BILL REQ. #:  Z-0764.1 

Read first time 01/30/14.   Referred to Committee on Appropriations.

     AN ACT Relating to streamlining forest and fish agreement-related programs providing funding with accountability by transferring proceeds from the state forest harvest excise tax to a dedicated account; amending RCW 84.33.081, 43.09.475, 84.33.0775, and 84.33.046; reenacting and amending RCW 76.09.405 and 76.09.020; adding a new section to chapter 43.09 RCW; adding a new section to chapter 76.09 RCW; and providing a contingent effective date.

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

Sec. 1   RCW 84.33.081 and 2007 c 69 s 5 are each amended to read as follows:
     (1) On the last business day of the second month of each calendar quarter, the state treasurer ((shall)) must distribute from the timber tax distribution account:
     (a) To each county: The amount of tax collected on behalf of each county under RCW 84.33.051, less each county's proportionate share of appropriations for collection and administration activities under RCW 84.33.051((, and shall transfer to the state general fund the amount of tax collected on behalf of the state under RCW 84.33.041, less the amount of the distribution under subsection (7) of this section and the state's proportionate share of appropriations for collection and administration activities under RCW 84.33.041)). The county treasurer ((shall)) must deposit moneys received under this section in a county timber tax account ((which shall)) that must be established by each county. Following receipt of moneys under this section, the county treasurer ((shall)) must make distributions from any moneys available in the county timber tax account to taxing districts in the county, except the state, under subsections (2) through (4) of this section.
     (b)(i) For fiscal years 2016 through 2040, to the forest and fish support account created in RCW 76.09.405: The amount of tax collected on behalf of the state under RCW 84.33.041 up to the limits according to the following schedule, less the amount of the distribution under subsections (1)(d) and (7) of this section, and the state's proportionate share of appropriations for collection and administration activities under RCW 84.33.041. These annual distributions from the timber tax distribution account are based on the May 24, 2012, settlement agreement entered into by the department of natural resources and the department of ecology. The distribution schedule is as follows:
     (A) Three million six hundred thousand dollars for the 2016 fiscal year;
     (B) Four million dollars for the 2017 through 2019 fiscal years;
     (C) Three million five hundred thousand dollars for the 2020 and 2021 fiscal years;
     (D) Three million dollars for fiscal years 2022 through 2029;
     (E) One million two hundred thousand dollars for fiscal years 2030 through 2040.
     (ii) If RCW 76.09.405(3) becomes operative, the distributions in (b)(i) of this subsection must be transferred by the state treasurer in equal parts to the appropriate accounts to support the programs listed in (c)(iii) of this subsection.
     (c)(i) For fiscal years 2016 through 2040, any tax collections in excess of the numbers provided in the schedule listed in (b)(i) of this subsection must be transferred by the state treasurer in equal parts to the appropriate accounts to support the programs listed in (c)(iii) of this subsection.
     (ii) Beginning in fiscal year 2041, in equal parts to the appropriate accounts to support the programs listed in (c)(iii) of this subsection: The amount of tax collected on behalf of the state under RCW 84.33.041 less the amount of the distribution under subsection (7) of this section, and the state's proportionate share of appropriations for collection and administration activities under RCW 84.33.041.
     (iii) The following programs will receive distributions:
     (A) The forestry riparian easement program established in RCW 76.13.120;
     (B) The family forest fish passage program created pursuant to RCW 76.13.150 that provides public cost assistance to small forest landowners associated with the road maintenance and abandonment processes; and
     (C) The program for riparian open space and critical habitat created pursuant to RCW 76.09.040, beginning in fiscal year 2017.
     (d)(i) Through fiscal year 2040, to the performance audits of government account created in RCW 43.09.475: One hundred thousand dollars every other biennia, beginning in the biennium starting July 1, 2017.
     (ii) If RCW 76.09.405(3) becomes operative, the distributions in (b)(i) of this subsection must be transferred by the state treasurer in equal parts to the appropriate accounts to support the programs listed in (c)(iii) of this subsection.
     (2) From moneys available, there first ((shall)) must be a distribution to each taxing district having debt service payments due during the calendar year, based upon bonds issued under authority of a vote of the people conducted pursuant to RCW 84.52.056 and based upon excess levies for a capital project fund authorized pursuant to RCW 84.52.053, of an amount equal to the timber assessed value of the district multiplied by the tax rate levied for payment of the debt service and capital projects((: PROVIDED, That)). However, in respect to levies for a debt service or capital project fund authorized before July 1, 1984, the amount allocated ((shall)) may not be less than an amount equal to the same percentage of such debt service or capital project fund represented by timber tax allocations to such payments in calendar year 1984. Distribution under this subsection (2) ((shall)) may be used only for debt service and capital projects payments. The distribution under this subsection ((shall)) must be made as follows: One-half of such amount ((shall)) must be distributed in the first quarter of the year and one-half ((shall)) must be distributed in the third quarter of the year.
     (3) From the moneys remaining after the distributions under subsection (2) of this section, the county treasurer ((shall)) must distribute to each school district an amount equal to one-half of the timber assessed value of the district or eighty percent of the timber roll of such district in calendar year 1983 as determined under this chapter, whichever is greater, multiplied by the tax rate, if any, levied by the district under RCW 84.52.052 or 84.52.053 for purposes other than debt service payments and capital projects supported under subsection (2) of this section. The distribution under this subsection ((shall)) must be made as follows: One-half of such amount ((shall)) must be distributed in the first quarter of the year and one-half ((shall)) must be distributed in the third quarter of the year.
     (4) After the distributions directed under subsections (2) and (3) of this section, if any, each taxing district ((shall)) must receive an amount equal to the timber assessed value of the district multiplied by the tax rate, if any, levied as a regular levy of the district or as a special levy not included in subsection (2) or (3) of this section.
     (5) If there are insufficient moneys in the county timber tax account to make full distribution under subsection (4) of this section, the county treasurer ((shall)) must multiply the amount to be distributed to each taxing district under that subsection by a fraction. The numerator of the fraction is the county timber tax account balance before making the distribution under that subsection. The denominator of the fraction is the account balance which would be required to make full distribution under that subsection.
     (6) After making the distributions under subsections (2) through (4) of this section in the full amount indicated for the calendar year, the county treasurer ((shall)) must place any excess revenue up to twenty percent of the total distributions made for the year under subsections (2) through (4) of this section in a reserve status until the beginning of the next calendar year. Any moneys remaining in the county timber tax account after this amount is placed in reserve ((shall)) must be distributed to each taxing district in the county in the same proportions as the distributions made under subsection (4) of this section.
     (7) On the last business day of the second month of each calendar quarter, the state treasurer ((shall)) must distribute from the timber tax distribution account to each county an amount of tax collected by the state under RCW 84.33.041 equal to the amount of any tribal tax credited against the county's tax under an agreement entered into under RCW 43.06.480.

