BILL REQ. #:  S-4311.1 

READ FIRST TIME 01/31/12.   

     AN ACT Relating to innovative industries for economic development; and adding a new chapter to Title 43 RCW.

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

NEW SECTION.  Sec. 1   This chapter may be known and cited as the Washington innovation industries enabling act. This chapter is enacted in the exercise of the police powers of this state for the purpose of protecting the economic well-being and general welfare of the people of this state.

NEW SECTION.  Sec. 2   (1) The legislature finds that innovation in the production of goods and services is woven throughout the history, economy, and culture of Washington state and that the future economic success of the state will be dependent on our being in the forefront of innovation. The legislature declares that the promotion of innovation within private sector companies is a fundamental purpose of state government and that the commercialization and manufacture of products within this state is in the public interest.
     (2) By this chapter, the legislature intends to accelerate the growth of industry clusters, strengthen industry collaboration in innovation, create jobs, enhance public revenues and further the continued commercialization and manufacture of innovative products in Washington, and the promotion of Washington's products and services nationally and globally. It is the purpose of this chapter to:
     (a) Enable industry-sponsored organizations to work collaboratively and provide technical and other joint assistance to help industrial producers meet their research, commercialization, financial, workforce training, marketing, exporting, and other industry identified needs;
     (b) Assist industrial producers to improve productivity and reduce costs within a globally competitive environment and remove impairments to their ability to compete in local, domestic, and foreign markets; and
     (c) Promote industry clusters individually and as part of a comprehensive state strategy to enhance the innovativeness, quality, reputation, and sales of Washington's industrial products.

NEW SECTION.  Sec. 3   The definitions in this section apply throughout this chapter unless the context clearly requires otherwise.
     (1) "Certified industry cluster" means an industry sector, which may include sector suppliers and associated institutions, which has been certified by the director as eligible for assistance through innovation industry funds.
     (2) "Director" means the director of the department of commerce or his or her duly appointed representative. The phrase "director or his or her designee" means the director unless he or she has designated an administrator, board, or other designee to act in the matter designated, in which case "director or his or her designee" means the administrator, board, or other person or persons so designated and not the director.
     (3) "Industry development organization" means a nonprofit, membership-based organization formed by firms within an industry cluster for the purpose of providing technical assistance and support to firms within the industry cluster. Industry development organization membership may be either statewide in scope or a workforce development area or areas as determined under the federal workforce investment act, P.L. 105-220.
     (4) "Industry cluster" means a group of firms, as determined by the director, that share a NAICS classification code or related NAICS classification codes as assigned by the department of revenue. The director may determine that firms sharing a NAICS code, such as supply firms or information technology firms, may be assigned to more than one industry cluster.
     (5)(a) "Innovation allocation" means for the calendar year in which certification of an industry cluster occurs and any subsequent calendar year during which an industry cluster is certified for the duration of the year, fifty percent of the amount, if any, of business and occupation taxes reported for that calendar year by all business entities within that certified industry cluster that exceed the projected tax receipts for that certified industry cluster.
     (b) An innovation allocation may not exceed five million dollars.
     (6) "Innovation industry funds" means the funds awarded to industry development organizations under section 6 of this act.
     (7) "NAICS" means the North American industry classification system.
     (8) "Projected tax receipts" means the expected business and occupation tax receipts for a calendar year from all businesses in a certified industry cluster based on a five-year trend line of state business and occupation taxes reported by all businesses in that certified industry cluster, as established by the department of revenue.

NEW SECTION.  Sec. 4   (1) The director is hereby authorized to implement, administer, and enforce this chapter. The director may adopt such rules as are necessary to carry out the provisions of this chapter, including rules that provide for a method to fund, out of the innovation industry account created in section 7 of this act, the actual costs, including personnel costs, for carrying out the director's obligations under this chapter if the costs are not directly funded by the legislature. The director must administer provisions of this act to align with the strategic plan and priorities of the Washington economic development commission.
     (2) The director, in consultation with the executive director of the Washington economic development commission, must:
     (a) Establish the process by which firms or industry development organizations may petition for certification of an industry cluster. The process must reference the minimum number of firms, or the minimum percent of the firms within an industry cluster, that must join in the petition. Industry firm participation in the cluster is voluntary;
     (b) Establish industry cluster certification standards. The certification standards must reference:
     (i) The minimum number of firms, which must be at least three, that may be in a certified industry cluster;
     (ii) The minimum rate of employment growth within the certified industry cluster;
     (iii) The minimum rate of revenue growth within the certified industry cluster;
     (iv) The identification of relationships with organizations critical to accelerating a cluster's innovation capacity and growth, such as universities and colleges, research organizations, workforce development organizations, public agencies, local economic development agencies, innovation partnership zones, and technical assistance providers; and
     (iv) Any other quantitative and qualitative factors as the director determines are appropriate;
     (c) Certify, via certification orders, industry clusters that meet the certification standards established by the director. The director may amend or terminate certification orders, consistent with the standards and rules adopted by the director;
     (d) Make the final determination on the NAICS codes that define a certified industry cluster;
     (e) Notify the director of the department of revenue when an industry cluster has been certified;
     (f) Establish the processes, selection criteria, and contractual requirements relating to the distribution of innovation industry funds; and
     (g) Provide bona fide industry development organizations seeking innovation industry funds.

