BILL REQ. #:  H-2833.3 

Read first time 03/12/2007.   Referred to Committee on Finance.

     AN ACT Relating to using the voluntary compliance revenue generated under the streamlined sales and use tax agreement for funding the law enforcement officers' and firefighters' retirement system plan 2 and local government public safety; amending RCW 82.14.... and 82.14.....; amending 2007 c ... (Substitute Senate Bill No. 5089) s 901 (uncodified); and adding a new section to chapter 82.32 RCW.

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

Sec. 1   2007 c ... (Substitute Senate Bill No. 5089) s 901 (uncodified) is amended to read as follows:
     (1) The legislature finds and declares that:
     (a) Washington state's participation as a member state in the streamlined sales and use tax agreement benefits the state, all its local taxing jurisdictions, and its retailing industry, by increasing state and local revenues, improving the state's business climate, and standardizing and simplifying the state's tax structure;
     (b) Participation in the streamlined sales and use tax agreement is a matter of statewide concern and is in the best interests of the state, the general public, and all local jurisdictions that impose a sales and use tax under applicable law;
     (c) Participation in the streamlined sales and use tax agreement requires the adoption of the agreement's sourcing provisions, which change the location in which a retail sale of delivered tangible personal property occurs for local sales tax purposes from the point of origin to the point of destination;
     (d) Changes in the local sales tax sourcing law provisions to conform with the streamlined sales and use tax agreement will cause sales tax revenues to shift among local taxing jurisdictions. The legislature finds that there will be an unintended adverse impact on local taxing jurisdictions that receive less revenues because local tax revenues will be redistributed, with revenue increases for some jurisdictions and reductions for others, due solely to changes in local sales tax sourcing rules to be implemented under section 503 of this act and the chapter ... (Substitute Senate Bill No. 5089), Laws of 2007 (this act) amendments to RCW 82.14.020, even though no local taxing jurisdiction has changed its tax rate or tax base;
     (e) The purpose of providing mitigation to such jurisdictions is to mitigate the unintended revenue redistribution effect of the sourcing law changes among local governments;
     (f) It is in the best interest of the state and all its subdivisions to mitigate the adverse effects of amending the local sales tax sourcing provisions to be in conformance with the streamlined sales and use tax agreement;
     (g) Additionally, changes in sourcing laws may have negative implications for industry sectors such as warehousing and manufacturing, as well as jurisdictions that house a concentration of these industries and have made zoning decisions, infrastructure investments, bonding decisions, and land use policy decisions based on point of origin sales tax rules in place before the effective date of this section, and the mitigation provided by sections 901 through 905 of this act is intended to help offset those negative implications; and
     (h) It is important that the state of Washington maintain its supply of industrial land for present and future economic development activities, and local governments taking advantage of the mitigation provided by sections 901 through 905 of this act should strive to maintain the supply of industrial land available for economic development efforts.
     (2) The legislature intends that the streamlined sales and use tax mitigation and public safety account established in section 902 of this act ((have the sole objective of)) has three objectives (a) mitigating, for negatively affected local taxing jurisdictions, the net local sales tax revenue reductions incurred as a result of section 503 of this act and the chapter ... (Substitute Senate Bill No. 5089), Laws of 2007 (this act) amendments to RCW 82.14.020; (b) providing additional funds for the law enforcement officers' and firefighters' retirement system plan 2 fund; and (c) funding local government public safety uses.

Sec. 2   RCW 82.14.... and 2007 c ... (Substitute Senate Bill No. 5089) s 902 are each amended to read as follows:
     (1) The streamlined sales and use tax mitigation and public safety account is created in the state treasury. The state treasurer shall transfer into the account from the general fund amounts as directed in section 903 of this act. Expenditures from the account may be used only for the ((purpose of)) purposes of (a) mitigating the negative fiscal impacts to local taxing jurisdictions as a result of section 503 of this act and the chapter ... (Substitute Senate Bill No. 5089), Laws of 2007 (this act) amendments to RCW 82.14.020; (b) providing additional funds for the law enforcement officers' and firefighters' retirement system plan 2 fund; and (c) funding local government public safety uses.
     (2) Beginning July 1, 2008, the state treasurer, as directed by the department, shall distribute the funds in the streamlined sales and use tax mitigation and public safety account to local taxing jurisdictions in accordance with section 903 of this act.
     (3) The definitions in this subsection apply throughout this section and RCW 82.14.390 and section 903 of this act.
     (a) "Agreement" means the same as in RCW 82.32.020.
     (b) "Local taxing jurisdiction" means counties, cities, transportation authorities under RCW 82.14.045, public facilities districts under chapters 36.100 and 35.57 RCW, public transportation benefit areas under RCW 82.14.440, and regional transit authorities under chapter 81.112 RCW, that impose a sales and use tax.
     (c) "Loss" or "losses" means the local sales and use tax revenue reduction to a local taxing jurisdiction resulting from the sourcing provisions in section 502 of this act and the chapter ... (Substitute Senate Bill No. 5089), Laws of 2007 (this act) amendments to RCW 82.14.020.
     (d) "Net loss" or "net losses" means a loss offset by any voluntary compliance revenue.
     (e) "Voluntary compliance revenue" means the local sales tax revenue gain to each local taxing jurisdiction reported to the department from persons registering through the central registration system authorized under the agreement.
     (f) "Working day" has the same meaning as in RCW 82.45.180.