Sec. 2   RCW 76.09.405 and 2007 c 54 s 3 and 2007 c 48 s 1 are each reenacted and amended to read as follows:
     (1) The forest and fish support account is hereby created in the state treasury. Receipts from appropriations, the surcharge imposed under RCW 82.04.261, the designated distributions from the timber tax distribution account under RCW 84.33.081, and other sources must be deposited into the account.
     (2)(a) Except for money entering the account through a distribution from the timber tax distribution account, all expenditures from the account ((shall)) must be used for activities pursuant to the state's implementation of the forests and fish report as defined in this chapter and related activities including, but not limited to, adaptive management, monitoring, and participation grants to tribes, state and local agencies, and not-for-profit public interest organizations.
     (b)(i) Except as provided in (b)(ii) of this subsection, until June 30, 2041, all moneys entering the account through distributions from the timber tax distribution account may only be used for conducting and completing the work identified in the cooperative monitoring, evaluation, and research work plan as adopted by the forest practices board. The annual distributions from the timber tax distribution account are based on the May 24, 2012, settlement agreement entered into by the department and the department of ecology.
     (ii) After the close of each fiscal biennium, any moneys received in distributions from the timber tax distribution account which remain unexpended in excess of five hundred thousand dollars must be transferred by the state treasurer no later than September 30th of each year in equal parts to the appropriate accounts to support the programs listed in RCW 84.33.081(1)(c)(iii).
     (iii) The department must issue a biennial report to the legislature, consistent with RCW 43.01.036, that details the receipts and distributions made under this section, the amounts used on work under the cooperative monitoring, evaluation, and research master schedule, and transfers made under (b)(ii) of this subsection.
     (3) Distributions from the timber tax distribution account to the forest and fish support account that support endangered species act, incidental take permit, or habitat conservation plan compliance will cease and those distributions will be transferred equally to the programs listed in RCW 84.33.081(1)(c)(iii) six months after any of the following occur:
     (a) The state's incidental take permit identified in RCW 77.85.190(2) is terminated, revoked, or rendered ineffective by federal legislation, rule making, or by a final decision of a court of competent jurisdiction or is substantially altered outside of the adaptive management process created in RCW 76.09.370; or
     (b) The state withdraws from the forest and fish habitat conservation plan or relinquishes its incidental take permit.
     (4) Distributions from the timber tax distribution account to the forest and fish support account that support clean water compliance will cease and those distributions will be transferred equally to the programs listed in RCW 84.33.081(1)(c)(iii) six months after the following occurs: The state, the United States environmental protection agency, or a court of competent jurisdiction made a final determination that clean water act assurances are terminated, revoked, or otherwise rendered ineffective by federal, state legislation, or rule making.
     (5) Distributions must be reinstated in the following circumstances:
     (a) If the incidental take permit or clean water act assurances identified in subsections (3) and (4) of this section are reinstated; or
     (b) The forest practices board, consistent with the adaptive management process provided in RCW 76.09.370, and after consultation with appropriate federal and state agencies, tribes, and other stakeholders, requests distributions to fund specific studies and activities designed to support reinstatement of clean water assurances and the incidental take permit. Such distributions must be limited to the funds identified to complete the studies and specified activities.
     (6) Expenditures from the account may also be used for reviews conducted by the Washington state institute for public policy described in section 7 of this act.
     (7) Expenditures from the account may be made only after appropriation by the legislature.
     (8) Nothing in this section affects the legislature from funding the forest practices program from other sources.

