BILL REQ. #:  H-0836.2 

Read first time 01/30/2007.   Referred to Committee on Commerce & Labor.

     AN ACT Relating to establishing a state tax policy that requires persons claiming certain tax incentives to maintain neutrality towards unionization; amending RCW 82.32.545, 82.04.250, 82.04.4461, 82.04.4463, 82.04.4487, 82.08.975, 82.08.980, 82.08.981, 82.12.975, 82.12.981, 84.36.655, and 82.29A.137; adding new sections to chapter 82.32 RCW; prescribing penalties; providing an effective date; providing an expiration date; and declaring an emergency.

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

NEW SECTION.  Sec. 1   (1) The legislature finds that the state's tax policy currently provides for tax exemptions and credits, as well as preferential tax rates, for certain industries. The state's tax policy does not, however, require neutrality towards unionization as a condition of claiming these incentives. As a result, some employers that benefit substantially from these incentives have encouraged or discouraged unionization.
     (2) The legislature declares that the state's tax policy should recognize the right of employees to freedom of association in the workplace and freedom of choice in who will represent employees in collective bargaining.
     (3) For these reasons, the legislature intends to bar persons from claiming these tax incentives if they choose to encourage or discourage unionization.
     (4) This act may be known and cited as the aerospace opportunity and responsibility act.

NEW SECTION.  Sec. 2   (1) A person is barred from claiming a tax incentive if the person or the person's agent encourages or discourages unionization by that person's employees or any other employee.
     (2) If a person claiming a tax incentive encourages or discourages unionization, a taxpayer may file a complaint with the director alleging that the person has violated this section. Within thirty days of receiving a complaint, the director shall conduct a hearing to determine whether the alleged violation has occurred. Within ten days of concluding a hearing, the director shall make a determination and render a decision. If the director determines, by a preponderance of the evidence, that the person violated this section, the department shall declare the amount of tax incentives taken for that year to be immediately due and payable. In addition, the person is liable to the state for a civil penalty equal to twice the amount of the tax incentive taken for the remainder of the year, and barred from claiming a tax incentive for that year and the following calendar year.
     (3) If a person claiming a tax incentive encourages or discourages unionization, a taxpayer also may bring a civil action in the name of the state seeking injunctive relief, civil penalties, and other appropriate equitable relief. A prevailing plaintiff in an action under this section is entitled to recover reasonable attorneys' fees and costs.
     (4) For purposes of this section:
     (a) "Employee organization" means an organization of any kind in which employees participate and which exists for the purpose, in whole or in part, of collective bargaining with employers;
     (b)(i) "Encourage or discourage unionization" means attempting to influence the decision of the person's employees in this state regarding whether to support or oppose an employee organization that represents or seeks to represent those employees for the purpose of collective bargaining, or become a member of an employee organization.
     (ii) "Encourage or discourage unionization" does not mean:
     (A) Addressing a grievance or negotiating or administering a collective bargaining agreement;
     (B) Allowing an employee organization or its representatives access to the employer's facilities or property;
     (C) Performing an activity required by federal or state law or by a collective bargaining agreement; or
     (D) Negotiating, entering into, or carrying out a voluntary recognition agreement with an employee organization.
     (c) "Tax incentive" means an exemption, credit, or preferential tax rate under Title 82 or 84 RCW for persons who are manufacturers or processors for hire of commercial airplanes, or components of such airplanes, including but not limited to an exemption, credit, or preferential tax rate under RCW 82.04.250, 82.04.4461, 82.04.4463, 82.04.4487, 82.08.975, 82.08.980, 82.08.981, 82.12.975, 82.12.980, 82.12.981, 82.29A.137, or 84.36.655.

