3099-S AMH MORR H5188.1

3099-S AMH MORR H5188.1

SHB 3099 - H AMD 938 BEYOND OBJECT OF BILL 2-17-98

By Representative Morris

On page 3, after line 11, insert the following:

"NEW SECTION. Sec. 2. A new section is added to chapter 82.04 RCW to read as follows:

(1) The definitions in this subsection apply to this section, sections 3 and 4 of this act, RCW 82.62.030, and sections 9 through 16 of this act, unless the context clearly requires otherwise.

(a) "Business" means the person applying for the tax deferral, credit, or exemption.

(b) "Construction" means the construction of a manufacturing operation complex and includes labor and services rendered in respect to construction. "Construction" ends when a project is completed as determined under subsection (2)(c) of this section.

(c) "Distressed county" means a county in which the average level of unemployment for the three years before the year in which an application is filed under this chapter exceeds the average state unemployment for those years by twenty percent.

(d) "Employment position" means a position in which a permanent full-time employee is employed in a project during the entire tax year. "The entire tax year" means the full-time position is filled for a period of twelve consecutive months. "Full-time" means at least thirty-five hours a week.

(e) "Equipping and operating" means the acquisition of tangible personal property for use at the manufacturing operation complex, and includes labor and services rendered in respect to the installation of tangible personal property.

(f) "Finished product" means an article, substance, or commodity that is manufactured at and shipped from the manufacturing operation complex.

(g) "Manufacturing operation complex" means the buildings, structures, and improvements located at the site where the manufacturing activity occurs. The complex includes the buildings, structures, and improvements used to receive, store, and ship raw materials and finished products as well as buildings, structures, and improvements used for the manufacturing production line. In addition, the term includes all administrative offices, employee support facilities, and production support facilities located at the site. The manufacturing operation complex does not include buildings, structures, and improvements located off of the site.

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

(i) "Project" means the site preparation, construction, and equipping and operating of a manufacturing operation complex.

(j) "Raw material" means the ingredients, components, substances, articles, or other tangible personal property that is received at the manufacturing operation complex for use as ingredients or components of the finished product.

(k) "Site" means a discrete geographical location.

(l) "Site preparation" means demolition of existing improvements, environmental remediation, earth moving, land clearing, site excavation, and shoring, and includes labor and services rendered in respect to site preparation.

(2) As a condition to receiving initial approval and as a condition of continuing eligibility, the following criteria must be met:

(a) The project must be located in a distressed county and must be owned and operated by a person who meets the definition of "manufacturer" as defined in RCW 82.04.110;

(b) The business must commit to an investment, by the time of completion of the project, in land, structures, and equipment, the value of which must be at least four percent of the total of the equalized assessed value in the county in which the project is located. The total equalized assessed value in the county is as published annually by the department in accordance with RCW 84.48.080. Continuing eligibility is conditioned on this investment having actually occurred;

(c)(i) The business must commit to and must create a minimum of twenty new employment positions at the project within two years of completion of the project.

(ii) The business must commit to and create one new employment position for each two million dollars invested in the project within two years of completion of the project. The twenty minimum positions in (c)(i) of this subsection are part of and not in addition to the positions required to meet the investment to job ratio.

(iii) The individuals in the new employment positions must be the employees of the business and must not have been relocated from other locations of the business within this state. Completion of the project is deemed to have occurred when the project is capable of operating and producing finished products. The department of community, trade, and economic development shall determine when the project is complete;

(d) The business must commit to and must pay an average wage of at least one hundred fifty percent of the average wage in the county. The employment security department shall determine the average wage in the county and shall report this amount to the department of community, trade, and economic development; and

(e) The business must remain operational for a fifteen-year period after the project is completed. "Operational" means that the level of employment at the manufacturing operation complex must not drop below the total employment positions required under (c) of this subsection.

(3)(a) The department of community, trade, and economic development shall determine the eligibility of a business and certify eligibility to the department of revenue.

(b) Approval of the project by a public vote of the governing body of the county or city in which the project is located is a precondition to deferral certification by the department of revenue. If the county or city approves the project, the county or city shall send a written notification of the approval to the department of revenue. If the project is in two jurisdictions, both jurisdictions must approve the project.

