AN ACT Relating to disposable diapers; adding a new section to chapter 70.95 RCW; adding a new chapter to Title 82 RCW; providing an expiration date; and declaring an emergency.

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

NEW SECTION. Sec. 1. The legislature finds that there is an increased need to encourage the development and use of recyclable disposable diapers to both increase the life of our landfills and to remove this problem waste from the landfills.

It is the intent of the legislature to encourage the development and use of recyclable diapers by granting sales tax deferrals to businesses that research, develop, manufacture, market, distribute, or collect and recycle disposable diapers. It is also the intent of the legislature to provide incentives to divert waste from landfills.

NEW SECTION. Sec. 2. Unless the context clearly requires otherwise, the definitions in this section apply throughout this chapter.

(1) "Applicant" means a person applying for a tax deferral under this chapter.

(2) "Person" has the meaning given in RCW 82.04.030.

(3) "Department" means the department of revenue.

(4) "Eligible project" means the acquisition of new related machinery and equipment when the machinery and equipment are to be used for either manufacturing or research and development activities directly related to the recycling of disposable diapers, which activity is commenced prior to December 31, 1994.

(5) "Manufacturing" means all activities of a commercial or industrial nature wherein labor or skill is applied, by hand or machinery, to materials so that as a result thereof a new, different, or useful substance or article related directly to the recycling of disposable diapers is produced for sale or commercial or industrial use and includes the production or fabrication of specially made or custom-made articles.

(6) "Research and development" means the development, refinement, testing, marketing, and commercialization of a product, service, or process before commercial sales have begun.

(7) "Machinery and equipment" means all industrial and research fixtures, equipment, and support facilities that are an integral and necessary part of a manufacturing or research and development operation. "Qualified machinery and equipment" includes computers; software; data processing equipment; laboratory equipment; manufacturing components such as belts, pulleys, shafts, and moving parts; molds, tools, and dies; operating structures; and all equipment used to control or operate the machinery. For purposes of this chapter, new machinery and equipment means either new to the taxing jurisdiction of the state or new to the certificate holder. Used machinery and equipment may be treated as new equipment and machinery if the certificate holder either brings the machinery and equipment into Washington or makes a retail purchase of the machinery and equipment in Washington or elsewhere.

(8) "Recipient" means a person receiving a tax deferral under this chapter.

(9) "Certificate holder" means an applicant to whom a tax deferral certificate has been issued.

(10) "Operationally complete" means constructed or improved to the point of being functionally useable for the intended purpose.

(11) "Initiation of construction" means that date upon which on-site construction commences.

NEW SECTION. Sec. 3. Application for deferral of taxes under this chapter shall be made to the department in a form and manner prescribed by the department. The application shall contain information regarding the location of the project, estimated or actual costs, time schedules for completion and operation, and other information required by the department. The department, in conjunction with the department of ecology, shall rule on the application within sixty days.

NEW SECTION. Sec. 4. Section 3 of this act shall expire July 1, 1994.

NEW SECTION. Sec. 5. The department shall, with the advice and recommendation of the department of ecology, issue a sales and use tax deferral certificate for state and local sales and use taxes due under chapters 82.08, 82.12, and 82.14 RCW on each eligible project. The use of the certificate shall be governed by rules established by the department.

NEW SECTION. Sec. 6. (1) The recipient shall begin paying the deferred taxes in the third year after the date certified by the department as the date on which the project is operationally complete. The first payment will be due on December 31st of the third calendar year after such certified date, with subsequent annual payments due on December 31st of the following four years with amounts of payment scheduled as follows:

Repay!ttment Year!sc ,5% of Defe!ttrred Tax Repaid

!tc1!tc10%

!tc2!tc15%

!tc3!tc20%

!tc4!tc25%

!tc5!tc30%

(2) The department may authorize an accelerated repayment schedule upon request of the recipient.

(3) Interest shall not be charged on any taxes deferred under this chapter for the period of deferral, although all other penalties and interest applicable to delinquent excise taxes may be assessed and imposed for delinquent payments under this chapter. The debt for deferred taxes is not extinguished by insolvency or other failure of the recipient.

NEW SECTION. Sec. 7. The department and the department of ecology shall jointly report to the legislature about the effects of this chapter on new manufacturing and research and development activities in this state related to disposable diapers. The report shall contain information concerning the number of deferral certificates granted, the amount of sales tax deferred, the number of jobs created, and other information useful in measuring such effects. Reports shall be submitted by January 1, 1990, and by January 1 of each year through 1995.

NEW SECTION. Sec. 8. Chapter 82.32 RCW applies to the administration of this chapter.

NEW SECTION. Sec. 9. Applications and any other information received by the department under this chapter shall not be confidential and shall be subject to disclosure.

NEW SECTION. Sec. 10. A new section is added to chapter 70.95 RCW to read as follows:

(1) Beginning July 1, 1992, local governments shall levy a local "problem" waste tax on disposable diapers. This tax shall be administered locally and collected by the department of revenue. Collection and distribution procedures under RCW 82.14.050 and 82.14.060 shall be followed.

(2) The "problem" waste tax shall be discontinued if the amount of disposable diapers deposited in the taxing district's landfill falls below five percent of the total number of disposable diapers purchased annually in the taxing district. The tax shall be reactivated if the total number of disposable diapers deposited in the landfill represents five percent or greater of the total number of disposable diapers purchased in the district.

(3) By July 1, 1991, the department of ecology shall report to the legislature and local governments on what is a reasonable tax rate on disposable diapers. Local governments shall then use these guidelines to establish the rate for their taxing district.

(4) After 1997, nonbiodegradable disposable diapers shall not be disposed of in landfills.

NEW SECTION. Sec. 11. Sections 1 through 9 of this act shall constitute a new chapter in Title 82 RCW.

NEW SECTION. Sec. 12. 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. 13. This act is necessary for the immediate preservation of the public peace, health, or safety, or support of the state government and its existing public institutions, and shall take effect immediately.