AN ACT Relating to fiscal reform; amending RCW 41.40.380, 82.03.130, 82.03.140, 82.04.230, 82.04.240, 82.04.250, 82.04.255, 82.04.260, 82.04.270, 82.04.280, 82.04.290, 82.16.020, 82.08.020, 82.04.050, 84.52.043, 84.52.065, 84.52.067, 43.135.020, 43.135.030, 43.135.040, 43.135.050, 43.135.060, 43.135.070, 82.44.110, 43.88.030, 82.14.200, 82.44.150, and 43.84.092; reenacting and amending RCW 82.02.030; adding a new section to chapter 82.04 RCW; adding a new section to chapter 82.16 RCW; adding new sections to chapter 43.135 RCW; adding a new section to chapter 43.03 RCW; adding new sections to chapter 82.14 RCW; adding a new Title 82A to the Revised Code of Washington; creating new sections; repealing RCW 82.04.300, 82.04.2901, 82.04.2904, 82.16.040, 43.88.520, 43.88.525, 43.88.530, 43.88.535, and 43.88.540; providing for submission of a portion of this act to a vote of the people; prescribing penalties; and providing a contingent effective date.

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

NEW SECTION. Sec. 1. CITATION. This act may be known and cited as "the spending controls and tax reform act."

NEW SECTION. Sec. 2. PURPOSE. The purposes of this act include but are not limited to:

(1) Imposing effective fiscal controls to limit the growth of state revenue and spending;

(2) Improving the fairness of the state tax system by eliminating or reducing regressivity and unfair tax burdens and providing tax relief for those least able to pay state taxes;

(3) Improving the stability and predictability of the state tax system;

(4) Improving Washington's economic climate for business growth and development by increased competitiveness with other states and tax relief for new and small businesses;

(5) Maintaining "revenue neutrality" for the state general fund in the 1989-1991 biennium while enabling state revenues to keep pace with growth in the state's economy; and

(6) Reducing federal income taxes for state taxpayers filing federal income tax returns with itemized deductions, because of the deductibility of state income taxes.

PART I

INCOME TAX‑-DEFINITIONS

NEW SECTION. Sec. 101. INTRODUCTORY. Unless the context clearly requires otherwise, the definitions in sections 102 through 113 of this act apply throughout this title.

NEW SECTION. Sec. 102. ADJUSTED GROSS INCOME. "Adjusted gross income" means adjusted gross income as determined under the internal revenue code.

NEW SECTION. Sec. 103. CORPORATION. "Corporation" means a person taxable as a corporation under the internal revenue code.

NEW SECTION. Sec. 104. DEPARTMENT. "Department" means the state department of revenue.

NEW SECTION. Sec. 105. FEDERAL BASE INCOME. "Federal base income" means:

(1) For individuals, adjusted gross income.

(2) For all other persons, taxable income as determined under the internal revenue code.

NEW SECTION. Sec. 106. INDIVIDUAL. "Individual" means a natural person.

NEW SECTION. Sec. 107. INTERNAL REVENUE CODE. "Internal revenue code" means the United States internal revenue code of 1986 and amendments thereto, as existing and in effect on January 1, 1989.

NEW SECTION. Sec. 108. PERSON. "Person" includes individuals, partnerships, firms, companies, fiduciaries, estates, trusts, and corporations.

NEW SECTION. Sec. 109. RESIDENT. "Resident" includes: (1) An individual who:

(a) Has resided in this state for the entire taxable year; or

(b) Is domiciled in this state unless the individual:

(i) Maintains no permanent place of abode in this state; and

(ii) Does maintain a permanent place of abode elsewhere; and

(iii) Spends in the aggregate not more than thirty days in the taxable year in this state; or

(c) Is not domiciled in this state, but maintains a permanent place of abode in this state and spends in the aggregate more than one hundred eighty-three days of the taxable year in this state unless the individual establishes to the satisfaction of the director of the department of revenue that the individual is in the state only for temporary or transitory purposes; or

(d) Claims the state of Washington as the individual's tax home for federal income tax purposes.

(2) A resident estate means an estate of which a personal representative was appointed by a Washington court, or, an estate the administration of which is carried on in this state.

(3) A resident trust means a trust whose situs as determined by RCW 11.96.040 is within the state of Washington.

NEW SECTION. Sec. 110. S CORPORATION. "S corporation" means an S corporation as defined in section 1361 of the internal revenue code.

NEW SECTION. Sec. 111. TAXABLE INCOME. "Taxable income" means federal base income after making the additions, subtractions, apportionments, and allocations provided under this title.

NEW SECTION. Sec. 112. TAXABLE YEAR. "Taxable year" means the taxpayer's taxable year as defined under the internal revenue code.

NEW SECTION. Sec. 113. TAXPAYER. "Taxpayer" means a person receiving income subject to tax under this title.

NEW SECTION. Sec. 114. DEFINITION OF TERMS GENERALLY. Except as provided in sections 101 through 113 of this act, any term used in this title has the same meaning as when used in a comparable context in the internal revenue code.

PART II

INCOME TAX‑-TAXABLE INCOME MODIFICATIONS

NEW SECTION. Sec. 201. INTRODUCTORY. In computing taxable income, modifications shall be made to the taxpayer's federal base income as required under this Part, unless the modification has the effect of duplicating an item of income or deduction.

NEW SECTION. Sec. 202. BUSINESS TAXES PAID FOR PERIODS BEFORE EFFECTIVE DATE. (1) Subtract gross income that was subject to tax under chapter 82.04 or 82.16 RCW for periods prior to the effective date of this act, to the extent the gross income was included in computing federal base income.

(2) Add any expenses incurred in the production of amounts subtracted under subsection (1) of this section, to the extent the expenses have been deducted in computing federal base income.

NEW SECTION. Sec. 203. CARRY-OVERS. Add amounts that have been deducted in computing federal base income to the extent the amounts have been carried over from taxable years ending before the effective date of this title.

NEW SECTION. Sec. 204. CARRYBACKS. Add amounts that have been deducted in computing federal base income to the extent the amounts have been carried back from future taxable years.

NEW SECTION. Sec. 205. NONPROFIT ORGANIZATIONS. Add any amounts subject to tax under subchapter F, chapter 1, subtitle A of the internal revenue code. For the purposes of computations under this section, if a nonprofit organization has no federal base income, or a negative federal base income, federal base income shall be treated as if it were zero.

NEW SECTION. Sec. 206. S CORPORATIONS. Add amounts upon which an S corporation is subject to tax under subchapter S, chapter 1, subtitle A of the internal revenue code.

NEW SECTION. Sec. 207. STATE AND LOCAL INCOME TAXES. Add taxes on or measured by net income that have been deducted under the internal revenue code in computing federal base income.

NEW SECTION. Sec. 208. STATE AND LOCAL OBLIGATIONS. (1) For corporations, add all gross income that has been excluded under section 103 of the internal revenue code in computing federal base income.

(2) For taxpayers other than corporations, add gross income that has been excluded under section 103 of the internal revenue code in computing federal base income, except gross income derived from obligations of the state of Washington or political subdivisions of the state of Washington.

(3) Subtract any expenses incurred in the production of amounts added under subsection (1) or (2) of this section, to the extent the expenses have not been deducted in computing federal base income.

NEW SECTION. Sec. 209. DEDUCTIONS REQUIRED BY FEDERAL LAW. (1) Subtract gross income that the state is prohibited from taxing under the Constitution or laws of the United States, to the extent the gross income was included in computing federal base income.

(2) Add any expenses incurred in the production of amounts subtracted under subsection (1) of this section, to the extent the expenses have been deducted in computing federal base income.

NEW SECTION. Sec. 210. TAX RETURNS FOR FRACTIONAL YEAR. (1) If the first taxable year of any taxpayer with respect to which a tax is imposed by this title ends before December 31st of the calendar year in which this title becomes effective, referred to in this section as a fractional taxable year, the taxable income for the fractional taxable year shall be the taxpayer's taxable income for the entire taxable year, adjusted by one of the following methods, at the taxpayer's election:

(a) The taxable income shall be multiplied by a fraction. The numerator of the fraction is the number of days in the fractional taxable year. The denominator of the fraction is the number of days in the entire taxable year.

(b) The taxable income shall be adjusted, in accordance with rules of the department, so as to include only such income and be reduced only by such deductions as can be clearly determined from the permanent records of the taxpayer to be attributable to the fractional taxable year.

(2) If an individual taxpayer's taxable income is adjusted under subsection (1) of this section, the deduction amounts allowed under section 402 of this act for the taxpayer shall be reduced by multiplying the amount of the exemption by a fraction. The numerator of the fraction is the number of days in the taxpayer's fractional taxable year. The denominator of the fraction is the number of days in the entire taxable year.

PART III

INCOME TAX‑-DIVISION OF INCOME, MODIFICATIONS, AND CREDITS

NEW SECTION. Sec. 301. APPORTIONMENT AND ALLOCATION OF INCOME‑-INDIVIDUALS, ESTATES, AND TRUSTS. (1) For resident individuals, estates, and trusts, all income shall be apportioned and allocated to this state.

(2) For nonresident individuals, estates, and trusts, income derived from sources within this state shall be apportioned and allocated to this state. For purposes of this title:

(a) The adjusted gross income of a nonresident derived from sources within this state is the net amount of items of income, gain, loss, and deduction of the nonresident's federal adjusted gross income that are derived from or connected with sources in this state including any distributive share of partnership income and deductions, and any share of estate or trust income and deductions, including any unrelated business income of an otherwise exempt trust or organization.

(b) Items of income, gain, loss, and deduction derived from or connected with sources within this state are those items attributable to the ownership or disposition of any interest in real or tangible personal property in this state, and a business, trade, profession, or occupation carried on within this state. The department shall issue rules to provide consistency of this section with the excise tax provisions.

(c) Deduction with respect to expenses, capital losses, and net operating losses shall be based solely on income, gains, losses, and deductions derived from or connected with sources in this state but shall otherwise be determined in the same manner as the corresponding federal deduction except as provided in this title.

(d) Income from intangible personal property, including annuities, dividends, interest, and gains from the disposition of intangible personal property, constitutes income derived from sources within the state of Washington only to the extent that such income is from property employed in a business, trade, profession, or occupation carried on within this state: PROVIDED, That distributed and undistributed income of an electing S corporation for federal tax purposes derived from or connected with sources within this state is income derived from sources within this state for a nonresident shareholder. A net operating loss of such corporation does constitute a loss or deduction connected with sources within this state for a nonresident shareholder.

(e) Compensation paid by the United States for service in the armed forces of the United States performed in this state by a nonresident does not constitute income derived from sources within this state.

(f) If a business, trade, profession, or occupation is carried on partly within and partly without this state, the determination of net income derived or connected with sources within this state as provided in this section, shall be made by apportionment and allocation under chapter 82.56 RCW.

NEW SECTION. Sec. 302. APPORTIONMENT AND ALLOCATION OF INCOME‑-CORPORATIONS. (1) For corporations other than financial organizations or public utilities, all income shall be apportioned and allocated to this state except income that is apportioned or allocated to another state under RCW 82.56.010.

(2) For financial organizations and public utilities, as defined in Article IV, Sec. 1 (d) and (f) of RCW 82.56.010, that are taxable both within this state and in another state within the meaning of Article IV, Sec. 3 of RCW 82.56.010, the amount of net income to be apportioned or allocated, or both, to this state shall be determined in accordance with rules adopted by the department. The rules shall, as far as the department deems practical, be consistent with the provisions of Article IV of RCW 82.56.010. In developing the rules, the department shall also give appropriate consideration to any uniform regulations adopted by the multistate tax commission pursuant to Article VII of RCW 82.56.010, and to the rules of other states in which the financial organizations and public utilities are also taxable.

NEW SECTION. Sec. 303. COMBINED REPORTING. (1) The department may permit or require a corporation that is subject to taxation under this title and is a part of a water's edge combined group to file a combined report covering the combined operations of the group. The report shall contain such information as shall be designated in rules adopted by the department.

(2) A corporation is a part of a water's edge combined group if it is engaged in business activities that are integrated with, dependent upon, or that contribute to the business activities of the group as a whole. Only corporations meeting one or more of the following descriptions may be included in a water's edge combined group:

(a) Corporations included or includable in a consolidated return for federal income tax purposes.

(b) United States possessions corporations.

(d) Domestic international sales corporations or foreign sales corporations.

