2260-S

2260-S.E AAS 4/15/99 S2844.1

ESHB 2260 - S AMD - 413

By Senators T. Sheldon, Rasmussen and Morton

ADOPTED 4/15/99

Strike everything after the enacting clause and insert the following:

"NEW SECTION. Sec. 1. The legislature finds that while Washington's economy is currently prospering, economic growth continues to be uneven, particularly as between metropolitan and rural areas. This has created in effect two Washingtons: One afflicted by inadequate infrastructure to support and attract investment, another suffering from congestion and soaring housing prices. In order to address these problems, the legislature intends to use resources strategically to build on our state's strengths while addressing threats to our prosperity.

PART I

LOCAL OPTION SALES AND USE TAX

Sec. 101. RCW 82.14.370 and 1998 c 55 s 6 are each amended to read as follows:

(1) The legislative authority of a ((~~distressed~~)) rural 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~~)) 0.08 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 public facilities in rural counties. The public facility must be listed as an item in the officially adopted county overall economic development plan, or the economic development section of the county's comprehensive plan, or the comprehensive plan of a city or town located within the county for those counties planning under RCW 36.70A.040. For those counties that do not have an adopted overall economic development plan and do not plan under the growth management act, the public facility must be listed in the county's capital facilities plan or the capital facilities plan of a city or town located within the county. In implementing this section, the county shall consult with cities, towns, and port districts located within the county. For the purposes of this section, "public facilities" means bridges, roads, domestic and industrial water facilities, sanitary sewer facilities, storm sewer facilities, railroad, electricity, natural gas, buildings, structures, telecommunications infrastructure, transportation infrastructure, or commercial infrastructure, 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~~)) rural 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 unemployment for those years by twenty percent)) an eligible area as defined in RCW 82.60.020.

PART II

DISTRESSED COUNTY ASSISTANCE ACCOUNT

Sec. 201. RCW 82.14.380 and 1998 c 321 s 10 (Referendum Bill No. 49) are each amended to read as follows:

(1) The distressed county assistance account is created in the state treasury. Into this account shall be placed a portion of all motor vehicle excise tax receipts as provided in RCW 82.44.110. At such times as distributions are made under RCW 82.44.150, the state treasurer shall distribute the funds in the distressed county assistance account to each county imposing the sales and use tax authorized under RCW 82.14.370 as of January 1, 1999, in the same proportions as distributions of the tax imposed under RCW 82.14.370 for these counties for the previous quarter.

(2) Funds distributed from the distressed county assistance account shall be expended by the counties for criminal justice and other purposes.

PART III

TECHNOLOGY-BASED BUSINESSES

Software

NEW SECTION. Sec. 301. It is the intent of the legislature to attract and retain technology-based businesses in distressed counties. Section 302 of this act provides a tax incentive to those businesses that develop or manufacture software in distressed counties. Section 303 of this act provides a tax incentive to those businesses that are engaged in the business of providing technical support services from distressed counties. Encouragement of these types of business will stimulate the information technology industry and be of benefit to the state economy in general. To further the impact and benefit of this program, this incentive is limited to those counties of the state that are characterized by unemployment or low income. The legislature finds that providing this targeted incentive will both increase its effectiveness and create a high technology work force in distressed counties.

NEW SECTION. Sec. 302. A new section is added to chapter 82.04 RCW to read as follows:

(1) Subject to the limits and provisions of this section, a credit is authorized against the tax otherwise due under this chapter for persons engaged in a distressed county in the business of manufacturing software or programming computers, as those terms are defined in this section.

(2) A person who partially or totally relocates a business from one distressed county to another distressed county is eligible for any qualifying new jobs created as a result of the relocation but is not eligible to receive credit for the jobs moved from one county to the other.

(3)(a) To qualify for the credit, the qualifying activity of the person must be conducted in a distressed county and the qualified employment position must be located in the distressed county.

(b) If an activity is conducted both from a distressed county and outside of a distressed county, the credit is available if at least ninety percent of the qualifying activity takes place within a distressed county. If the qualifying activity is a service taxable activity, the place where the work is performed is the place at which the activity is conducted.

(4)(a) The credit under this section shall equal one thousand dollars for each qualified employment position created after July 1, 1999, in an eligible area. A credit is earned for the calendar year the person is hired to fill the position. Additionally a credit is earned for each year the position is maintained over the subsequent consecutive years, up to six years. The county must meet the definition of a distressed county at the time the position is filled. If the county does not have a distressed county status the following year or years, the position is still eligible for the remaining years if all other conditions are met.

