WSR 99-04-022

PROPOSED RULES

DEPARTMENT OF REVENUE


[ Filed January 22, 1999, 3:13 p.m. ]

Original Notice.

Preproposal statement of inquiry was filed as WSR 98-19-079.

Title of Rule: WAC 458-20-261 Exemptions and credits for ride sharing, public transportation, and nonmotorized commuting.

Purpose: To explain the circumstances under which persons may claim tax exemptions and credits related to ride sharing.

Statutory Authority for Adoption: RCW 82.32.300, 82.04.4453, and 82.16.048.

Statute Being Implemented: RCW 82.04.355, 82.04.4453, 82.04.4454, 82.04.4455, 82.08.0287, 82.12.0282, 82.16.047, 82.16.048, and 82.16.049.

Summary: The rule is being adopted to describe the sales tax, use tax, business and occupation tax, and public utility tax exemptions which apply in connection with ride sharing activities. It describes the business and occupation (B&O) tax and public utility tax credit programs available to employers who provide financial incentives for employees to use ride sharing, public transportation, and nonmotorized commuting. It explains the procedures used to claim the credits.

Reasons Supporting Proposal: The rule will inform taxpayers about the tax benefits associated with ride sharing. RCW 82.04.4453 and 82.16.048 provide that the Department of Revenue will adopt a rule to tell taxpayers how to claim credits against the B&O tax and public utility tax for financial incentives paid to or on behalf of employees.

Name of Agency Personnel Responsible for Drafting: Greg Potegal, 711 Capitol Way South, Suite #303, Olympia, WA, (360) 753-1971; Implementation: Claire Hesselholt, 711 Capitol Way South, Suite #303, Olympia, WA, (360) 753-3446; and Enforcement: Russell Brubaker, 711 Capitol Way South, Suite #303, Olympia, WA, (360) 586-0257.

Name of Proponent: Department of Revenue, governmental.

Rule is not necessitated by federal law, federal or state court decision.

Explanation of Rule, its Purpose, and Anticipated Effects: The rule explains the circumstances under which persons may claim tax exemptions and credits related to ride sharing. The rule describes the sales, use, B&O, and public utility tax exemptions which apply in connection with ride sharing activities. It describes the B&O and public utility tax credit programs available to employers who provide financial incentives for employees to use ride sharing, public transportation, and nonmotorized commuting. The rule also explains the procedures to be used to claim the B&O and public utility tax credits.

Proposal does not change existing rules.

No small business economic impact statement has been prepared under chapter 19.85 RCW. The rule does not impose a responsibility or require a small business to perform something that is not already required by law.

RCW 34.05.328 does not apply to this rule adoption. This is not a significant legislative rule. It is an interpretive rule that sets forth the Department of Revenue's interpretation of the statutes dealing with ride share tax incentives.

Hearing Location: Evergreen Plaza Building, 711 Capitol Way, Second Floor Conference Room, Olympia, WA, on March 17, 1999, at 10:00 a.m.

Assistance for Persons with Disabilities: Contact Virginia Sunde by March 10, 1999, TDD 1-800-451-7985 or (360) 586-8640.

Submit Written Comments to: Greg Potegal, Department of Revenue, P.O. Box 47467, Olympia, WA 98504-7467, fax (360) 664-0693, e-mail gregp@dor.wa.gov, by March 17, 1999.

Date of Intended Adoption: March 29, 1999.

January 22, 1999

Claire Hesselholt, Rules Manager

Legislation and Policy Division

OTS-2762.2


NEW SECTION
WAC 458-20-261
Exemptions and credits for ride sharing, public transportation, and nonmotorized commuting.

(1) Introduction. This section explains the various tax credits and exemptions which apply in connection with ride sharing, public transportation, and nonmotorized commuting.

(2) Definitions. For purposes of this section, the following definitions apply, unless otherwise required by the context.

(a) "Ride sharing" and "commuter ride sharing" mean a car pool or van pool arrangement whereby one or more fixed groups not exceeding fifteen persons each including the drivers, and (i) not fewer than five persons including the drivers, or (ii) not fewer than four persons including the drivers where at least two of those persons are confined to wheelchairs when riding, are transported in a passenger motor vehicle with a gross vehicle weight not exceeding ten thousand pounds, excluding special rider equipment. The transportation must be between their places of abode or termini near such places, and their places of employment or educational or other institutions, each group in a single daily round trip where the drivers are also on the way to or from their places of employment or educational or other institution. The terms include ride sharing on Washington state ferries.