(e) Corporations incorporated in a country that either does not impose an income tax or imposes an income tax at a rate lower than ninety percent of the federal tax rate on the federally defined income tax base, if:

(i) Fifty percent or more of either the sales or purchases or of payments of income or expenses, exclusive of payments for intangible property, or payments of eighty percent or more of all expenses are made directly or indirectly to one or more members of a water's edge combined group; or

(ii) The corporation conducts no significant economic activity.

(f) Foreign corporations having at least a threshold level of business activity in the United States, as determined under rules of the department.

(g) United States corporations that are members of a group of two or more corporations with a common owner or owners, either corporate or noncorporate, where more than fifty percent of the voting stock of each member corporation is directly or indirectly owned by the common owner or owners or by one or more of the member corporations.

(3) The income attributable to the Washington activities of a corporation that is a part of a water's edge combined group shall be determined by the apportionment of the entire business net income of the group and the allocation of nonbusiness income of the corporation, using the factors and methods in section 302 of this act and the rules of the department adopted under section 302 of this act. Business net income may include income of corporations that do not have federal taxable income because they are not subject to federal taxation.

NEW SECTION. Sec. 304. PARTNERSHIPS AND S CORPORATIONS. (1) The taxable incomes of partners shall be computed by including a pro rata share of the modifications under Part II and sections 301 through 303 of this act and the credits allowed under section 403 of this act, if the modification or credit relates to the income of the partnership. Each partner's pro rata share of a modification or credit is the amount of modification or credit multiplied by a fraction. The numerator of the fraction is the partner's distributive share of partnership income. The denominator of the fraction is the total partnership income. The fraction shall never be greater than one.

(2) The taxable incomes of shareholders of S corporations shall be computed by including a share of the modifications under Part II and sections 301 through 303 of this act and the credits allowed under section 403 of this act, if the modification or credit relates to the income of the S corporation. Each shareholder's share of a modification or credit is the amount of modification or credit multiplied by a fraction. The numerator of the fraction is the shareholder's pro rata share of S corporation income. The denominator of the fraction is the total S corporation income. The fraction shall never be greater than one.

(3) As used in this section:

(a) "S corporation income" includes both distributed and undistributed federal taxable income of the S corporation less any amount subject to tax under section 206 of this act.

(b) "Pro rata share" means pro rata share as determined under section 1366(a) of the internal revenue code.

NEW SECTION. Sec. 305. ESTATES, TRUSTS, AND BENEFICIARIES. (1) The taxable incomes of estates, trusts, and beneficiaries thereof shall be computed by including a share of the modifications under Part II and sections 301 through 303 of this act and the credits allowed under section 403 of this act.

Each taxpayer's share of a modification or credit is the amount of modification or credit multiplied by a fraction. The numerator of the fraction is the taxpayer's share of the distributable net income of the estate or trust. The denominator of the fraction is the total distributable net income of the estate or trust. The fraction shall never be greater than one.

(2) As used in this section, "distributable net income" means distributable net income as defined in the internal revenue code. If an estate or trust has no federal distributable net income, the term means the income of the estate or trust which is distributed or is required to be distributed during the taxable year under local law or the terms of the estate or trust instrument.

(3) Any portion of a modification that is not included in calculating the taxable incomes of the beneficiaries shall be included in calculating the taxable income of the trust or estate. PART IV

INCOME TAX‑-RATES AND CREDITS

NEW SECTION. Sec. 401. PERSONAL INCOME TAX IMPOSED. (1) A regular tax and an additional tax are imposed on taxable income of individuals, estates, and trusts as provided in this section.

(2) The standard deductions and personal exemptions provided in section 402 of this act are allowed in computing taxable income for the regular tax. The regular tax is equal to taxable income multiplied by the rate of four and one-tenth percent.

(3) A deduction of one hundred thousand dollars is allowed in computing taxable income for the additional tax. The additional tax is equal to taxable income multiplied by the rate of two and four-tenths percent.

(4) The taxes imposed in this section shall never be less than zero.

NEW SECTION. Sec. 402. STANDARD DEDUCTION‑-PERSONAL EXEMPTION. The following standard deductions and personal exemption deductions are allowed in determining the regular tax under section 401(2) of this act:

(1) The standard deduction for an individual is:

(a) Fifteen thousand dollars for a joint return or a surviving spouse;

(b) Thirteen thousand two hundred dollars for a head of household;

(d) Seven thousand five hundred dollars for a married individual filing a separate return.

(2) A personal exemption deduction in the amount of three thousand seven hundred fifty dollars is allowed for each individual for whom a personal exemption deduction is allowed for federal income tax purposes.

(3) The deductions from adjusted gross income allowed under this section for individual taxpayers who are not residents of this state for the entire taxable year shall be reduced by multiplying the amount of the deductions by a fraction. The numerator of the fraction is the taxpayer's adjusted gross income attributable to sources within the state of Washington. The denominator of the fraction is the taxpayer's adjusted gross income from all sources. The fraction shall never be greater than one.

NEW SECTION. Sec. 403. CREDIT FOR INCOME TAXES DUE ANOTHER JURISDICTION. (1) The intent of this section is to prevent double taxation of income potentially subject to tax in both Washington and another jurisdiction.

(2) As used in this section, "another jurisdiction" means another state or foreign country, or a political subdivision of another state or foreign country.

(3) A resident individual, estate, or trust is allowed a credit against the tax imposed under this title, equal to the lesser of:

(a) The amount of tax paid to another jurisdiction on net income derived from sources within the other jurisdiction; or

(b) The amount of tax due under this title, before application of credits allowable by this title, multiplied by a fraction. The numerator of the fraction is the amount of the taxpayer's adjusted gross income subject to tax in the other jurisdiction. The denominator of the fraction is the taxpayer's total adjusted gross income as modified under Part II of this title. The fraction shall never be greater than one.

(4) If the laws of another jurisdiction contain a provision exempting a resident of Washington from net income taxes on income derived from sources in that jurisdiction, the director is authorized to enter into a reciprocal agreement with that jurisdiction providing a similar tax exemption for residents of that jurisdiction for income derived from sources within Washington.

(5) The amount of tax credits received by any taxpayer under this section shall not exceed the total amount of tax due, and there shall be no carryback or carryforward of any unused credits.

NEW SECTION. Sec. 404. DUAL RESIDENCE. If an individual is regarded as a resident both of this state and another jurisdiction for state personal income tax purposes, the department shall reduce the tax on that portion of the individual's income that is subjected to tax in both jurisdictions solely by virtue of dual residence, if the other taxing jurisdiction allows a similar reduction. The reduction shall equal the lower of the two taxes applicable to the income taxed twice, multiplied by a fraction. The numerator of the fraction is the tax imposed by this state on the income taxed twice. The denominator of the fraction is the tax imposed by both jurisdictions on the income taxed twice. The fraction shall never be greater than one.

NEW SECTION. Sec. 405. CORPORATE PRIVILEGE TAXES IMPOSED. (1) Excise taxes are imposed on each corporation for the privilege of engaging in business in this state, as provided in this section.

(2) A regular corporate tax is imposed equal to four and one-tenth percent of the taxable income of the corporation.

(3) An additional corporate tax is imposed equal to the excess, if any, of the tentative minimum tax for the taxable year, over the tax due under subsection (1) of this section for the taxable year. The tentative minimum tax is equal to two and four-tenths percent of the alternative minimum taxable income of the corporation. Alternative minimum taxable income for the purposes of this section shall be determined by applying the additions, subtractions, allocations, and apportionments provided in Parts II and III of this act to alternative minimum taxable income as determined under the internal revenue code.

(4) The taxes imposed in this section shall never be less than zero.

NEW SECTION. Sec. 406. EXEMPTION‑-INSURERS. The taxes imposed in this title do not apply to any person in respect to an insurance business that is exempt from business and occupation tax under RCW 82.04.320.

PART V

INCOME TAX‑-WITHHOLDING AND ESTIMATED TAX

NEW SECTION. Sec. 501. EMPLOYER WITHHOLDING‑-REQUIREMENTS. (1) Every employer making a payment of wages or salaries earned in this state, regardless of the place where the payment is made, and who is required by the internal revenue code to withhold taxes, shall deduct and withhold tax as prescribed by the department by rule. The rules prescribed shall reasonably reflect the annual tax liability under this title of the employee under this title. Every employer making such a deduction and withholding shall furnish to the employee a record of the amount of tax deducted and withheld from the employee on forms provided by the department.

(2) If the employee is a resident of this state and earns income from personal services entirely performed in another state that imposes an income tax on the income, and the employer withholds income taxes under the laws of the state in which the income is earned, the employer is not required to withhold any tax imposed by this title on the income if the laws of the state in which the income is earned allow a similar exemption for its residents who earn income in this state.

NEW SECTION. Sec. 502. LIABILITY OF EMPLOYER FOR TAX WITHHELD. Any person required to deduct and withhold the tax imposed by this title is liable to the department for the payment of the amount deducted and withheld, and is not liable to any other person for the amount of tax deducted and withheld under this title or for the act of withholding. The amount of tax so deducted and withheld shall be held to be a special fund in trust for this state.

NEW SECTION. Sec. 503. CREDIT FOR TAX WITHHELD‑-HOW CLAIMED. The amount deducted and withheld as tax under section 501 of this act during any taxable year shall be allowed as a credit against the tax imposed for the taxable year by this title. If the liability of any individual for taxes, interest, penalties, or other amounts due the state of Washington is less than the total amount of the credit that the individual is entitled to claim under this section, the individual is entitled to a refund from the department in the amount of the excess of the credit over the amounts otherwise due. If any individual entitled to claim a credit under this section is not otherwise required by this title to file a return, a refund may be obtained in the amount of the credit by filing a return, with applicable sections completed, to claim the refund. No credit or refund is allowed under this section unless the credit or refund is claimed on a return filed for the taxable year for which the amount was deducted and withheld.

NEW SECTION. Sec. 504. WITHHOLDING‑-FAILURE TO PAY OR COLLECT‑-PENALTIES. (1) The tax required by this title to be collected by the employer shall be deemed to be held in trust by the employer until paid to the department.

(2) In case any employer, or a responsible person within the meaning of internal revenue code section 6672, fails to collect the tax imposed by this title or having collected the tax fails to pay it to the department, the employer or responsible person shall, nevertheless, be personally liable to the state for the amount of the tax. The interest and penalty provisions of chapter 82.32 RCW apply to this section.

NEW SECTION. Sec. 505. ESTIMATED TAX IMPOSED‑-DUE DATE OF ESTIMATED TAXES‑-AMOUNT OF ESTIMATED TAX‑-UNDERPAYMENT PENALTY. (1) Each taxpayer who is required by the internal revenue code to make payment of estimated taxes shall pay to the department on forms prescribed by the department the estimated taxes due under this title.

(2) The provisions of the internal revenue code relating to the determination of reporting periods and due dates of payments of estimated tax apply to the estimated tax payments due under this section.

(3) The amount of the estimated tax shall be the annualized tax divided by the number of months in the reporting period. No estimated tax shall be due if the annualized tax is less than five hundred dollars. The provisions of RCW 82.32.050 and 82.32.090 shall apply to underpayments of estimated tax but shall not apply to underpayments if the tax remitted to the department under this Part is either ninety percent of the tax shown on the return or one hundred percent of the tax shown on the previous year's tax return. (4) For purposes of this section, the annualized tax is the taxpayer's projected tax liability for the taxable year as computed under internal revenue code section 6654 and the regulations thereunder.

PART VI

INCOME TAX‑-ADMINISTRATION AND ENFORCEMENT

NEW SECTION. Sec. 601. METHOD OF ACCOUNTING. (1) A taxpayer's method of accounting for purposes of the tax imposed under this title shall be the same as the taxpayer's method of accounting for federal income tax purposes. If no method of accounting has been regularly used by a taxpayer for federal income tax purposes or if the method used does not clearly reflect income, tax due under this title shall be computed by a method of accounting that in the opinion of the department fairly reflects income.

(2) If a person's method of accounting is changed for federal income tax purposes, it shall be similarly changed for purposes of this title.

NEW SECTION. Sec. 602. PERSONS REQUIRED TO FILE RETURNS. (1) All taxpayers shall file with the department, on forms prescribed by the department, an income tax return for each taxable year. An individual owing no tax for a taxable year is not required to file a return for that year. Each person required to file a return under this title shall, without assessment, notice, or demand, pay any tax due thereon to the department on or before the date fixed for the filing of the return.

(2) The department may by rule require that certain taxpayers file, on forms prescribed by the department, informational returns for any period.

