BILL REQ. #:  S-5609.1 

READ FIRST TIME 02/28/08.   

     AN ACT Relating to improving the effectiveness of tax incentives for eligible business projects in rural counties and community empowerment zones; amending RCW 82.62.010, 82.62.030, and 82.62.045; creating a new section; and providing an effective date.

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

Sec. 1   RCW 82.62.010 and 2007 c 485 s 1 are each amended to read as follows:
     Unless the context clearly requires otherwise, the definitions in this section apply throughout this chapter.
     (1) "Applicant" means a person applying for a tax credit under this chapter.
     (2) "Department" means the department of revenue.
     (3) "Eligible area" means an area as defined in RCW 82.60.020.
     (4)(a) "Eligible business project" means manufacturing or research and development activities which are conducted by an applicant in an eligible area at a specific facility, provided the applicant's average qualified employment positions at the specific facility will be at least ((fifteen)) ten percent greater in the four consecutive full calendar quarters after the calendar quarter during which the first qualified employment position is filled than the applicant's average qualified employment positions at the same facility in the four consecutive full calendar quarters immediately preceding the calendar quarter during which the first qualified employment position is filled.
     (b) "Eligible business project" does not include any portion of a business project undertaken by a light and power business as defined in RCW 82.16.010(5) or that portion of a business project creating qualified full-time employment positions outside an eligible area.
     (5) "First qualified employment position" means the first qualified employment position filled for which a credit under this chapter is sought.
     (6) "Manufacturing" means the same as defined in RCW 82.04.120. "Manufacturing" also includes computer programming, the production of computer software, and other computer-related services, and the activities performed by research and development laboratories and commercial testing laboratories.
     (7) "Person" has the meaning given in RCW 82.04.030.
     (8)(a)(i) "Qualified employment position" means a permanent full-time employee employed in the eligible business project during four consecutive full calendar quarters.
     (ii) For seasonal employers, "qualified employment position" also includes the equivalent of a full-time employee in work hours for four consecutive full calendar quarters.
     (b) For purposes of this subsection, "full time" means a normal work week of at least thirty-five hours.
     (c) Once a permanent, full-time employee has been employed, a position does not cease to be a qualified employment position solely due to periods in which the position goes vacant, as long as:
     (i) The cumulative period of any vacancies in that position is not more than one hundred twenty days in the four-quarter period; and
     (ii) During a vacancy, the employer is training or actively recruiting a replacement permanent, full-time employee for the position.
     (9) "Recipient" means a person receiving tax credits under this chapter.
     (10) "Research and development" means the development, refinement, testing, marketing, and commercialization of a product, service, or process before commercial sales have begun. As used in this subsection, "commercial sales" 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.
     (11) "Seasonal employee" means an employee of a seasonal employer who works on a seasonal basis. For the purposes of this subsection and subsection (12) of this section, "seasonal basis" means a continuous employment period of less than twelve consecutive months.
     (12) "Seasonal employer" means a person who regularly hires more than fifty percent of its employees to work on a seasonal basis.

Sec. 2   RCW 82.62.030 and 2007 c 485 s 3 are each amended to read as follows:
     (1)(a) A person shall be allowed a credit against the tax due under chapter 82.04 RCW as provided in this section. The credit shall equal: (i) Four thousand dollars for each qualified employment position with wages and benefits greater than forty thousand dollars annually that is directly created in an eligible business project and (ii) two thousand dollars for each qualified employment position with wages and benefits less than or equal to forty thousand dollars annually that is directly created in an eligible business project.
     (b) For purposes of calculating the amount of credit under (a) of this subsection with respect to qualified employment positions as defined in RCW 82.62.010(8)(a)(ii):
     (i) In determining the number of qualified employment positions, a fractional amount is rounded down to the nearest whole number; and
     (ii) Wages and benefits for each qualified employment position shall be equal to the quotient derived by dividing: (A) The sum of the wages and benefits earned for the four consecutive full calendar quarter period for which a credit under this chapter is earned by all of the person's new seasonal employees hired during that period; by (B) the number of qualified employment positions plus any fractional amount subject to rounding as provided under (b)(i) of this subsection. For purposes of this chapter, a credit is earned for the four consecutive full calendar quarters after the calendar quarter during which the first qualified employment position is filled.
     (2) The department shall keep a running total of all credits allowed under this chapter during each fiscal year. The department shall not allow any credits which would cause the total to exceed ((seven)) nine million ((five hundred thousand)) dollars in any fiscal year. If all or part of an application for credit is disallowed under this subsection, the disallowed portion shall be carried over to the next fiscal year. However, the carryover into the next fiscal year is only permitted to the extent that the cap for the next fiscal year is not exceeded.
     (3) No recipient may use the tax credits to decertify a union or to displace existing jobs in any community in the state.
     (4) The credit may be used against any tax due under chapter 82.04 RCW, and may be carried over until used. No refunds may be granted for credits under this section.

Sec. 3   RCW 82.62.045 and 2007 c 485 s 4 are each amended to read as follows:
     (1) For the purposes of this section "eligible area" also means a designated community empowerment zone approved under RCW 43.31C.020.
     (2) An eligible business project located within an eligible area as defined in this section qualifies for a credit under this chapter for those employees who at the time of hire are residents of the community empowerment zone in which the project is located, if the ((fifteen)) ten percent threshold is met. As used in this subsection, "resident" means the person makes his or her home in the community empowerment zone. A mailing address alone is insufficient to establish that a person is a resident for the purposes of this section.
     (3) All other provisions and eligibility requirements of this chapter apply to applicants eligible under this section.

NEW SECTION.  Sec. 4   This act takes effect July 1, 2008.

NEW SECTION.  Sec. 5   This act applies to tax credits acquired under RCW 82.62.030 prospectively only from the effective date of this act.