BILL REQ. #:  S-0939.2 

Read first time 02/02/11.   Referred to Committee on Ways & Means.

     AN ACT Relating to tax incentives for certain segments of the aerospace industry; amending RCW 82.04.260, 82.04.4461, 82.04.4463, and 82.08.975; providing an effective date; and declaring an emergency.

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

Sec. 1   RCW 82.04.260 and 2011 c 2 s 203 (Initiative Measure No. 1107) are each amended to read as follows:
     (1) Upon every person engaging within this state in the business of manufacturing:
     (a) Wheat into flour, barley into pearl barley, soybeans into soybean oil, canola into canola oil, canola meal, or canola by-products, or sunflower seeds into sunflower oil; as to such persons the amount of tax with respect to such business is equal to the value of the flour, pearl barley, oil, canola meal, or canola by-product manufactured, multiplied by the rate of 0.138 percent;
     (b) Beginning July 1, 2012, seafood products that remain in a raw, raw frozen, or raw salted state at the completion of the manufacturing by that person; or selling manufactured seafood products that remain in a raw, raw frozen, or raw salted state at the completion of the manufacturing, to purchasers who transport in the ordinary course of business the goods out of this state; as to such persons the amount of tax with respect to such business is equal to the value of the products manufactured or the gross proceeds derived from such sales, multiplied by the rate of 0.138 percent. Sellers must keep and preserve records for the period required by RCW 82.32.070 establishing that the goods were transported by the purchaser in the ordinary course of business out of this state;
     (c) Beginning July 1, 2012, dairy products that as of September 20, 2001, are identified in 21 C.F.R., chapter 1, parts 131, 133, and 135, including by-products from the manufacturing of the dairy products such as whey and casein; or selling the same to purchasers who transport in the ordinary course of business the goods out of state; as to such persons the tax imposed is equal to the value of the products manufactured or the gross proceeds derived from such sales multiplied by the rate of 0.138 percent. Sellers must keep and preserve records for the period required by RCW 82.32.070 establishing that the goods were transported by the purchaser in the ordinary course of business out of this state;
     (d) Beginning July 1, 2012, fruits or vegetables by canning, preserving, freezing, processing, or dehydrating fresh fruits or vegetables, or selling at wholesale fruits or vegetables manufactured by the seller by canning, preserving, freezing, processing, or dehydrating fresh fruits or vegetables and sold to purchasers who transport in the ordinary course of business the goods out of this state; as to such persons the amount of tax with respect to such business is equal to the value of the products manufactured or the gross proceeds derived from such sales multiplied by the rate of 0.138 percent. Sellers must keep and preserve records for the period required by RCW 82.32.070 establishing that the goods were transported by the purchaser in the ordinary course of business out of this state;
     (e) Until July 1, 2009, alcohol fuel, biodiesel fuel, or biodiesel feedstock, as those terms are defined in RCW 82.29A.135; as to such persons the amount of tax with respect to the business is equal to the value of alcohol fuel, biodiesel fuel, or biodiesel feedstock manufactured, multiplied by the rate of 0.138 percent; and
     (f) Wood biomass fuel as defined in RCW 82.29A.135; as to such persons the amount of tax with respect to the business is equal to the value of wood biomass fuel manufactured, multiplied by the rate of 0.138 percent.
     (2) Upon every person engaging within this state in the business of splitting or processing dried peas; as to such persons the amount of tax with respect to such business is equal to the value of the peas split or processed, multiplied by the rate of 0.138 percent.
     (3) Upon every nonprofit corporation and nonprofit association engaging within this state in research and development, as to such corporations and associations, the amount of tax with respect to such activities is equal to the gross income derived from such activities multiplied by the rate of 0.484 percent.
     (4) Upon every person engaging within this state in the business of slaughtering, breaking and/or processing perishable meat products and/or selling the same at wholesale only and not at retail; as to such persons the tax imposed is equal to the gross proceeds derived from such sales multiplied by the rate of 0.138 percent.
