BILL REQ. #:  S-5255.1 

READ FIRST TIME 02/28/08.   

     AN ACT Relating to creating a sales and use tax deferral program for eligible investment projects in community empowerment zones; amending RCW 82.63.030; reenacting and amending RCW 82.32.590 and 82.32.600; adding a new chapter to Title 82 RCW; and providing an effective date.

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

NEW SECTION.  Sec. 1   The definitions in this section apply throughout this chapter unless the context clearly requires otherwise.
     (1) "Applicant" means a person applying for a tax deferral under this chapter.
     (2) "Corporate headquarters" means a facility or facilities where corporate staff employees are physically employed, and where the majority of the company's management services are handled either on a regional or a national basis. Company management services may include: Accounts receivable and payable, accounting, data processing, distribution management, employee benefit plan, financial and securities accounting, information technology, insurance, legal, merchandising, payroll, personnel, purchasing procurement, planning, reporting and compliance, research and development, tax, treasury, or other headquarters-related services. "Corporate headquarters" does not include a facility or facilities used for manufacturing, wholesaling, or warehousing.
     (3) "Department" means the department of revenue.
     (4) "Eligible area" means a designated community empowerment zone approved under RCW 43.31C.020.
     (5)(a) "Eligible investment project" means an investment project in a qualified building or buildings in an eligible area, as defined in subsection (4) of this section, which will have employment at the qualified building or buildings of at least three hundred employees in qualified employment positions, each of whom must earn for the year reported at least the average annual wage for the state for that year as determined by the employment security department.
     (b) The lessor or owner of a qualified building or buildings is not eligible for a deferral unless:
     (i) The underlying ownership of the building or buildings vests exclusively in the same person; or
     (ii)(A) The lessor by written contract agrees to pass the economic benefit of the deferral to the lessee;
     (B) The lessee that receives the economic benefit of the deferral agrees in writing with the department to complete the annual survey required under section 2 of this act; and
     (C) 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.
     (6) "Investment project" means a capital investment of at least thirty million dollars in a qualified building or buildings including tangible personal property and fixtures that will be incorporated as an ingredient or component of such buildings during the course of their construction, and including labor and services rendered in the planning, installation, and construction of the project.
     (7) "Manufacture" has the same meaning as provided in RCW 82.04.120.
     (8) "Person" has the same meaning as provided in RCW 82.04.030.
     (9) "Qualified building or buildings" means construction of a new structure or structures or expansion of an existing structure or structures to be used for corporate headquarters. If a building is used partly for corporate headquarters and partly for other purposes, the applicable tax deferral is determined by apportionment of the costs of construction under rules adopted by the department.
     (10) "Qualified employment position" means a permanent full-time employee employed in the eligible investment project during the entire tax year. The term "entire tax year" means a full-time position that is filled for a period of twelve consecutive months. The term "full-time" means at least thirty-five hours a week, four hundred fifty-five hours a quarter, or one thousand eight hundred twenty hours a year.
     (11) "Recipient" means a person receiving a tax deferral under this chapter.
     (12) "Warehouse" means a building or structure, or any part thereof, in which goods, wares, or merchandise are received for storage for compensation.
     (13) "Wholesale sale" has the same meaning as provided in RCW 82.04.060.

NEW SECTION.  Sec. 2   (1) Application for deferral of taxes under this chapter can be made at any time prior to completion of construction of a qualified building or buildings, but tax liability incurred prior to the department's receipt of an application may not be deferred. The application must be made to the department in a form and manner prescribed by the department. The application must contain information regarding the location of the investment project, the applicant's average employment in the state for the prior year, estimated or actual new employment related to the project, estimated or actual wages of employees related to the project, estimated or actual costs, time schedules for completion and operation, and other information required by the department. The department must rule on the application within sixty days.
     (2)(a) 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.
     (b) Applicants for deferral of taxes under this chapter must agree to complete an annual survey. If the economic benefits of the deferral are passed to a lessee as provided in section 1(5) of this act, the lessee must agree to complete the annual survey and the applicant is not required to complete the annual survey. The survey is due by March 31st of the year following the calendar year in which the investment project is certified by the department as having been operationally complete and the seven succeeding calendar years. The survey must include the amount of tax deferred. The survey must also include the following information for employment positions in Washington:
     (i) The number of total employment positions;
     (ii) Full-time, part-time, and temporary employment positions as a percent of total employment;
     (iii) The number of employment positions according to the following wage bands: Less than thirty thousand dollars; thirty thousand dollars or greater, but less than sixty thousand dollars; and sixty thousand dollars or greater. A wage band containing fewer than three individuals may be combined with another wage band; and
     (iv) The number of employment positions that have employer-provided medical, dental, and retirement benefits, by each of the wage bands.
     (c) The department may request additional information necessary to measure the results of the deferral program, to be submitted at the same time as the survey.
     (d) All information collected under this subsection, except the amount of the tax deferral taken, is deemed taxpayer information under RCW 82.32.330 and is not disclosable. Information on the amount of tax deferral taken is not subject to the confidentiality provisions of RCW 82.32.330 and may be disclosed to the public upon request.
     (3) The department must use the information to study the tax deferral program authorized under this chapter. The department must report to the legislature by December 1, 2014, and December 1, 2018. The reports must measure the effect of the program on job creation, the number of jobs created for Washington residents, company growth, the introduction of new products, the diversification of the state's economy, growth in research and development investment, the movement of firms or the consolidation of firms' operations into the state, and such other factors as the department selects. If fewer than three deferrals are granted under this chapter, the department may not report statistical information.
     (4) Applications for deferral of taxes under this section may not be made after December 31, 2020.