(3) In the event an adjustment to a taxpayer's federal return is made by the taxpayer or the internal revenue service, the taxpayer shall, within ninety days of the final determination of the adjustment by the internal revenue service or within thirty days of the filing of a federal return adjusted by the taxpayer, file with the department on forms prescribed by the department, a corrected return reflecting the adjustments as finally determined. The taxpayer shall pay any additional tax due resulting from the finally determined internal revenue service adjustment or a taxpayer adjustment without notice and assessment. Notwithstanding any provision of this title or any other title to the contrary, the period of limitation for the collection of the additional tax, interest and penalty due as a result of an adjustment by the taxpayer or a finally determined internal revenue service adjustment shall begin at the later of thirty days following the final determination of the adjustment or the date of the filing of the corrected return.

NEW SECTION. Sec. 603. DUE DATE FOR FILING A RETURN‑- EXTENSIONS‑-INTEREST AND PENALTIES. The due date of a return required to be filed with the department shall be the due date of the federal income tax return or informational return for federal income tax purposes. The department shall have the authority to grant extensions of times by which returns required to be filed by this title may be submitted. The department shall also have the authority to grant extensions of time to pay tax with regard to taxes imposed by this title. Interest at the rate as specified in RCW 82.32.050 shall accrue during any extension period and the interest and penalty provisions of chapter 82.32 RCW shall apply to late payments and deficiencies. Notwithstanding the limitation of RCW 82.32.090, in the case of the late filing of an informational return, there shall be imposed a penalty the amount of which shall be established by the department by rule. The penalty shall not exceed fifty dollars per month for a maximum of ten months. RCW 82.32.105 shall apply to this section.

NEW SECTION. Sec. 604. JOINT RETURN. (1) If the federal income tax liabilities of both spouses are determined on a joint federal return for the taxable year, they shall file a joint return under this title.

(2) If neither spouse is required to file a federal income tax return for the taxable year, a joint return shall be filed under this title under the same conditions under which a joint return may be filed for purposes of the federal income tax.

(3) If the federal income tax liability of either spouse is determined on a separate federal return for the taxable year, they shall file separate returns under this title.

(4) In any case in which a joint return is filed under this section, the liability of the husband and wife is joint and several, unless the spouse is relieved of liability under section 6013 of the internal revenue code.

NEW SECTION. Sec. 605. RECORDS‑-RETURNS. (1) Every taxpayer and every person required to deduct and withhold the tax imposed under this title shall keep records, render statements, make returns, file reports, and perform other acts as the department requires by rule. Each return shall be made under penalty of perjury and on forms prescribed by the department. The department may require other statements and reports be made under penalty of perjury and on forms prescribed by the department. The department may require any taxpayer and any person required to deduct and withhold the tax imposed under this title to furnish to the department a correct copy of any return or document that the taxpayer has filed with the internal revenue service or received from the internal revenue service.

(2) All books and records and other papers and documents required to be kept under this title are subject to inspection by the department at all times during business hours of the day.

NEW SECTION. Sec. 606. ESTIMATION AGREEMENTS. The department may reasonably estimate the items of business or nonbusiness income of a taxpayer having an office within the state and one or more other states or foreign countries that may be apportioned or allocated to the state and may enter into estimation agreements with such taxpayers for the determination of their liability for the tax imposed by this title.

NEW SECTION. Sec. 607. PROVISIONS OF INTERNAL REVENUE CODE CONTROL. (1) To the extent possible without being inconsistent with this title, all of the provisions of the internal revenue code relating to the following subjects apply to the taxes imposed under this title:

(a) Time of payment of tax deducted and withheld under section 501 of this act;

(b) Liability of transferees;

(c) Time and manner of making returns, extensions of time for filing returns, verification of returns, and the time when a return is deemed filed.

(2) The department by rule may provide modifications and exceptions to the provisions listed in subsection (1) of this section, if reasonably necessary to facilitate the prompt, efficient, and equitable collection of tax under this title.

Sec. 608. Section 39, chapter 274, Laws of 1947 as last amended by section 20, chapter 107, Laws of 1988 and RCW 41.40.380 are each amended to read as follows:

(1) Subject to subsections (2) and (3) of this section, the right of a person to a pension, an annuity, or retirement allowance, any optional benefit, any other right accrued or accruing to any person under the provisions of this chapter, the various funds created by this chapter, and all moneys and investments and income thereof, are hereby exempt from any state, county, municipal, or other local tax, and shall not be subject to execution, garnishment, attachment, the operation of bankruptcy or insolvency laws, or other process of law whatsoever, and shall be unassignable.

(2) This section shall not be deemed to prohibit a beneficiary of a retirement allowance from authorizing deductions therefrom for payment of premiums due on any group insurance policy or plan issued for the benefit of a group comprised of public employees of the state of Washington or its political subdivisions and which has been approved for deduction in accordance with rules and regulations that may be promulgated by the state health care authority and/or the department of retirement systems, and this section shall not be deemed to prohibit a beneficiary of a retirement allowance from authorizing deductions therefrom for payment of dues and other membership fees to any retirement association or organization the membership of which is composed of retired public employees, if a total of three hundred or more of such retired employees have authorized such deduction for payment to the same retirement association or organization.

(3) Subsection (1) of this section shall not prohibit the department of retirement systems from complying with (a) a wage assignment order for child support issued pursuant to chapter 26.18 RCW, (b) an order to withhold and deliver issued pursuant to chapter 74.20A RCW, (c) a mandatory benefits assignment order issued pursuant to chapter 41.50 RCW, or (d) any administrative or court order expressly authorized by federal law.

(4) Subsection (1) of this section does not exempt any pension or other benefit received under this chapter from tax under Title 82A RCW Parts I through VI of this act, nor does it prohibit the department of retirement systems from complying with the tax withholding requirements of that title.

NEW SECTION. Sec. 609. REFUNDS OF OVERPAYMENTS‑-OTHER ADMINISTRATIVE PROVISIONS. (1) The department shall refund all taxes improperly paid or collected.

(2) The following sections apply to the administration of taxes imposed under this title: 82.32.020, 82.32.050, 82.32.060, 82.32.070, 82.32.090, 82.32.100, 82.32.105, 82.32.110, 82.32.120, 82.32.130, 82.32.140, 82.32.150, 82.32.160, 82.32.170, 82.32.180, 82.32.190, 82.32.200, 82.32.210, 82.32.220, 82.32.230, 82.32.235, 82.32.237, 82.32.240, 82.32.245, 82.32.260, 82.32.265, 82.32.300, 82.32.310, 82.32.320, 82.32.330, 82.32.340, 82.32.350, 82.32.360, and 82.32.380.

NEW SECTION. Sec. 610. RULES. The department may adopt rules under chapter 34.05 RCW for the administration and enforcement of this title. The rules, to the extent possible without being inconsistent with this title, shall follow the internal revenue code and the regulations and rulings of the United States treasury department with respect to the federal income tax. The department may adopt as a part of these rules any portions of the internal revenue code and treasury department regulations and rulings, in whole or in part.

NEW SECTION. Sec. 611. CRIMES. (1) Any person who knowingly attempts to evade the tax imposed under this title or payment thereof is guilty of a class C felony as provided in chapter 9A.20 RCW.

(2) Any person required to collect tax imposed under this title who knowingly fails to collect, truthfully account for, or pay over the tax is guilty of a class C felony as provided in chapter 9A.20 RCW.

(3) Any person who knowingly fails to pay tax, pay estimated tax, make returns, keep records, or supply information, as required under this title, is guilty of a gross misdemeanor as provided in chapter 9A.20 RCW.

NEW SECTION. Sec. 612. CODIFICATION. Parts I through VI of this act shall constitute a new title, to be codified as Title 82A RCW.

PART VII

INCOME TAX‑-APPEALS

Sec. 701. BOARD OF TAX APPEALS‑-JURISDICTION. Section 42, chapter 26, Laws of 1967 ex. sess. as last amended by section 6, chapter 46, Laws of 1982 1st ex. sess. and RCW 82.03.130 are each amended to read as follows:

The board shall have jurisdiction to decide the following types of appeals:

(1) Appeals taken pursuant to RCW 82.03.190.

(2) Appeals from a county board of equalization pursuant to RCW 84.08.130.

(3) Appeals by an assessor or landowner from an order of the director of revenue made pursuant to RCW 84.08.010 and 84.08.060, the right to such an appeal being hereby established.

(4) Appeals by an assessor or owner of an intercounty public utility or private car company from determinations by the director of revenue of equalized assessed valuation of property and the apportionment thereof to a county made pursuant to chapter 84.12 RCW and 84.16 RCW, the right to such appeal being hereby established.

(5) Appeals by an assessor, landowner, or owner of an intercounty public utility or private car company from a determination of any county indicated ratio for such county compiled by the department of revenue pursuant to RCW 84.48.075: PROVIDED, That

(a) Said appeal be filed after review of the ratio under RCW 84.48.075(3) and not later than fifteen days after the date of certification as required by RCW 84.48.075; and

(b) The hearing before the board shall be expeditiously held in accordance with rules prescribed by the board and shall take precedence over all matters of the same character.

(6) Appeals relating to income tax deficiencies and refunds including penalties and interest under Title 82A RCW (Parts I through VI of this act).

Sec. 702. ELECTION OF FORMAL OR INFORMAL HEARING. Section 43, chapter 26, Laws of 1967 ex. sess. as last amended by section 4, chapter 222, Laws of 1988 and RCW 82.03.140 are each amended to read as follows:

In all appeals over which the board has jurisdiction under RCW 82.03.130, a party taking an appeal may elect either a formal or an informal hearing, such election to be made according to rules of practice and procedure to be promulgated by the board: PROVIDED, That nothing shall prevent the assessor or taxpayer, as a party to an appeal pursuant to RCW 84.08.130, within twenty days from the date of the receipt of the notice of appeal, from filing with the clerk of the board notice of intention that the hearing be a formal one: PROVIDED, HOWEVER, That nothing herein shall be construed to modify the provisions of RCW 82.03.190: AND PROVIDED FURTHER, That upon an appeal under RCW 82.03.130(5) or (6), the director of revenue may, within ten days from the date of its receipt of the notice of appeal, file with the clerk of the board notice of its ((~~intention that the hearing be held pursuant to chapter 34.04 RCW~~)) election of a formal hearing. In the event that appeals are taken from the same decision, order, or determination, as the case may be, by different parties and only one of such parties elects a formal hearing, a formal hearing shall be granted.

PART VIII

BUSINESS EXCISE TAXES REDUCED

Sec. 801. EXTRACTORS. Section 82.04.230, chapter 15, Laws of 1961 as last amended by section 2, chapter 281, Laws of 1971 ex. sess. and RCW 82.04.230 are each amended to read as follows:

Upon every person engaging within this state in business as an extractor; as to such persons the amount of the tax with respect to such business shall be equal to the value of the products, including byproducts, extracted for sale or for commercial or industrial use, multiplied by the rate of ((~~forty-four one-hundredths~~)) three hundred eighty-seven one-thousandths of one percent;

The measure of the tax is the value of the products, including byproducts, so extracted, regardless of the place of sale or the fact that deliveries may be made to points outside the state.

Sec. 802. MANUFACTURERS. Section 82.04.240, chapter 15, Laws of 1961 as last amended by section 1, chapter 172, Laws of 1981 and RCW 82.04.240 are each amended to read as follows:

Upon every person except persons taxable under subsections (2), (3), (4), (5), (7), (8), or (9) of RCW 82.04.260 engaging within this state in business as a manufacturer; as to such persons the amount of the tax with respect to such business shall be equal to the value of the products, including byproducts, manufactured, multiplied by the rate of ((~~forty-four one-hundredths~~)) three hundred eighty-seven one-thousandths of one percent.

The measure of the tax is the value of the products, including byproducts, so manufactured regardless of the place of sale or the fact that deliveries may be made to points outside the state.

Sec. 803. RETAILERS. Section 82.04.250, chapter 15, Laws of 1961 as last amended by section 2, chapter 172, Laws of 1981 and RCW 82.04.250 are each amended to read as follows:

(1) Upon every person except persons taxable under RCW 82.04.260(8) or subsection (2) of this section engaging within this state in the business of making sales at retail, as to such persons, the amount of tax with respect to such business shall be equal to the gross proceeds of sales of the business, multiplied by the rate of ((~~forty-four one-hundredths~~)) three hundred seventy-seven one-thousandths of one percent.