     (5) Upon every person engaging within this state in the business of acting as a travel agent or tour operator; as to such persons the amount of the tax with respect to such activities is equal to the gross income derived from such activities multiplied by the rate of 0.275 percent.
     (6) Upon every person engaging within this state in business as an international steamship agent, international customs house broker, international freight forwarder, vessel and/or cargo charter broker in foreign commerce, and/or international air cargo agent; as to such persons the amount of the tax with respect to only international activities is equal to the gross income derived from such activities multiplied by the rate of 0.275 percent.
     (7) Upon every person engaging within this state in the business of stevedoring and associated activities pertinent to the movement of goods and commodities in waterborne interstate or foreign commerce; as to such persons the amount of tax with respect to such business is equal to the gross proceeds derived from such activities multiplied by the rate of 0.275 percent. Persons subject to taxation under this subsection are exempt from payment of taxes imposed by chapter 82.16 RCW for that portion of their business subject to taxation under this subsection. Stevedoring and associated activities pertinent to the conduct of goods and commodities in waterborne interstate or foreign commerce are defined as all activities of a labor, service or transportation nature whereby cargo may be loaded or unloaded to or from vessels or barges, passing over, onto or under a wharf, pier, or similar structure; cargo may be moved to a warehouse or similar holding or storage yard or area to await further movement in import or export or may move to a consolidation freight station and be stuffed, unstuffed, containerized, separated or otherwise segregated or aggregated for delivery or loaded on any mode of transportation for delivery to its consignee. Specific activities included in this definition are: Wharfage, handling, loading, unloading, moving of cargo to a convenient place of delivery to the consignee or a convenient place for further movement to export mode; documentation services in connection with the receipt, delivery, checking, care, custody and control of cargo required in the transfer of cargo; imported automobile handling prior to delivery to consignee; terminal stevedoring and incidental vessel services, including but not limited to plugging and unplugging refrigerator service to containers, trailers, and other refrigerated cargo receptacles, and securing ship hatch covers.
     (8) Upon every person engaging within this state in the business of disposing of low-level waste, as defined in RCW 43.145.010; as to such persons the amount of the tax with respect to such business is equal to the gross income of the business, excluding any fees imposed under chapter 43.200 RCW, multiplied by the rate of 3.3 percent.
     If the gross income of the taxpayer is attributable to activities both within and without this state, the gross income attributable to this state must be determined in accordance with the methods of apportionment required under RCW 82.04.460.
     (9) Upon every person engaging within this state as an insurance producer or title insurance agent licensed under chapter 48.17 RCW or a surplus line broker licensed under chapter 48.15 RCW; as to such persons, the amount of the tax with respect to such licensed activities is equal to the gross income of such business multiplied by the rate of 0.484 percent.
     (10) Upon every person engaging within this state in business as a hospital, as defined in chapter 70.41 RCW, that is operated as a nonprofit corporation or by the state or any of its political subdivisions, as to such persons, the amount of tax with respect to such activities is equal to the gross income of the business multiplied by the rate of 0.75 percent through June 30, 1995, and 1.5 percent thereafter.
     (11)(a) Beginning October 1, 2005, upon every person engaging within this state in the business of manufacturing commercial airplanes, or components of such airplanes, or making sales, at retail or wholesale, of commercial airplanes or components of such airplanes, manufactured by the seller, 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 and the gross proceeds of sales 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:
     (i) 0.4235 percent from October 1, 2005, through June 30, 2007; and
     (ii) 0.2904 percent beginning July 1, 2007.
     (b)(i) Beginning July 1, 2008, upon every person who is not eligible to report under the provisions of (a) of this subsection (11) and is engaging within this state in the business of manufacturing tooling specifically designed for use in manufacturing commercial airplanes or components of such airplanes, or making sales, at retail or wholesale, of such tooling manufactured by the seller, 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 and the gross proceeds of sales 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.
     (((c))) (ii) Beginning July 1, 2012, upon every person who is not eligible to report under the provisions of (a) of this subsection (11) and is engaging within this state in the business of manufacturing tooling specifically designed for use in manufacturing unmanned aerial vehicles or components of unmanned aerial vehicles, or making sales, at retail or wholesale, of such tooling manufactured by the seller, 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 and the gross proceeds of sales 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 0.2904 percent.