Sec. 3   RCW 43.09.475 and 2013 2nd sp.s. c 4 s 974 are each amended to read as follows:
     The performance audits of government account is hereby created in the custody of the state treasurer. Revenue identified in RCW 82.08.020(5) ((and)), 82.12.0201 ((shall)), and 84.33.081 must be deposited in the account. Money in the account ((shall)) must be used to fund the implementation of section 4 of this act, performance audits, and follow-up performance audits under RCW 43.09.470 and ((shall)) must be expended by the state auditor in accordance with chapter 1, Laws of 2006. Only the state auditor or the state auditor'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. During the 2011-2013 and the 2013-2015 fiscal biennia, the performance audits of government account may be appropriated for fraud investigations in the state auditor's office and the department of social and health services, audit and collection functions in the department of revenue, the joint legislative audit and review committee, the office of financial management, the superintendent of public instruction and audits of school districts. In addition, during the 2011-2013 and 2013-2015 fiscal biennia the account may be used to fund the office of financial management's contract for the compliance audit of the state auditor.

NEW SECTION.  Sec. 4   A new section is added to chapter 43.09 RCW to read as follows:
     The state auditor must, in each fiscal biennium that the performance audits of government account receives distributions from the timber tax distribution account under RCW 84.33.081, conduct a fiscal audit of the department of natural resources' compliance with the requirements of RCW 76.09.405(2). Each audit performed under this section must include all previous biennia since the most recent past audit.