(b) "Ride sharing for persons with special transportation needs" means an arrangement whereby a group of persons with special transportation needs, and their attendants, is transported by a public social service agency or a private, nonprofit transportation provider as defined in RCW 81.66.010(3) in a passenger motor vehicle as defined by the department of licensing to include small buses, cutaways, and modified vans not more than twenty-eight feet long. The driver need not be a person with special transportation needs.

(c) "Persons with special transportation needs" means those persons, including their personal attendants, who because of physical or mental disability, income status, or age are unable to transport themselves or to purchase appropriate transportation.

(d) "Public transportation" means the transportation of passengers by means other than chartered or sightseeing bus, together with necessary passenger terminals and parking facilities or other properties necessary for passenger and vehicular access to and from such people moving systems. It includes passenger services of the Washington state ferries.

(e) "Nonmotorized commuting" means commuting to and from the workplace by an employee by walking or running or by riding a bicycle or other device not powered by a motor. It does not include teleworking.

(3) Business and occupation tax and public utility tax exemptions. Amounts received from providing commuter ride sharing and ride sharing for persons with special transportation needs are exempt from the business and occupation tax and from the public utility tax. RCW 82.04.355 and 82.16.047.

(4) Retail sales tax exemption. RCW 82.08.0287 provides a retail sales tax exemption for sales of passenger motor vehicles as ride-sharing vehicles.

(a) Sales tax does not apply to sales of passenger motor vehicles used for commuter ride sharing or ride sharing for persons with special transportation needs if the vehicles are exempt from motor vehicle excise tax under RCW 82.44.015 for thirty-six consecutive months beginning within thirty days of application for exemption from sales tax. If the vehicle is used as a ride-sharing vehicle for less than thirty-six consecutive months, the registered owner must notify the department of revenue and pay the tax.

(b) Vehicles with five or six passengers, including driver, used for commuter ride sharing must be operated within a county having a commute trip reduction plan under chapter 70.94 RCW in order to be purchased without payment of sales tax. In addition, for the exemption to apply at least one of the following conditions must apply:

(i) The vehicle must be operated by a public transportation agency for the general public;

(ii) The vehicle must be used by a major employer, as defined in RCW 70.94.524, as an element of its commute trip reduction program for their employees; or

(iii) The vehicle must be owned and operated by individual employees and must be registered either with the employer as part of its commute trip reduction program or with a public transportation agency serving the area where the employees live or work.

(5) Use tax exemption. RCW 82.12.0282 provides a use tax exemption for the use of passenger motor vehicles as ride-sharing vehicles.

(a) Use tax does not apply to the use of passenger motor vehicles used for commuter ride sharing or ride sharing for persons with special transportation needs if the vehicles are exempt from motor vehicle excise tax under RCW 82.44.015 for thirty-six consecutive months beginning within thirty days of application for exemption from use tax. If the vehicle is used as a ride-sharing vehicle for less than thirty-six consecutive months, the registered owner must notify the department of revenue and pay the tax.

(b) Vehicles with five or six passengers, including driver, used for commuter ride sharing must be operated within a county having a commute trip reduction plan under chapter 70.94 RCW in order to be purchased without payment of sales tax. In addition, for the exemption to apply at least one of the following conditions must apply:

(i) The vehicle must be operated by a public transportation agency for the general public;

(ii) The vehicle must be used by a major employer, as defined in RCW 70.94.524, as an element of its commute trip reduction program for their employees; or

(iii) The vehicle must be owned and operated by individual employees and must be registered either with the employer as part of its commute trip reduction program or with a public transportation agency serving the area where the employees live or work.

(6) Business and occupation tax and public utility tax credit. Employers in Washington are allowed a credit against their business and occupation tax and public utility tax liability for amounts paid to or on behalf of employees for ride sharing in vehicles carrying two or more persons, using public transportation, or using nonmotorized commuting. RCW 82.04.4453 and 82.16.048. Employers must provide incentives before June 30, 2000, to be eligible for the credit. The credit program expires December 31, 2000.