     (c) Beginning July 1, 2012, upon every person engaging within this state in the business of manufacturing unmanned aerial vehicles or components of unmanned aerial vehicles, or making sales, at retail or wholesale, of unmanned aerial vehicles or components of unmanned aerial vehicles manufactured by the seller, 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 and the gross proceeds of sales 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 0.2904 percent.
     (d) For the purposes of this subsection (11), the following definitions apply:
     (i) "Commercial airplane" ((and "component" have)) has the same meaning((s)) as provided in RCW 82.32.550.
     (((d))) (ii) "Component" has the same meaning as provided in RCW 82.32.550 when used with respect to commercial airplanes.
     (iii) "Components of unmanned aerial vehicles" means any tangible personal property that is attached to and becomes an integral part of the unmanned aerial vehicle. The term includes such items as engines, engine and body parts, batteries, paint, and tires.
     (iv) "Unmanned aerial vehicle" means a reusable, uncrewed vehicle capable of controlled, sustained, level flight and powered by a jet or reciprocating engine.
     (e) In addition to all other requirements under this title, a person reporting under the tax rate provided in this subsection (11) must file a complete annual report with the department under RCW 82.32.534.
     (((e))) (f) This subsection (11) does not apply on and after July 1, 2024.
     (12)(a) Until July 1, 2024, upon every person engaging within this state in the business of extracting timber or extracting for hire timber; as to such persons the amount of tax with respect to the business is, in the case of extractors, equal to the value of products, including by-products, extracted, or in the case of extractors for hire, equal to the gross income of the business, multiplied by the rate of 0.4235 percent from July 1, 2006, through June 30, 2007, and 0.2904 percent from July 1, 2007, through June 30, 2024.
     (b) Until July 1, 2024, upon every person engaging within this state in the business of manufacturing or processing for hire: (i) Timber into timber products or wood products; or (ii) timber products into other timber products or wood products; as to such persons the amount of the tax with respect to the business is, in the case of manufacturers, equal to the value of products, including by-products, manufactured, or in the case of processors for hire, equal to the gross income of the business, multiplied by the rate of 0.4235 percent from July 1, 2006, through June 30, 2007, and 0.2904 percent from July 1, 2007, through June 30, 2024.
     (c) Until July 1, 2024, upon every person engaging within this state in the business of selling at wholesale: (i) Timber extracted by that person; (ii) timber products manufactured by that person from timber or other timber products; or (iii) wood products manufactured by that person from timber or timber products; as to such persons the amount of the tax with respect to the business is equal to the gross proceeds of sales of the timber, timber products, or wood products multiplied by the rate of 0.4235 percent from July 1, 2006, through June 30, 2007, and 0.2904 percent from July 1, 2007, through June 30, 2024.
     (d) Until July 1, 2024, upon every person engaging within this state in the business of selling standing timber; as to such persons the amount of the tax with respect to the business is equal to the gross income of the business multiplied by the rate of 0.2904 percent. For purposes of this subsection (12)(d), "selling standing timber" means the sale of timber apart from the land, where the buyer is required to sever the timber within thirty months from the date of the original contract, regardless of the method of payment for the timber and whether title to the timber transfers before, upon, or after severance.
     (e) For purposes of this subsection, the following definitions apply:
     (i) "Biocomposite surface products" means surface material products containing, by weight or volume, more than fifty percent recycled paper and that also use nonpetroleum-based phenolic resin as a bonding agent.
     (ii) "Paper and paper products" means products made of interwoven cellulosic fibers held together largely by hydrogen bonding. "Paper and paper products" includes newsprint; office, printing, fine, and pressure-sensitive papers; paper napkins, towels, and toilet tissue; kraft bag, construction, and other kraft industrial papers; paperboard, liquid packaging containers, containerboard, corrugated, and solid- fiber containers including linerboard and corrugated medium; and related types of cellulosic products containing primarily, by weight or volume, cellulosic materials. "Paper and paper products" does not include books, newspapers, magazines, periodicals, and other printed publications, advertising materials, calendars, and similar types of printed materials.