Sec. 5   RCW 84.33.0775 and 2010 c 210 s 35 are each amended to read as follows:
     (1) A taxpayer is allowed a credit against the tax imposed under RCW 84.33.041 for timber harvested ((on and after)) between January 1, 2000, and June 30, 2015, under a forest practices notification filed or application approved under RCW 76.09.050 and subject to enhanced aquatic resources requirements.
     (2)(a) For a person other than a small harvester who elects to calculate tax under RCW 84.33.074, the credit is equal to the stumpage value of timber harvested for sale or for commercial or industrial use multiplied by eight-tenths of one percent.
     (b) For a small harvester who elects to calculate tax under RCW 84.33.074, the credit is equal to sixteen percent of the tax imposed under this chapter.
     (c) The amount of credit claimed by a taxpayer under this section ((shall)) must be reduced by the amount of any compensation received from the federal government for reduced timber harvest due to enhanced aquatic resource requirements. If the amount of compensation from the federal government exceeds the amount of credit available to a taxpayer in any reporting period, the excess ((shall)) must be carried forward and applied against credits in future reporting periods. This subsection does not apply to small harvesters ((as defined in RCW 84.33.073)).
     (d) Refunds may not be given in place of credits. Credit may not be claimed in excess of tax owed. The department ((of revenue shall)) must disallow any credits, used or unused, upon written notification from the department of natural resources of a final decision that timber for which credit was claimed was not harvested under a forest practices notification filed or application approved under RCW 76.09.050 and subject to enhanced aquatic resources requirements.
     (3) As used in this section, a forest practices notification or application is subject to enhanced aquatic resource requirements if it includes, in whole or in part, riparian area, wetland, or steep or unstable slope from which the operator is limited, by rule adopted under RCW 76.09.055, 34.05.090, 43.21C.250, and 76.09.370, or any federally approved habitat conservation plan or department of natural resources approved watershed analysis, from harvesting timber, or if a road is included within or adjacent to the area covered by such notification or application and the road is covered by a road maintenance plan approved by the department of natural resources under rules adopted under chapter 76.09 RCW, the forest practices act, or a federally approved habitat conservation plan.
     (4) For forest practices notification or applications submitted after January 1, 2000, the department of natural resources ((shall)) must indicate whether the notification or application is subject to enhanced aquatic resource requirements and, unless notified of a contrary determination by the pollution control hearings board, the department ((of revenue shall)) must use such indication in determining the credit to be allowed against the tax assessed under RCW 84.33.041. The department of natural resources ((shall)) must develop revisions to the form of the forest practices notifications and applications to provide a space for the applicant to indicate and the department of natural resources to confirm or not confirm, whether the notification or application is subject to enhanced aquatic resource requirements. For forest practices notifications or applications submitted before January 1, 2000, the applicant may submit the approved notification or application to the department of natural resources for confirmation that the notification or application is subject to enhanced aquatic resource requirements. Upon any such submission, the department of natural resources will within thirty days confirm or deny that the notification or application is subject to enhanced aquatic resource requirements and will forward separate evidence of each confirmation to the department of revenue. Unless notified of a contrary ruling by the pollution control hearings board, the department ((of revenue shall)) must use the separate confirmations in determining the credit to be allowed against the tax assessed under RCW 84.33.041.
     (5) A refusal by the department of natural resources to confirm that a notification or application is subject to enhanced aquatic resources requirements may be appealed to the pollution control hearings board.
     (6) A person receiving approval of credit must keep records necessary for the department ((of revenue)) to verify eligibility under this section.

Sec. 6   RCW 84.33.046 and 1984 c 204 s 7 are each amended to read as follows:
     (1) The rate of tax imposed under RCW 84.33.041 for timber harvested between July 1, 1988, and ((thereafter, shall be)) June 30, 2015, is five percent.
     (2) The rate of tax imposed under RCW 84.33.041 for timber harvested after June 30, 2015, is five percent, except that for timber harvested under a forest practices notification filed or application approved under RCW 76.09.050 the rate of tax imposed is 4.2 percent. The rate provided in this subsection is calculated to compensate the taxpayer for the termination of access to the tax credit created in RCW 84.33.0775 beginning on the same date.
     (3) The legislature finds that the change in the tax rate for timber harvest provided in this section is a measure to ensure an equalization in the tax rate necessary for technical consistency due to the elimination of a tax credit available to those same taxpayers in RCW 84.33.0775. This section is a government streamlining reform, does not represent a tax preference, and is not an attempt by the legislature to induce a specific performance. As such, this section is exempt from the provisions of RCW 82.32.805 and 82.32.808.

