BILL REQ. #:  H-1869.1 

READ FIRST TIME 03/01/13.   

     AN ACT Relating to the sales and use tax exemption expiration date for machinery and equipment used in generating electricity; amending RCW 82.08.962 and 82.12.962; adding a new section to chapter 82.32 RCW; adding a new section to chapter 43.136 RCW; creating a new section; providing an effective date; providing expiration dates; and declaring an emergency.

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

NEW SECTION.  Sec. 1   It is the intent of the legislature to help promote energy independence in the state of Washington and to better position Washington to attract a vibrant clean energy technology manufacturing sector to the state. The purpose of the tax preference created in this act is to incentivize electricity generation from renewable energy sources, reducing the costs of transitioning to these sources and technologies by exempting machinery, equipment, and labor and service charges associated with such electricity generation from the retail sales and use tax. This tax preference makes the most of the local renewable resources, protects us from the price volatility of certain fossil fuel sources, and helps the state achieve its greenhouse gas emissions targets. In addition, promoting manufacture and installation of facilities capable of generating power from renewable sources can create economic benefits in both rural and urban counties, creating high-quality jobs and developing a skilled workforce in an industry sector in which significant job growth is anticipated over the coming decades.

Sec. 2   RCW 82.08.962 and 2009 c 469 s 101 are each amended to read as follows:
     (1)(a) Except as provided in RCW 82.08.963, purchasers who have paid the tax imposed by RCW 82.08.020 on machinery and equipment used directly in generating electricity using fuel cells, wind, sun, biomass energy, tidal or wave energy, geothermal resources, anaerobic digestion, technology that converts otherwise lost energy from exhaust, or landfill gas as the principal source of power, or to sales of or charges made for labor and services rendered in respect to installing such machinery and equipment, are eligible for an exemption as provided in this section, but only if the purchaser develops with such machinery, equipment, and labor a facility capable of generating not less than one thousand watts of electricity.
     (b) Beginning on July 1, 2009, through June 30, 2011, the tax levied by RCW 82.08.020 does not apply to the sale of machinery and equipment described in (a) of this subsection that are used directly in generating electricity or to sales of or charges made for labor and services rendered in respect to installing such machinery and equipment.
     (c) Beginning on July 1, 2011, through ((June 30, 2013)) January 1, 2020, the amount of the exemption under this subsection (1) is equal to seventy-five percent of the state and local sales tax paid. The purchaser is eligible for an exemption under this subsection (1)(c) in the form of a remittance.
     (2) For purposes of this section and RCW 82.12.962, the following definitions apply:
     (a) "Biomass energy" includes: (i) By-products of pulping and wood manufacturing process; (ii) animal waste; (iii) solid organic fuels from wood; (iv) forest or field residues; (v) wooden demolition or construction debris; (vi) food waste; (vii) liquors derived from algae and other sources; (viii) dedicated energy crops; (ix) biosolids; and (x) yard waste. "Biomass energy" does not include wood pieces that have been treated with chemical preservatives such as creosote, pentachlorophenol, or copper-chrome-arsenic; wood from old growth forests; or municipal solid waste.
     (b) "Fuel cell" means an electrochemical reaction that generates electricity by combining atoms of hydrogen and oxygen in the presence of a catalyst.
     (c) "Landfill gas" means biomass fuel, of the type qualified for federal tax credits under Title 26 U.S.C. Sec. 29 of the federal internal revenue code, collected from a "landfill" as defined under RCW 70.95.030.
     (d)(i) "Machinery and equipment" means fixtures, devices, and support facilities that are integral and necessary to the generation of electricity using fuel cells, wind, sun, biomass energy, tidal or wave energy, geothermal resources, anaerobic digestion, technology that converts otherwise lost energy from exhaust, or landfill gas as the principal source of power.
     (ii) "Machinery and equipment" does not include: (A) Hand-powered tools; (B) property with a useful life of less than one year; (C) repair parts required to restore machinery and equipment to normal working order; (D) replacement parts that do not increase productivity, improve efficiency, or extend the useful life of machinery and equipment; (E) buildings; or (F) building fixtures that are not integral and necessary to the generation of electricity that are permanently affixed to and become a physical part of a building.
     (3)(a) Machinery and equipment is "used directly" in generating electricity by wind energy, solar energy, biomass energy, tidal or wave energy, geothermal resources, anaerobic digestion, technology that converts otherwise lost energy from exhaust, or landfill gas power if it provides any part of the process that captures the energy of the wind, sun, biomass energy, tidal or wave energy, geothermal resources, anaerobic digestion, technology that converts otherwise lost energy from exhaust, or landfill gas, converts that energy to electricity, and stores, transforms, or transmits that electricity for entry into or operation in parallel with electric transmission and distribution systems.
     (b) Machinery and equipment is "used directly" in generating electricity by fuel cells if it provides any part of the process that captures the energy of the fuel, converts that energy to electricity, and stores, transforms, or transmits that electricity for entry into or operation in parallel with electric transmission and distribution systems.
     (4)(a) A purchaser claiming an exemption in the form of a remittance under subsection (1)(c) of this section must pay the tax imposed by RCW 82.08.020 and all applicable local sales taxes imposed under the authority of chapters 82.14 and 81.104 RCW. The purchaser may then apply to the department for remittance in a form and manner prescribed by the department. A purchaser may not apply for a remittance under this section more frequently than once per quarter. The purchaser must specify the amount of exempted tax claimed and the qualifying purchases for which the exemption is claimed. The purchaser must retain, in adequate detail, records to enable the department to determine whether the purchaser is entitled to an exemption under this section, including: Invoices; proof of tax paid; and documents describing the machinery and equipment.
     (b) The department must determine eligibility under this section based on the information provided by the purchaser, which is subject to audit verification by the department. The department must on a quarterly basis remit exempted amounts to qualifying purchasers who submitted applications during the previous quarter.
     (((5) This section expires July 1, 2013.))