(2) Upon every person engaging within this state in the business of making sales at retail that are exempt from the tax imposed under chapter 82.08 RCW by reason of RCW 82.08.0261, 82.08.0262, or 82.08.0263, as to such persons, the amount of tax with respect to such business shall be equal to the gross proceeds of sales of the business, multiplied by the rate of three hundred eighty-seven one-thousandths of one percent.

Sec. 804. REAL ESTATE BROKERS. Section 3, chapter 65, Laws of 1970 ex. sess. as last amended by section 2, chapter 32, Laws of 1985 and RCW 82.04.255 are each amended to read as follows:

Upon every person engaging within the state as a real estate broker; as to such persons, the amount of the tax with respect to such business shall be equal to the gross income of the business, multiplied by the rate of ((~~1.50~~)) one and two-tenths percent.

The measure of the tax on real estate commissions earned by the real estate broker shall be the gross commission earned by the particular real estate brokerage office including that portion of the commission paid to salesmen or associate brokers in the same office on a particular transaction: PROVIDED, HOWEVER, That where a real estate commission is divided between an originating brokerage office and a cooperating brokerage office on a particular transaction, each brokerage office shall pay the tax only upon their respective shares of said commission: AND PROVIDED FURTHER, That where the brokerage office has paid the tax as provided herein, salesmen or associate brokers within the same brokerage office shall not be required to pay a similar tax upon the same transaction.

Sec. 805. MISCELLANEOUS BUSINESSES. Section 1, chapter 139, Laws of 1987 and RCW 82.04.260 are each amended to read as follows:

(1) Upon every person engaging within this state in the business of buying wheat, oats, dry peas, dry beans, lentils, triticale, corn, rye and barley, but not including any manufactured or processed products thereof, and selling the same at wholesale; the tax imposed shall be equal to the gross proceeds derived from such sales multiplied by the rate of ((~~one one-hundredth~~)) nine one-thousandths of one percent.

(2) Upon every person engaging within this state in the business of manufacturing wheat into flour, barley into pearl barley, soybeans into soybean oil, or sunflower seeds into sunflower oil; as to such persons the amount of tax with respect to such business shall be equal to the value of the flour, pearl barley, or oil manufactured, multiplied by the rate of ((~~one-eighth~~)) one hundred ten one-thousandths of one percent.

(3) 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 shall be equal to the value of the peas split or processed, multiplied by the rate of ((~~one-quarter~~)) two hundred twenty one-thousandths of one percent.

(4) Upon every person engaging within this state in the business of manufacturing seafood products which remain in a raw, raw frozen, or raw salted state at the completion of the manufacturing by that person; as to such persons the amount of tax with respect to such business shall be equal to the value of the products manufactured, multiplied by the rate of ((~~one-eighth~~)) one hundred ten one-thousandths of one percent.

(5) Upon every person engaging within this state in the business of manufacturing by canning, preserving, freezing or dehydrating fresh fruits and vegetables; as to such persons the amount of tax with respect to such business shall be equal to the value of the products canned, preserved, frozen or dehydrated multiplied by the rate of ((~~three-tenths~~)) two hundred sixty-four one-thousandths of one percent.

(6) 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 shall be equal to the gross income derived from such activities multiplied by the rate of ((~~forty-four one-hundredths~~)) three hundred eighty-seven one-thousandths of one percent.

(7) 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 shall be equal to the gross proceeds derived from such sales multiplied by the rate of ((~~twenty-five one-hundredths of one percent through June 30, 1986, and one-eighth~~)) one hundred ten one-thousandths of one percent ((~~thereafter~~)).

(8) Upon every person engaging within this state in the business of making sales, at retail or wholesale, of nuclear fuel assemblies manufactured by that person, as to such persons the amount of tax with respect to such business shall be equal to the gross proceeds of sales of the assemblies multiplied by the rate of ((~~twenty-five one-hundredths~~)) two hundred twenty one-thousandths of one percent.

(9) Upon every person engaging within this state in the business of manufacturing nuclear fuel assemblies, as to such persons the amount of tax with respect to such business shall be equal to the value of the products manufactured multiplied by the rate of ((~~twenty-five one-hundredths~~)) two hundred twenty one-thousandths of one percent.

(10) Upon every person engaging within this state in the business of acting as a travel agent; as to such persons the amount of the tax with respect to such activities shall be equal to the gross income derived from such activities multiplied by the rate of ((~~twenty-five one-hundredths~~)) two hundred twenty one-thousandths of one percent.

(11) 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 shall be equal to the gross income derived from such activities multiplied by the rate of ((~~thirty-three one-hundredths~~)) two hundred ninety one-thousandths of one percent.

(12) 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 shall be equal to the gross proceeds derived from such activities multiplied by the rate of ((~~thirty-three one hundredths~~)) two hundred ninety one-thousandths of one percent. Persons subject to taxation under this subsection shall be 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.

(13) 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 shall be equal to the gross income of the business, excluding any fees imposed under chapter 43.200 RCW, multiplied by the rate of ((~~thirty~~)) twenty-six and four-tenths 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 shall be determined in accordance with the methods of apportionment required under RCW 82.04.460.

(14) Upon every person engaging within this state as an insurance agent, insurance broker, or insurance solicitor licensed under chapter 48.17 RCW; as to such persons, the amount of the tax with respect to such licensed activities shall be equal to the gross income of such business multiplied by the rate of eight hundred eighty one-thousandths of one percent.

Sec. 806. WHOLESALERS‑-DISTRIBUTORS. Section 82.04.270, chapter 15, Laws of 1961 as last amended by section 4, chapter 172, Laws of 1981 and RCW 82.04.270 are each amended to read as follows:

(1) Upon every person except persons taxable under subsections (1) or (8) of RCW 82.04.260 engaging within this state in the business of making sales at wholesale; as to such persons the amount of tax with respect to such business shall be equal to the gross proceeds of sales of such business multiplied by the rate of ((~~forty-four one-hundredths~~)) three hundred eighty-seven one-thousandths of one percent.

(2) The tax imposed by this section is levied and shall be collected from every person engaged in the business of distributing in this state articles of tangible personal property, owned by them from their own warehouse or other central location in this state to two or more of their own retail stores or outlets, where no change of title or ownership occurs, the intent hereof being to impose a tax equal to the wholesaler's tax upon persons performing functions essentially comparable to those of a wholesaler, but not actually making sales: PROVIDED, That the tax designated in this section may not be assessed twice to the same person for the same article. The amount of the tax as to such persons shall be computed by multiplying ((~~forty-four one-hundredths~~)) three hundred eighty-seven one-thousandths of one percent of the value of the article so distributed as of the time of such distribution: PROVIDED, That persons engaged in the activities described in this subsection shall not be liable for the tax imposed if by proper invoice it can be shown that they have purchased such property from a wholesaler who has paid a business and occupation tax to the state upon the same articles. This proviso shall not apply to purchases from manufacturers as defined in RCW 82.04.110. The department of revenue shall prescribe uniform and equitable rules for the purpose of ascertaining such value, which value shall correspond as nearly as possible to the gross proceeds from sales at wholesale in this state of similar articles of like quality and character, and in similar quantities by other taxpayers: PROVIDED FURTHER, That delivery trucks or vans will not under the purposes of this section be considered to be retail stores or outlets.

Sec. 807. MISCELLANEOUS BUSINESSES. Section 2, chapter 8, Laws of 1970 ex. sess. as last amended by section 2, chapter 226, Laws of 1986 and RCW 82.04.280 are each amended to read as follows:

Upon every person engaging within this state in the business of: (1) Printing, and of publishing newspapers, periodicals or magazines; (2) building, repairing or improving any street, place, road, highway, easement, right of way, mass public transportation terminal or parking facility, bridge, tunnel, or trestle which is owned by a municipal corporation or political subdivision of the state or by the United States and which is used or to be used, primarily for foot or vehicular traffic including mass transportation vehicles of any kind and including any readjustment, reconstruction or relocation of the facilities of any public, private or cooperatively owned utility or railroad in the course of such building, repairing or improving, the cost of which readjustment, reconstruction, or relocation, is the responsibility of the public authority whose street, place, road, highway, easement, right of way, mass public transportation terminal or parking facility, bridge, tunnel, or trestle is being built, repaired or improved; (3) extracting for hire or processing for hire; (4) operating a cold storage warehouse or storage warehouse, but not including the rental of cold storage lockers; (5) representing and performing services for fire or casualty insurance companies as an independent resident managing general agent licensed under the provisions of RCW 48.05.310; (6) radio and television broadcasting, excluding network, national and regional advertising computed as a standard deduction based on the national average thereof as annually reported by the Federal Communications Commission, or in lieu thereof by itemization by the individual broadcasting station, and excluding that portion of revenue represented by the out-of-state audience computed as a ratio to the station's total audience as measured by the 100 micro-volt signal strength and delivery by wire, if any; (7) engaging in activities which bring a person within the definition of consumer contained in RCW 82.04.190(6), as now or hereafter amended; as to such persons, the amount of tax on such business shall be equal to the gross income of the business multiplied by the rate of ((~~forty-four one hundredths~~)) three hundred eighty-seven one-thousandths of one percent.

As used in this section, "cold storage warehouse" means a storage warehouse used to store fresh and/or frozen perishable fruits or vegetables, meat, seafood, dairy products, or fowl, or any combination thereof, at a desired temperature to maintain the quality of the product for orderly marketing.

As used in this section, "storage warehouse" means a building or structure, or any part thereof, in which goods, wares, or merchandise are received for storage for compensation, except field warehouses, fruit warehouses, fruit packing plants, warehouses licensed under chapter 22.09 RCW, public garages storing automobiles, railroad freight sheds, docks and wharves, and "self-storage" or "mini storage" facilities whereby customers have direct access to individual storage areas by separate entrance.

Sec. 808. SERVICE AND OTHER BUSINESSES. Section 82.04.290, chapter 15, Laws of 1961 as last amended by section 3, chapter 32, Laws of 1985 and RCW 82.04.290 are each amended to read as follows:

Upon every person engaging within this state in any business activity other than or in addition to those enumerated in RCW 82.04.230, 82.04.240, 82.04.250, 82.04.255, 82.04.260, 82.04.270, and 82.04.280; as to such persons the amount of tax on account of such activities shall be equal to the gross income of the business multiplied by the rate of ((~~1.50~~)) one and two-tenths percent. This section includes, among others, and without limiting the scope hereof (whether or not title to materials used in the performance of such business passes to another by accession, confusion or other than by outright sale), persons engaged in the business of rendering any type of service which does not constitute a "sale at retail" or a "sale at wholesale." The value of advertising, demonstration, and promotional supplies and materials furnished to an agent by his principal or supplier to be used for informational, educational and promotional purposes shall not be considered a part of the agent's remuneration or commission and shall not be subject to taxation under this section.

Sec. 809. UTILITY BUSINESSES. Section 82.16.020, chapter 15, Laws of 1961 as last amended by section 14, chapter 282, Laws of 1986 and RCW 82.16.020 are each amended to read as follows:

(1) There is levied and there shall be collected from every person a tax for the act or privilege of engaging within this state in any one or more of the businesses herein mentioned. The tax shall be equal to the gross income of the business, multiplied by the rate set out after the business, as follows:

(a) Railroad, express, railroad car, sewerage collection, light and power, and telegraph businesses: Three and ((~~six-tenths~~)) eighty-two one-thousandths of one percent;

(b) Gas distribution business: Three and ((~~six-tenths~~)) eighty-two one-thousandths of one percent;

(d) Vessels under sixty-five feet in length, except tugboats, operating upon the waters within the state: ((~~Six-tenths~~)) Five hundred fourteen one-thousandths of one percent;

(e) Motor transportation and tugboat businesses, and all public service businesses other than ones mentioned above: One and ((~~eight-tenths~~)) five hundred forty-one one-thousandths of one percent;

(f) Water distribution business: Four and ((~~seven-tenths~~)) twenty-three one-thousandths of one percent.

(2) ((~~An additional tax is imposed equal to the rate specified in RCW 82.02.030 multiplied by the tax payable under subsection (1) of this section.~~

~~(3)~~)) Twenty-five percent of the moneys collected under subsection (1) of this section on water distribution businesses and ((~~sixty~~)) seventy-five percent of the moneys collected under subsection (1) of this section on sewerage collection businesses shall be deposited in the public works assistance account created in RCW 43.155.050.

NEW SECTION. Sec. 810. SMALL BUSINESS DEDUCTIONS. A new section is added to chapter 82.04 RCW to read as follows:

(1) As used in this section:

(a) "Combined measure of tax" means the total of the value of products, gross proceeds of sales, and gross income of the business for all activities upon which business and occupation taxes are imposed under this chapter.