Sec. 3   RCW 82.32.545 and 2003 2nd sp.s. c 1 s 16 are each amended 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 RCW 82.04.260(((13))) (11) or who claims an exemption or credit under RCW 82.04.4461, 82.08.980, 82.12.980, 82.29A.137, 84.36.655, and 82.04.4463 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 RCW 82.04.260(((13))) (11), or tax exemption or credit under RCW 82.04.4461, 82.08.980, 82.12.980, 82.29A.137, 84.36.655, and 82.04.4463. The report is due by March 31st following any year in which a preferential tax rate under RCW 82.04.260(((13))) (11) is used, or tax exemption or credit under RCW 82.04.4461, 82.08.980, 82.12.980, 82.29A.137, 84.36.655, and 82.04.4463 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 by the due date of the report, the department shall declare the amount of taxes exempted or credited, or reduced in the case of the preferential business and occupation tax rate, for that year to be immediately due and payable. Excise 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.
     (3) By November ((1, 2010, and by November 1, 2023)) 1st of each even-numbered year from 2008 through 2022, 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 chapter 1, Laws of 2003 2nd sp. sess. in regard to keeping Washington competitive. The report shall measure the effect of chapter 1, Laws of 2003 2nd sp. sess. on job retention, net jobs created for Washington residents, company growth, diversification of the state's economy, cluster dynamics, 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 1, Laws of 2003 2nd sp. sess.

Sec. 4   RCW 82.04.250 and 2006 c 177 s 5 are each amended to read as follows:
     (1) Upon every person engaging within this state in the business of making sales at retail, except persons taxable as retailers under other provisions of this chapter, as to such persons, the amount of tax with respect to such business shall be equal to the gross proceeds of sales of the business, multiplied by the rate of 0.471 percent.
     (2) Upon every person engaging within this state in the business of making sales at retail that are exempt from the tax imposed under chapter 82.08 RCW by reason of RCW 82.08.0261, 82.08.0262, or 82.08.0263, except persons taxable under RCW 82.04.260(11) or subsection (3) of this section, as to such persons, the amount of tax with respect to such business shall be equal to the gross proceeds of sales of the business, multiplied by the rate of 0.484 percent.
     (3) Upon every person engaging within this state in the business of making sales at retail that are exempt from the tax imposed under chapter 82.08 RCW by reason of RCW 82.08.0261, 82.08.0262, or 82.08.0263, that is classified by the federal aviation administration as a FAR part 145 certificated repair station with airframe and instrument ratings and limited ratings for nondestructive testing, radio, Class 3 Accessory, and specialized services, as to such persons, the amount of tax with respect to such business shall be equal to the gross proceeds of sales of the business, multiplied by the rate of .2904 percent. Every person taxed at the preferential tax rate under this subsection must comply with section 2 of this act.

Sec. 5   RCW 82.04.4461 and 2003 2nd sp.s. c 1 s 7 are each amended to read as follows:
     (1)(a) In computing the tax imposed under this chapter, a credit is allowed for each person for preproduction development spending occurring after December 1, 2003.
     (b) Before July 1, 2005, any credits earned under this section must be accrued and carried forward and may not be used until July 1, 2005. These carryover credits may be used at any time thereafter, and may be carried over until used. Refunds may not be granted in the place of a credit.
     (2) The credit is equal to the amount of qualified preproduction development expenditures of a person, multiplied by the rate of 1.5 percent.
     (3) Except as provided in subsection (1)(b) of this section the credit shall be taken against taxes due for the same calendar year in which the qualified preproduction development expenditures are incurred. Credit earned on or after July 1, 2005, may not be carried over. The credit for each calendar year shall not exceed the amount of tax otherwise due under this chapter for the calendar year. Refunds may not be granted in the place of a credit.
     (4) Any person claiming the credit shall file an affidavit form prescribed by the department that shall include the amount of the credit claimed, an estimate of the anticipated preproduction development expenditures during the calendar year for which the credit is claimed, an estimate of the taxable amount during the calendar year for which the credit is claimed, and such additional information as the department may prescribe.
     (5) The definitions in this subsection apply throughout this section.
     (a) "Aeronautics" means the study of flight and the science of building and operating commercial aircraft.
     (b) "Person" means a person as defined in RCW 82.04.030, who is a manufacturer or processor for hire of commercial airplanes, or components of such airplanes, as those terms are defined in RCW 82.32.550.
     (c) "Preproduction development" means research, design, and engineering activities performed in relation to the development of a product, product line, model, or model derivative, including prototype development, testing, and certification. The term includes the discovery of technological information, the translating of technological information into new or improved products, processes, techniques, formulas, or inventions, and the adaptation of existing products and models into new products or new models, or derivatives of products or models. The term does not include manufacturing activities or other production-oriented activities, however the term does include tool design and engineering design for the manufacturing process. The term does not 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.
     (d) "Preproduction development spending" means qualified preproduction development expenditures plus eighty percent of amounts paid to a person other than a public educational or research institution to conduct qualified preproduction development.
     (e) "Qualified preproduction development" means preproduction development performed within this state in the field of aeronautics.
     (f) "Qualified preproduction development expenditures" means operating expenses, including wages, compensation of a proprietor or a partner in a partnership as determined by the department, benefits, supplies, and computer expenses, directly incurred in qualified preproduction 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 preproduction development. The term does not include capital costs and overhead, such as expenses for land, structures, or depreciable property.
     (g) "Taxable amount" means the taxable amount subject to the tax imposed in this chapter required to be reported on the person's 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.
     (6) In addition to all other requirements under this title, a person taking the credit under this section must ((report as required under)) comply with RCW 82.32.545 and section 2 of this act.
     (7) Credit may not be claimed for expenditures for which a credit is claimed under RCW 82.04.4452.
     (8) This section expires July 1, 2024.