NEW SECTION.  Sec. 5   (1) Upon receipt of a certification order from the director, the department of revenue must establish the projected tax receipts for a certified industry cluster. The department of revenue must establish the projected tax receipts by the later of sixty days following the receipt of the certification order or September 1st of the year in which the certification order was received. In determining the projected tax receipts the department of revenue must use existing data that is compiled in the department of revenue's normal course of business and used for other purposes. No corrections to the projected tax receipts for a certified industry cluster may be made after the department of revenue determines the initial innovation allocation for that certified industry cluster.
     (2) The department of revenue must determine the annual innovation allocation attributable to each certified industry cluster when the data is available. Such determination must be made by September 1st of each year. In determining the annual innovation allocation the department of revenue must use existing data that is compiled in the department of revenue's normal course of business and used for other purposes. No changes to the innovation allocation for a certified industry cluster may be made after the department of revenue notifies the state treasurer of that innovation allocation as required in subsection (3) of this section.
     (3) The department of revenue must notify the state treasurer of the innovation allocations determined under subsection (2) of this section. When innovation allocations are greater than zero, the state treasurer must transfer such amounts from the general fund to the innovation industry account created in section 7 of this act.
     (4) The department of revenue must annually provide to the director such contact information for firms within a certified industry cluster as is subject to disclosure under RCW 82.32.330(3)(k). The information required under this subsection must be provided by a date mutually agreed to by the department of revenue and the director.

NEW SECTION.  Sec. 6   (1) The innovation industry program is established in the department of commerce. The director may award funds via contract with industry development organizations to assist certified industry clusters consistent with the purpose of this chapter. The period during which awarded funds may be used may be up to five years. The amount awarded to an industry development organization must not exceed five million dollars per year and may not exceed the amount of private sector contributions to the industry development organization. Industry development organizations must indicate the certified industry cluster they seek to serve and whether they intend to provide services statewide or within a substate area. The director must set qualification standards for industry development organizations applying for funds under the program including, but not limited to, the number and the percentage of certified industry cluster firms in the proposed service area that are members of the industry development organization.
     (2) Innovation industry funds awarded to industry development organizations may be used for any of the following:
     (a) Research and development of better and more efficient production, processing, transportation, handling, and marketing of value-added products;
     (b) Assistance with quality control and testing of products and processes;
     (c) Workforce training and recruitment;
     (d) Incubation and acceleration services;
     (e) Export assistance, including the prevention, modification, or elimination of trade barriers;
     (f) Providing marketing information and services including the development of cooperative efforts;
     (g) Providing information and services for meeting energy efficiency and conservation objectives; and
     (h) Any other services as are approved by the director.
     (3) Innovation industry funds may not be used for:
     (a) Lobbying;
     (b) Providing cash grants or loans to businesses; or
     (c) Any other purpose prohibited by the director through rule or contract.
     (4) The contracts with industry development organizations must specify:
     (a) The expected deliverables and performance requirements;
     (b) The annual reporting requirements; and
     (c) That the organizations must demonstrate the maintenance of previous efforts and the use of innovation industry funds for activities in addition to and beyond previous efforts.
     (5) Priority will be given to those applicants who demonstrate:
     (a) The capacity to serve all firms in an industry cluster;
     (b) Collaboration with, and the ability to facilitate the goals of, innovation partnership zones established under RCW 43.330.270; and
     (c) Collaboration with centers of excellence established under RCW 28B.50.902 or with other industry specific assistance centers.
     (6) Industry development organizations receiving innovation industry funds may contract with other research, education, management, and technical assistance providers for services necessary to meet industry cluster objectives and state contract obligations.
     (7) The director may, through interagency agreement or contract, utilize the services of public or private entities to carry out the provisions of this chapter.
     (8) All activities of the certified industry cluster under the provisions of this act should not violate United States antitrust law.

NEW SECTION.  Sec. 7   (1) The innovation industry account is created in the custody of the state treasury. All receipts from innovation allocations collected by the department of revenue under section 5 of this act must be deposited in the account. Expenditures from the account may be used only for the innovation industry program and the costs associated with carrying out the director's obligations under this chapter. Only the director or the director's designee may authorize expenditures from the account. The account is subject to allotment procedures under chapter 43.88 RCW, but an appropriation is not required for expenditures.
     (2) The director must keep subaccounts for each certified industry cluster and must:
     (a) Deposit the innovation allocation attributable to each certified industry cluster into its subaccount after deducting for administrative costs incurred by innovate Washington; and
     (b) Make innovation industry funds available to industry development organizations from the appropriate certified industry cluster subaccount.

NEW SECTION.  Sec. 8   Sections 1 through 7 of this act constitute a new chapter in Title 43 RCW.