(b) "Threshold amount" means:

(i) Fourteen thousand dollars for taxpayers for whom at least eighty percent of the combined measure of tax for the reporting period is attributable to the business of making sales at retail.

(ii) Five thousand dollars for sole proprietors for whom at least eighty percent of the combined measure of tax for the reporting period is attributable to the business of rendering any type of service that does not constitute a sale at retail.

(iii) Eight thousand dollars for all other taxpayers.

(2) In computing the tax imposed under this chapter, there may be deducted from the combined measure of tax an amount equal to the product of the threshold amount multiplied by the number of months in the reporting period, determined under RCW 82.32.045, reduced by the amount computed under subsection (3) of this section.

(3) For each taxpayer the amount under subsection (2) of this section shall be reduced, but not below zero, by twenty percent of the amount by which the combined measure of tax for a reporting period exceeds the product of the threshold amount multiplied by the number of months in the reporting period.

(4) If a taxpayer engages in more than one business activity only a single deduction using a single threshold amount applied against the combined measures of tax is allowed under this section. The taxpayer may specify how the deduction is to be divided among the measures of tax.

(5) Any person claiming a deduction under the provisions of this section may be required to file returns even though no tax may be due.

NEW SECTION. Sec. 811. SMALL BUSINESS DEDUCTIONS‑-UTILITIES. A new section is added to chapter 82.16 RCW to read as follows:

(1) In computing the tax imposed under this chapter, there may be deducted from the gross income of the business an amount equal to eight thousand dollars multiplied by the number of months in the reporting period (determined under RCW 82.32.045) reduced by the amount computed under subsection (2) of this section.

(2) For each taxpayer the amount under subsection (1) of this section shall be reduced, but not below zero, by twenty percent of the amount by which the measure of tax for a reporting period exceeds the product of the threshold amount multiplied by the number of months in the reporting period.

(3) If a person engages in more than one business activity only a single deduction computed based on the combined measures of tax is allowed by this section.

(4) Any person claiming deduction(s) under the provisions of this section may be required to file returns even though no tax may be due.

Sec. 812. CROSS-REFERENCE CORRECTION. Section 31, chapter 35, Laws of 1982 1st ex. sess. as last amended by section 4, chapter 80, Laws of 1987, section 15, chapter 472, Laws of 1987, and by section 6, chapter 9, Laws of 1987 1st ex. sess. and RCW 82.02.030 are each reenacted and amended to read as follows:

(1) The rate of the additional taxes under RCW 54.28.020(2), 54.28.025(2), 66.24.210(2), 66.24.290(2), ((~~82.04.2901, 82.16.020(2),~~)) 82.26.020(2), 82.27.020(5), 82.29A.030(2), and 82.44.020(6) shall be seven percent; and

(2) The rate of the additional taxes under RCW 82.08.150(4) shall be fourteen percent.

NEW SECTION. Sec. 813. REPEALER. The following acts or parts of acts are each repealed:

(1) Section 82.04.300, chapter 15, Laws of 1961, section 3, chapter 293, Laws of 1961, section 41, chapter 278, Laws of 1975 1st ex. sess., section 4, chapter 196, Laws of 1979 ex. sess., section 213, chapter 3, Laws of 1983 and RCW 82.04.300;

(2) Section 4, chapter 32, Laws of 1985 and RCW 82.04.2901;

(3) Section 3, chapter 9, Laws of 1983, section 3, chapter 3, Laws of 1983 2nd ex. sess., section 5, chapter 32, Laws of 1985 and RCW 82.04.2904; and

(4) Section 82.16.040, chapter 15, Laws of 1961 and RCW 82.16.040.

PART IX

RETAIL SALES AND USE TAXES REDUCED

Sec. 901. RETAIL SALES TAX RATE. Section 1, chapter 32, Laws of 1985 and RCW 82.08.020 are each amended to read as follows:

(1) There is levied and there shall be collected a tax on each retail sale in this state equal to ((~~six and five-tenths~~)) four and one-tenth percent of the selling price.

(2) The tax imposed under this chapter shall apply to successive retail sales of the same property.

(3) The rate provided in this section applies to taxes imposed under chapter 82.12 RCW as provided in RCW 82.12.020.

Sec. 902. SALE AT RETAIL DEFINED‑-NEW BUILDINGS EXCLUDED. Section 1, chapter 253, Laws of 1988 and RCW 82.04.050 are each amended to read as follows:

(1) "Sale at retail" or "retail sale" means every sale of tangible personal property (including articles produced, fabricated, or imprinted) to all persons irrespective of the nature of their business and including, among others, without limiting the scope hereof, persons who install, repair, clean, alter, improve, construct, or decorate real or personal property of or for consumers other than a sale to a person who (a) purchases for the purpose of resale as tangible personal property in the regular course of business without intervening use by such person, or (b) installs, repairs, cleans, alters, imprints, improves, constructs, or decorates real or personal property of or for consumers, if such tangible personal property becomes an ingredient or component of such real or personal property without intervening use by such person, or (c) purchases for the purpose of consuming the property purchased in producing for sale a new article of tangible personal property or substance, of which such property becomes an ingredient or component or is a chemical used in processing, when the primary purpose of such chemical is to create a chemical reaction directly through contact with an ingredient of a new article being produced for sale, or !se (d) purchases for the purpose of consuming the property purchased in producing ferrosilicon which is subsequently used in producing magnesium for sale, if the primary purpose of such property is to create a chemical reaction directly through contact with an ingredient of ferrosilicon, or (e) purchases for the purpose of providing the property to consumers as part of competitive telephone service, as defined in RCW 82.04.065. The term shall include every sale of tangible personal property which is used or consumed or to be used or consumed in the performance of any activity classified as a "sale at retail" or "retail sale" even though such property is resold or utilized as provided in (a), (b), (c), (d), or (e) above following such use. The term also means every sale of tangible personal property to persons engaged in any business which is taxable under RCW 82.04.280, subsections (2) and (7) and RCW 82.04.290.

(2) The term "sale at retail" or "retail sale" shall include the sale of or charge made for tangible personal property consumed and/or for labor and services rendered in respect to the following: (a) The installing, repairing, cleaning, altering, imprinting, or improving of tangible personal property of or for consumers, including charges made for the mere use of facilities in respect thereto, but excluding charges made for the use of coin operated laundry facilities when such facilities are situated in an apartment house, hotel, motel, rooming house, trailer camp or tourist camp for the exclusive use of the tenants thereof, and also excluding sales of laundry service to members by nonprofit associations composed exclusively of nonprofit hospitals, and excluding services rendered in respect to live animals, birds and insects; (b) the constructing, repairing, decorating, or improving of new or existing buildings or other structures under, upon, or above real property of or for consumers, including the installing or attaching of any article of tangible personal property therein or thereto, whether or not such personal property becomes a part of the realty by virtue of installation, and shall also include the sale of services or charges made for the clearing of land and the moving of earth excepting the mere leveling of land used in commercial farming or agriculture; (c) the charge for labor and services rendered in respect to constructing, repairing, or improving any structure upon, above, or under any real property owned by an owner who conveys the property by title, possession, or any other means to the person performing such construction, repair, or improvement for the purpose of performing such construction, repair, or improvement and the property is then reconveyed by title, possession, or any other means to the original owner; (d) the sale of or charge made for labor and services rendered in respect to the cleaning, fumigating, razing or moving of existing buildings or structures, but shall not include the charge made for janitorial services; and for purposes of this section the term "janitorial services" shall mean those cleaning and caretaking services ordinarily performed by commercial janitor service businesses including, but not limited to, wall and window washing, floor cleaning and waxing, and the cleaning in place of rugs, drapes and upholstery. The term "janitorial services" does not include painting, papering, repairing, furnace or septic tank cleaning, snow removal or sandblasting; (e) the sale of or charge made for labor and services rendered in respect to automobile towing and similar automotive transportation services, but not in respect to those required to report and pay taxes under chapter 82.16 RCW; (f) the sale of and charge made for the furnishing of lodging and all other services by a hotel, rooming house, tourist court, motel, trailer camp, and the granting of any similar license to use real property, as distinguished from the renting or leasing of real property, and it shall be presumed that the occupancy of real property for a continuous period of one month or more constitutes a rental or lease of real property and not a mere license to use or enjoy the same; (g) the sale of or charge made for tangible personal property, labor and services to persons taxable under (a), (b), (c), (d), (e), and (f) above when such sales or charges are for property, labor and services which are used or consumed in whole or in part by such persons in the performance of any activity defined as a "sale at retail" or "retail sale" even though such property, labor and services may be resold after such use or consumption. Nothing contained in this paragraph shall be construed to modify the first paragraph of this section and nothing contained in the first paragraph of this section shall be construed to modify this paragraph.

(3) The term "sale at retail" or "retail sale" shall include the sale of or charge made for personal business or professional services including amounts designated as interest, rents, fees, admission, and other service emoluments however designated, received by persons engaging in the following business activities: (a) Amusement and recreation businesses including but not limited to golf, pool, billiards, skating, bowling, ski lifts and tows and others; (b) abstract, title insurance and escrow businesses; (c) credit bureau businesses; (d) automobile parking and storage garage businesses.

(4) The term shall also include the renting or leasing of tangible personal property to consumers.

(5) The term shall also include the providing of telephone service, as defined in RCW 82.04.065, to consumers.

(6) The term shall not include the sale of or charge made for labor and services rendered in respect to the building, repairing, or improving of any street, place, road, highway, easement, right of way, mass public transportation terminal or parking facility, bridge, tunnel, or trestle which is owned by a municipal corporation or political subdivision of the state or by the United States and which is used or to be used primarily for foot or vehicular traffic including mass transportation vehicles of any kind. The term shall also not include sales of feed, seed, seedlings, fertilizer, and spray materials to persons who participate in the federal conservation reserve program or its successor administered by the United States department of agriculture, or to persons for the purpose of producing for sale any agricultural product whatsoever, including plantation Christmas trees and milk, eggs, wool, fur, meat, honey, or other substances obtained from animals, birds, or insects but only when such production and subsequent sale are exempt from tax under RCW 82.04.330, nor shall it include sales of chemical sprays or washes to persons for the purpose of post-harvest treatment of fruit for the prevention of scald, fungus, mold, or decay.

(7) The term shall not include the sale of or charge made for labor and services rendered in respect to the constructing, repairing, decorating, or improving of new or existing buildings or other structures under, upon, or above real property of or for the United States, any instrumentality thereof, or a county or city housing authority created pursuant to chapter 35.82 RCW, including the installing, or attaching of any article of tangible personal property therein or thereto, whether or not such personal property becomes a part of the realty by virtue of installation. Nor shall the term include the sale of services or charges made for the clearing of land and the moving of earth of or for the United States, any instrumentality thereof, or a county or city housing authority.

(8) The term shall not include the sale of or charge made for labor and services rendered in respect to the construction of new buildings to be used for either manufacturing or research and development activities. As used in this subsection, "buildings" and "research and development" have the meanings given in RCW 82.61.010.

PART X

PROPERTY TAXES REDUCED

Sec. 1001. MAXIMUM LEVY RATES. Section 134, chapter 195, Laws of 1973 1st ex. sess. as amended by section 5, chapter 274, Laws of 1988 and RCW 84.52.043 are each amended to read as follows:

Within and subject to the limitations imposed by RCW 84.52.050 as amended, the regular ad valorem tax levies upon real and personal property by the taxing districts hereafter named shall be as follows:

(1) Levies of the senior taxing districts shall be as follows: (a) The levy by the state shall not exceed three dollars and ((~~sixty~~)) twenty cents per thousand dollars of assessed value adjusted to the state equalized value in accordance with the indicated ratio fixed by the state department of revenue to be used exclusively for the support of the common schools; (b) the levy by any county shall not exceed one dollar and eighty cents per thousand dollars of assessed value; (c) the levy by any road district shall not exceed two dollars and twenty-five cents per thousand dollars of assessed value; and (d) the levy by any city or town shall not exceed three dollars and thirty-seven and one-half cents per thousand dollars of assessed value. However any county is hereby authorized to increase its levy from one dollar and eighty cents to a rate not to exceed two dollars and forty-seven and one-half cents per thousand dollars of assessed value for general county purposes if the total levies for both the county and any road district within the county do not exceed four dollars and five cents per thousand dollars of assessed value, and no other taxing district has its levy reduced as a result of the increased county levy.