     (iii) "Recycled paper" means paper and paper products having fifty percent or more of their fiber content that comes from postconsumer waste. For purposes of this subsection (12)(e)(iii), "postconsumer waste" means a finished material that would normally be disposed of as solid waste, having completed its life cycle as a consumer item.
     (iv) "Timber" means forest trees, standing or down, on privately or publicly owned land. "Timber" does not include Christmas trees that are cultivated by agricultural methods or short-rotation hardwoods as defined in RCW 84.33.035.
     (v) "Timber products" means:
     (A) Logs, wood chips, sawdust, wood waste, and similar products obtained wholly from the processing of timber, short-rotation hardwoods as defined in RCW 84.33.035, or both;
     (B) Pulp, including market pulp and pulp derived from recovered paper or paper products; and
     (C) Recycled paper, but only when used in the manufacture of biocomposite surface products.
     (vi) "Wood products" means paper and paper products; dimensional lumber; engineered wood products such as particleboard, oriented strand board, medium density fiberboard, and plywood; wood doors; wood windows; and biocomposite surface products.
     (f) Except for small harvesters as defined in RCW 84.33.035, a person reporting under the tax rate provided in this subsection (12) must file a complete annual survey with the department under RCW 82.32.585.
     (13) Upon every person engaging within this state in inspecting, testing, labeling, and storing canned salmon owned by another person, as to such persons, the amount of tax with respect to such activities is equal to the gross income derived from such activities multiplied by the rate of 0.484 percent.
     (14)(a) Upon every person engaging within this state in the business of printing a newspaper, publishing a newspaper, or both, the amount of tax on such business is equal to the gross income of the business multiplied by the rate of 0.2904 percent.
     (b) A person reporting under the tax rate provided in this subsection (14) must file a complete annual report with the department under RCW 82.32.534.

Sec. 2   RCW 82.04.4461 and 2010 c 114 s 115 are each amended to read as follows:
     (1)(((a)(i))) In computing the tax imposed under this chapter, a credit is allowed for each person for qualified aerospace product development. ((For a person who is a manufacturer or processor for hire of commercial airplanes or components of such airplanes,)) The credit is equal to the amount of qualified aerospace product development expenditures of a person, multiplied by the rate of 1.5 percent.
     (2)(a)(i) Credit may be earned for expenditures occurring after December 1, 2003, and related to the development of commercial airplanes or components of such airplanes by manufacturers or processors for hire. ((For all other persons,))
     (ii) Credit may be earned ((only)) for expenditures occurring after June 30, 2008, related to the development of any or all of the following aerospace products:
     (A) Commercial airplanes or components of such airplanes by persons not eligible for the credit under (a)(i) of this subsection (2);
     (B) Tooling specifically designed for use in manufacturing commercial airplanes or their components; and
     (C) Machinery and equipment that is designed for use, by federal aviation regulation part 145 certificated repair stations, primarily for the maintenance, repair, overhaul, or refurbishing of commercial airplanes or their components.
     (iii) Credit may be earned for expenditures occurring after July 1, 2011, related to the development of any or all of the following aerospace products:
     (A) Unmanned aerial vehicles or components of unmanned aerial vehicles;
     (B) Tooling specifically designed for use in manufacturing unmanned aerial vehicles or components of unmanned aerial vehicles; and
     (C) Machinery and equipment that is designed for use, by federal aviation regulation part 145 certificated repair stations, primarily for the maintenance, repair, overhaul, or refurbishing of unmanned aerial vehicles or components of unmanned aerial vehicles.
     (((ii))) (b) For purposes of this subsection, the following definitions apply:
     (i) "Commercial airplane" ((and "component" have)) has the same meaning((s)) as provided in RCW 82.32.550.
     (((b))) (ii) "Component" has the same meaning as provided in RCW 82.32.550 when used with respect to commercial airplanes.