Sec. 6   RCW 82.04.4463 and 2006 c 177 s 10 are each amended to read as follows:
     (1) In computing the tax imposed under this chapter, a credit is allowed for property taxes and leasehold excise taxes paid during the calendar year.
     (2) The credit is equal to:
     (a)(i)(A) Property taxes paid on new buildings, and land upon which this property is located, built after December 1, 2003, and used exclusively in manufacturing commercial airplanes or components of such airplanes; and
     (B) Leasehold excise taxes paid with respect to a building built after January 1, 2006, the land upon which the building is located, or both, if the building is used exclusively in manufacturing commercial airplanes or components of such airplanes; or
     (ii) Property taxes attributable to an increase in assessed value due to the renovation or expansion, after December 1, 2003, of a building used exclusively in manufacturing commercial airplanes or components of such airplanes; and
     (b) An amount equal to property taxes paid on machinery and equipment exempt under RCW 82.08.02565 or 82.12.02565 and acquired after December 1, 2003, multiplied by a fraction. The numerator of the fraction is the total taxable amount subject to the tax imposed under RCW 82.04.260(11) and the denominator of the fraction is the total taxable amount subject to the tax imposed under all manufacturing classifications in chapter 82.04 RCW, required to be reported on the person's returns for the calendar year before the calendar year in which the credit under this section is earned. No credit is available under this subsection (2)(b) if either the numerator or the denominator of the fraction is zero. If the fraction is greater than or equal to nine-tenths, then the fraction is rounded to one. For purposes of this subsection, "returns" means the combined excise tax returns for the calendar year.
     (3) For the purposes of this section, "commercial passenger airplane" and "component" have the meanings given in RCW 82.32.550.
     (4) A person taking the credit under this section is subject to all the requirements of chapter 82.32 RCW. ((In addition, the person must report as required under RCW 82.32.545.)) A credit earned during one calendar year may be carried over to be credited against taxes incurred in a subsequent calendar year, but may not be carried over a second year. No refunds may be granted for credits under this section.
     (5) In addition to all other requirements under this title, a person taking the credit under this section must ((report as required under)) comply with RCW 82.32.545 and section 2 of this act.
     (6) This section expires July 1, 2024.

