BILL REQ. #:  S-3966.1 

Read first time 01/31/2006.   Referred to Committee on Water, Energy & Environment.

     AN ACT Relating to smart grid energy technology; amending RCW 28B.20.296 and 82.63.010; adding a new section to chapter 82.08 RCW; adding a new section to chapter 82.12 RCW; providing an effective date; and providing expiration dates.

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

Sec. 1   RCW 28B.20.296 and 2004 c 151 s 2 are each amended to read as follows:
     (1) The Washington technology center, through its northwest energy technology collaborative, shall provide a forum for public and private collaborative initiatives to promote renewable energy and energy efficiency sectors in Washington state and the Pacific Northwest. The center shall seek to integrate the initiatives of the northwest energy technology collaborative into existing state programs and initiatives, including grant programs administered by the center, and energy efficiency business development projects and energy assistance programs of the department of community, trade, and economic development.
     (2) The center, through its northwest energy technology collaborative, shall develop and implement a strategic plan for public and private collaboration in renewable energy and energy efficiency business development. The center, together with the department, shall prepare an initial draft of a statewide strategic plan and circulate it widely among businesses and individuals in these sectors for review and comment. The center shall also organize a summit of public and private sector interests to further developments of the proposed strategic plan. The plan shall address, among other things, the role that public sector policies, programs, and expenditures may play in promoting these economic sectors, including subjects such as work force development, education, tax incentives, economic development assistance, public sector energy purchases, public sector construction standards, transportation, and land use regulation and zoning. The strategic plan shall include recommendations for legislative and administrative policy changes and for legislative appropriations. The plan shall also recommend proposals for capital and operating investments in public higher education facilities, proposals for creating and strengthening public and private partnerships, and proposals for federal financial assistance and expenditures for research and development programs in Washington state. The finalized strategic plan shall be provided to the governor and to the appropriate committees of the senate and house of representatives by January 1, 2005.
     (3) No later than December 1, 2007, the department, in collaboration with the center and its northwest energy technology collaborative, shall adopt rules creating a certification process for smart grid energy technologies that promise to significantly improve the reliability, efficiency, and environmental integrity of electrical transmission and distribution systems. The rules shall not take effect until after the end of the next regular legislative session. "Smart grid energy technology" has the same meaning as provided in RCW 82.63.010.
     (4) The strategic plan required by subsection (2) of this section may be incorporated into the center's five-year strategic plan required by RCW 28B.20.289(3)(f).

