BILL REQ. #:  H-2070.1 

READ FIRST TIME 02/25/05.   

     AN ACT Relating to tax incentives for alternative fuels; reenacting and amending RCW 82.04.260; 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 82.29A RCW; adding a new section to chapter 82.04 RCW; creating a new section; providing an effective date; providing contingent expiration dates; and declaring an emergency.

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

NEW SECTION.  Sec. 1   A new section is added to chapter 82.08 RCW to read as follows:
     (1) The tax levied by RCW 82.08.020 does not apply to sales of tangible personal property that is used in the construction of a manufacturing facility or sales of or charges made for labor and services rendered with respect to the construction of a manufacturing facility, if the facility is used primarily to manufacture an alternative fuel.
     (2) The tax levied by RCW 82.08.020 does not apply to sales of fuel storage tanks, delivery vehicles, or associated facilities or to sales of or charges made for labor and services rendered in respect to installing, repairing, cleaning, altering, or improving the storage tanks, delivery vehicles, and associated facilities, including repair parts and replacement parts, necessary for fuel storage or distribution if the fuel distributed by the vehicles is liquefied natural gas produced from renewable, waste, or stranded sources of methane gas.
     (3) A person taking an exemption under this section must keep records necessary for the department to verify eligibility under this section. 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.
     (4) For the purposes of this section, "alternative fuel" has the same meaning as provided in section 6(1)(a) of this act.
     (5)(a) This section expires July 1, 2015 or July 1 of the year following the year in which the department of licensing estimates that the aggregate volume of alternative fuels sold at retail for vehicular purposes represents twenty percent of the aggregate volume of all fuels sold at retail for vehicular purposes.
     (b) In order to calculate the percentage of alternative fuel sales in (a) of this subsection, the department of licensing may use as a proxy the estimated portion of the tax base of the special fuels tax under chapter 82.38 RCW relating to fuels other than diesel fuel. If exact volumes are unknown, the department may use reasonable methods to derive estimates of volumes. To make the calculation, the department shall convert fuel volumes to gasoline-equivalent gallons, using the method utilized by the United States department of energy in reporting such comparisons as of January 1, 2005.
     (c) The department of licensing is authorized to promulgate rules necessary to implement this section.

NEW SECTION.  Sec. 2   A new section is added to chapter 82.12 RCW to read as follows:
     (1) The provisions of this chapter do not apply to the use of tangible personal property that is incorporated in the construction of a manufacturing facility or the use of labor and services rendered with respect to the construction of a manufacturing facility, if the facility is used primarily to manufacture an alternative fuel.
     (2) The provisions of this chapter do not apply to the use of fuel storage tanks, delivery vehicles, or associated facilities or to sales of or charges made for labor and services rendered in respect to installing, repairing, cleaning, altering, or improving the storage tanks, delivery vehicles, and associated facilities, including repair parts and replacement parts, necessary for fuel storage or distribution if the fuel distributed by the vehicles is liquefied natural gas produced from renewable, waste, or stranded sources of methane gas.
     (3) A person taking an exemption under this section must keep records necessary for the department to verify eligibility under this section. 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.
     (4) For the purposes of this section, "alternative fuel" has the same meaning as provided in section 6(1)(a) of this act.
     (5)(a) This section expires July 1, 2015 or July 1 of the year following the year in which the department of licensing estimates that the aggregate volume of alternative fuels sold at retail for vehicular purposes represents twenty percent of the aggregate volume of all fuels sold at retail for vehicular purposes.
     (b) In order to calculate the percentage of alternative fuel sales in (a) of this subsection, the department of licensing may use as a proxy the estimated portion of the tax base of the special fuels tax under chapter 82.38 RCW relating to fuels other than diesel fuel. If exact volumes are unknown, the department may use reasonable methods to derive estimates of volumes. To make the calculation, the department shall convert fuel volumes to gasoline-equivalent gallons, using the method utilized by the United States department of energy in reporting such comparisons as of January 1, 2005.
     (c) The department of licensing is authorized to promulgate rules necessary to implement this section.