(c) When both of the notices under (a) and (b) of this subsection are received, the department of revenue shall issue a sales and use tax deferral certificate for use under sections 3 and 4 of this act.

(4) In addition to the initial certification under subsection (3) of this section, the project must be reviewed by the department of community, trade, and economic development each year for continuing eligibility. The business shall provide an annual report to the department of community, trade, and economic development, in a form as required by the department, of its status relative to the eligibility criteria under subsection (2) of this section. The department of community, trade, and economic development shall review the annual report and determine whether the project continues to meet the eligibility criteria. The department of community, trade, and economic development shall provide a written notice of this determination to the business and to the department of revenue. Annual reapproval by the county or city in which the project is located is not required. If the project fails to meet the eligibility criteria the amount of taxes deferred under sections 3 and 4 of this act are immediately due.

(5) Taxes deferred under sections 3 and 4 of this act need not be repaid if the project maintains its eligibility criteria for a fifteen-year period. The fifteen-year period begins when the deferral certificate is sent under subsection (3)(c) of this section by the department of revenue to the business.

(6) Application for the deferral under sections 3 and 4 of this act may not be accepted before the effective date of this section or after June 30, 2003.

(7) The employment security department shall provide such data to the department of revenue and the department of community, trade, and economic development as is necessary to administer this section wage data shall be updated annually to reflect current state and county conditions.

NEW SECTION. Sec. 3. A new section is added to chapter 82.08 RCW to read as follows:

(1) A person that has received a certification from the department under section 2(3)(c) of this act may use that certificate for deferral of the state share of taxes due under this chapter on the site preparation, construction, and equipping and operating of the project.

(2) The certificate is not valid for sales that occurred before certification by the department. After the project is determined to be complete under section 2(2)(c) of this act, the certificate is limited to taxes related to equipping and operating of the project.

(3)(a) The certificate may be used for fifteen years after its issuance.

(b) The deferral under this section is conditioned on the business remaining eligible under section 2 of this act. If the project fails to meet the eligibility criteria, the amount of taxes deferred under this section are immediately due. The department shall assess interest at the rate provided for delinquent excise taxes, but not penalties, retroactively to the date of deferral.

(4) The buyer must keep such records as the department requires for audit and verification purposes.

NEW SECTION. Sec. 4. A new section is added to chapter 82.12 RCW to read as follows:

(2) The certificate is not valid for tax due on use that occurred before certification by the department. After the project is determined to be complete under section 2(2)(c) of this act, the certificate is limited to tax due on use of tangible personal property related to equipping and operating of the project.

(3)(a) The certificate may be used for fifteen years after its issuance.

(4) The buyer must keep such records as the department requires for audit and verification purposes.

NEW SECTION. Sec. 5. A new section is added to chapter 82.14 RCW to read as follows:

The deferral under sections 3 and 4 of this act is for the state portion of the sales and use tax and does not extend to the tax imposed in this chapter.

Sec. 6. RCW 81.104.170 and 1997 c 450 s 5 are each amended to read as follows:

Cities that operate transit systems, county transportation authorities, metropolitan municipal corporations, public transportation benefit areas, and regional transit authorities may submit an authorizing proposition to the voters and if approved by a majority of persons voting, fix and impose a sales and use tax in accordance with the terms of this chapter, solely for the purpose of providing high capacity transportation service.

The tax authorized pursuant to this section shall be in addition to the tax authorized by RCW 82.14.030 and shall be collected from those persons who are taxable by the state pursuant to chapters 82.08 and 82.12 RCW upon the occurrence of any taxable event within the taxing district. The maximum rate of such tax shall be approved by the voters and shall not exceed one percent of the selling price (in the case of a sales tax) or value of the article used (in the case of a use tax). The maximum rate of such tax that may be imposed shall not exceed nine‑tenths of one percent in any county that imposes a tax under RCW 82.14.340, or within a regional transit authority if any county within the authority imposes a tax under RCW 82.14.340. The exemptions in RCW 82.08.820 and 82.12.820 are for the state portion of the sales and use tax and do not extend to the tax authorized in this section.

The deferral in sections 3 and 4 of this act is for the state portion of the sales tax and does not extend to the tax imposed in this chapter.