(a) In most cases, the amount of the credit is equal to the amount paid to or on behalf of each employee multiplied by fifty percent, but may not exceed sixty dollars per employee per year. However, for ride sharing in vehicles carrying two persons, the credit is equal to the amount paid to or on behalf of each employee multiplied by thirty percent, but may not exceed sixty dollars per employee per year. The credit is based upon amounts paid to or on behalf of individual employees, and may not be based upon an average of amounts paid to or on behalf of employees for qualifying purposes.

(b) The credit may not exceed the amount of business and occupation tax or public utility tax that would otherwise be due for the same calendar year after all other credits are applied.

(c) An employer may not receive credit for amounts paid to or on behalf of the same employee under both the business and occupation tax and the public utility tax.

(d) The total credit received by an employer against both the business and occupation tax and the public utility tax may not exceed one hundred thousand dollars for a calendar year.

(e) The total credit granted to all employers under both the business and occupation tax and the public utility tax may not exceed one million five hundred thousand dollars for a calendar year.

(f) No credit or portion of a credit denied because of exceeding the limitations in (d) or (e) of this subsection may be used against tax liability for other calendar years.

(7) Credit procedures. This subsection explains the procedures used in the credit program described in subsection (6) of this rule.

(a) Persons apply for the credit by completing a ride share credit reporting schedule and filing it with the combined excise tax return covering the period for which the credit is claimed. The ride share credit reporting schedule is available upon request from the department of revenue.

(b) Persons may not apply for the credit more frequently than once per quarter nor less frequently then once per year against taxes due for the same calendar year in which the amounts for which credit is claimed were paid to or on behalf of employees.

(c) Credit must be claimed by the due date of the last tax return for the calendar year in which the payment to or on behalf of employees was made.

(i) Credit not previously claimed may not be claimed for the first time on supplemental or amended tax returns filed after the due date of the last tax return for the calendar year in which the payment to or on behalf of employees was made.

(ii) If the department of revenue has granted an extension of the due date for the last tax return for the calendar year in which the payment to or on behalf of employees was made, the credit must be claimed by the extended due date.

(d) The department of revenue tabulates the amount of credit taken by all employers on a quarterly basis. If the annual maximum of one million five hundred thousand dollars in credit is exceeded in a given quarter, no further credit will be allowed in succeeding quarters in the same calendar year. For the quarter in which the maximum is exceeded, the department of revenue calculates the amount of credit available at the beginning of the quarter and determines the proportional share of that amount for every employer who has claimed a credit in the quarter. Employers are billed for the difference between the amount of credit they claimed and the prorated amount of credit for which they are eligible.

(8) Examples. The following examples identify a number of facts and then state a conclusion. These examples should be used only as a general guide. The tax results of other situations must be determined after a review of all of the facts and circumstances.

(a) An employer pays one hundred eighty dollars for a yearly bus pass for one employee. For another employee, the employer buys a bicycle helmet and bicycle lock for a total of fifty dollars. This is the total expenditure during a calendar year of amounts paid to or on behalf of employees in support of ride sharing, using public transportation, and using nonmotorized commuting. The employer may claim a credit of sixty dollars for the amount spent for the employee using the bus pass. Fifty percent of one hundred eighty dollars is ninety dollars, but the credit is limited to sixty dollars per employee. The employer may claim a credit of twenty-five dollars (fifty percent of fifty dollars) for the amount spent for the employee who bicycles to work. Even though fifty percent of two hundred thirty dollars, the amount spent on both employees, works out to be less than sixty dollars per employee, the credit is computed by looking at actual spending for each employee and not by averaging the spending for both employees.

(b) An employer provides parking spaces for the exclusive use of ride-sharing vehicles. Amounts spent for signs, painting, or other costs related to the parking spaces do not qualify for the credit. This is because the credit is for financial incentives paid to or on behalf of employees. While the parking spaces support the use of ride-sharing vehicles, they are not financial incentives and do not involve amounts paid to or on behalf of employees.

(c) As part of its commute trip reduction program, an employer pays the cab fare for an employee who has an emergency and must leave the workplace but has no vehicle available because he or she commutes by ride-sharing vehicle. The cab fare qualifies for the credit, if it does not cause the sixty dollar limitation to be exceeded, because it is an amount paid on behalf of a specific employee.

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Washington State Code Reviser's Office