Sec. 7   RCW 82.04.4487 and 2006 c 177 s 3 are each amended to read as follows:
     (1) In computing the tax imposed under this chapter, a credit is allowed for each person for qualified preproduction development expenditures occurring after July 1, 2006.
     (2) The credit is equal to the amount of qualified preproduction development expenditures of a person, multiplied by the rate of 1.5 percent.
     (3) The credit shall be taken against taxes due for the same calendar year in which the qualified preproduction development expenditures are incurred. Credits may not be carried over. The credit for each calendar year may not exceed the amount of tax otherwise due under this chapter for the calendar year. Refunds may not be granted in the place of a credit.
     (4) Any person entitled to the credit in this section as a result of qualified preproduction development conducted under contract may assign all or any portion of the credit to the person contracting for the performance of the qualified preproduction development.     
     (5) The definitions in this subsection apply throughout this section.
     (a) "Aeronautics" means the study of flight and the science of building and operating commercial aircraft.
     (b) "Preproduction development" means research, design, and engineering activities performed in relation to the development of a product, product line, model, or model derivative, including prototype development, testing, and certification. The term includes the discovery of technological information, the translating of technological information into new or improved products, processes, techniques, formulas, or inventions, and the adaptation of existing products and models into new products or new models, or derivatives of products or models. The term does not include manufacturing activities or other production-oriented activities. The term does not 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.
     (c) "Qualified preproduction development" means preproduction development performed within this state in the field of aeronautics.
     (d) "Qualified preproduction development expenditures" means operating expenses, including wages, compensation of a proprietor or a partner in a partnership as determined by the department, benefits, supplies, and computer expenses, directly incurred in qualified preproduction 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 preproduction development. The term does not include capital costs and overhead, such as expenses for land, structures, or depreciable property.
     (6) In addition to all other requirements under this title, a person taking the credit under this section must comply with section 2 of this act.
     (7) Credit may not be claimed for expenditures for which a credit is claimed under RCW 82.04.4452 or 82.04.4461.
     (((7))) (8) This section expires July 1, 2024.

Sec. 8   RCW 82.08.975 and 2003 2nd sp.s. c 1 s 9 are each amended to read as follows:
     (1) The tax levied by RCW 82.08.020 shall not apply to sales of computer hardware, computer peripherals, or software, not otherwise eligible for exemption under RCW 82.08.02565, to a manufacturer or processor for hire of commercial airplanes or components of such airplanes, used primarily in the development, design, and engineering of such products, or to sales of or charges made for labor and services rendered in respect to installing the computer hardware, computer peripherals, or software. 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) In addition to all other requirements under this title, a person taking the exemption under this section must comply with section 2 of this act.
     (3) As used in this section, "commercial airplane" and "component" have the meanings given in RCW 82.32.550. "Peripherals" includes keyboards, monitors, mouse devices, and other accessories that operate outside of the computer, excluding cables, conduit, wiring, and other similar property.
     (((3))) (4) This section expires July 1, 2024.

Sec. 9   RCW 82.08.980 and 2003 2nd sp.s. c 1 s 11 are each amended 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 by a manufacturer engaged in the manufacturing of superefficient airplanes or by a port district, to be leased to a manufacturer engaged in the manufacturing of superefficient airplanes, to sales of tangible personal property that will be incorporated as an ingredient or component of such buildings during the course of the constructing, 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). 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) No application is necessary for the tax exemption in this section, however in order to qualify under this section before starting construction the port district must have entered into an agreement with the manufacturer to build such a facility. A person taking the exemption under this section is subject to all the requirements of chapter 82.32 RCW. In addition, the person must ((report as required under)) comply with RCW 82.32.545 and section 2 of this act.
     (3) The exemption in this section applies to buildings, or parts of buildings, that are used exclusively in the manufacturing of superefficient airplanes, including buildings used for the storage of raw materials and finished product.
     (4) For the purposes of this section, "superefficient airplane" has the meaning given in RCW 82.32.550.
     (5) This section expires July 1, 2024.

Sec. 10   RCW 82.08.981 and 2006 c 177 s 1 are each amended to read as follows:
     (1) The tax levied by RCW 82.08.020 does not apply to sales of computer hardware, computer peripherals, or software, not otherwise eligible for exemption under RCW 82.08.02565 or 82.08.975, used primarily in the development, design, and engineering of commercial airplanes or components of such airplanes, or to sales of or charges made for labor and services rendered in respect to installing the computer hardware, computer peripherals, or software. 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) In addition to all other requirements under this title, a person taking the exemption under this section must comply with section 2 of this act.
     (3) As used in this section:
     (a) "Commercial airplane" and "component" have the meanings in RCW 82.32.550.
     (b) "Peripherals" includes keyboards, monitors, mouse devices, and other accessories that operate outside of the computer, excluding cables, conduit, wiring, and other similar property.
     (((3))) (4) This section expires July 1, 2024.