NEW SECTION.  Sec. 3   A new section is added to chapter 84.36 RCW to read as follows:
     (1)(a) All buildings, machinery, equipment, and other personal property which is used primarily for the manufacture of an alternative fuel, the land upon which this property is located, and land that is reasonably necessary in the manufacture of the alternative fuel, which together comprise a new manufacturing facility or an addition to an existing manufacturing facility, are exempt from property taxes payable for the six years beginning with taxes payable the following year from the date the facility or the addition to the existing facility becomes operational.
     (b) For manufacturing facilities which manufacture products in addition to an alternative fuel, the amount of the property tax exemption shall be based upon the annual percentage of the total value of all products manufactured that is the value of the alternative fuel manufactured.
     (2) Claims for exemptions authorized by this section shall be filed with the county assessor on forms prescribed by the department of revenue and furnished by the assessor. Once filed, the exemption is valid for six years and shall not be renewed. The assessor shall verify and approve claims as the assessor determines to be justified and in accordance with this section. No claims may be approved after December 31, 2009.
     (3) The department of revenue may promulgate rules, pursuant to chapter 34.05 RCW, as necessary to properly administer this section.
     (4) For the purposes of this section, "alternative fuel" has the same meaning as provided in section 6(1)(a) of this act.
     (5)(a) This section expires January 1, 2016 or January 1 of the year following the year in which the department of licensing estimates that the aggregate volume of alternative fuels sold at retail for vehicular purposes represents twenty percent of the aggregate volume of all fuels sold at retail for vehicular purposes.
     (b) In order to calculate the percentage of alternative fuel sales in (a) of this subsection, the department of licensing may use as a proxy the estimated portion of the tax base of the special fuels tax under chapter 82.38 RCW relating to fuels other than diesel fuel. If exact volumes are unknown, the department may use reasonable methods to derive estimates of volumes. To make the calculation, the department shall convert fuel volumes to gasoline-equivalent gallons, using the method utilized by the United States department of energy in reporting such comparisons as of January 1, 2005.
     (c) The department of licensing is authorized to promulgate rules necessary to implement this section.

NEW SECTION.  Sec. 4   A new section is added to chapter 82.29A RCW to read as follows:
     (1)(a) All leasehold interests in buildings, machinery, equipment, and other personal property which is used primarily for the manufacture of an alternative fuel, the land upon which this property is located, and land that is reasonably necessary in the manufacture of the alternative fuel, which together comprise a new manufacturing facility or an addition to an existing manufacturing facility, are exempt from leasehold taxes for a period of six years from the date on which the facility or the addition to the existing facility becomes operational.
     (b) For manufacturing facilities which manufacture products in addition to an alternative fuel, the amount of the leasehold tax exemption shall be based upon the annual percentage of the total value of all products manufactured that is the value of the alternative fuel manufactured.
     (2) Claims for exemptions authorized by this section shall be filed with the department of revenue on forms prescribed by the department of revenue and furnished by the department of revenue. Once filed, the exemption is valid for six years and shall not be renewed. The department of revenue shall verify and approve claims as the department of revenue determines to be justified and in accordance with this section. No claims may be approved after December 31, 2009.
     (3) The department may promulgate rules, pursuant to chapter 34.05 RCW, as necessary to properly administer this section.
     (4) For the purposes of this section, "alternative fuel" has the same meaning as provided in section 6(1)(a) of this act.
     (5)(a) This section expires July 1, 2015 or July 1 of the year following the year in which the department of licensing estimates that the aggregate volume of alternative fuels sold at retail for vehicular purposes represents twenty percent of the aggregate volume of all fuels sold at retail for vehicular purposes.
     (b) In order to calculate the percentage of alternative fuel sales in (a) of this subsection, the department of licensing may use as a proxy the estimated portion of the tax base of the special fuels tax under chapter 82.38 RCW relating to fuels other than diesel fuel. If exact volumes are unknown, the department may use reasonable methods to derive estimates of volumes. To make the calculation, the department shall convert fuel volumes to gasoline-equivalent gallons, using the method utilized by the United States department of energy in reporting such comparisons as of January 1, 2005.
     (c) The department of licensing is authorized to promulgate rules necessary to implement this section.