NEW SECTION. Sec. 7. A new section is added to chapter 82.32 RCW to read as follows:

The department of revenue may develop and institute a tax reporting method whereby the taxpayer uses deductions, credits, or other accounting techniques, as directed by the department, to allow the department to administer, and the taxpayer to report, the deferral in sections 3 and 4 of this act simply and efficiently. Taxpayers who are entitled to this deferral and sellers who receive deferral certificates from buyers shall keep their records in a form and manner as directed by the department so that the department can distinguish between taxable and exempt transactions.

Sec. 8. RCW 82.62.030 and 1997 c 366 s 5 are each amended to read as follows:

(1) A person shall be allowed a credit against the tax due under chapter 82.04 RCW as provided in this section. For an application approved before January 1, 1996, the credit shall equal one thousand dollars for each qualified employment position directly created in an eligible business project. For an application approved on or after January 1, 1996, the credit shall equal two thousand dollars for each qualified employment position directly created in an eligible business project. For an application approved on or after July 1, 1997, the credit shall equal four thousand dollars for each qualified employment position with wages and benefits greater than forty thousand dollars annually that is directly created in an eligible business. For an application approved on or after July 1, 1997, the credit shall equal two thousand dollars for each qualified employment position with wages and benefits less than or equal to forty thousand dollars annually that is directly created in an eligible business.

(2) The department shall keep a running total of all credits granted under this chapter during each fiscal year. The department shall not allow any credits which would cause the tabulation to exceed five million five hundred thousand dollars in fiscal year 1998 or 1999 or seven million five hundred thousand dollars in any fiscal year thereafter. If all or part of an application for credit is disallowed under this subsection, the disallowed portion shall be carried over for approval the next fiscal year. However, the applicant's carryover into the next fiscal year is only permitted if the tabulation for the next fiscal year does not exceed the cap for that fiscal year as of the date on which the department has disallowed the application.

(3) No recipient may use the tax credits to decertify a union or to displace existing jobs in any community in the state.

(4) No recipient may receive a tax credit on taxes which have not been paid during the taxable year.

(5) A business that has received certification from the department of revenue under section 2 of this act is eligible for an annual credit of four thousand dollars for each of the positions used to establish project eligibility. Positions created in excess of those required to maintain eligibility are also eligible for the credit under this subsection. The business may apply for the credit once the project is complete, as determined in section 2 of this act. The business may apply each of the successive seven years following its initial application under this subsection and shall receive the credit if the continuing employment requirements of section 2 of this act are met. The credits granted under this subsection do not affect the caps under subsection (2) of this section and the fifteen percent requirement under RCW 82.62.010. Application for the credit under this subsection may not be accepted before the effective date of this section.

NEW SECTION. Sec. 9. (1) All real and personal property belonging to a business and used in connection with a project that qualifies under this chapter is exempt from ad valorem property taxation for fifteen successive years from completion of construction and certification of the project, as determined under section 2 of this act.

(2) The exemption does not include real or personal property acquired or constructed prior to the approval of the application prescribed in this chapter. The exemption provided by this chapter is in addition to any other incentives, tax credits, or grants provided by law.

(3) The definitions in section 2 of this act apply to this chapter, where applicable.

NEW SECTION. Sec. 10. A person making application for exemption under this chapter must meet the requirements of section 2 of this act and must enter into a contract approved by the department and the governing body or bodies of the city or county in which the project is located. In the contract the applicant must agree to the requirements of section 2 of this act and this chapter. The department of revenue may not accept any application for exemption under this chapter after June 30, 2003.

NEW SECTION. Sec. 11. An applicant seeking a tax exemption under this chapter must complete the following procedures:

(1) The applicant shall apply to the department on forms prepared by the department. The application for exemption must contain the following:

(a) A description of the manner in which the applicant intends to proceed with acquisition and construction of the project, together with proposed time frames for accomplishing the requirements of section 2 of this act and this chapter; and

(b) A statement that the applicant is aware of the potential tax liability that will be imposed if the property ceases to be eligible for the exemption provided under this chapter.

(2) The applicant must verify the application for exemption by oath or affirmation.

(3) The department may permit the applicant to revise an application for exemption before final action on the application is taken by the department.