NEW SECTION.  Sec. 3   A new section is added to chapter 82.32 RCW to read as follows:
     Every taxpayer claiming an exemption under RCW 82.08.962 or 82.12.962 must file with the department a complete annual survey as required under RCW 82.32.585, except that the taxpayer must file a separate survey for each facility owned or operated in the state of Washington developed with machinery, equipment, services, or labor for which the exemption under this act is claimed.

NEW SECTION.  Sec. 4   A new section is added to chapter 43.136 RCW to read as follows:
     (1) The intent of the tax preference provided in RCW 82.08.962 and 82.12.962 is to promote electricity generation by facilities with generating capacity of not less than one thousand watts, using renewable energy fuel sources in order to improve energy security and decrease greenhouse gas emissions. Encouraging the development of more facilities that generate power from renewable energy has both immediate and long-term value to the state.
     (2) As part of the joint legislative audit and review committee's 2019 tax preference reviews conducted under this chapter, the joint legislative audit and review committee must assess the performance of the tax preferences established in RCW 82.08.956 and 82.12.956 with reference to the intent and performance milestones established in this section.
     (3) The department of revenue must provide the joint legislative audit and review committee with annual survey information and any other tax data necessary to conduct the review required in subsection (2) of this section. The Washington State University energy program, department of ecology, and other agencies, as requested, must cooperate with the committee by providing information to assist the committee's analysis.
     (4) The report is not limited to, but must include, the following information:
     (a) Identification of the baseline number of facilities, prior to July 1, 2009, with generating capacity of not less than one thousand watts, using fuel cells, wind, sun, biomass energy, tidal or wave energy, geothermal resources, anaerobic digestion, technology that converts otherwise lost energy from exhaust, or landfill gas as the principal source of power.
     (b) The number of facilities developed each year by purchasers claiming the preference for machinery, equipment, labor, or other services, and the increase in the number of such facilities, as compared to the baseline established in (a) of this subsection.
     (c) The total generating capacity in megawatts and total power production in kilowatt-hours of the facilities reported in (b) of this subsection.
     (d) The estimated greenhouse gas emissions avoided as a result of power generation from renewable energy sources by the facilities reported in (b) of this subsection.
     (e) The number of barrels of oil and tons of coal avoided as a result of power generation from renewable energy sources by the facilities reported in (b) of this subsection, as estimated from the average fuel mix of electricity generated statewide.
     (f) The number of employees and wages and benefits reported by taxpayers claiming the exemption at the facilities reported in (a) of this subsection.
     (g) Subject to data availability, analysis of how the wages and benefits reported in (e) of this subsection compare with statewide averages and averages in the county in which the facility is located.
     (5) This section expires January 1, 2020.

Sec. 5   RCW 82.12.962 and 2009 c 469 s 102 are each amended to read as follows:
     (1)(a) Except as provided in RCW 82.12.963, consumers who have paid the tax imposed by RCW 82.12.020 on machinery and equipment used directly in generating electricity using fuel cells, wind, sun, biomass energy, tidal or wave energy, geothermal resources, anaerobic digestion, technology that converts otherwise lost energy from exhaust, or landfill gas as the principal source of power, or to sales of or charges made for labor and services rendered in respect to installing such machinery and equipment, are eligible for an exemption as provided in this section, but only if the purchaser develops with such machinery, equipment, and labor a facility capable of generating not less than one thousand watts of electricity.
     (b) Beginning on July 1, 2009, through June 30, 2011, the provisions of this chapter do not apply in respect to the use of machinery and equipment described in (a) of this subsection that are used directly in generating electricity or to sales of or charges made for labor and services rendered in respect to installing such machinery and equipment.
     (c) Beginning on July 1, 2011, through ((June 30, 2013)) January 1, 2020, the amount of the exemption under this subsection (1) is equal to seventy-five percent of the state and local sales tax paid. The consumer is eligible for an exemption under this subsection (1)(c) in the form of a remittance.
     (2)(a) A person claiming an exemption in the form of a remittance under subsection (1)(c) of this section must pay the tax imposed by RCW 82.12.020 and all applicable local use taxes imposed under the authority of chapters 82.14 and 81.104 RCW. The consumer may then apply to the department for remittance in a form and manner prescribed by the department. A consumer may not apply for a remittance under this section more frequently than once per quarter. The consumer must specify the amount of exempted tax claimed and the qualifying purchases or acquisitions for which the exemption is claimed. The consumer must retain, in adequate detail, records to enable the department to determine whether the consumer is entitled to an exemption under this section, including: Invoices; proof of tax paid; and documents describing the machinery and equipment.
     (b) The department must determine eligibility under this section based on the information provided by the consumer, which is subject to audit verification by the department. The department must on a quarterly basis remit exempted amounts to qualifying consumers who submitted applications during the previous quarter.
     (3) Purchases exempt under RCW 82.08.962 are also exempt from the tax imposed under RCW 82.12.020.
     (4) The definitions in RCW 82.08.962 apply to this section.
     (5) This section expires ((June 30, 2013)) January 1, 2020.

NEW SECTION.  Sec. 6   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, 2013.