(b) Credit may not be taken for hiring of persons into positions that exist before July 1, 1999. Credit is authorized for new employees hired for new positions created on or after July 1, 1999. New positions filled by existing employees are eligible for the credit under this section only if the position vacated by the existing employee is filled by a new hire. A business that is a sole proprietorship without any employees is equivalent to one employee position and this type of business is eligible to receive credit for one position.

(c) If a position is filled before July 1st, this position is eligible for the full yearly credit. If it is filled after June 30th, this position is eligible for half of the credit.

(d) A person that has engaged in qualifying activities in the distressed county before the effective date of this section qualifies for the credit under this section for positions created and filled after the effective date of this section.

(5) No application is necessary for the tax credit. The person must keep records necessary for the department to verify eligibility under this section. This information includes information relating to description of qualifying activity engaged in the distressed county and outside the distressed county by the person as well as detailed records on positions and employees. The department shall, in consultation with a representative group of affected taxpayers, develop a method of segregating activity and related income so that those persons who engage in multiple activities can determine eligibility for credit under this section.

(6) If at any time the department finds that a person is not eligible for tax credit under this section, the amount of taxes for which a credit has been claimed shall be immediately due. The department shall assess interest, but not penalties, on the taxes for which the person is not eligible. The interest shall be assessed at the rate provided for delinquent excise taxes under chapter 82.32 RCW, shall be assessed retroactively to the date the tax credit was taken, and shall accrue until the taxes for which a credit has been used are repaid.

(7) The credit under this section may be used against any tax due under this chapter, but in no case may a credit earned during one calendar year be carried over to be credited against taxes incurred in a subsequent calendar year. A person is not eligible to receive a credit under this section if the person is receiving credit for the same position under chapter 82.62 RCW or RCW 82.04.44525 or is taking the credit under section 303 of this act. No refunds may be granted for credits under this section.

(8) County eligibility under this section shall be based on the same list as published by the department under chapter 82.60 RCW. The eligibility period is from July 1st of each year to June 30th of the next year.

(9) A person taking tax credits under this section shall make an annual report to the department. The report shall be in a letter form and shall include the following information: Number of positions for which credit is being claimed, type of position for which credit is being claimed, type of activity in which the person is engaged in the county, and how long the person has been located in the county. The report must be filed by January 30th of each year for which credit was claimed during the previous year.

(10) Transfer of ownership does not affect credit eligibility; however, the credit is available to the successor for remaining periods in the seven years only if the eligibility conditions of this section are met.

(11) As used in this section:

(a) "Distressed county" means an eligible area as defined in RCW 82.60.020.

(b) "Manufacturing" means the same as "to manufacture" under RCW 82.04.120. Manufacturing includes the activities of both manufacturers and processors for hire.

(c) "Programming" means the activities that involve the creation or modification of software, as that term is defined in this chapter, and that are taxable as a service under RCW 82.04.290(2) or as a retail sale under RCW 82.04.050.

(d) "Qualifying activity" means manufacturing of software or programming computers.

(e) "Qualified employment position" means a permanent full-time position doing programming of software or manufacturing of software. This excludes administrative, professional, service, executive, and other similar positions. If an employee is either voluntarily or involuntarily separated from employment, the employment position is considered filled on a full-time basis if the employer is either training or actively recruiting a replacement employee. Full-time means a position for at least thirty-five hours a week.

(f) "Software" has the same meaning as defined in RCW 82.04.215.

(12) No credit may be taken or accrued under this section on or after July 1, 2003.

(13) This section expires June 30, 2003.

Help Desk Services

NEW SECTION. Sec. 303. A new section is added to chapter 82.04 RCW to read as follows:

(1) Subject to the limits and provisions of this section, a credit is authorized against the tax otherwise due under this chapter for persons engaged in a distressed county in the business of providing information technology help desk services to third parties.

(2) To qualify for the credit, the help desk services must be conducted from a distressed county.

(3)(a) For the first eighty-four months in which the person is engaged in the activity of providing information technology help desk services in the distressed county, the amount of the credit shall be equal to one hundred percent of the amount of tax due under this chapter that is attributable to providing the services from the distressed county. In order to qualify for the credit under this subsection (3)(a), the county must meet the definition of "distressed county" at the time the person begins to conduct qualifying business in the county. If the county subsequently does not qualify for distressed county status, the person may continue to take the credit for the remaining time in the eighty-four months if all other conditions are met. A person who locates in a county during a period of time for which the county does not meet the distressed county status is not eligible to receive the credit under this subsection (3)(a).

