BILL REQ. #:  H-3841.1 

Read first time 01/14/2004.   Referred to Committee on Technology, Telecommunications & Energy.

     AN ACT Relating to providing incentives to support the renewable energy industry in Washington state; adding new sections to chapter 82.04 RCW; adding a new section to chapter 82.08 RCW; adding a new section to chapter 82.12 RCW; adding a new section to chapter 84.36 RCW; adding a new section to chapter 82.32 RCW; creating a new section; providing an effective date; and providing expiration dates.

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

NEW SECTION.  Sec. 1   The legislature finds that the welfare of the people of the state of Washington is positively impacted through the encouragement and expansion of key growth industries in the state. The legislature further finds that targeting tax incentives to focus on key growth industries is an important strategy to enhance the state's business climate.
     A recent report by the Washington State University energy program recognized the solar electric industry as one of the state's important growth industries. It is of great concern that businesses in this industry have been increasingly expanding and relocating their operations elsewhere. The report indicates that additional incentives for the solar electric industry are needed in recognition of the unique forces and issues involved in business decisions in this industry.
     Therefore, the legislature intends to enact comprehensive tax incentives for the solar electric industry that address activities of the manufacture of these products and to encourage these industries to locate in counties with high unemployment. Tax incentives for the solar electric industry are important in both retention and expansion of existing business and attraction of new businesses, all of which will strengthen this growth industry within our state, will create jobs, and will bring many indirect benefits to the state.

NEW SECTION.  Sec. 2   A new section is added to chapter 82.04 RCW to read as follows:
     (1) The tax imposed by section 3 of this act does not apply to any person who manufactures solar energy systems using photovoltaic modules, if located in a county with an annual average unemployment rate of greater than twelve percent in the calendar year prior to the effective date of this act, as determined by the commissioner of the employment security department.
     (2) For the purposes of this section:
     (a) "Module" means the smallest nondivisible self-contained physical structure housing interconnected photovoltaic cells and providing a single direct current electrical output.
     (b) "Photovoltaic cell" means a device that converts light directly into electricity without moving parts.
     (c) "Solar energy system" means any device or combination of devices or elements that rely upon direct sunlight as an energy source for use in the generation of electricity.
     (3) This section expires June 30, 2013.

NEW SECTION.  Sec. 3   A new section is added to chapter 82.04 RCW to read as follows:
     (1) Upon every person engaging within this state in the business of manufacturing solar energy systems using photovoltaic modules, the amount of the tax with respect to such business shall be equal to the value of the products manufactured, multiplied by the rate of 0.275 percent. For the purposes of this section, "solar energy system" has the same meaning as contained in section 2 of this act.
     (2) This section expires June 30, 2013.

NEW SECTION.  Sec. 4   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 charges made for labor and services rendered in respect to the constructing of new buildings used for the manufacture of solar energy systems using photovoltaic modules into a solar energy system located in a county with an annual average unemployment rate of greater than twelve percent in the calendar year prior to the effective date of this act, as determined by the commissioner of the employment security department, to sales of tangible personal property that will be incorporated as an ingredient or component of such buildings during the course of the constructing. The exemption is available only when the buyer provides the seller with an exemption certificate in a form and manner prescribed by the department. The seller shall retain a copy of the certificate for the seller's files.
     (2) To be eligible under this section the business owner must meet the following requirements for an eight-year period, such period beginning the day the new building commences commercial production, or a portion of tax otherwise due shall be immediately due and payable pursuant to subsection (3) of this section:
     (a) The business owner must maintain at least seventy-five percent of full employment at the new building for which the exemption under this section is claimed.
     (b) Before commencing commercial production at a new facility the business owner must meet with the department to review projected employment levels in the new buildings. The department, using information provided by the taxpayer, shall make a determination of the number of full-time positions that would be filled at full employment. This number shall be used throughout the eight-year period to determine whether any tax is to be repaid. This information is not subject to the confidentiality provisions of RCW 82.32.330 and may be disclosed to the public upon request.
     (c) No application is necessary for the tax exemption. The person is subject to all the requirements of chapter 82.32 RCW. A person taking the exemption under this section must report as required under section 8 of this act.
     (3) If the employment requirement is not met for any one calendar year, one-eighth of the exempt sales and use taxes shall be due and payable by April 1st of the following year. The department shall assess interest to the date the tax was imposed, but not penalties, on the taxes for which the person is not eligible.
     (4) The exemption applies to new buildings, or parts of buildings, that are used exclusively in the manufacture of solar energy systems using photovoltaic modules into a solar energy system located in a county with an annual average unemployment rate of greater than twelve percent in the calendar year prior to the effective date of this act, as determined by the commissioner of the employment security department, including the storage of raw materials and finished product.
     (5) For the purposes of this section:
     (a) "Commencement of commercial production" is deemed to have occurred when the equipment and process qualifications in the new building are completed and production for sale has begun; and
     (b) "Full employment" is the number of positions required for full capacity production at the new building.
     (c) "Solar energy system" has the same meaning as provided in section 2 of this act.
     (6) No exemption may be taken after June 30, 2013, however all of the eligibility criteria and limitations are applicable to any exemptions claimed before that date.
     (7) This section expires June 30, 2013.