NEW SECTION.  Sec. 3   (1) The department must issue a sales and use tax deferral certificate for state and local sales and use taxes due under chapters 82.08, 82.12, and 82.14 RCW on each eligible investment project meeting the requirements of this chapter.
     (2) No certificate may be issued for an investment project that has already received a deferral under chapter 82.60 or 82.63 RCW or this chapter, except that an investment project for qualified research and development that has already received a deferral may also receive an additional deferral certificate for adapting the investment project for use in pilot scale manufacturing.
     (3) The department must keep a running total of all deferrals granted under this chapter during each fiscal biennium.
     (4) The number of eligible investment projects for which the benefits of this chapter will be allowed is limited to two per biennium. The department must approve deferral certificates for completed applications on a first in-time basis. During any biennium, only one deferral certificate may be issued per community empowerment zone.

Sec. 4   RCW 82.63.030 and 2004 c 2 s 5 are each amended to read as follows:
     (1) Except as provided in subsection (2) of this section, the department shall issue a sales and use tax deferral certificate for state and local sales and use taxes due under chapters 82.08, 82.12, and 82.14 RCW on each eligible investment project.
     (2) No certificate may be issued for an investment project that has already received a deferral under chapter 82.60 ((or 82.61)) RCW or this chapter, except that an investment project for qualified research and development that has already received a deferral may also receive an additional deferral certificate for adapting the investment project for use in pilot scale manufacturing.
     (3) This section shall expire January 1, 2015.

NEW SECTION.  Sec. 5    (1) Except as provided in subsection (2) of this section, taxes deferred under this chapter need not be repaid.
     (2)(a) If, on the basis of the survey under section 2 of this act or other information, the department finds that an investment project is no longer an "eligible investment project" under section 1 of this act at any time during the calendar year in which the investment project is certified by the department as having been operationally completed, or at any time during any of the seven succeeding calendar years, a portion of deferred taxes are immediately due according to the following schedule:

NEW SECTION.  Sec. 6   The qualified employment positions must be filled by the end of the calendar year following the year in which the project is certified as operationally complete. If a recipient does not meet the requirements for qualified employment positions by the end of the second calendar year following the year in which the project is certified as operationally complete, all deferred taxes are immediately due.

Sec. 7   RCW 82.32.590 and 2006 c 354 s 17, 2006 c 300 s 10, 2006 c 177 s 8, 2006 c 112 s 7, and 2006 c 84 s 7 are each reenacted and amended to read as follows:
     (1) If the department finds that the failure of a taxpayer to file an annual survey or annual report under RCW 82.04.4452, 82.32.5351, 82.32.650, 82.32.635, 82.32.640, 82.32.630, 82.32.610, section 2 of this act, or 82.74.040 by the due date was the result of circumstances beyond the control of the taxpayer, the department shall extend the time for filing the survey or report. Such extension shall be for a period of thirty days from the date the department issues its written notification to the taxpayer that it qualifies for an extension under this section. The department may grant additional extensions as it deems proper.
     (2) In making a determination whether the failure of a taxpayer to file an annual survey or annual report by the due date was the result of circumstances beyond the control of the taxpayer, the department shall be guided by rules adopted by the department for the waiver or cancellation of penalties when the underpayment or untimely payment of any tax was due to circumstances beyond the control of the taxpayer.

Sec. 8   RCW 82.32.600 and 2007 c 54 s 23 and 2007 c 54 s 22 are each reenacted and amended to read as follows:
     (1) Persons required to file annual surveys or annual reports under RCW 82.04.4452 or 82.32.5351, 82.32.610, 82.32.630, 82.32.635, 82.32.640, section 2 of this act, or 82.74.040 must electronically file with the department all surveys, reports, returns, and any other forms or information the department requires in an electronic format as provided or approved by the department. As used in this section, "returns" has the same meaning as "return" in RCW 82.32.050.
     (2) Any survey, report, return, or any other form or information required to be filed in an electronic format under subsection (1) of this section is not filed until received by the department in an electronic format.
     (3) The department may waive the electronic filing requirement in subsection (1) of this section for good cause shown.

NEW SECTION.  Sec. 9   Sections 1 through 3, 5, and 6 of this act constitute a new chapter in Title 82 RCW.

NEW SECTION.  Sec. 10   This act takes effect July 1, 2009.