Sec. 5   RCW 82.04.260 and 2003 2nd sp.s. c 1 s 4 and 2003 2nd sp.s. c 1 s 3 are each reenacted and amended to read as follows:
     (1) Upon every person engaging within this state in the business of manufacturing:
     (a) Wheat into flour, barley into pearl barley, soybeans into soybean oil, canola into canola oil, canola meal, or canola byproducts, or sunflower seeds into sunflower oil; as to such persons the amount of tax with respect to such business shall be equal to the value of the flour, pearl barley, oil, canola meal, or canola byproduct manufactured, multiplied by the rate of 0.138 percent;
     (b) Seafood products which remain in a raw, raw frozen, or raw salted state at the completion of the manufacturing by that person; as to such persons the amount of tax with respect to such business shall be equal to the value of the products manufactured, multiplied by the rate of 0.138 percent;
     (c) By canning, preserving, freezing, processing, or dehydrating fresh fruits and vegetables, or selling at wholesale fresh fruits and vegetables canned, preserved, frozen, processed, or dehydrated by the seller and sold to purchasers who transport in the ordinary course of business the goods out of this state; as to such persons the amount of tax with respect to such business shall be equal to the value of the products canned, preserved, frozen, processed, or dehydrated multiplied by the rate of 0.138 percent. As proof of sale to a person who transports in the ordinary course of business goods out of this state, the seller shall annually provide a statement in a form prescribed by the department and retain the statement as a business record;
     (d) Dairy products that as of September 20, 2001, are identified in 21 C.F.R., chapter 1, parts 131, 133, and 135, including byproducts from the manufacturing of the dairy products such as whey and casein; or selling the same to purchasers who transport in the ordinary course of business the goods out of state; as to such persons the tax imposed shall be equal to the value of the products manufactured multiplied by the rate of 0.138 percent. As proof of sale to a person who transports in the ordinary course of business goods out of this state, the seller shall annually provide a statement in a form prescribed by the department and retain the statement as a business record;
     (e) ((Alcohol fuel, biodiesel fuel, or biodiesel feedstock, as those terms are defined in RCW 82.29A.135; as to such persons the amount of tax with respect to the business shall be equal to the value of alcohol fuel, biodiesel fuel, or biodiesel feedstock manufactured, multiplied by the rate of 0.138 percent. This subsection (1)(e) expires July 1, 2009; and
     (f) Alcohol fuel or wood biomass fuel, as those terms are defined in RCW 82.29A.135; as to such persons the amount of tax with respect to the business shall be equal to the value of alcohol fuel or wood biomass fuel manufactured, multiplied by the rate of 0.138 percent)) Alternative fuel; as to such persons the amount of tax imposed shall be equal to the value of the products manufactured multiplied by the rate of 0.138 percent. This subsection (1)(e) expires July 1, 2015; and
     (f) Natural gas liquefaction equipment, including equipment to produce compressed natural gas formed by pressurizing and vaporizing liquefied natural gas; as to such persons the amount of tax imposed shall be equal to the value of the products manufactured multiplied by the rate of 0.138 percent. This subsection (1)(f) expires July 1, 2015.
     (2) Upon every person engaging within this state in the business of splitting or processing dried peas; as to such persons the amount of tax with respect to such business shall be equal to the value of the peas split or processed, multiplied by the rate of 0.138 percent.
     (3) Upon every nonprofit corporation and nonprofit association engaging within this state in research and development, as to such corporations and associations, the amount of tax with respect to such activities shall be equal to the gross income derived from such activities multiplied by the rate of 0.484 percent.
     (4) Upon every person engaging within this state in the business of slaughtering, breaking and/or processing perishable meat products and/or selling the same at wholesale only and not at retail; as to such persons the tax imposed shall be equal to the gross proceeds derived from such sales multiplied by the rate of 0.138 percent.
     (5) Upon every person engaging within this state in the business of making sales, at retail or wholesale, of nuclear fuel assemblies manufactured by that person, as to such persons the amount of tax with respect to such business shall be equal to the gross proceeds of sales of the assemblies multiplied by the rate of 0.275 percent.
     (6) Upon every person engaging within this state in the business of manufacturing nuclear fuel assemblies, as to such persons the amount of tax with respect to such business shall be equal to the value of the products manufactured multiplied by the rate of 0.275 percent.
     (7) Upon every person engaging within this state in the business of acting as a travel agent or tour operator; as to such persons the amount of the tax with respect to such activities shall be equal to the gross income derived from such activities multiplied by the rate of 0.275 percent.
     (8) Upon every person engaging within this state in business as an international steamship agent, international customs house broker, international freight forwarder, vessel and/or cargo charter broker in foreign commerce, and/or international air cargo agent; as to such persons the amount of the tax with respect to only international activities shall be equal to the gross income derived from such activities multiplied by the rate of 0.275 percent.