(b) A person who is not eligible for the credit under (a) of this subsection is potentially eligible for credit under this subsection (3)(b). If the person is engaged in the activity of providing information technology help desk services in a distressed county, the amount of the credit shall equal sixty-eight percent of the amount of tax due under this chapter that is attributable to providing the service from the distressed county. In order to qualify for the credit under this subsection, the county must meet the definition of "distressed county" during the period of time for which the credit is being claimed. A person is not eligible for a credit under this subsection (3)(b) for activity conducted during any period of time the county does not have a distressed county status.

(c) A person who has engaged in providing information technology help desk services in the distressed county before the effective date of this section qualifies for the credit under (a) of this subsection for any remaining time in the eighty-four months, after which time the person is potentially eligible for the credit under (b) of this subsection. A person who has engaged in providing information technology help desk services in the distressed county before the effective date of this section for more than eighty-four months is potentially eligible for the credit under (b) of this subsection.

(4) No application is necessary for the tax credit. The person must keep records necessary for the department to verify eligibility under this section. These records include information relating to description of activity engaged in a distressed county by the person.

(5) If at any time the department finds that a person is not eligible for tax credit under this section, the amount of taxes for which a credit has been used is immediately due. The department shall assess interest, but not penalties, on the credited taxes for which the person is not eligible. The interest shall be assessed at the rate provided for delinquent excise taxes under chapter 82.32 RCW, shall be assessed retroactively to the date the tax credit was taken, and shall accrue until the taxes for which a credit has been used are repaid.

(6) The credit under this section may be used against any tax due under this chapter, but in no case may a credit earned during one calendar year be carried over to be credited against taxes incurred in a subsequent calendar year. A person is not eligible to receive a credit under this section if the person is receiving credit under section 302 of this act or RCW 82.04.44525 or chapter 82.62 RCW. No refunds may be granted for credits under this section.

(7) County eligibility under this section shall be based on the same list as published by the department under chapter 82.60 RCW. The eligibility period is from July 1st of each year to June 30th of the next year.

(8) A person taking tax credits under this section shall make an annual report to the department. The report shall be in a letter form and shall include the following information: Type of activity in which the person is engaged in the county, number of employees in the distressed county, and how long the person has been located in the county. The report must be filed by January 30th of each year for which credit was claimed during the previous year.

(9) Transfer of ownership does not affect credit eligibility; however, the credit is available to the successor only if the eligibility conditions of this section are met.

(10) As used in this section:

(a) "Distressed county" means an eligible area as defined in RCW 82.60.020.

(b) "First eighty-four months" means the eighty-four months of operation in a county following commencement of business activity. Business activity is deemed to commence upon the act of engaging in the business of providing the help desk services from the county.

(c) "Information technology help desk services" means the following inbound technical or customer support services performed using electronic and telephonic communication:

(i) Hardware and software maintenance;

(ii) Hardware and software diagnostics and troubleshooting;

(iii) Hardware and software installation;

(iv) Hardware and software repair;

(v) Hardware and software information and training; and

(vi) Hardware and software upgrade.

(11) No credit may be taken or accrued under this section on or after July 1, 2003.

(12) This section expires June 30, 2003.

NEW SECTION. Sec. 304. A new section is added to chapter 82.62 RCW to read as follows:

(1) A person is not eligible to receive a credit under this chapter if the person is receiving credit for the same position under section 302 of this act or RCW 82.04.44525 or is receiving a credit under section 303 of this act.

(2) This section expires June 30, 2003.

NEW SECTION. Sec. 305. The following acts or parts of acts are each repealed:

(1) RCW 82.60.045 (Eligible projects--Additional requirements) and 1995 1st sp.s. c 3 s 7 & 1994 sp.s. c 1 s 4; and

(2) RCW 82.60.047 (Governor designation of county as eligible area‑-Natural disaster, business closure, military base closure, mass layoff) and 1994 sp.s. c 1 s 9.

PART IV

ELECTRIC UTILITIES

NEW SECTION. Sec. 401. The legislature finds that it is necessary to employ multiple approaches to revitalize the economy of Washington state's rural areas. The legislature also finds that where possible, Washington state should develop programs which can complement other private, state, and federal programs. It is the intent of section 402 of this act to complement such rural economic development efforts by creating a public utility tax offset program to help establish locally based electric utility revolving fund programs to be used for economic development and job creation.