(2) Except as provided in RCW 84.52.100, the aggregate levies of junior taxing districts and senior taxing districts, other than the state, shall not exceed five dollars and fifty-five cents per thousand dollars of assessed valuation. The term "junior taxing districts" includes all taxing districts other than the state, counties, road districts, cities, towns, port districts, and public utility districts. The limitations provided in this subsection shall not apply to: (a) Levies at the rates provided by existing law by or for any port or public utility district; (b) excess property tax levies authorized in Article VII, section 2 of the state Constitution; (c) levies for acquiring conservation futures as authorized under RCW 84.34.230; and (d) levies for emergency medical care or emergency medical services imposed under RCW 84.52.069.

(3) It is the intent of the legislature that the provisions of this section shall supersede all conflicting provisions of law including RCW 84.52.050.

Sec. 1002. STATE LEVY. Section 1, chapter 133, Laws of 1967 ex. sess. as last amended by section 1, chapter 218, Laws of 1979 ex. sess. and RCW 84.52.065 are each amended to read as follows:

Subject to the limitations in RCW 84.55.010, in each year the state shall levy for collection in the following year for the support of common schools of the state and the common school construction fund a tax of three dollars and ((~~sixty~~)) twenty cents per thousand dollars of assessed value upon the assessed valuation of all taxable property within the state adjusted to the state equalized value in accordance with the indicated ratio fixed by the state department of revenue.

Sec. 1003. STATE LEVY‑-DISPOSITION OF REVENUE. Section 2, chapter 133, Laws of 1967 ex. sess. and RCW 84.52.067 are each amended to read as follows:

All revenues generated by fifteen cents per thousand dollars of assessed value of the property taxes levied by the state shall be paid into the common school construction fund. All remaining revenues from property taxes levied by the state shall be used only for the support of common schools and shall be paid into the general fund of the state treasury ((~~as provided in RCW 84.56.280~~)).

NEW SECTION. Sec. 1004. APPLICATION. Sections 1001 through 1003 of this act shall be effective for taxes levied for collection in 1990 and thereafter.

PART XI

REVENUE LIMIT AND RESERVE FUND

Sec. 1101. DEFINITIONS. Section 2, chapter 1, Laws of 1980 and RCW 43.135.020 are each amended to read as follows:

As used in this chapter, the following terms have the meanings indicated unless otherwise required.

(1) "State tax revenue" means all ((~~state moneys received in the treasury from every source except those revenues excluded for the term~~)) "general state revenues" as defined by Article VIII, section (1)(c) of the state Constitution ((~~other than~~)), plus:

(a) Revenues from the state property tax levied for the support of the common schools and the common school construction fund under RCW 84.52.065, as now or hereafter amended; and

(b) Revenues from taxes levied for other specific purposes, unless dedication for the specific purpose is made in a law:

(i) Enacted before the effective date of this section;

(ii) Enacted by a favorable vote of sixty percent of the members elected to each house of the legislature; or

(iii) Enacted as an initiative or referendum approved by the people pursuant to the powers reserved by the people under Article II, section 1 of the state Constitution.

(2) "State personal income" means the dollar amount published as total personal income of persons of the state for the calendar year by the United States department of commerce or its successor agency.

(3) "State tax revenue limit" or "limit" means the state tax revenue limit created by this chapter.

(4) "Taxing district" means those districts included within the term "taxing district" under RCW 84.04.120, as now or hereafter amended.

(5) "State personal income ((~~ratio~~)) change" for any calendar year means the ((~~quotient formed by dividing~~)) percentage change in (a) state personal income for the calendar year under consideration ((by)) over (b) the state personal income for the immediately preceding calendar year.

Sec. 1102. REVENUE LIMITS. Section 3, chapter 1, Laws of 1980 and RCW 43.135.030 are each amended to read as follows:

(1) The state tax revenue limit for the fiscal biennium ending June 30, 1991, and for each third fiscal biennium thereafter, shall be equal to state tax revenue for the previous fiscal biennium increased by one-third of the sum of the state personal income changes for the six calendar years immediately preceding the beginning of the fiscal biennium for which the limit is being computed.

(2) The state tax revenue limit for any ((~~fiscal year~~)) other fiscal biennium shall be the previous fiscal ((~~year's~~)) biennium's state tax revenue limit ((~~multiplied by the average state personal income ratio~~)) increased by one-third of the sum of the state personal income changes for the ((~~three~~)) six calendar years immediately preceding the beginning of the fiscal ((~~year~~)) biennium for which the limit is being computed.

(((2) For purposes of computing the state tax revenue limit for the fiscal year beginning July 1, 1980, the phrase "the previous fiscal year's state tax revenue limit" means the state tax revenue collected in the fiscal year beginning July 1, 1978, multiplied by the average state personal income ratio for the calendar years 1976, 1977, and 1978.))

Sec. 1103. SETTING TAX RATES‑-EXCESS REVENUE INTO RESERVE FUND. Section 4, chapter 1, Laws of 1980 and RCW 43.135.040 are each amended to read as follows:

Except as provided in RCW 43.135.050, taxes, fees, and charges on persons, property, and activities shall be imposed, levied, or set by the legislature in such a manner that the estimated state tax revenue for each fiscal ((~~year of the next~~)) biennium will not exceed the state tax revenue limit for that fiscal ((~~year: PROVIDED, The legislature may at any time adjust such taxes, fees, and charges for the second fiscal year of the~~)) biennium. If actual revenues exceed the limit, the excess, as determined by the office of financial management, shall be deposited in the revenue reserve fund.

Sec. 1104. REVENUE LIMITS‑-BIENNIA. Section 5, chapter 1, Laws of 1980 and RCW 43.135.050 are each amended to read as follows:

(1) The state tax revenue limit for any fiscal ((~~year~~)) biennium may be exceeded in order to meet an emergency as declared ((~~by the legislature by two-thirds vote of each house. The legislature, by two-thirds vote of each house, shall set~~)) in a law approved by a favorable vote of at least sixty percent of the members elected to each house of the legislature, or by an initiative or referendum approved by the people pursuant to the powers reserved by the people under Article II, section 1 of the state Constitution, setting forth the circumstances constituting the emergency and the amount of state tax revenue in excess of the applicable state tax revenue limit necessary to meet the emergency.

(2) Any amount of state tax revenue authorized by subsection (1) of this section in excess of the state tax revenue limit shall be authorized only for the fiscal ((~~year~~)) biennium in which the vote is taken and/or the next succeeding fiscal ((~~year, as directed by the legislature~~)) biennium.

(3) Except where the emergency results from a court order, the amount of state tax revenue authorized under subsection (1) of this section in excess of the limit shall not be used in the revenue base used to compute the state tax revenue limit for subsequent ((~~years~~)) biennia.

Sec. 1105. TAXING DISTRICTS‑-REIMBURSEMENT. Section 6, chapter 1, Laws of 1980 and RCW 43.135.060 are each amended to read as follows:

(1) The legislature shall not impose responsibility for new programs or increased levels of service under existing programs on any taxing district unless the districts are reimbursed for the costs thereof by the state. Legislative authorization of new revenue sources or increased revenues from existing sources constitutes reimbursement under this subsection.

(2) ((That proportion of state tax revenue which consists of direct state appropriations to taxing districts taken as a group shall not be decreased below that proportion appropriated in the biennium immediately preceding January 1, 1980: PROVIDED, This proportion shall be decreased in any fiscal year only if: (a) The legislature decreases the state tax revenue limit for that fiscal year by an amount equal to the dollar amount of any decrease in direct state appropriations to taxing districts taken as a whole; or (b) the state tax revenue limit has been increased under RCW 43.135.050(3) or 43.135.060(3) and the decrease of the proportion is commensurate with the increase in the state tax revenue limit.

~~(3)~~)) If by order of any court, or legislative enactment, the costs of a federal or taxing district program are transferred to or from the state, the otherwise applicable state tax revenue limit shall be increased or decreased, as the case may be, by the dollar amount of the costs of the program.

((~~(4)~~)) (3) The legislature, in consultation with the office of financial management or its successor agency, shall determine the costs of any new programs or increased levels of service under existing programs imposed on any taxing district or transferred to or from the state.

Sec. 1106. REVENUE IN EXCESS OF LIMIT. Section 7, chapter 1, Laws of 1980 and RCW 43.135.070 are each amended to read as follows:

The legislature shall, prior to any other appropriation, provide for the payment of the principal and interest of the indebtedness of the state. ((~~State tax revenue collected in any fiscal year in excess of the state tax revenue limit for that fiscal year shall be included as part of the state tax revenue for the succeeding fiscal year.~~))

NEW SECTION. Sec. 1107. REVENUE RESERVE FUND. A new section is added to chapter 43.135 RCW to read as follows:

The revenue reserve fund is hereby established in the state treasury. Unobligated balances in the general fund at the close of each fiscal biennium, as determined by the office of financial management, shall be transferred to the revenue reserve fund. If at the close of any biennium the balance in the revenue reserve fund exceeds three percent of the total general fund appropriations for operating purposes during that biennium, the excess shall be transferred to the common school construction fund. Moneys in the revenue reserve fund may be spent only by appropriation in a law approved by a favorable vote of at least sixty percent of the members elected to each house of the legislature.

NEW SECTION. Sec. 1108. TRANSFER OF FUNDS. The balance in and all amounts accrued to the budget stabilization account on the effective date of this section shall be transferred to the revenue reserve account.

NEW SECTION. Sec. 1109. ALTERATION OF TAX RATE PROPORTIONALITY. A new section is added to chapter 43.135 RCW to read as follows:

The relative proportionality between the rates of state sales and use, business and occupation, public utility, personal income, and corporate income taxes, as established in Parts IV, VIII, and IX of this act shall not be altered, unless by a law approved by a favorable vote of at least sixty percent of the members elected to each house of the legislature, or by an initiative or referendum approved by the people pursuant to the powers reserved by the people under Article II, section 1 of the state Constitution. If the personal income includes more than one rate, only the rate that applies to the median income for a family of four, as determined by the legislature, shall be subject to the proportionality requirement of this subsection.

NEW SECTION. Sec. 1110. APPROVAL OF TAX PREFERENCES. A new section is added to chapter 43.135 RCW to read as follows:

Any bill that includes an exemption from tax, an exclusion or deduction from the base of a tax, a credit against a tax, a deferral of tax, or a preferential rate of tax shall not become law unless approved by a favorable vote of at least sixty percent of the members elected to each house of the legislature, or by an initiative or referendum approved by the people pursuant to the powers reserved by the people under Article II, section 1 of the state Constitution.

NEW SECTION. Sec. 1111. REPEALER. The following acts or parts of acts are each repealed:

(1) Section 1, chapter 280, Laws of 1981 and RCW 43.88.520;

(2) Section 2, chapter 280, Laws of 1981, section 52, chapter 57, Laws of 1985 and RCW 43.88.525;

(3) Section 3, chapter 280, Laws of 1981, section 2, chapter 36, Laws of 1982 1st ex. sess. and RCW 43.88.530;

(4) Section 4, chapter 280, Laws of 1981, section 3, chapter 36, Laws of 1982 1st ex. sess. and RCW 43.88.535; and

(5) Section 5, chapter 280, Laws of 1981, section 11, chapter 138, Laws of 1984 and RCW 43.88.540.

PART XII

OTHER STATE FISCAL MATTERS

Sec. 1201. MOTOR VEHICLE EXCISE TAX‑-STATE SHARE. Section 82.44.110, chapter 15, Laws of 1961 as last amended by section 7, chapter 9, Laws of 1987 1st ex. sess. and RCW 82.44.110 are each amended to read as follows:

The county auditor shall regularly, when remitting license fee receipts, pay over and account to the director of licensing for the excise taxes collected under the provisions of this chapter. The director shall forthwith transmit the excise taxes to the state treasurer, ninety-eight percent of which excise tax revenue shall upon receipt thereof be credited by the state treasurer to the general fund, and two percent of which excise tax revenue shall be credited by the state treasurer to the motor vehicle fund to defray administrative and other expenses incurred by the state department of licensing in the collection of the excise tax: PROVIDED, That:

(1) One hundred percent of the proceeds of the additional tax imposed by RCW 82.44.020(2) shall be credited by the state treasurer to the Puget Sound capital construction account in the motor vehicle fund;

(2) One hundred percent of the proceeds of the additional tax imposed by RCW 82.44.020(3) shall be credited by the state treasurer to the Puget Sound ferry operations account in the motor vehicle fund; and

(3) ((~~All~~)) Seventy percent of the revenues collected under RCW 82.44.020(6) shall be credited by the state treasurer to the transportation account. The remainder of the revenues collected under RCW 82.44.020(6) shall be credited by the state treasurer to the general fund.