     (iii) "Unmanned aerial vehicle" and "components of unmanned aerial vehicles" have the same meanings as in RCW 82.04.260.
     (3) Before July 1, 2005, any credits earned under this section must be accrued and carried forward and may not be used until July 1, 2005. These carryover credits may be used at any time thereafter, and may be carried over until used. Refunds may not be granted in the place of a credit.
     (((2) The credit is equal to the amount of qualified aerospace product development expenditures of a person, multiplied by the rate of 1.5 percent.
     (3))) (4) Except as provided in subsection (((1)(b))) (3) of this section the credit must be claimed against taxes due for the same calendar year in which the qualified aerospace product development expenditures are incurred. Credit earned on or after July 1, 2005, may not be carried over. The credit for each calendar year may not exceed the amount of tax otherwise due under this chapter for the calendar year. Refunds may not be granted in the place of a credit.
     (((4))) (5) Any person claiming the credit must file a form prescribed by the department that must include the amount of the credit claimed, an estimate of the anticipated aerospace product development expenditures during the calendar year for which the credit is claimed, an estimate of the taxable amount during the calendar year for which the credit is claimed, and such additional information as the department may prescribe.
     (((5))) (6) The definitions in this subsection apply throughout this section.
     (a) "Aerospace product" has the meaning given in RCW 82.08.975.
     (b) "Aerospace product development" means research, design, and engineering activities performed in relation to the development of an aerospace product or of a product line, model, or model derivative of an aerospace product, including prototype development, testing, and certification. The term includes the discovery of technological information, the translating of technological information into new or improved products, processes, techniques, formulas, or inventions, and the adaptation of existing products and models into new products or new models, or derivatives of products or models. The term does not include manufacturing activities or other production-oriented activities, however the term does include tool design and engineering design for the manufacturing process. The term does not include surveys and studies, social science and humanities research, market research or testing, quality control, sale promotion and service, computer software developed for internal use, and research in areas such as improved style, taste, and seasonal design.
     (c) "Qualified aerospace product development" means aerospace product development performed within this state.
     (d) "Qualified aerospace product development expenditures" means operating expenses, including wages, compensation of a proprietor or a partner in a partnership as determined by the department, benefits, supplies, and computer expenses, directly incurred in qualified aerospace product development by a person claiming the credit provided in this section. The term does not include amounts paid to a person or to the state and any of its departments and institutions, other than a public educational or research institution to conduct qualified aerospace product development. The term does not include capital costs and overhead, such as expenses for land, structures, or depreciable property.
     (e) "Taxable amount" means the taxable amount subject to the tax imposed in this chapter required to be reported on the person's tax returns during the year in which the credit is claimed, less any taxable amount for which a credit is allowed under RCW 82.04.440.
     (((6))) (7) In addition to all other requirements under this title, a person claiming the credit under this section must file a complete annual report with the department under RCW 82.32.534.
     (((7))) (8) Credit may not be claimed for expenditures for which a credit is claimed under RCW 82.04.4452.
     (((8))) (9) This section expires July 1, 2024.

Sec. 3   RCW 82.04.4463 and 2010 1st sp.s. c 23 s 515 are each amended to read as follows:
     (1) In computing the tax imposed under this chapter, a credit is allowed for property taxes and leasehold excise taxes paid during the calendar year.