NEW SECTION. Sec. 12. The department may approve the application for exemption filed under this chapter if it finds that:

(1) The proposed project is or will be, at the time of completion, in conformance with all applicable local government regulations in effect at the time the application for exemption is approved;

(2) The applicant has complied with all requirements under this chapter;

(3) The site of the project is located in a distressed county, as defined by section 2 of this act; and

(4) The governing body of the county or city in which the project is located has by a public vote approved the project and has sent a written notification of the approval to the department.

NEW SECTION. Sec. 13. (1) The department shall approve or deny an application for exemption filed under this chapter within sixty days after it is received, unless in the discretion of the department additional time is necessary in order to make a decision.

(2) If the application for exemption is approved, the department shall issue the applicant a conditional certificate of tax exemption. The certificate must contain a statement by a duly authorized administrative official of the department that the applicant has complied with the requirements of this chapter.

(3) If the application for exemption is denied by the department, the deciding administrative official shall state in writing the reasons for the denial and mail the notice to the applicant at the applicant's last known address within ten days of the denial.

(4) Upon receiving a denial of the application for a property tax exemption under this chapter, the applicant may appeal the denial to the board of tax appeals in accordance with the rules of practice and procedure of the board. This appeal must be submitted within thirty days of the date the notice is received. If the exemption is denied, the sixty-day time period for approving the application for exemption regarding the project must be extended to the extent necessary to accommodate the appeal process.

NEW SECTION. Sec. 14. (1) Upon completion of construction of a project for which an application for exemption under this chapter has been approved, the owner of the eligible business shall file with the department the following:

(a) A statement of the amount of expenditures for land, structures, machinery, and equipment made with respect to the project;

(b) A description of the work that has been completed and a statement that the owner's property qualifies the property for exemption under this chapter; and

(c) A statement that the work has been completed within two years of the issuance of the conditional certificate of tax exemption.

(2) Within thirty days of the date the statements required under subsection (1) of this section are received, the authorized representative of the department shall determine whether the work completed is consistent with the application for exemption and the contract approved by the legislative authority of the local taxing districts and is qualified for exemption under this chapter. The department shall also determine which completed improvements specifically meet the requirements and required findings.

(3) The department shall file the certificate of tax exemption with the county assessor within ten days of approval if:

(a) The construction is completed within two years of the date the conditional certificate of tax exemption was issued or within an authorized extension of this time limit; and

(b) The authorized representative of the department determines that improvements were constructed consistent with the application for exemption and other applicable requirements and the applicant's property is qualified for exemption under this chapter.

(4) The authorized representative of the department shall notify the applicant that a certificate of tax exemption will not be issued if the representative determines that:

(a) The construction was not completed within two years of the approval date or within any authorized extension of the time limit;

(b) The improvements were not constructed consistent with the application for exemption or other applicable requirements; or

(5) If the authorized representative of the department finds that the project was not completed within the required time period is due to circumstances beyond the control of the applicant and that the applicant has been acting and could reasonably be expected to act in good faith and with due diligence, the department may extend the deadline for completion of the project for a period not to exceed twenty-four consecutive months.

(6) The decision by the deciding officer that an owner of an eligible business is not entitled to a certificate of tax exemption may be appealed to the board of tax appeals in accordance with the rules of practice and procedure of the board.

NEW SECTION. Sec. 15. (1) Within thirty days of the anniversary of the date the certificate of tax exemption was issued and each year thereafter for a period of fifteen years, the owner of the eligible business shall file with a designated representative of the department of community, trade, and economic development an annual report indicating the following:

(a) A certification by the owner that the use of the property has not changed since the date the certificate was approved by the department; and

(b) A description of changes or improvements made after the certificate of tax exemption was issued.

(2) The department of community, trade, and economic development shall annually determine whether the business meets the requirements of this chapter and shall annually report this determination to the department of revenue.