NEW SECTION.  Sec. 7   A new section is added to chapter 76.09 RCW to read as follows:
     (1) The Washington state institute for public policy must study and, if appropriate, make recommendations to the legislature related to the management, funding, transparency, efficiency, effectiveness, and overall operations of the adaptive management program at the department of natural resources.
     (2) The Washington state institute for public policy must consult with interested stakeholders for input on additional issues to be included in the study, however, at a minimum, the study must consider and draw conclusions relating to:
     (a) The process for prioritization, revision, inclusion, and exclusion of projects relating to cooperative monitoring, evaluation, and research by topical group; including a review of project relevancy and the existence of current research to justify recent revisions;
     (b) The capacity and ability for the adaptive management program to implement the timelines approved by the forest practices board; including a review funding, the scientific qualifications of the participants, the research methods used, the degree to which lean process recommendations have been implemented, and the other resources available to the program;
     (c) The anticipated tasks of the adaptive management program that are not related to the master schedule of cooperative monitoring, evaluation, and research work;
     (d) The process by which policy decisions are informed by research and research is directed by policy decisions; including potential science workloads dictated by those policy discussions;
     (e) The degree to which related scientific research conforms to modern research principles and degrees of peer review; and
     (f) The exploration of additional contracting tools for study initiation and implementation.
     (3) The Washington state institute for public policy is authorized to contract with consultants if specialized work is required to conduct the review required in this section and the state treasurer is authorized to allocate up to one hundred thousand dollars to the Washington state institute for public policy from the forest and fish support account created in RCW 76.09.405 for the purposes of each review under subsection (4) of this section.
     (4) The Washington state institute for public policy must complete the initial implementation of this section by no later than October 31, 2016, and must update its review every five years on a schedule consistent with the five-year review required in the forest practices habitat conservation plan. Prior to each subsequent five-year review, the forest practices board must review and if necessary, modify the issues required in the review. If RCW 76.09.405(3) (a) or (b) takes effect, no further reviews by the Washington state institute for public policy are required.

