SENATE BILL REPORT

SB 5106

BYSenators Smitherman, Lee, Warnke, Williams and McMullen

Developing a model shared foreign sales corporation.

Senate Committee on Economic Development & Labor

Senate Hearing Date(s):January 11, 1989; January 23, 1989

Majority Report:  That Substitute Senate Bill No. 5106 be substituted therefor, and the substitute bill do pass.

      Signed by Senators Lee, Chairman; Anderson, Vice Chairman; McMullen, Matson, Murray, Saling, Smitherman, Warnke, West, Williams.

Senate Staff:Jack Brummel (786-7428)

                  January 24, 1989

AS REPORTED BY COMMITTEE ON ECONOMIC DEVELOPMENT & LABOR, JANUARY 23, 1989

BACKGROUND:

Increasing exports of Washington products offer a way to improve the performance of the Washington economy and increase state revenues.  Foreign sales corporations represent the only major federal tax incentive for exporters.  The tax benefit amounts to a 15 percent reduction in corporate taxes on exports.  A shared foreign sales corporation allows 25 or fewer small and medium sized exporters to take advantage of the tax benefits by becoming shareholders in a corporation established in a qualifying foreign country.  Each exporter-shareholder of a shared foreign sales corporation owns a separate class of stock and operates its own export business as usual. 

SUMMARY:

The Department of Trade and Economic Development develops a model shared foreign sales corporation and makes the model available to exporters, port authorities, and trade associates in the state.

EFFECT OF PROPOSED SUBSTITUTE:

The Business Assistance Center of the Department of Trade and Economic Development develops a model shared foreign sales corporation.  The department makes all legal, financial and accounting arrangements necessary for the formation of the model shared foreign sales corporation.  The model is made available for potential use by small businesses with 250 or fewer employees.  The department charges back the startup costs to the exporter shareholders of the model corporation.  The appropriation is reduced from $50,000 to $25,000 for the development of the model corporation.

Appropriation:    $25,000

Revenue:    yes

Fiscal Note:      requested January 10, 1989

Senate Committee - Testified: Dave Rogers, Washington Public Ports Association; Steve Odom, Department of Trade and Economic Development