NEW SECTION. Sec. 16. (1) Land, structures, and machinery and equipment that have been exempted under this chapter shall continue to be exempt if not converted to another use for at least fifteen years from the date of issuance of the certificate of tax exemption. If the owner intends to convert the development to another use, the owner must notify the assessor within sixty days of the change in use. If, after a certificate of tax exemption has been filed with the county assessor, the assessor discovers that the use of a portion of the property has changed or will be changed to a use that no longer meets the requirements as previously approved or agreed upon by contract between the department and the owner and that the eligible business no longer qualifies for the exemption, the tax exemption must be canceled and the following must occur:

(a) Additional property tax must be imposed upon the property in the amount that would normally be imposed, plus a penalty amounting to twenty percent of the additional tax. This additional tax is calculated based upon the difference between the property tax paid and the amount of property tax otherwise due and payable had the property not been granted an exemption. The tax, together with penalty and interest, is due in accordance with RCW 84.56.020 the year following the year the property no longer qualifies for exemption;

(b) The tax must include interest upon the amount of additional tax at the same statutory rate charged on delinquent property taxes from the dates on which the additional tax could have been paid without penalty if the property had been assessed at a value without regard to this chapter; and

(c) An additional tax unpaid on its due date is delinquent. From the date of delinquency until the additional tax and penalty are paid, interest must be charged at the same rate applied by law to delinquent ad valorem property taxes. The additional tax owed together with interest and penalty become a lien on the land and attach at the time the property or portion of the property no longer meets applicable requirement. The lien has priority to and must be fully paid and satisfied before a recognizance, mortgage, judgment, debt, obligation, or responsibility to or with which the land may become charged or liable. The lien may be foreclosed upon expiration of the same period after delinquency and in the same manner provided by law for foreclosure of liens for delinquent real or personal property taxes.

(2) When a determination has been made that a tax exemption is to be canceled for a reason stated in this section, the department shall notify the owner of the property, shown by the tax rolls, by mail that the exemption will be canceled. Upon receiving the notice that the exemption is to be canceled, the owner may appeal the cancellation to the board of tax appeals in accordance with the rules of practice and procedures of the board. This appeal must be submitted within thirty days of the date the notice of cancellation is received and must specify the factual and legal basis on which the determination of cancellation is alleged to be erroneous.

(3) Upon receiving notice from the department or its authorized representative that an exemption has been canceled, the county officials having possession of the assessment and tax rolls shall correct the rolls and collect additional taxes, interest, and penalty in accordance with this section.

NEW SECTION. Sec. 17. A new section is added to chapter 82.04 RCW to read as follows:

(1) As used in this section:

(a) "Board" means the community economic revitalization board under chapter 43.160 RCW;

(b) "Private-sector business" or "business" means "person" as defined in RCW 82.04.030. "Private-sector business" does not include a public agency. "Public agency" means the state or its agencies, instrumentalities, or political subdivisions, or the United States or any instrumentality thereof, or an Indian tribe or nation; and

(c) "Public facilities" means bridges, roads, domestic and industrial water, sanitary sewer, storm sewer, railroad, electricity, natural gas, buildings or structures, and port facilities, in the state of Washington.

(2) A person shall be allowed a credit against tax due under this chapter or chapter 82.16 RCW as provided in this section. The credit shall equal fifty cents for each dollar of private funds spent on qualifying public facilities. A person may not receive credit for funds spent by another person. Eligible spending is limited to construction, reconstruction, or improvement of the public facility, and includes rights of way and real property acquisition, engineering and design work, environmental assessment and mitigation, and materials acquisition.

(3) The department, subject to the limitations of subsection (4) of this section, shall approve applications for tax credits upon occurrence of the following:

(a) A written certification is submitted by the board to the department, stating the applicant has been approved for a loan or grant under chapter 43.160 RCW. The tax credit applicant shall provide a written request to the board, requesting the board to provide such certification to the department;

(b) A written agreement is submitted to the department before the start of the public facility project, signed by the public agency responsible for the public facility and the business spending money on the public facility, establishing the financial obligations of the business and stating that the public facility is to be owned and controlled by the public agency;

(c) If the facility will be owned by the business until completion, a written agreement is submitted to the department providing a mechanism for transfer of ownership of the facility to the public agency upon completion of the project; and

(d) The business, in consultation with the public agency, provides a letter to the department establishing that the public facility will enable the business to create, retain, or expand jobs. The business making the expenditures must be the same business upon which the job criteria is based. A business may not use the jobs upon which an earlier project was based to justify additional projects for which the business is applying for tax credits.