     (9) Upon every person engaging within this state in the business of stevedoring and associated activities pertinent to the movement of goods and commodities in waterborne interstate or foreign commerce; as to such persons the amount of tax with respect to such business shall be equal to the gross proceeds derived from such activities multiplied by the rate of 0.275 percent. Persons subject to taxation under this subsection shall be exempt from payment of taxes imposed by chapter 82.16 RCW for that portion of their business subject to taxation under this subsection. Stevedoring and associated activities pertinent to the conduct of goods and commodities in waterborne interstate or foreign commerce are defined as all activities of a labor, service or transportation nature whereby cargo may be loaded or unloaded to or from vessels or barges, passing over, onto or under a wharf, pier, or similar structure; cargo may be moved to a warehouse or similar holding or storage yard or area to await further movement in import or export or may move to a consolidation freight station and be stuffed, unstuffed, containerized, separated or otherwise segregated or aggregated for delivery or loaded on any mode of transportation for delivery to its consignee. Specific activities included in this definition are: Wharfage, handling, loading, unloading, moving of cargo to a convenient place of delivery to the consignee or a convenient place for further movement to export mode; documentation services in connection with the receipt, delivery, checking, care, custody and control of cargo required in the transfer of cargo; imported automobile handling prior to delivery to consignee; terminal stevedoring and incidental vessel services, including but not limited to plugging and unplugging refrigerator service to containers, trailers, and other refrigerated cargo receptacles, and securing ship hatch covers.
     (10) Upon every person engaging within this state in the business of disposing of low-level waste, as defined in RCW 43.145.010; as to such persons the amount of the tax with respect to such business shall be equal to the gross income of the business, excluding any fees imposed under chapter 43.200 RCW, multiplied by the rate of 3.3 percent.
     If the gross income of the taxpayer is attributable to activities both within and without this state, the gross income attributable to this state shall be determined in accordance with the methods of apportionment required under RCW 82.04.460.
     (11) Upon every person engaging within this state as an insurance agent, insurance broker, or insurance solicitor licensed under chapter 48.17 RCW; as to such persons, the amount of the tax with respect to such licensed activities shall be equal to the gross income of such business multiplied by the rate of 0.484 percent.
     (12) Upon every person engaging within this state in business as a hospital, as defined in chapter 70.41 RCW, that is operated as a nonprofit corporation or by the state or any of its political subdivisions, as to such persons, the amount of tax with respect to such activities shall be equal to the gross income of the business multiplied by the rate of 0.75 percent through June 30, 1995, and 1.5 percent thereafter. The moneys collected under this subsection shall be deposited in the health services account created under RCW 43.72.900.
     (13)(a) Beginning October 1, 2005, upon every person engaging within this state in the business of manufacturing commercial airplanes, or components of such airplanes, as to such persons the amount of tax with respect to such business shall, in the case of manufacturers, be equal to the value of the product manufactured, or in the case of processors for hire, be equal to the gross income of the business, multiplied by the rate of:
     (i) 0.4235 percent from October 1, 2005, through the later of June 30, 2007, or the day preceding the date final assembly of a superefficient airplane begins in Washington state, as determined under RCW 82.32.550; and
     (ii) 0.2904 percent beginning on the later of July 1, 2007, or the date final assembly of a superefficient airplane begins in Washington state, as determined under RCW 82.32.550.
     (b) Beginning October 1, 2005, upon every person engaging within this state in the business of making sales, at retail or wholesale, of commercial airplanes, or components of such airplanes, manufactured by that person, as to such persons the amount of tax with respect to such business shall be equal to the gross proceeds of sales of the airplanes or components multiplied by the rate of:
     (i) 0.4235 percent from October 1, 2005, through the later of June 30, 2007, or the day preceding the date final assembly of a superefficient airplane begins in Washington state, as determined under RCW 82.32.550; and
     (ii) 0.2904 percent beginning on the later of July 1, 2007, or the date final assembly of a superefficient airplane begins in Washington state, as determined under RCW 82.32.550.
     (c) For the purposes of this subsection (13), "commercial airplane," "component," and "final assembly of a superefficient airplane" have the meanings given in RCW 82.32.550.
     (d) In addition to all other requirements under this title, a person eligible for the tax rate under this subsection (13) must report as required under RCW 82.32.545.
     (e) This subsection (13) does not apply after the earlier of: July 1, 2024; or December 31, 2007, if assembly of a superefficient airplane does not begin by December 31, 2007, as determined under RCW 82.32.550.

NEW SECTION.  Sec. 6   A new section is added to chapter 82.04 RCW, to be codified between RCW 82.04.010 and 82.04.220, to read as follows:
     (1)(a) Alternative fuel means:
     (i) Alcohol fuel, biodiesel fuel, biodiesel feedstock, or wood biomass fuel, as those terms are defined in RCW 82.29A.135; or
     (ii)(A) Liquefied natural gas, if the gas is manufactured from renewable, waste, or stranded sources of methane gas;
     (B) Compressed natural gas, if the gas is derived from liquefied natural gas that is manufactured from renewable, waste, or stranded sources of methane gas; or
     (C) Methane, if the methane is: (I) Obtained from the anaerobic digestion of material, including but not limited to, agricultural waste or sewage; and (II) subsequently used to manufacture liquefied natural gas.
     (b) "Anaerobic digestion" means a biological process that enables organic matter to be broken down by bacteria in the absence of air to produce a gas principally composed of methane.
     (2)(a) Subsection (1)(a)(i) of this section expires July 1, 2009.
     (b) This section expires July 1, 2015.

NEW SECTION.  Sec. 7   Section 3 of this act applies to taxes levied for collection in 2006 and thereafter.

NEW SECTION.  Sec. 8   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 July 1, 2005.