Sec. 8   RCW 76.09.020 and 2012 1st sp.s. c 1 s 212 are each reenacted and amended to read as follows:
     The definitions in this section apply throughout this chapter unless the context clearly requires otherwise.
     (1) "Adaptive management" means reliance on scientific methods to test the results of actions taken so that the management and related policy can be changed promptly and appropriately.
     (2) "Appeals board" means the pollution control hearings board created by RCW 43.21B.010.
     (3) "Application" means the application required pursuant to RCW 76.09.050.
     (4) "Aquatic resources" includes water quality, salmon, other species of the vertebrate classes Cephalaspidomorphi and Osteichthyes identified in the forests and fish report, the Columbia torrent salamander (Rhyacotriton kezeri), the Cascade torrent salamander (Rhyacotriton cascadae), the Olympic torrent salamander (Rhyacotriton olympian), the Dunn's salamander (Plethodon dunni), the Van Dyke's salamander (Plethodon vandyke), the tailed frog (Ascaphus truei), and their respective habitats.
     (5) "Board" means the forest practices board created in RCW 76.09.030.
     (6) "Commissioner" means the commissioner of public lands.
     (7) "Contiguous" means land adjoining or touching by common corner or otherwise. Land having common ownership divided by a road or other right-of-way ((shall be)) is considered contiguous.
     (8) "Conversion to a use other than commercial timber operation" means a bona fide conversion to an active use which is incompatible with timber growing and as may be defined by forest practices rules.
     (9) "Date of receipt" has the same meaning as defined in RCW 43.21B.001.
     (10) "Department" means the department of natural resources.
     (11) "Ecosystem services" means the benefits that the public enjoys as a result of natural processes and biological diversity.
     (12) "Ecosystem services market" means a system in which providers of ecosystem services can access financing or market capital to protect, restore, and maintain ecological values, including the full spectrum of regulatory, quasiregulatory, and voluntary markets.
     (13) "Fill" means the placement of earth material or aggregate for road or landing construction or other similar activities.
     (14) "Fish passage barrier" means any artificial instream structure that impedes the free passage of fish.
     (15) "Forest land" means all land which is capable of supporting a merchantable stand of timber and is not being actively used for a use which is incompatible with timber growing. Forest land does not include agricultural land that is or was enrolled in the conservation reserve enhancement program by contract if such agricultural land was historically used for agricultural purposes and the landowner intends to continue to use the land for agricultural purposes in the future. As it applies to the operation of the road maintenance and abandonment plan element of the forest practices rules on small forest landowners, the term "forest land" excludes:
     (a) Residential home sites, which may include up to five acres; and
     (b) Cropfields, orchards, vineyards, pastures, feedlots, fish pens, and the land on which appurtenances necessary to the production, preparation, or sale of crops, fruit, dairy products, fish, and livestock exist.
     (16) "Forest landowner" means any person in actual control of forest land, whether such control is based either on legal or equitable title, or on any other interest entitling the holder to sell or otherwise dispose of any or all of the timber on such land in any manner. However, any lessee or other person in possession of forest land without legal or equitable title to such land shall be excluded from the definition of "forest landowner" unless such lessee or other person has the right to sell or otherwise dispose of any or all of the timber located on such forest land.
     (17)(a) "Forest practice" means any activity conducted on or directly pertaining to forest land and relating to growing, harvesting, or processing timber, including but not limited to:
     (((a))) (i) Road and trail construction, including forest practices hydraulic projects that include water crossing structures, and associated activities and maintenance;
     (((b))) (ii) Harvesting, final and intermediate;
     (((c))) (iii) Precommercial thinning;
     (((d))) (iv) Reforestation;
     (((e))) (v) Fertilization;
     (((f))) (vi) Prevention and suppression of diseases and insects;
     (((g))) (vii) Salvage of trees; and
     (((h))) (viii) Brush control.
     (b) "Forest practice" ((shall)) does not include preparatory work such as tree marking, surveying and road flagging, and removal or harvesting of incidental vegetation from forest lands such as berries, ferns, greenery, mistletoe, herbs, mushrooms, and other products which cannot normally be expected to result in damage to forest soils, timber, or public resources.
     (18) "Forest practices hydraulic project" means a hydraulic project, as defined under RCW 77.55.011, that requires a forest practices application or notification under this chapter.
     (19) "Forest practices rules" means any rules adopted pursuant to RCW 76.09.040.
     (20) "Forest road," as it applies to the operation of the road maintenance and abandonment plan element of the forest practices rules on small forest landowners, means a road or road segment that crosses land that meets the definition of forest land, but excludes residential access roads.
     (21) "Forest trees" does not include hardwood trees cultivated by agricultural methods in growing cycles shorter than fifteen years if the trees were planted on land that was not in forest use immediately before the trees were planted and before the land was prepared for planting the trees. "Forest trees" includes Christmas trees, but does not include Christmas trees that are cultivated by agricultural methods, as that term is defined in RCW 84.33.035.
     (22) "Forests and fish report" means the forests and fish report to the board dated April 29, 1999.
     (23) "Operator" means any person engaging in forest practices except an employee with wages as his or her sole compensation.
     (24) "Person" means any individual, partnership, private, public, or municipal corporation, county, the department or other state or local governmental entity, or association of individuals of whatever nature.
     (25) "Public resources" means water, fish and wildlife, and in addition ((shall)) means capital improvements of the state or its political subdivisions.
     (26) "Small forest landowner" has the same meaning as defined in RCW 76.09.450.
     (27) "Timber" means forest trees, standing or down, of a commercial species, including Christmas trees. However, "timber" does not include Christmas trees that are cultivated by agricultural methods, as that term is defined in RCW 84.33.035.
     (28) "Timber owner" means any person having all or any part of the legal interest in timber. Where such timber is subject to a contract of sale, "timber owner" ((shall)) means the contract purchaser.
     (29) "Unconfined channel migration zone" means the area within which the active channel of an unconfined stream is prone to move and where the movement would result in a potential near-term loss of riparian forest adjacent to the stream. Sizeable islands with productive timber may exist within the zone.
     (30) "Unconfined stream" means generally fifth order or larger waters that experience abrupt shifts in channel location, creating a complex floodplain characterized by extensive gravel bars, disturbance species of vegetation of variable age, numerous side channels, wall-based channels, oxbow lakes, and wetland complexes. Many of these streams have dikes and levees that may temporarily or permanently restrict channel movement.
     (31) "Forest practices habitat conservation plan" means the habitat conservation plan that the department submitted to the United States fish and wildlife service and the national marine fisheries service in December of 2005 and approved by the services in May of 2006, as amended.

NEW SECTION.  Sec. 9   Section 5 of this act takes effect if section 6 of this act is enacted into law during the regular 2014 legislative session.