Sec. 2   RCW 82.63.010 and 2004 c 2 s 3 are each amended to read as follows:
     Unless the context clearly requires otherwise, the definitions in this section apply throughout this chapter.
     (1) "Advanced computing" means technologies used in the designing and developing of computing hardware and software, including innovations in designing the full spectrum of hardware from hand-held calculators to super computers, and peripheral equipment.
     (2) "Advanced materials" means materials with engineered properties created through the development of specialized processing and synthesis technology, including ceramics, high value-added metals, electronic materials, composites, polymers, and biomaterials.
     (3) "Applicant" means a person applying for a tax deferral under this chapter.
     (4) "Biotechnology" means the application of technologies, such as recombinant DNA techniques, biochemistry, molecular and cellular biology, genetics and genetic engineering, cell fusion techniques, and new bioprocesses, using living organisms, or parts of organisms, to produce or modify products, to improve plants or animals, to develop microorganisms for specific uses, to identify targets for small molecule pharmaceutical development, or to transform biological systems into useful processes and products or to develop microorganisms for specific uses.
     (5) "Department" means the department of revenue.
     (6) "Electronic device technology" means technologies involving microelectronics; semiconductors; electronic equipment and instrumentation; radio frequency, microwave, and millimeter electronics; optical and optic-electrical devices; and data and digital communications and imaging devices.
     (7) "Eligible investment project" means an investment project which either initiates a new operation, or expands or diversifies a current operation by expanding, renovating, or equipping an existing facility. The lessor or owner of the qualified building is not eligible for a deferral unless:
     (a) The underlying ownership of the buildings, machinery, and equipment vests exclusively in the same person; or
     (b)(i) The lessor by written contract agrees to pass the economic benefit of the deferral to the lessee;
     (ii) The lessee that receives the economic benefit of the deferral agrees in writing with the department to complete the annual survey required under RCW 82.63.020(2); and
     (iii) The economic benefit of the deferral passed to the lessee is no less than the amount of tax deferred by the lessor and is evidenced by written documentation of any type of payment, credit, or other financial arrangement between the lessor or owner of the qualified building and the lessee.
     (8) "Environmental technology" means assessment and prevention of threats or damage to human health or the environment, environmental cleanup, development of smart grid energy technologies, and the development of alternative energy sources.
     (9) "Investment project" means an investment in qualified buildings or qualified machinery and equipment, including labor and services rendered in the planning, installation, and construction or improvement of the project.
     (10) "Person" has the meaning given in RCW 82.04.030 and includes state universities as defined in RCW 28B.10.016.
     (11) "Pilot scale manufacturing" means design, construction, and testing of preproduction prototypes and models in the fields of biotechnology, advanced computing, electronic device technology, advanced materials, and environmental technology other than for commercial sale. As used in this subsection, "commercial sale" excludes sales of prototypes or sales for market testing if the total gross receipts from such sales of the product, service, or process do not exceed one million dollars.
     (12) "Qualified buildings" means construction of new structures, and expansion or renovation of existing structures for the purpose of increasing floor space or production capacity used for pilot scale manufacturing or qualified research and development, including plant offices and other facilities that are an essential or an integral part of a structure used for pilot scale manufacturing or qualified research and development. If a building is used partly for pilot scale manufacturing or qualified research and development, and partly for other purposes, the applicable tax deferral shall be determined by apportionment of the costs of construction under rules adopted by the department.
     (13) "Qualified machinery and equipment" means fixtures, equipment, and support facilities that are an integral and necessary part of a pilot scale manufacturing or qualified research and development operation. "Qualified machinery and equipment" includes: Computers; software; data processing equipment; laboratory equipment, instrumentation, and other devices used in a process of experimentation to develop a new or improved pilot model, plant process, product, formula, invention, or similar property; manufacturing components such as belts, pulleys, shafts, and moving parts; molds, tools, and dies; vats, tanks, and fermenters; operating structures; and all other equipment used to control, monitor, or operate the machinery. For purposes of this chapter, qualified machinery and equipment must be either new to the taxing jurisdiction of the state or new to the certificate holder, except that used machinery and equipment may be treated as qualified machinery and equipment if the certificate holder either brings the machinery and equipment into Washington or makes a retail purchase of the machinery and equipment in Washington or elsewhere.
     (14) "Qualified research and development" means research and development performed within this state in the fields of advanced computing, advanced materials, biotechnology, electronic device technology, and environmental technology.
     (15) "Recipient" means a person receiving a tax deferral under this chapter.
     (16) "Research and development" means activities performed to discover technological information, and technical and nonroutine activities concerned with translating technological information into new or improved products, processes, techniques, formulas, inventions, or software. The term includes exploration of a new use for an existing drug, device, or biological product if the new use requires separate licensing by the federal food and drug administration under chapter 21, C.F.R., as amended. The term does not include adaptation or duplication of existing products where the products are not substantially improved by application of the technology, nor does the term include surveys and studies, social science and humanities research, market research or testing, quality control, sale promotion and service, computer software developed for internal use, and research in areas such as improved style, taste, and seasonal design.
     (17) "Smart grid energy technology" means a technology developed with the intent to significantly improve the reliability, efficiency, and environmental integrity of electrical transmission and distribution systems, including advanced metering, load management, and control technologies, high-temperature superconductor technologies, the development and use of advanced grid design, operation, and planning tools, and advanced energy delivery, storage and transmission technologies, materials, and systems that contribute to significant load reductions or enhancements in reliability, operational flexibility, or power-carrying capability within electric transmission or distribution systems.
     (18)(a) "Initiation of construction" means the date that a building permit is issued under the building code adopted under RCW 19.27.031 for:
     (i) Construction of the qualified building, if the underlying ownership of the building vests exclusively with the person receiving the economic benefit of the deferral;
     (ii) Construction of the qualified building, if the economic benefits of the deferral are passed to a lessee as provided in subsection (7) of this section; or
     (iii) Tenant improvements for a qualified building, if the economic benefits of the deferral are passed to a lessee as provided in subsection (7) of this section.
     (b) "Initiation of construction" does not include soil testing, site clearing and grading, site preparation, or any other related activities that are initiated before the issuance of a building permit for the construction of the foundation of the building.
     (c) If the investment project is a phased project, "initiation of construction" shall apply separately to each phase.

NEW SECTION.  Sec. 3   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 used primarily in smart grid energy technology product development, or to sales of or charges made for labor and services rendered in respect to installing the tangible personal property. 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) The following definitions apply to this section:
     (a) "Smart grid energy technology" has the meaning provided in RCW 82.63.010; and
     (b) "Smart grid energy technology product development" means research, design, and engineering activities performed in relation to the development of smart grid energy technology.
     (3) This section expires July 1, 2015.

NEW SECTION.  Sec. 4   A new section is added to chapter 82.12 RCW to read as follows:
     (1) The provisions of this chapter do not apply in respect to the use of tangible personal property used primarily in smart grid energy technology product development, or to the use of labor and services rendered in respect to installing the tangible personal property.
     (2) The definitions in section 3 of this act apply to this section.
     (3) This section expires July 1, 2015.

NEW SECTION.  Sec. 5   This act takes effect July 1, 2006.