BILL REQ. #:  S-1107.2 

Read first time 02/06/09.   Referred to Committee on Environment, Water & Energy.

     AN ACT Relating to modifying the business and occupation tax on wholesalers of solar energy systems and sales and use tax treatment of semiconductor materials; amending RCW 82.04.294, 82.08.965, 82.08.9651, and 82.12.9651; and amending 2006 c 300 s 12 (uncodified).

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

Sec. 1   RCW 82.04.294 and 2007 c 54 s 8 are each amended to read as follows:
     (1)(a) Beginning October 1, 2005, upon every person engaging within this state in the business of manufacturing solar energy systems using photovoltaic modules, or of manufacturing solar grade silicon to be used exclusively in components of such systems; as to such persons the amount of tax with respect to such business shall, in the case of manufacturers, be equal to the value of the product manufactured, or in the case of processors for hire, be equal to the gross income of the business, multiplied by the rate of 0.2904 percent.
     (b) Beginning October 1, 2009, upon every person engaging within this state in the business of manufacturing solar energy systems using photovoltaic modules, or of manufacturing solar grade silicon, silicon solar wafers, silicon solar cells, thin film solar devices, or compound semiconductor solar wafers to be used exclusively in components of such systems; as to such persons the amount of tax with respect to such business is, in the case of manufacturers, equal to the value of the product manufactured, or in the case of processors for hire, equal to the gross income of the business, multiplied by the rate of 0.275 percent.
     (2)(a) Beginning October 1, 2005, upon every person engaging within this state in the business of making sales at wholesale of solar energy systems using photovoltaic modules, or of solar grade silicon to be used exclusively in components of such systems, manufactured by that person; as to such persons the amount of tax with respect to such business shall be equal to the gross proceeds of sales of the solar energy systems using photovoltaic modules, or of the solar grade silicon to be used exclusively in components of such systems, multiplied by the rate of 0.2904 percent.
     (b) Beginning October 1, 2009, upon every person engaging within this state in the business of making sales at wholesale of solar energy systems using photovoltaic modules, or of solar grade silicon, silicon solar wafers, silicon solar cells, thin film solar devices, or compound semiconductor solar wafers to be used exclusively in components of such systems, manufactured by that person; as to such persons the amount of tax with respect to such business is equal to the gross proceeds of sales of the solar energy systems using photovoltaic modules, or of the solar grade silicon to be used exclusively in components of such systems, multiplied by the rate of 0.275 percent.
     (3) Beginning October 1, 2009, silicon solar wafers, silicon solar cells, thin film solar devices, or compound semiconductor solar wafers are "semiconductor materials" for the purposes of RCW 82.08.965, 82.08.9651, 82.12.965, and 82.12.9651.
     (4) The definitions in this subsection apply throughout this section.
     (a) "Compound semiconductor solar wafers" means a semiconductor solar wafer composed of elements from two or more different groups of the periodic table.
     (b) "Module" means the smallest nondivisible self-contained physical structure housing interconnected photovoltaic cells and providing a single direct current electrical output.
     (((b))) (c) "Photovoltaic cell" means a device that converts light directly into electricity without moving parts.
     (((c))) (d) "Silicon solar cells" means a photovoltaic cell manufactured from a silicon solar wafer.
     (e) "Silicon solar wafers" means a silicon wafer manufactured for solar conversion purposes.
     (f) "Solar energy system" means any device or combination of devices or elements that rely upon direct sunlight as an energy source for use in the generation of electricity.
     (((d))) (g) "Solar grade silicon" means high-purity silicon used exclusively in components of solar energy systems using photovoltaic modules to capture direct sunlight. "Solar grade silicon" does not include silicon used in semiconductors.
     (((4))) (h) "Thin film solar devices" means a nonparticipating substrate on which various semiconducting materials are deposited to produce a photovoltaic cell that is used to generate electricity.
     (5) This section expires June 30, 2014.