NEW SECTION.  Sec. 5   A new section is added to chapter 82.12 RCW to read as follows:
     (1) The provisions of this chapter do not apply with respect to the use of tangible personal property that will be incorporated as an ingredient or component of new buildings used for the manufacture of solar energy systems using photovoltaic modules into a solar energy system located in a county with an annual average unemployment rate of greater than twelve percent in the calendar year prior to the effective date of this act, as determined by the commissioner of the employment security department during the course of constructing such buildings or to labor and services rendered in respect to installing, during the course of constructing, building fixtures not otherwise eligible for the exemption under RCW 82.08.02565(2)(b).
     (2) The eligibility requirements, conditions, and definitions in section 4 of this act apply to this section.
     (3) No exemption may be taken after June 30, 2013, however all of the eligibility criteria and limitations are applicable to any exemptions claimed before that date.
     (4) This section expires June 30, 2013.

NEW SECTION.  Sec. 6   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 section 3 of this act for persons engaged in the business of manufacturing solar energy systems using photovoltaic modules into a solar energy system located in a county with an annual average unemployment rate of greater than twelve percent in the calendar year prior to the effective date of this act, as determined by the commissioner of the employment security department. For the purposes of this section "solar energy system" has the same meaning as provided in section 2 of this act.
     (2)(a) The credit under this section shall equal three thousand dollars for each full-time employment position used in manufacturing process that takes place in a new building exempt from sales and use tax under sections 4 and 5 of this act. A credit is earned for the calendar year a person fills a position. Additionally a credit is earned for each year the position is maintained over the subsequent consecutive years, up to eight years. Those positions that are not filled for the entire year are eligible for fifty percent of the credit if filled less than six months, and the entire credit if filled more than six months.
     (b) To qualify for the credit, the manufacturing activity of the person must be conducted at a new building that qualifies for the exemption from sales and use tax under sections 4 and 5 of this act.
     (3) No application is necessary for the tax credit. The person is subject to all of the requirements of chapter 82.32 RCW. 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. No refunds may be granted for credits under this section.
     (4) 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 retroactive to the date the tax credit was taken, and shall accrue until the taxes for which a credit has been used are repaid.
     (5) A person taking the credit under this section must report under section 8 of this act.
     (6) Credits may be taken after July 1, 2004, for those buildings at which commercial production began before June 30, 2013, subject to all of the eligibility criteria and limitations of this section.
     (7) This section expires June 30, 2013.

NEW SECTION.  Sec. 7   A new section is added to chapter 84.36 RCW to read as follows:
     (1) Machinery and equipment exempt under RCW 82.08.02565 or 82.12.02565 used in the manufacture of solar energy systems using photovoltaic modules into a solar energy system located in a county with an annual average unemployment rate of greater than twelve percent in the calendar year prior to the effective date of this act, as determined by the commissioner of the employment security department at a building exempt from sales and use tax and in compliance with the employment requirement under sections 4 and 5 of this act are exempt from taxation under this chapter. "Solar energy system" has the same meaning as provided in section 2 of this act.
     (2) A person seeking this exemption must make application to the county assessor, on forms prescribed by the department.
     (3) A person receiving an exemption under this section must report in the manner prescribed in section 8 of this act.
     (4) This section is effective for taxes levied for collection one year after the effective date of this act and thereafter.
     (5) This section expires December 31, 2013, for taxes levied for collection in the following year.

NEW SECTION.  Sec. 8   A new section is added to chapter 82.32 RCW to read as follows:
     (1) The legislature finds that accountability and effectiveness are important aspects of setting tax policy. In order to make policy choices regarding the best use of limited state resources the legislature needs information on how a tax incentive is used.
     (2)(a) A person who reports taxes under section 3 of this act or who claims an exemption or credit under section 2 or 4 through 7 of this act, shall make an annual report to the department detailing employment, wages, and employer-provided health and retirement benefits per job at the manufacturing site. The report shall not include names of employees. The report shall also detail employment by the total number of full-time, part-time, and temporary positions. The first report filed under this subsection shall include employment, wage, and benefit information for the twelve-month period immediately before first use of a preferential tax rate under section 3 of this act, or tax exemption or credit under section 2 or 4 through 7 of this act. The report is due by March 31st following any year in which a preferential tax rate under section 3 of this act is used, or tax exemption or credit under section 2 or 4 through 7 of this act is taken. This information is not subject to the confidentiality provisions of RCW 82.32.330 and may be disclosed to the public upon request.
     (b) If a person fails to submit an annual report under (a) of this subsection the department shall declare the amount of taxes exempted or credited for that year to be immediately due and payable. Excise taxes payable under this subsection are subject to interest, as provided under this chapter. This information is not subject to the confidentiality provisions of RCW 82.32.330 and may be disclosed to the public upon request.
     (3) By November 1, 2009, and November 1, 2012, the joint legislative audit and review committee, in consultation with the department, shall report to the legislature on the effectiveness of chapter . . ., Laws of 2004 (this act) in regard to keeping Washington competitive. The report shall measure the effect of chapter . . ., Laws of 2004 (this act) on job retention, net jobs created for Washington residents, company growth, diversification of the state's economy, and other factors as the committees select. The reports shall include a discussion of principles to apply in evaluating whether the legislature should reenact any or all of the tax preferences in chapter . . ., Laws of 2004 (this act).

NEW SECTION.  Sec. 9   This act takes effect July 1, 2004.