Sec. 3   RCW 82.14.... and 2007 c ... (Substitute Senate Bill No. 5089) s 903 are each amended to read as follows:
     (1) In order to mitigate local sales tax revenue net losses as a result of the sourcing provisions of the streamlined sales and use tax agreement under this title, the state treasurer shall transfer into the streamlined sales and use tax mitigation and public safety account from the general fund the sum of thirty-one million six hundred thousand dollars on July 1, 2008. On July 1, 2009, and each July 1st thereafter, the state treasurer shall transfer into the streamlined sales and use tax mitigation and public safety account from the general fund the sum required to mitigate actual net losses as determined under this section.
     (2) Beginning July 1, 2008, and continuing until the department determines annual losses under subsection (3) of this section, the department shall determine the amount of local sales tax net loss each local taxing jurisdiction experiences as a result of the sourcing provisions of the streamlined sales and use tax agreement under this title each calendar quarter. The department shall determine losses by analyzing and comparing data from tax return information and tax collections for each local taxing jurisdiction before and after the effective date of this section on a calendar quarter basis. The department's analysis may be revised and supplemented in consultation with the oversight committee as provided in subsection (4) of this section. To determine net losses, the department shall reduce losses by the amount of voluntary compliance revenue for the calendar quarter analyzed. Beginning December 31, 2008, distributions shall be made quarterly from the streamlined sales and use tax mitigation and public safety account by the state treasurer, as directed by the department, to each local taxing jurisdiction, other than public facilities districts for losses in respect to taxes imposed under the authority of RCW 82.14.390, in an amount representing its net losses for the previous calendar quarter. Distributions shall be made on the last working day of each calendar quarter and shall cease when distributions under subsection (3) of this section begin.
     (3)(a) By December 31, 2009, or such later date the department in consultation with the oversight committee determines that sufficient data is available, the department shall determine each local taxing jurisdiction's annual loss. The department shall determine annual losses by comparing at least twelve months of data from tax return information and tax collections for each local taxing jurisdiction before and after the effective date of this section. The department shall not be required to determine annual losses on a recurring basis, but may make any adjustments to annual losses as it deems proper as a result of the annual reviews provided in (b) of this subsection. Beginning the calendar quarter in which the department determines annual losses, and each calendar quarter thereafter, distributions shall be made from the streamlined sales and use tax mitigation and public safety account by the state treasurer on the last working day of the calendar quarter, as directed by the department, to each local taxing jurisdiction, other than public facilities districts for losses in respect to taxes imposed under the authority of RCW 82.14.390, in an amount representing one-fourth of the jurisdiction's annual loss reduced by voluntary compliance revenue reported during the previous calendar quarter.
     (b) The department's analysis of annual losses shall be reviewed by December 1st of each year and may be revised and supplemented in consultation with the oversight committee as provided in subsection (4) of this section.
     (4) The department shall convene an oversight committee to assist in the determination of losses. The committee shall include one representative of one city whose revenues are increased, one representative of one city whose revenues are reduced, one representative of one county whose revenues are increased, one representative of one county whose revenues are decreased, one representative of one transportation authority under RCW 82.14.045 whose revenues are increased, and one representative of one transportation authority under RCW 82.14.045 whose revenues are reduced, as a result of section 503 of this act and the chapter ... (Substitute Senate Bill No. 5089), Laws of 2007 (this act) amendments to RCW 82.14.020. Beginning July 1, 2008, the oversight committee shall meet quarterly with the department to review and provide additional input and direction on the department's analyses of losses. Local taxing jurisdictions may also present to the oversight committee additional information to improve the department's analyses of the jurisdiction's loss. Beginning January 1, 2010, the oversight committee shall meet at least annually with the department by December 1st.
     (5) The rule-making provisions of chapter 34.05 RCW do not apply to this section.

NEW SECTION.  Sec. 4   A new section is added to chapter 82.32 RCW to read as follows:
     (1) Beginning January 1, 2009, and on the first business day of every calendar quarter thereafter, the state treasurer shall transfer the lesser of voluntary compliance revenue for the previous calendar quarter or six million two hundred fifty thousand dollars into the law enforcement officers' and firefighters' retirement system plan 2 fund.
     (2)(a) Beginning January 1, 2009, and on the first business day of every calendar quarter thereafter, the state treasurer shall transfer the lesser of voluntary compliance revenue for the previous calendar quarter or six million two hundred fifty thousand dollars to local governments for public safety purposes as set forth under (b) of this subsection.
     (b) The transfer under (a) of this subsection must be apportioned to result in an equal amount being provided for each law enforcement officer and firefighter employed by a local government, based on the total number of law enforcement officers and firefighters employed by all local governments. For the purpose of this subsection, "local government" means any city, town, county, district, or other municipal corporation that employs firefighters or law enforcement officers, as defined in RCW 41.26.030.
     (3) For the purposes of this section, "voluntary compliance revenue" means the state sales tax revenue gain to the state reported to the department from persons registering through the central registration system authorized under the streamlined sales and use tax agreement in excess of the mitigation amounts provided to local governments under section 903, chapter . . . (Substitute Senate Bill No. 5089), Laws of 2007.
     (4) In the event voluntary compliance revenue is less than twelve million five hundred thousand dollars, the treasurer shall divide that amount between the transfers under subsections (1) and (2) of this section.