6239-S AMS POUL WILS 037

SSB 6239 - S AMD 609

By Senators Poulsen and Fraser

1/28/04 ADOPTED

On page 2, beginning on line 20, strike all material down through line 5 on page 5 and insert the following:

"(2) The credit is equal to the greater of the amount of qualified research and development expenditures of a person or eighty percent of amounts received by a person other than a public educational or research institution in compensation for the conduct of qualified research and development, multiplied by the rate provided in RCW 82.04.260(3) in the case of a nonprofit corporation or nonprofit association engaging within this state in research and development, and the ((rate provided in RCW 82.04.290(2))) person's average tax rate for every other person.

(3) Any person entitled to the credit provided in subsection (2) of this section as a result of qualified research and development conducted under contract may assign all or any portion of the credit to the person contracting for the performance of the qualified research and development.

(4) The credit, including any credit assigned to a person under subsection (3) of this section, shall be taken against taxes due for the same calendar year in which the qualified research and development expenditures are incurred. The credit, including any credit assigned to a person under subsection (3) of this section, for each calendar year shall not exceed the lesser of two million dollars or the amount of tax otherwise due under this chapter for the calendar year.

(5) Any person taking the credit, including any credit assigned to a person under subsection (3) of this section, whose research and development spending during the calendar year in which the credit is claimed fails to exceed 0.92 percent of the person's taxable amount during the same calendar year shall be liable for payment of the additional taxes represented by the amount of credit taken together with interest, but not penalties. Interest shall be due at the rate provided for delinquent excise taxes retroactively to the date the credit was taken until the taxes are paid. Any credit assigned to a person under subsection (3) of this section that is disallowed as a result of this section may be taken by the person who performed the qualified research and development subject to the limitations set forth in subsection (4) of this section.

(6) Any person claiming the credit, and any person assigning a credit as provided in subsection (3) of this section, shall file an affidavit form prescribed by the department which shall include the amount of the credit claimed, ((an estimate of)) the ((anticipated)) qualified research and development expenditures during the calendar year for which the credit is claimed, ((an estimate of)) and the taxable amount during the calendar year for which the credit is claimed, and such additional information as the department may prescribe. The report is due by March 31st following any year a credit is taken.

(7)(a) A person claiming the credit shall agree to supply the department with information ((necessary to measure the results of the tax credit program for qualified research and development expenditures)) on research and development spending, and product development, which may be measured by a proxy such as research projects, copyrights, trademarks, or patents issued. The survey information is deemed tax information under RCW 82.32.330.

(b) If a person fails to provide the information required under this subsection by the due date, the person entitled to the credit provided in subsection (2) of this section is not eligible to take or assign the credit provided in subsection (2) of this section in the year the person failed to complete the survey.

(8) The ((department)) joint legislative audit and review committee shall use the information ((required under)) from subsection (7) of this section and from other state agency sources to ((perform three assessments on)) study the tax credit program authorized under this section. ((The assessments will take place in 1997, 2000, and 2003. The department shall prepare reports on each assessment and deliver their reports by September 1, 1997, September 1, 2000, and September 1, 2003. The assessments)) The committee shall report to the legislature by December 1, 2013. The study shall measure the effect of the program on ((job creation, the number of jobs created for Washington residents,)) company growth, the introduction of new products as measured by copyrights, trademarks, and overall patent issuance, the diversification of the state's economy, growth in research and development investment, and the movement of firms or the consolidation of firms' operations into the state((, and such other factors as the department selects)). In conducting this evaluation, the committee shall:

(a) Use a generally accepted econometric model and contract with outside experts; and

(b) Evaluate the direct, indirect, and induced impacts of this program together with the program authorized under RCW 82.63.020.

(9) For the purpose of this section:

(a) "Average tax rate" means a person's total tax under this chapter for the reporting period divided by the taxpayer's total taxable income under this chapter for the reporting period.

(b) "Qualified research and development expenditures" means operating expenses, including wages, compensation of a proprietor or a partner in a partnership as determined under rules adopted by the department, benefits, supplies, and computer expenses, directly incurred in qualified research and development by a person claiming the credit provided in this section. The term does not include amounts paid to a person other than a public educational or research institution to conduct qualified research and development. Nor does the term include capital costs and overhead, such as expenses for land, structures, or depreciable property.

(((b))) (c) "Qualified research and development" shall have the same meaning as in RCW 82.63.010.

(((c))) (d) "Research and development spending" means qualified research and development expenditures plus eighty percent of amounts paid to a person other than a public educational or research institution to conduct qualified research and development.

(((d))) (e) "Taxable amount" means the taxable amount subject to the tax imposed in this chapter required to be reported on the person's combined excise tax returns during the year in which the credit is claimed, less any taxable amount for which a credit is allowed under RCW 82.04.440."

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EFFECT: Uses the taxpayer's average tax rate for computing the hi-tech business and occupation tax credit rather than 1.5%.