(4)(a) Tax credits are available on a first-come basis, with priority based on the date an application is received by the department. Upon completion of a public facility, as determined by the department, the department shall certify the business as eligible for tax credits under this section. An applicant is not eligible for tax credits under this section in excess of the amount of tax that would otherwise be due under this chapter. Approved credit may be carried over one calendar year after the year in which the credit is approved. Any unused credit remaining after the one-year carry-over period has elapsed expires. Refunds shall not be given in place of credits.

(b) The department shall keep a running total of all credits approved. The sum total of credits granted under this section and section 18 of this act shall be no more than five million dollars of credits each fiscal year. If the amount requested for a credit in an application will cause the cap to be exceeded, the department shall give a partial approval of the project, equal to the amount of remaining credit available for the fiscal year.

(c) The amount of credit taken is not confidential or subject to RCW 82.32.330, and is disclosable by the department as a public record.

(5) Investments in a public facility do not give the private-sector business a right or privilege, or any other benefit in the public facility.

(6) An application under this section may not be approved after June 30, 2005.

(7) Tax credits shall not be granted for spending that occurred before the effective date of this section. Applicants are not eligible based on a loan or grant approved before the effective date of this section.

(8) If a person has used a credit granted under this section against tax due under chapter 82.16 RCW the person may not use the same credit for tax due under this chapter.

(9) The tax credit program under this section and section 18 of this act is limited to expenditures for public facilities located in distressed counties. "Distressed county" means a county in which the average level of unemployment for the three years before the year in which an application is filed under this section exceeds the average state unemployment for those years by twenty percent.

NEW SECTION. Sec. 18. A new section is added to chapter 82.16 RCW to read as follows:

The tax credit program under section 17 of this act is available to persons for tax due under this chapter. If a person has used a credit granted under this section against tax due under chapter 82.04 RCW the person may not use the same credit for tax due under this chapter.

NEW SECTION. Sec. 19. It is the intent of the legislature to promote the creation and the retention of jobs. To that end section 20, chapter . . ., Laws of 1998 (section 20 of this act) allows counties to provide public facilities that will attract and retain businesses, thereby creating and maintaining jobs.

Sec. 20. RCW 82.14.370 and 1997 c 366 s 3 are each amended to read as follows:

(1) The legislative authority of a distressed county may impose a sales and use tax in accordance with the terms of this chapter. The tax is in addition to other taxes authorized by law and shall be collected from those persons who are taxable by the state under chapters 82.08 and 82.12 RCW upon the occurrence of any taxable event within the county. The rate of tax shall not exceed ((~~0.04~~)) 0.12 percent of the selling price in the case of a sales tax or value of the article used in the case of a use tax.

(2) The tax imposed under subsection (1) of this section shall be deducted from the amount of tax otherwise required to be collected or paid over to the department of revenue under chapter 82.08 or 82.12 RCW. The department of revenue shall perform the collection of such taxes on behalf of the county at no cost to the county.

(3) Moneys collected under this section shall only be used for the purpose of financing qualifying public facilities in rural counties. The public facility must be listed as an item in the economic development section of the comprehensive plan for those counties planning under RCW 36.70A.040, or, for those counties who do not plan under the growth management act, the public facility must be listed in the county's capital facilities plan. For the purposes of this section, "public facilities" means bridges, roads, domestic and industrial water, sanitary sewer, storm sewer, railroad, electricity, natural gas, buildings or structures, and port facilities, in the state of Washington.

(4) No tax may be collected under this section before July 1, 1998. No tax may be collected under this section by a county more than twenty-five years after the date that a tax is first imposed under this section.

(5) For purposes of this section, "distressed county" means a county in which the average level of unemployment for the three years before the year in which a tax is first imposed under this section exceeds the average state ((~~employment~~)) unemployment for those years by twenty percent.

NEW SECTION. Sec. 21. Sections 9 through 16 of this act constitute a new chapter in Title 84 RCW.

NEW SECTION. Sec. 22. 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. 23. This act takes effect July 1, 1998."

Correct the title.

EFFECT: Provides for additional industrial development by making available certain tax benefits for manufacturing projects locating in distressed counties; allowing a credit against B&O taxes for private funds spent on public facilities; and allowing distressed counties additional sales taxes for economic development related public facilities.