     (2) The credit is equal to:
     (a)(i)(A) Property taxes paid on buildings, and land upon which the buildings are located, constructed after December 1, 2003, and used exclusively in manufacturing commercial airplanes or components of such airplanes; and
     (B) Leasehold excise taxes paid with respect to buildings constructed after January 1, 2006, the land upon which the buildings are located, or both, if the buildings are used exclusively in manufacturing commercial airplanes or components of such airplanes; and
     (C) Property taxes or leasehold excise taxes paid on, or with respect to, buildings constructed after June 30, 2008, the land upon which the buildings are located, or both, and used exclusively for aerospace product development of aerospace products described in RCW 82.04.4461(2)(a) (i) or (ii), manufacturing tooling specifically designed for use in manufacturing commercial airplanes or their components, or in providing aerospace services in respect to commercial airplanes or their components, by persons not within the scope of (a)(i)(A) and (B) of this subsection (2) and are taxable under RCW 82.04.290(3), 82.04.260(((10))) (11)(b)(i), or 82.04.250(3); ((or)) and
     (D) Property taxes or leasehold excise taxes paid on, or with respect to, buildings constructed after June 30, 2011, the land upon which the buildings are located, or both, and used exclusively for aerospace product development of aerospace products described in RCW 82.04.4461(2)(a)(iii), manufacturing unmanned aerial vehicles or components of unmanned aerial vehicles, or in providing aerospace services in respect to unmanned aerial vehicles or components of unmanned aerial vehicles, by persons not within the scope of (a)(i)(A), (B), and (C) of this subsection (2) and are taxable under RCW 82.04.290(3), 82.04.260(11) (b)(ii) or (c), or 82.04.250(3);
     (ii) Property taxes attributable to an increase in assessed value due to the renovation or expansion, after:
     (A) December 1, 2003, of ((a)) buildings used exclusively in manufacturing commercial airplanes or components of such airplanes; ((and))
     (B) June 30, 2008, of buildings used exclusively for aerospace product development of aerospace products described in RCW 82.04.4461(2)(a)(ii), manufacturing tooling specifically designed for use in manufacturing commercial airplanes or their components, or in providing aerospace services in respect to commercial airplanes or their components, by persons not within the scope of (a)(ii)(A) of this subsection (2) and are taxable under RCW 82.04.290(3), 82.04.260(((10))) (11)(b)(i), or 82.04.250(3); and
     (C) June 30, 2011, of buildings used exclusively for aerospace product development of aerospace products described in RCW 82.04.4461(2)(a)(iii), manufacturing unmanned aerial vehicles or components of unmanned aerial vehicles, or in providing aerospace services in respect to unmanned aerial vehicles or components of unmanned aerial vehicles, by persons not within the scope of (a)(ii)(A) and (B) of this subsection (2) and are taxable under RCW 82.04.290(3), 82.04.260(11) (b)(ii) or (c), or 82.04.250(3); and
     (b) An amount equal to:
     (i)(A) Property taxes paid, by persons taxable under RCW 82.04.260(((10))) (11)(a), on machinery and equipment exempt under RCW 82.08.02565 or 82.12.02565 and acquired after December 1, 2003;
     (B) Property taxes paid, by persons taxable under RCW 82.04.260(((10))) (11)(b)(i), on machinery and equipment exempt under RCW 82.08.02565 or 82.12.02565 and acquired after June 30, 2008; ((or))
     (C) Property taxes paid, by persons taxable under RCW 82.04.250(3) or 82.04.290(3), on computer hardware, computer peripherals, and software exempt under RCW 82.08.975 or 82.12.975 ((and)), acquired after June 30, 2008, and used in providing aerospace services or aerospace product development related to any or all of the aerospace products described in RCW 82.04.4461(2)(a) (i) or (ii);
     (D) Property taxes paid, by persons taxable under RCW 82.04.260(11) (b)(ii) or (c), on machinery and equipment exempt under RCW 82.08.02565 or 82.12.02565 and acquired after June 30, 2011; or
     (E) Property taxes paid, by persons taxable under RCW 82.04.250(3) or 82.04.290(3), on computer hardware, computer peripherals, and software exempt under RCW 82.08.975 or 82.12.975, acquired after June 30, 2011, and used in providing aerospace services or aerospace product development related to any or all of the aerospace products described in RCW 82.04.4461(2)(a)(iii).
     (ii) For purposes of determining the amount eligible for credit under (i)(A) ((and)), (B), and (D) of this subsection (2)(b), the amount of property taxes paid is multiplied by a fraction.
     (A) The numerator of the fraction is the total taxable amount subject to the tax imposed under RCW 82.04.260(((10))) (11) (a) ((or)), (b), or (c) on the applicable business activities of manufacturing commercial airplanes, components of such airplanes, unmanned aerial vehicles, components of unmanned aerial vehicles, or tooling specifically designed for use in the manufacturing of commercial airplanes ((or)), components of such airplanes, unmanned aerial vehicles, components of unmanned aerial vehicles.
