BILL REQ. #:  H-4998.1 

READ FIRST TIME 02/10/04.   

     AN ACT Relating to exempting from the state public utility tax the sales of electricity to an electrolytic processing business; amending RCW 82.16.020; adding a new section to chapter 82.16 RCW; adding a new section to chapter 82.32 RCW; and providing an expiration date.

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

NEW SECTION.  Sec. 1   A new section is added to chapter 82.16 RCW to read as follows:
     (1) For the purposes of this section:
     (a) "Chlor-alkali electrolytic processing business" means a person who is engaged in a business that uses more than ten average megawatts of electricity per month in a chlor-alkali electrolytic process to split the electrochemical bonds of sodium chloride and water to make chlorine and sodium hydroxide. A "chlor-alkali electrolytic processing business" does not include direct service industrial customers or their subsidiaries that contract for the purchase of power from the Bonneville power administration as of the effective date of this section.
     (b) "Sodium chlorate electrolytic processing business" means a person who is engaged in a business that uses more than ten average megawatts of electricity per month in a sodium chlorate electrolytic process to split the electrochemical bonds of sodium chloride and water to make sodium chlorate and hydrogen. A "sodium chlorate electrolytic processing business" does not include direct service industrial customers or their subsidiaries that contract for the purchase of power from the Bonneville power administration as of the effective date of this section.
     (2) Effective July 1, 2004, the tax levied under this chapter does not apply to sales of electricity made by a light and power business to a chlor-alkali electrolytic processing business or a sodium chlorate electrolytic processing business for the electrolytic process if the contract for sale of electricity to the business contains the following terms:
     (a) The electricity to be used in the electrolytic process is separately metered from the electricity used for general operations of the business;
     (b) The price charged for the electricity used in the electrolytic process will be reduced by an amount equal to the tax exemption available to the light and power business under this section; and
     (c) Disallowance of all or part of the exemption under this section is a breach of contract and the damages to be paid by the chlor-alkali electrolytic processing business or the sodium chlorate electrolytic processing business are the amount of the tax exemption disallowed.
     (3) If the electrolytic processing business is located within a jurisdiction that imposes tax under RCW 35.21.865 on a light and power business that supplies electricity to the electrolytic processing business, the exemption provided for in this section does not apply. However, a preferential tax rate applies to the sale of electricity by the light and power business to the electrolytic processing business. If the rate of tax imposed under RCW 35.21.865 on the sale of electricity by the light and power business to the electrolytic processing business is less than the general rate of tax imposed on electric energy businesses, the tax rate provided under RCW 82.16.020 for the light and power business is reduced by an equal percentage.
     (4) The exemption provided for in this section does not apply to amounts received from the remarketing or resale of electricity originally obtained by contract for the electrolytic process.
     (5) In order to claim an exemption under this section, the chlor-alkali electrolytic processing business or the sodium chlorate electrolytic processing business must provide the light and power business with an exemption certificate in a form and manner prescribed by the department.
     (6)(a) This section does not apply to sales of electricity made after December 31, 2006.
     (b) This section expires June 30, 2007.

Sec. 2   RCW 82.16.020 and 1996 c 150 s 2 are each amended to read as follows:
     (1) There is levied and there shall be collected from every person a tax for the act or privilege of engaging within this state in any one or more of the businesses herein mentioned. The tax shall be equal to the gross income of the business, multiplied by the rate set out after the business, as follows:
     (a) Express, sewerage collection, and telegraph businesses: Three and six-tenths percent;
     (b) Light and power business: Three and sixty-two one-hundredths percent, except as provided in section 1 of this act;
     (c) Gas distribution business: Three and six-tenths percent;
     (d) Urban transportation business: Six-tenths of one percent;
     (e) Vessels under sixty-five feet in length, except tugboats, operating upon the waters within the state: Six-tenths of one percent;
     (f) Motor transportation, railroad, railroad car, and tugboat businesses, and all public service businesses other than ones mentioned above: One and eight-tenths of one percent;
     (g) Water distribution business: Four and seven-tenths percent.
     (2) An additional tax is imposed equal to the rate specified in RCW 82.02.030 multiplied by the tax payable under subsection (1) of this section.
     (3) Twenty percent of the moneys collected under subsection (1) of this section on water distribution businesses and sixty percent of the moneys collected under subsection (1) of this section on sewerage collection businesses shall be deposited in the public works assistance account created in RCW 43.155.050.

NEW SECTION.  Sec. 3   A new section is added to chapter 82.32 RCW to read as follows:
     (1) For the purposes of this section, "electrolytic processing business tax exemption" means the exemption and preferential tax rate under section 1 of this act.
     (2) 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 to evaluate whether the stated goals of legislation were achieved.
     (3) The goals of the electrolytic processing business tax exemption are:
     (a) To retain family wage jobs by enabling electrolytic processing businesses to maintain production of chlor-alkali and sodium chlorate at a level that will preserve at least seventy-five percent of the jobs that were on the payroll effective January 1, 2004, as adjusted for employment reductions publicly announced before November 30, 2003; and
     (b) To allow the electrolytic processing industries to continue production in this state through 2006 so that the industries will be positioned to preserve and create new jobs when the anticipated reduction of energy costs occur.
     (4)(a) A person who receives the benefit of an electrolytic processing business tax exemption 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 is due by March 31st following any year in which a tax exemption is claimed or used. The report shall not include names of employees. The report shall detail employment by the total number of full-time, part-time, and temporary positions. The report shall indicate the quantity of product produced at the plant during the time period covered by the report. 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 tax exemption. Employment reports shall include data for actual levels of employment and identification of the number of jobs affected by any employment reductions that have been publicly announced at the time of the report. Information in a report under this section 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 by the due date of the report, the department shall declare the amount of taxes exempted for that year to be immediately due and payable. Public utility taxes payable under this subsection are subject to interest but not penalties, 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.
     (5) By December 1, 2005, and by December 1, 2006, the fiscal committees of the house of representatives and the senate, in consultation with the department, shall report to the legislature on the effectiveness of the tax incentive under section 1 of this act. The report shall measure the effect of the incentive on job retention for Washington residents, and other factors as the committees select. The report shall also discuss expected trends or changes to electricity prices as they affect the industries that benefit from the incentives.