NEW SECTION. Sec. 402. A new section is added to chapter 82.16 RCW to read as follows:

(1) The following definitions apply to this section:

(a) "Qualifying project" means a project designed to achieve job creation or business retention, to add or upgrade nonelectrical infrastructure, to add or upgrade health and safety facilities, to accomplish energy and water use efficiency improvements, including renewable energy development, or to add or upgrade emergency services in any designated qualifying rural area.

(b) "Qualifying rural area" means:

(i) An eligible area as defined in RCW 82.60.020; or

(ii) Any geographic area in the state that receives electricity from a light and power business with twelve thousand or fewer customers with fewer than twenty-six meters per mile of distribution line as determined and published by the department of revenue effective July 1st of each year. The department shall use current data provided by the electricity industry.

(c) "Electric utility rural economic development revolving fund" means a fund devoted exclusively to funding qualifying projects in qualifying rural areas.

(d) "Local board" is a board of directors with at least, but not limited to, three members representing local businesses and community groups who have been appointed by the sponsoring electric utility to oversee and direct the activities of the electric utility rural economic development revolving fund.

(2) A light and power business with fewer than twenty-six active meters per mile of distribution line in any geographic area in the state shall be allowed a credit against taxes due under this chapter in an amount equal to fifty percent of contributions made in any calendar year directly to an electric utility rural economic development revolving fund. The credit shall be taken in a form and manner as required by the department. The credit under this section shall not exceed twenty-five thousand dollars per calendar year per light and power business. The credit may not exceed the tax that would otherwise be due under this chapter. Refunds shall not be granted in the place of credits. Expenditures not used to earn a credit in one calendar year may not be used to earn a credit in subsequent years.

(3) The right to earn tax credits under this section expires December 31, 2005.

(4) To qualify for the credit in subsection (2) of this section, the light and power business shall establish an electric utility rural economic development revolving fund which is governed by a local board whose members shall reside in the qualifying rural area served by the light and power business. The local board shall have authority to determine all criteria and conditions for the expenditure of funds from the electric utility rural economic development fund, and for the terms and conditions of repayment.

(5) Any funds repaid to the electric utility rural economic development fund by recipients shall be made available for additional qualifying projects.

(6) If at any time the electric utility rural economic development fund is dissolved, any moneys claimed as a tax credit under this section shall either be granted to a qualifying project or refunded to the state within two years of termination.

(7) The total amount of credits that may be used in any fiscal year shall not exceed three hundred fifty thousand dollars in any fiscal year. The department shall allow the use of earned credits on a first-come, first-served basis. Unused earned credits may be carried over to subsequent years.

PART V

DISASTER VICTIMS' RELIEF

NEW SECTION. Sec. 501. A new section is added to chapter 82.08 RCW to read as follows:

(1) The tax levied by RCW 82.08.020 shall not apply to sales of labor and services rendered in respect to:

(a) The moving of houses out of any landslide area that has been declared as a federal disaster area;

(b) The demolition of houses located in a landslide area that has been declared as a federal disaster area; or

(2) This section expires July 1, 2000.

PART VI

MISCELLANEOUS

NEW SECTION. Sec. 601. Part headings and subheadings used in this act are not any part of the law.

NEW SECTION. Sec. 602. Section 501 of this act applies retroactively to March 1, 1998.

NEW SECTION. Sec. 603. Section 501 of 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 takes effect immediately.

NEW SECTION. Sec. 604. Sections 1, 101, 201, 301 through 305, 401, 402, 601, and 605 of this act take effect August 1, 1999.

NEW SECTION. Sec. 605. Section 305 of this act does not affect any existing right acquired or liability or obligation under the sections repealed in section 305 of this act or any rule or order adopted under those sections, nor does it affect any proceeding instituted under those sections.

NEW SECTION. Sec. 606. 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."

ESHB 2260 - S AMD - 413

By Senators Rasmussen, T. Sheldon and Morton

ADOPTED 4/15/99

On page 1, line 1 of the title, after "counties;" strike the remainder of the title and insert "amending RCW 82.14.370 and 82.14.380; adding new sections to chapter 82.04 RCW; adding a new section to chapter 82.16 RCW; adding a new section to chapter 82.60 RCW; adding a new section to chapter 82.08 RCW; creating new sections; repealing RCW 82.60.045 and 82.60.047; providing an effective date; providing expiration dates; and declaring an emergency."