     (B) The denominator of the fraction is the total taxable amount subject to the tax imposed under all manufacturing classifications in chapter 82.04 RCW.
     (C) For purposes of both the numerator and denominator of the fraction, the total taxable amount refers to the total taxable amount required to be reported on the person's returns for the calendar year before the calendar year in which the credit under this section is earned. The department may provide for an alternative method for calculating the numerator in cases where the tax rate provided in RCW 82.04.260(((10))) (11) for manufacturing was not in effect during the full calendar year before the calendar year in which the credit under this section is earned.
     (D) No credit is available under (b)(i)(A) ((or)), (B), or (D) of this subsection (2) if either the numerator or the denominator of the fraction is zero. If the fraction is greater than or equal to nine-tenths, then the fraction is rounded to one.
     (E) As used in (b)(ii)(C) of this subsection (2), "returns" means the tax returns for which the tax imposed under this chapter is reported to the department.
     (3) The definitions in this subsection apply throughout this section, unless the context clearly indicates otherwise.
     (a) "Aerospace product development" has the same meaning as provided in RCW 82.04.4461.
     (b) "Aerospace services" has the same meaning given in RCW 82.08.975.
     (c) "Commercial airplane" ((and "component" have)) has the same meaning((s)) as provided in RCW 82.32.550.
     (d) "Component" has the same meaning as provided in RCW 82.32.550 when used with respect to commercial airplanes.
     (e) "Unmanned aerial vehicles" and "components of unmanned aerial vehicles" have the same meanings as in RCW 82.04.260.
     (4) A credit earned during one calendar year may be carried over to be credited against taxes incurred in a subsequent calendar year, but may not be carried over a second year. No refunds may be granted for credits under this section.
     (5) In addition to all other requirements under this title, a person claiming the credit under this section must file a complete annual report with the department under RCW 82.32.534.
     (6) This section expires July 1, 2024.

Sec. 4   RCW 82.08.975 and 2008 c 81 s 2 are each amended to read as follows:
     (1) The tax levied by RCW 82.08.020 ((shall)) does not apply to sales of computer hardware, computer peripherals, or software, not otherwise eligible for exemption under RCW 82.08.02565, used primarily in the development, design, and engineering of aerospace products or in providing aerospace services, or to sales of or charges made for labor and services rendered in respect to installing the computer hardware, computer peripherals, or software.
     (2) 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)) must retain a copy of the certificate for the seller's files.
     (3) As used in this section, the following definitions apply:
     (a) "Aerospace products" means:
     (i) Commercial airplanes and their components;
     (ii) Unmanned aerial vehicles and components of unmanned aerial vehicles;
     (iii) Machinery and equipment that is designed and used primarily for the maintenance, repair, overhaul, or refurbishing of commercial airplanes or their components or unmanned aerial vehicles or components of unmanned aerial vehicles, by federal aviation regulation part 145 certificated repair stations; and
     (((iii))) (iv) Tooling specifically designed for use in manufacturing commercial airplanes or their components or unmanned aerial vehicles or components of unmanned aerial vehicles.
     (b) "Aerospace services" means the maintenance, repair, overhaul, or refurbishing of commercial airplanes or their components or unmanned aerial vehicles or components of unmanned aerial vehicles, but only when such services are performed by a FAR part 145 certificated repair station.
     (c) "Commercial airplane" ((and "component" have)) has the same meaning((s)) provided in RCW 82.32.550.
     (d) "Component" has the same meaning as provided in RCW 82.32.550 when used with respect to commercial airplanes.
     (e) "Peripherals" includes keyboards, monitors, mouse devices, and other accessories that operate outside of the computer, excluding cables, conduit, wiring, and other similar property.
     (f) "Unmanned aerial vehicles" and "components of unmanned aerial vehicles" have the same meanings provided in RCW 82.04.260.
     (4) This section expires July 1, 2024.

NEW SECTION.  Sec. 5   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, 2011.