document that the taxpayer has filed with the internal revenue service or received from the internal revenue service.
     (2) All books and records and other papers and documents required to be kept under this title are subject to inspection by the department at all times during business hours of the day.

NEW SECTION.  Sec. 8   (1) To the extent possible without being inconsistent with this chapter, all of the provisions of the internal revenue code relating to the time and manner of making returns, extensions of time for filing returns, verification of returns, and the time when a return is deemed filed apply to this chapter.
     (2) The department by rule may provide modifications and exceptions to requirements of subsection (1) of this section, if reasonably necessary to facilitate the prompt, efficient, and equitable collection of tax under this chapter.

NEW SECTION.  Sec. 9   (1) The department must refund all taxes improperly paid or collected.
     (2) The following sections apply to the administration of taxes imposed under this title: RCW 82.32.050, 82.32.055, 82.32.060, 82.32.070, 82.32.080, 82.32.090, 82.32.100, 82.32.105, 82.32.110, 82.32.117, 82.32.120, 82.32.130, 82.32.135, 82.32.140, 82.32.150, 82.32.160, 82.32.170, 82.32.180, 82.32.190, 82.32.200, 82.32.210, 82.32.212, 82.32.220, 82.32.230, 82.32.235, 82.32.237, 82.32.240, 82.32.245, 82.32.260, 82.32.265, 82.32.300, 82.32.310, 82.32.320, 82.32.330, 82.32.340, 82.32.350, 82.32.360, 82.32.380, and 82.32.410.

NEW SECTION.  Sec. 10   The department may adopt rules under chapter 34.05 RCW for the administration and enforcement of this chapter. The rules, to the extent possible without being inconsistent with this chapter, must follow the internal revenue code and the regulations and rulings of the United States treasury department with respect to the federal income tax. The department may adopt as a part of these rules any portions of the internal revenue code and treasury department regulations and rulings, in whole or in part.

NEW SECTION.  Sec. 11   Taxes collected under this chapter must be deposited into the state general fund.

NEW SECTION.  Sec. 12   This chapter applies to taxable years beginning on or after January 1, 2013.

Sec. 13   RCW 82.03.130 and 2005 c 253 s 7 are each amended to read as follows:
     (1) The board ((shall have)) has jurisdiction to decide the following types of appeals:
     (a) Appeals taken pursuant to RCW 82.03.190.
     (b) Appeals from a county board of equalization pursuant to RCW 84.08.130.
     (c) Appeals by an assessor or landowner from an order of the director of revenue made pursuant to RCW 84.08.010 and 84.08.060, if filed with the board of tax appeals within thirty days after the mailing of the order, the right to such an appeal being hereby established.
     (d) Appeals by an assessor or owner of an intercounty public utility or private car company from determinations by the director of revenue of equalized assessed valuation of property and the apportionment thereof to a county made pursuant to chapter 84.12 and 84.16 RCW, if filed with the board of tax appeals within thirty days after mailing of the determination, the right to such appeal being hereby established.
     (e) Appeals by an assessor, landowner, or owner of an intercounty public utility or private car company from a determination of any county indicated ratio for such county compiled by the department of revenue pursuant to RCW 84.48.075((: PROVIDED, That)).
     (i) ((Said)) The appeal must be filed after review of the ratio under RCW 84.48.075(3) and not later than fifteen days after the mailing of the certification; and
     (ii) The hearing before the board ((shall)) must be expeditiously held in accordance with rules prescribed by the board and ((shall)) takes precedence over all matters of the same character.
     (f) Appeals from the decisions of sale price of second-class shorelands on navigable lakes by the department of natural resources pursuant to RCW ((79.94.210)) 79.125.450.
     (g) Appeals from urban redevelopment property tax apportionment district proposals established by governmental ordinances pursuant to RCW 39.88.060.
     (h) Appeals from interest rates as determined by the department of revenue for use in valuing farmland under current use assessment pursuant to RCW 84.34.065.
     (i) Appeals from revisions to stumpage value tables used to determine value by the department of revenue pursuant to RCW 84.33.091.
     (j) Appeals from denial of tax exemption application by the department of revenue pursuant to RCW 84.36.850.
     (k) Appeals pursuant to RCW 84.40.038(3).
     (l) Appeals pursuant to RCW 84.39.020.
     (m) Appeals relating to capital gains tax deficiencies and refunds, including penalties and interest, under chapter 82.--- RCW (the new chapter created in section 15 of this act).
     (2) Except as otherwise specifically provided by law hereafter, the provisions of RCW 1.12.070 ((shall)) apply to all notices of appeal filed with the board of tax appeals.

Sec. 14   RCW 82.03.140 and 2000 c 103 s 1 are each amended to read as follows:
     In all appeals over which the board has jurisdiction under RCW 82.03.130, a party taking an appeal may elect either a formal or an informal hearing, such election to be made according to rules of practice and procedure to be promulgated by the board((: PROVIDED, That)). However, nothing ((shall)) prevents the assessor or taxpayer, as a party to an appeal pursuant to RCW 84.08.130, within twenty days from the date of the receipt of the notice of appeal, from filing with the clerk of the board notice of intention that the hearing be a formal one((: PROVIDED, HOWEVER, That)). Moreover, nothing ((herein shall)) in this section may be construed to modify the provisions of RCW 82.03.190((: AND PROVIDED FURTHER, That)) and upon an appeal under RCW 82.03.130(1) (e) or (m), the director of revenue may, within ten days from the date of its receipt of the notice of appeal, file with the clerk of the board notice of its ((intention that the hearing be held pursuant to chapter 34.05 RCW)) election of a formal hearing. In the event that appeals are taken from the same decision, order, or determination, as the case may be, by different parties and only one of such parties elects a formal hearing, a formal hearing ((shall)) must be granted.

NEW SECTION.  Sec. 15   Sections 1 through 12 of this act constitute a new chapter in Title 82 RCW.