NEW SECTION. Sec. 1202. TRANSPORTATION ACCOUNT CREATED. The transportation account is hereby created in the state treasury. Moneys in the account may be spent only after appropriation by statute. Expenditures from the account may be used only for state highways, roads, streets, bridges, ferries, rail and public transportation systems, and other transportation purposes.

NEW SECTION. Sec. 1203. SALARY INCREASES‑-DATES. A new section is added to chapter 43.03 RCW to read as follows:

(1) Effective July 1, 1991, all salary increases approved by the legislature for any state employee or official shall become effective on July 1 of each year. No salary increase approved by the legislature shall be permitted to become effective on any other date. For common school employees, the effective date for all legislative increases shall be September 1 of the year in which such increase is approved by the legislature, and all legislative allocations for common school employees shall be applicable for a full school year.

(2) Increases awarded on the basis of an employee or official's anniversary date shall be unaffected by this section.

Sec. 1204. BUDGET DOCUMENTS‑-FISCAL IMPACTS OF PROPOSALS. Section 2, chapter 502, Laws of 1987 and RCW 43.88.030 are each amended to read as follows:

(1) The director of financial management shall provide all agencies with a complete set of instructions for submitting biennial budget requests to the director at least three months before agency budget documents are due into the office of financial management. The budget document or documents shall consist of the governor's budget message which shall be explanatory of the budget and shall contain an outline of the proposed financial policies of the state for the ensuing fiscal period and shall describe in connection therewith the important features of the budget. The message shall set forth the reasons for salient changes from the previous fiscal period in expenditure and revenue items and shall explain any major changes in financial policy. Attached to the budget message shall be such supporting schedules, exhibits and other explanatory material in respect to both current operations and capital improvements as the governor shall deem to be useful to the legislature. The budget document or documents shall set forth a proposal for expenditures in the ensuing fiscal period based upon the estimated revenues as approved by the economic and revenue forecast council for such fiscal period from the source and at the rates existing by law at the time of submission of the budget document. However, the estimated revenues for use in the governor's budget document may be adjusted to reflect budgetary revenue transfers and revenue estimates dependent upon budgetary assumptions of enrollments, workloads, and caseloads. All adjustments to the approved estimated revenues must be set forth in the budget document. The governor may additionally submit, as an appendix to each agency budget or to the budget document or documents, a proposal for expenditures in the ensuing fiscal period from revenue sources derived from proposed changes in existing statutes.

The budget document or documents shall also contain:

(a) Revenues classified by fund and source for the immediately past fiscal period, those received or anticipated for the current fiscal period, and those anticipated for the ensuing biennium;

(b) The undesignated fund balance or deficit, by fund;

(c) Such additional information dealing with expenditures, revenues, workload, performance and personnel as the legislature may direct by law or concurrent resolution;

(d) Such additional information dealing with revenues and expenditures as the governor shall deem pertinent and useful to the legislature;

(e) Tabulations showing expenditures classified by fund, function, activity and object; and

(f) A delineation of each agency's activities, including those activities funded from nonbudgeted, nonappropriated sources, including funds maintained outside the state treasury.

(2) The budget document or documents shall include as a separate item a detailed estimate of the expected fiscal impact of each new proposed bill, resolution, program, or item on the budget which will increase or decrease or which tends to increase or decrease state government revenues or expenditures. Additionally, the budget document or documents shall separately include the same detailed fiscal impact forecast information for each of the succeeding four fiscal years. This information shall also be provided for any bills or resolutions submitted which are intended to support the governor's budget.

(3) The budget document or documents shall include a summary by fund showing actual funding for each agency for each fiscal year of the prior biennium and appropriated amounts for each fiscal year of the biennium for which the budget has been proposed.

(4) The budget document or documents shall include detailed estimates of all anticipated revenues applicable to proposed operating or capital expenditures and shall also include all proposed operating or capital expenditures. The total of beginning undesignated fund balance and estimated revenues less working capital and other reserves shall equal or exceed the total of proposed applicable expenditures. The budget document or documents shall further include:

(a) Interest, amortization and redemption charges on the state debt;

(b) Payments of all reliefs, judgments and claims;

(d) Expenditures incident to the operation for each agency;

(e) Revenues derived from agency operations;

(f) Expenditures and revenues shall be given in comparative form showing those incurred or received for the immediately past fiscal period and those anticipated for the current biennium and next ensuing biennium;

((~~(h)~~)) (g) Common school expenditures on a fiscal-year basis.

((~~(3)~~)) (5) A separate budget document or schedule may be submitted consisting of:

(a) Expenditures incident to current or pending capital projects and to proposed new capital projects, relating the respective amounts proposed to be raised therefor by appropriations in the budget and the respective amounts proposed to be raised therefor by the issuance of bonds during the fiscal period;

(b) A capital program consisting of proposed capital projects for at least the two fiscal periods succeeding the next fiscal period. The capital program shall include for each proposed project a statement of the reason or purpose for the project along with an estimate of its cost;

(d) Such other information relating to capital improvement projects as the legislature may direct by law or concurrent resolution.

((~~(4)~~)) (6) No change affecting the comparability of agency or program information relating to expenditures, revenues, workload, performance and personnel shall be made in the format of any budget document or report presented to the legislature under this section or RCW 43.88.160(1) relative to the format of the budget document or report which was presented to the previous regular session of the legislature during an odd-numbered year without prior legislative concurrence. Prior legislative concurrence shall consist of (a) a favorable majority vote on the proposal by the standing committees on ways and means of both houses if the legislature is in session or (b) a favorable majority vote on the proposal by members of the legislative evaluation and accountability program committee if the legislature is not in session.

PART XIII

TARGETED FISCAL ASSISTANCE

NEW SECTION. Sec. 1301. TARGETED FISCAL ASSISTANCE ACCOUNT. A new section is added to chapter 82.14 RCW to read as follows:

There is created in the custody of the state treasurer an account to be known as the "targeted fiscal assistance account." Effective July 1, 1990, with the fiscal 1990 earnings, and continuing every July 1 thereafter, an amount representing one-half of the proportionate share of the investment income earned by the moneys in the local sales and use tax account created by RCW 82.14.050, other than those attributable to the sales and use tax distributions to counties under RCW 82.14.030 as determined by the department of revenue, shall be placed into this account, where it shall be held until distributed in accordance with section 1303 of this act during the following calendar year. Effective July 1, 1990, an amount representing one-half of the proportionate share of the investment income earned by the moneys in the local sales and use tax account created by RCW 82.14.050, attributable to the sales and use tax distributions to counties under RCW 82.14.030 as determined by the department of revenue, shall be placed in the county sales and use tax equalization account, where it shall be held until distributed in accordance with RCW 82.14.200 during the following calendar year.

Sec. 1302. COUNTY SALES AND USE TAX EQUALIZATION ACCOUNT. Section 21, chapter 49, Laws of 1982 1st ex. sess. as last amended by section 82, chapter 57, Laws of 1985 and RCW 82.14.200 are each amended to read as follows:

There is created in the state treasury a special account to be known as the "county sales and use tax equalization account." Into this account shall be placed a portion of all motor vehicle excise tax receipts as provided in RCW 82.44.150(2). Funds in this account shall be ((~~allocated~~)) distributed by the state treasurer, according to allocations determined by the department of revenue under the following procedure:

(1) Prior to April 1st of each year the director of revenue shall inform the state treasurer of the total and the per capita levels of revenues for the unincorporated area of each county and the state-wide weighted average per capita level of revenues for the unincorporated areas of all counties imposing the sales and use tax authorized under RCW 82.14.030(1) for the previous calendar year.

(2) Beginning with January, 1990, distribution, at such times as distributions are made under RCW 82.44.150, as now or hereafter amended, the ((~~state treasurer~~)) department of revenue shall apportion to each county imposing the sales and use tax under RCW 82.14.030(1) at the maximum rate and receiving less than ((~~one~~)) three hundred fifty thousand dollars from the tax for the previous calendar year, an amount from the county sales and use tax equalization account sufficient, when added to the amount of revenues received the previous calendar year by the county, to equal ((~~one~~)) three hundred fifty thousand dollars.

The department of revenue shall establish a governmental price index as provided in this subsection. The base year for the index shall be the end of the third quarter of ((~~1982~~)) 1989. Prior to November 1, ((~~1983~~)) 1990, and prior to each November 1st thereafter, the department of revenue shall establish another index figure for the third quarter of that year. The department of revenue may use the implicit price deflators for state and local government purchases of goods and services calculated by the United States department of commerce to establish the governmental price index. Beginning on January 1, ((~~1984~~)) 1991, and each January 1st thereafter, the ((~~one~~)) three hundred fifty thousand dollar base figure in this subsection shall be adjusted in direct proportion to the percentage change in the governmental price index from ((~~1982~~)) 1989 until the year before the adjustment. Distributions made under this subsection for ((~~1984~~)) 1991 and thereafter shall use this adjusted base amount figure.

(3) Subsequent to the distributions under subsection (2) of this section and at such times as distributions are made under RCW 82.44.150, as now or hereafter amended, the ((~~state treasurer~~)) department of revenue shall apportion to each county imposing the sales and use tax under RCW 82.14.030(1) at the maximum rate and receiving less than seventy percent of the state-wide weighted average per capita level of revenues for the unincorporated areas of all counties as determined by the department of revenue under subsection (1) of this section, an amount from the county sales and use tax equalization account sufficient, when added to the per capita level of revenues for the unincorporated area received the previous calendar year by the county, to equal seventy percent of the state-wide weighted average per capita level of revenues for the unincorporated areas of all counties determined under subsection (1) of this section, subject to reduction under subsections (6) and (7) of this section. When computing distributions under this section, any distribution under subsection (2) of this section shall be considered revenues received from the tax imposed under RCW 82.14.030(1) for the previous calendar year.

(4) Subsequent to the distributions under subsection (3) of this section and at such times as distributions are made under RCW 82.44.150, as now or hereafter amended, the ((~~state treasurer~~)) department of revenue shall apportion to each county imposing the sales and use tax under RCW 82.14.030(2) at the maximum rate and receiving a distribution under subsection (2) of this section, a third distribution from the county sales and use tax equalization account. The distribution to each qualifying county shall be equal to the distribution to the county under subsection (2) of this section, subject to the reduction under subsections (6) and (7) of this section. To qualify for the total distribution under this subsection, the county must impose the tax under RCW 82.14.030(2) for the entire calendar year. Counties imposing the tax for less than the full year shall qualify for prorated allocations under this subsection proportionate to the number of months of the year during which the tax is imposed.

(5) Subsequent to the distributions under subsection (4) of this section and at such times as distributions are made under RCW 82.44.150, as now or hereafter amended, the ((~~state treasurer~~)) department of revenue shall apportion to each county imposing the sales and use tax under RCW 82.14.030(2) at the maximum rate and receiving a distribution under subsection (3) of this section, a fourth distribution from the county sales and use tax equalization account. The distribution to each qualifying county shall be equal to the distribution to the county under subsection (3) of this section, subject to the reduction under subsections (6) and (7) of this section. To qualify for the distributions under this subsection, the county must impose the tax under RCW 82.14.030(2) for the entire calendar year. Counties imposing the tax for less than the full year shall qualify for prorated allocations under this subsection proportionate to the number of months of the year during which the tax is imposed.

(6) Revenues distributed under this section in any calendar year shall not exceed an amount equal to seventy percent of the state-wide weighted average per capita level of revenues for the unincorporated areas of all counties during the previous calendar year. If distributions under subsections (3) through (5) of this section cannot be made because of this limitation, then distributions under subsections (3) through (5) of this section shall be reduced ratably among the qualifying counties.

(7) If inadequate revenues exist in the county sales and use tax equalization account to make the distributions under subsections (3) through (5) of this section, then the distributions under subsections (3) through (5) of this section shall be reduced ratably among the qualifying counties. At such time during the year as additional funds accrue to the county sales and use tax equalization account, additional distributions shall be made under subsections (3) through (5) of this section to the counties.

(8) If the level of revenues in the county sales and use tax equalization account exceeds the amount necessary to make the distributions under subsections (2) through (5) of this section, then the additional revenues shall be credited and transferred to the state general fund.

(9) All earnings of investments of balances in the county sales and use tax equalization account shall be credited to the general fund.