Sec. 2   RCW 82.08.965 and 2003 c 149 s 5 are each amended to read as follows:
     (1) The tax levied by RCW 82.08.020 ((shall)) does not apply to charges made for labor and services rendered in respect to the constructing of new buildings used for the manufacturing of semiconductor materials, 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) To be eligible under this section the manufacturer or processor for hire must meet the following requirements for an eight-year period, such period beginning the day the new building commences commercial production, or a portion of tax otherwise due shall be immediately due and payable pursuant to subsection (3) of this section:
     (a) The manufacturer or processor for hire must maintain at least seventy-five percent of full employment at the new building for which the exemption under this section is claimed.
     (b) Before commencing commercial production at a new facility the manufacturer or processor for hire must meet with the department to review projected employment levels in the new buildings. The department, using information provided by the taxpayer, shall make a determination of the number of positions that would be filled at full employment. This number shall be used throughout the eight-year period to determine whether any tax is to be repaid. This information is not subject to the confidentiality provisions of RCW 82.32.330 and may be disclosed to the public upon request.
     (c) In those situations where a production building in existence on the effective date of this section will be phased out of operation during which time employment at the new building at the same site is increased, the manufacturer or processor for hire shall maintain seventy-five percent of full employment at the manufacturing site overall.
     (d) No application is necessary for the tax exemption. The person is subject to all the requirements of chapter 82.32 RCW. A person taking the exemption under this section must report as required under RCW 82.32.535.
     (3) If the employment requirement is not met for any one calendar year, one-eighth of the exempt sales and use taxes shall be due and payable by April 1st of the following year. The department shall assess interest to the date the tax was imposed, but not penalties, on the taxes for which the person is not eligible.
     (4) The exemption applies to new buildings, or parts of buildings, that are used exclusively in the manufacturing of semiconductor materials, including the storage of raw materials and finished product.
     (5) For the purposes of this section:
     (a) "Commencement of commercial production" is deemed to have occurred when the equipment and process qualifications in the new building are completed and production for sale has begun; and
     (b) "Full employment" is the number of positions required for full capacity production at the new building, for positions such as line workers, engineers, and technicians.
     (c) "Semiconductor materials" has the same meaning as provided in RCW 82.04.240(2) and 82.04.294(3).
     (6) No exemption may be taken after twelve years after the effective date of this act, however all of the eligibility criteria and limitations are applicable to any exemptions claimed before that date.
     (7) This section expires twelve years after the effective date of this act.

Sec. 3   RCW 82.08.9651 and 2006 c 84 s 3 are each amended to read as follows:
     (1) The tax levied by RCW 82.08.020 shall not apply to sales of gases and chemicals used by a manufacturer or processor for hire in the production of semiconductor materials. This exemption is limited to gases and chemicals used in the production process to grow the product, deposit or grow permanent or sacrificial layers on the product, to etch or remove material from the product, to anneal the product, to immerse the product, to clean the product, and other such uses whereby the gases and chemicals come into direct contact with the product during the production process, or uses of gases and chemicals to clean the chambers and other like equipment in which such processing takes place. For the purposes of this section, "semiconductor materials" has the meaning provided in RCW 82.04.2404 and 82.04.294(3).
     (2) A person taking the exemption under this section must report under RCW 82.32.5351. No application is necessary for the tax exemption. The person is subject to all of the requirements of chapter 82.32 RCW.
     (3) This section expires twelve years after December 1, 2006.

Sec. 4   RCW 82.12.9651 and 2006 c 84 s 4 are each amended to read as follows:
     (1) The provisions of this chapter do not apply with respect to the use of gases and chemicals used by a manufacturer or processor for hire in the production of semiconductor materials. This exemption is limited to gases and chemicals used in the production process to grow the product, deposit or grow permanent or sacrificial layers on the product, to etch or remove material from the product, to anneal the product, to immerse the product, to clean the product, and other such uses whereby the gases and chemicals come into direct contact with the product during the production process, or uses of gases and chemicals to clean the chambers and other like equipment in which such processing takes place. For purposes of this section, "semiconductor materials" has the meaning provided in RCW 82.04.2404 and 82.04.294(3).
     (2) A person taking the exemption under this section must report under RCW 82.32.5351. No application is necessary for the tax exemption. The person is subject to all of the requirements of chapter 82.32 RCW.
     (3) This section expires twelve years after December 1, 2006.

Sec. 5   2006 c 300 s 12 (uncodified) is amended to read as follows:
     (1)(a) ((This act and)) Section 2, chapter . . ., Laws of 2009 (section 2 of this act), section 7, chapter 300, Laws of 2006, and section 4, chapter 149, Laws of 2003 are contingent upon the siting and commercial operation of a significant semiconductor microchip fabrication facility in the state of Washington.
     (b) For the purposes of this section:
     (i) "Commercial operation" means the same as "commencement of commercial production" as used in RCW 82.08.965.
     (ii) "Semiconductor microchip fabrication" means "manufacturing semiconductor microchips" as defined in RCW 82.04.426.
     (iii) "Significant" means the combined investment of new buildings and new machinery and equipment in the buildings, at the commencement of commercial production, will be at least one billion dollars.
     (2) ((This act)) Chapter 149, Laws of 2003 takes effect the first day of the month in which a contract for the construction of a significant semiconductor fabrication facility is signed, as determined by the director of the department of revenue.
     (3)(a) The department of revenue ((shall)) must provide notice of the effective date of this act to affected taxpayers, the legislature, and others as deemed appropriate by the department.
     (b) If, after making a determination that a contract has been signed and ((this act)) chapter 149, Laws of 2003 is effective, the department discovers that commencement of commercial production did not take place within three years of the date the contract was signed, the department ((shall)) must make a determination that ((this act)) chapter 149, Laws of 2003 is no longer effective, and all taxes that would have been otherwise due ((shall be)) are deemed deferred taxes and are immediately assessed and payable from any person reporting tax under RCW 82.04.240(2) or claiming an exemption or credit under section 2 or 5 through 10 ((of this act)), chapter 149, Laws of 2003. The department is not authorized to make a second determination regarding the effective date of ((this act)) chapter 149, Laws of 2003.