Sec. 11   RCW 82.12.975 and 2003 2nd sp.s. c 1 s 10 are each amended to read as follows:
     (1) The provisions of this chapter shall not apply in respect to the use of computer hardware, computer peripherals, or software, not otherwise eligible for exemption under RCW 82.12.02565, by a manufacturer or processor for hire of commercial airplanes or components of such airplanes, used primarily in the development, design, and engineering of such products, or to the use of labor and services rendered in respect to installing the computer hardware, computer peripherals, or software.
     (2) In addition to all other requirements under this title, a person taking the exemption under this section must comply with section 2 of this act.
     (3) As used in this section, "commercial airplane" and "component" have the meanings given in RCW 82.32.550. "Peripherals" includes keyboards, monitors, mouse devices, and other accessories that operate outside of the computer, excluding cables, conduit, wiring, and other similar property.
     (((3))) (4) This section expires July 1, 2024.

Sec. 12   RCW 82.12.981 and 2006 c 177 s 2 are each amended to read as follows:
     (1) The provisions of this chapter do not apply in respect to the use of computer hardware, computer peripherals, or software, not otherwise eligible for exemption under RCW 82.12.02565 or 82.12.975, used primarily in the development, design, and engineering of commercial airplanes or components of such airplanes, or to the use of labor and services rendered in respect to installing the computer hardware, computer peripherals, or software.
     (2) In addition to all other requirements under this title, a person taking the exemption under this section must comply with section 2 of this act.
     (3) As used in this section:
     (a) "Commercial airplane" and "component" have the meanings in RCW 82.32.550.
     (b) "Peripherals" includes keyboards, monitors, mouse devices, and other accessories that operate outside of the computer, excluding cables, conduit, wiring, and other similar property.
     (((3))) (4) This section expires July 1, 2024.

Sec. 13   RCW 84.36.655 and 2003 2nd sp.s. c 1 s 14 are each amended to read as follows:
     (1) Effective January 1, 2005, all buildings, machinery, equipment, and other personal property of a lessee of a port district eligible under RCW 82.08.980 and 82.12.980, used exclusively in manufacturing superefficient airplanes, are exempt from property taxation. A person taking the credit under RCW 82.04.4463 is not eligible for the exemption under this section. For the purposes of this section, "superefficient airplane" and "component" have the meanings given in RCW 82.32.550.
     (2) In addition to all other requirements under this title, a person taking the exemption under this section must ((report as required under)) comply with RCW 82.32.545 and section 2 of this act.
     (3) Claims for exemption authorized by this section shall be filed with the county assessor on forms prescribed by the department and furnished by the assessor. The assessor shall verify and approve claims as the assessor determines to be justified and in accordance with this section. No claims may be filed after December 31, 2023. The department may adopt rules, under the provisions of chapter 34.05 RCW, as necessary to properly administer this section.
     (4) This section applies to taxes levied for collection in 2006 and thereafter.
     (5) This section expires July 1, 2024.

Sec. 14   RCW 82.29A.137 and 2003 2nd sp.s. c 1 s 13 are each amended to read as follows:
     (1) All leasehold interests in port district facilities exempt from tax under RCW 82.08.980 or 82.12.980 and used by a manufacturer engaged in the manufacturing of superefficient airplanes, as defined in RCW 82.32.550, are exempt from tax under this chapter. A person taking the credit under RCW 82.04.4463 is not eligible for the exemption under this section.
     (2) In addition to all other requirements under this title, a person taking the exemption under this section must ((report as required under)) comply with RCW 82.32.545 and section 2 of this act.
     (3) This section expires July 1, 2024.

NEW SECTION.  Sec. 15   If any provision of this act or its application to any person or circumstance is held invalid, the remainder of the act or the application of the provision to other persons or circumstances is not affected.

NEW SECTION.  Sec. 16   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, 2007.

NEW SECTION.  Sec. 17   Section 4 of this act expires July 1, 2011.

NEW SECTION.  Sec. 18   Sections 1 and 2 of this act are each added to chapter 82.32 RCW.