NEW SECTION. Sec. 1303. ALLOCATION OF FUNDS. A new section is added to chapter 82.14 RCW to read as follows:

The funds in the targeted fiscal assistance account are to be allocated by the department of revenue and distributed by the state treasurer in the following manner:

(1) Prior to January 25, 1990, and each January 25th thereafter, the department of revenue shall determine which cities, if any, shall receive distributions from this account. Cities meeting both the following criteria shall be eligible for distributions from this account: (a) Cities imposing the sales and use tax under RCW 82.14.030(1) at the maximum rate and receiving less than seventy percent of the state-wide weighted average per capita level of revenues for all cities as determined by the department of revenue under RCW 82.14.210(1); and (b) cities that have a per capita assessed valuation of property that is at or below seventy percent of the state-wide average per capita assessed valuation of property for all cities. The department of revenue shall inform the state treasurer of the cities to receive distributions from this fund.

(2) Beginning in July 1990 and continuing every July thereafter, the department of revenue shall apportion to each eligible city an amount from the targeted fiscal assistance account sufficient, when added to the per capita level of revenues received from distributions under RCW 82.14.030(1) the previous calendar year and from the current year's distributions under RCW 82.14.210(3), to equal seventy-five percent of the state-wide weighted average per capita level of revenues for all cities as determined under RCW 82.14.210(1).

(3) At the same time as distributions are made under subsection (2) of this section, the department of revenue shall apportion to each city imposing the sales and use tax under RCW 82.14.030(2) at the maximum rate and receiving a distribution under subsection (2) of this section, a second distribution from the targeted fiscal assistance account. The distribution to each eligible city shall be equal to the distribution to the city under subsection (2) of this section. To qualify for the distributions under this subsection, the city must impose the tax under RCW 82.14.030(2) for the entire calendar year. Cities imposing the tax for less than the full year shall qualify for prorated allocations under this subsection proportionate to the number of months of the year during which the tax is imposed.

(4) If inadequate revenues exist in the targeted fiscal assistance account to make the distribution under subsections (2) and (3) of this section, then such distribution shall be reduced ratably among the eligible cities.

(5) If the level of revenues in the targeted fiscal assistance account exceeds the amount necessary to make the distributions under subsection (2) or (3) of this section, then the additional revenues shall be credited to the general fund.

(6) All earnings of investments of balances in the targeted fiscal assistance account shall be credited to the general fund.

Sec. 1304. MOTOR VEHICLE EXCISE TAXES‑-APPORTIONMENT. Section 1, chapter 18, Laws of 1988 and RCW 82.44.150 are each amended to read as follows:

(1) The director of licensing shall on the twenty-fifth day of February, May, August, and November of each year, commencing with November, 1971, advise the state treasurer of the total amount of motor vehicle excise taxes remitted to the department of licensing during the preceding calendar quarter ending on the last day of March, June, September, and December, respectively, except for those payable under RCW 82.44.020(6) and 82.44.030, from motor vehicle owners residing within each municipality which has levied a tax under RCW 35.58.273, which amount of excise taxes shall be determined by the director as follows:

The total amount of motor vehicle excise taxes remitted to the department, except those payable under RCW 82.44.020(6) and 82.44.030, from each county shall be multiplied by a fraction, the numerator of which is the population of the municipality residing in such county, and the denominator of which is the total population of the county in which such municipality or portion thereof is located. The product of this computation shall be the amount of excise taxes from motor vehicle owners residing within such municipality or portion thereof. Where the municipality levying a tax under RCW 35.58.273 is located in more than one county, the above computation shall be made by county, and the combined products shall provide the total amount of motor vehicle excise taxes from motor vehicle owners residing in the municipality as a whole. Population figures required for these computations shall be supplied to the director by the office of financial management, who shall adjust the fraction annually.

(2) On the first day of the months of January, April, July, and October of each year, the state treasurer based upon information provided by the department of licensing shall make the following apportionment and distribution of motor vehicle excise taxes deposited in the general fund except taxes collected under RCW 82.44.020(6). A sum equal to seventeen percent thereof shall be paid to cities and towns in the proportions and for the purposes hereinafter set forth; a sum equal to ((~~two percent thereof~~)) three percent shall be allocable to the county sales and use tax equalization account under RCW 82.14.200; and a sum equal to four and two-tenths percent of the special excise tax levied under RCW 35.58.273 by those municipalities authorized to levy a special excise tax at a rate not exceeding ninety-six one-hundredths of one percent on the fair market value of every motor vehicle owned by a resident of such municipality shall be deposited in the rail development account established in RCW 47.78.010.

(3) The amount payable to cities and towns shall be apportioned among the several cities and towns within the state according to the following formula:

(a) Sixty-five percent of the sum specified in subsection (2) of this section to be paid to cities and towns shall be apportioned ratably on the basis of population as last determined by the office of financial management.

(b) Thirty-five percent of the sum specified in subsection (2) of this section to be paid to cities and towns shall be apportioned to cities and towns under RCW 82.14.210.

(4) When so apportioned, the amount payable to each such city and town shall be transmitted to the city treasurer thereof, and shall be utilized by such city or town for the purposes of police and fire protection and the preservation of the public health therein, and not otherwise. In case it be adjudged that revenue derived from the excise tax imposed by this chapter cannot lawfully be apportioned or distributed to cities or towns, all moneys directed by this section to be apportioned and distributed to cities and towns shall be credited and transferred to the state general fund.

(5) On the first day of the months of January, April, July, and October of each year, the state treasurer, based upon information provided by the department of licensing, shall remit motor vehicle excise tax revenues imposed and collected under RCW 35.58.273 as follows:

(a) The amount required to be remitted by the state treasurer to the treasurer of any municipality levying the tax shall not exceed in any calendar year the amount of locally-generated tax revenues, excluding the excise tax imposed under RCW 35.58.273 for the purposes of this section, which shall have been budgeted by the municipality to be collected in such calendar year for any public transportation purposes including but not limited to operating costs, capital costs, and debt service on general obligation or revenue bonds issued for these purposes; and

(b) In no event may the amount remitted in a single calendar quarter exceed the amount collected on behalf of the municipality under RCW 35.58.273 during the calendar quarter next preceding the immediately preceding quarter.

(6) At the close of each calendar year accounting period, but not later than April 1, each municipality that has received motor vehicle excise taxes under subsection (5) of this section shall transmit to the director of licensing and the state auditor a written report showing by source the previous year's budgeted tax revenues for public transportation purposes as compared to actual collections. Any municipality that has not submitted the report by April 1 shall cease to be eligible to receive motor vehicle excise taxes under subsection (5) of this section until the report is received by the director of licensing. If a municipality has received more or less money under subsection (5) of this section for the period covered by the report than it is entitled to receive by reason of its locally-generated collected tax revenues, the director of licensing shall, during the next ensuing quarter that the municipality is eligible to receive motor vehicle excise tax funds, increase or decrease the amount to be remitted in an amount equal to the difference between the locally-generated budgeted tax revenues and the locally-generated collected tax revenues. In no event may the amount remitted for a calendar year exceed the amount collected on behalf of the municipality under RCW 35.58.273 during that same calendar year. At the time of the next fiscal audit of each municipality, the state auditor shall verify the accuracy of the report submitted and notify the director of licensing of any discrepancies.

(7) The motor vehicle excise taxes imposed under RCW 35.58.273 and required to be remitted under this section shall be remitted without legislative appropriation.

(8) Any municipality levying and collecting a tax under RCW 35.58.273 which does not have an operating, public transit system or a contract for public transportation services in effect within one year from the initial effective date of the tax shall return to the state treasurer all motor vehicle excise taxes received under subsection (5) of this section.

Sec. 1305. STATE TREASURY SURPLUS BALANCES‑-EARNINGS OF INVESTMENTS. Section 51, chapter 57, Laws of 1985 and RCW 43.84.092 are each amended to read as follows:

Except as provided in RCW 43.84.090 and section 1301 of this act, all earnings of investments of surplus balances in the state treasury shall be deposited to the treasury income account, which account is hereby established in the state treasury.

On or before July 20 of each year, the state treasurer shall distribute all earnings credited to the treasury income account as of June 30 to the funds for the fiscal year in which it was earned. Except as otherwise provided by statute, the state treasurer shall credit the various accounts and funds in the state treasury their proportionate share of earnings based upon each fund's average daily balance for the period: PROVIDED, That earnings on the balances of the forest reserve fund, the federal forest revolving fund, the liquor excise tax fund, the treasury income account, the suspense account, the undistributed receipts account, the state payroll revolving account, the agency vendor payment revolving fund, and the local leasehold excise tax account((~~, and the local sales and use tax account~~)) shall be credited to the state treasurer's service fund: PROVIDED FURTHER, That earnings on the balances of the tort claims revolving fund, the agency payroll revolving fund, the special fund salary and insurance contribution increase revolving fund and special fund semimonthly payroll revolving fund shall be credited to the state general fund.

PART XIV

ADVISORY BALLOT

NEW SECTION. Sec. 1401. LEGISLATIVE FINDINGS ON CURRENT TAX SYSTEM. (1) The legislature finds that the current state tax system for the state general fund is primarily dependent on state sales and use taxes, business and occupation taxes, and property taxes.

(a) In the 1987-1989 biennium, the state sales and use taxes provided approximately fifty-one percent of revenues to the state general fund. The state sales and use tax rate is currently six and one-half percent. Local governments and transit districts are authorized to levy an additional tax of up to one and six-tenths percent for a total of eight and one-tenth percent. This rate is among the highest in the nation.

(b) In the 1987-1989 biennium, the state business and occupation taxes provided approximately seventeen percent of revenues to the state general fund. These taxes are based on gross receipts and do not take into account whether a business is profitable.

(c) In the 1987-1989 biennium, the state property taxes provided approximately twelve percent of revenues to the state general fund.

(2) The legislature finds that:

(a) Current spending and revenue limitations have not been effective in controlling the growth of state spending and revenue;

(b) The current state tax system is regressive because it taxes individuals with lower incomes proportionately more than it taxes individuals with higher incomes;

(d) The current state tax system, with its relatively high rates for sales and use taxes and its dependence on taxes on the gross receipts of businesses, hinders small businesses and the development of new businesses;

(e) The current state tax system does not produce growth of revenues to the state general fund which matches the growth rate of personal income in the state's economy; and

(f) The current state tax system, because of its dependence on state sales and use taxes and the lack of an income tax, does not allow Washington taxpayers to deduct state taxes for purposes of federal income taxes.

(3) The legislature further finds that the people of this state have never had the opportunity to vote directly on whether they wish to maintain the current structure of the state tax system.

(4) The legislature further finds that this act would provide an alternative to replace the current structure of the state tax system, but that a vote of the people on the proposed constitutional amendment (SHJR 4205) upon which Parts I through XIII of this act are contingent does not necessarily imply satisfaction or dissatisfaction with the current state tax system.

NEW SECTION. Sec. 1402. ADVISORY REFERENDUM ON CURRENT TAXES. The legislature finds that the people of this state should have the opportunity to vote directly to advise the legislature whether they wish to maintain the current structure of the state tax system, including its primary dependence on the sales and use, business and occupations, and property taxes.

NEW SECTION. Sec. 1403. MEASURE SUBMITTED TO THE PEOPLE. (1) There shall be an advisory referendum on section 1402 of this act submitted to the people at the next succeeding general election to be held in this state, in accordance with Article II, section 1 of the state Constitution, as amended, and the laws adopted to facilitate the operation thereof.

(2) The ballot question on this advisory referendum shall immediately precede on the ballot the state constitutional amendment (SHJR 4205) upon which Parts I through XIII of this act are contingent.

NEW SECTION. Sec. 1404. BALLOT TITLE. Pursuant to RCW 29.79.260, the ballot title on the advisory referendum as provided in section 1403 of this act shall be:

"Shall the Legislature be advised to retain the current state tax system, including nondeductible sales taxes, business, and property taxes?"

PART XV

MISCELLANEOUS

NEW SECTION. Sec. 1501. SEVERABILITY CLAUSE. If any provision of this act or its application to any person or circumstance is held invalid, the remainder of the act or the application of the provision to other persons or circumstances is not affected.

NEW SECTION. Sec. 1502. CAPTIONS AND HEADINGS. Captions and part headings as used in this act constitute no part of the law.

NEW SECTION. Sec. 1503. CONTINGENT EFFECTIVE DATE. Parts I through XIII of this act shall take effect January 1, 1990, if the proposed amendment to Article VII of the state Constitution authorizing an income tax and requiring a balanced tax system (SHJR 4205) is validly submitted and is approved and ratified by the voters at a general election held in November 1989. If the proposed amendment is not so approved and ratified, this act shall be null and void in its entirety.