BILL REQ. #:  H-0297.6 

Read first time 01/13/11.   Referred to Committee on Community Development & Housing.

     AN ACT Relating to providing support for small business; amending RCW 82.32.105 and 43.330.060; adding a new section to chapter 43.330 RCW; adding a new section to chapter 82.04 RCW; adding a new section to chapter 19.02 RCW; adding a new section to chapter 82.32 RCW; adding a new chapter to Title 82 RCW; creating new sections; and repealing RCW 43.131.401 and 43.131.402.

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

NEW SECTION.  Sec. 1   The legislature finds that: (1) Small businesses are critical to Washington's economic recovery and strength; (2) many small businesses are experiencing financial hardship because of the economic downturn in the state and nation; and (3) small businesses start-up and expansion will have a favorable impact on Washington's economy by creating jobs, expanding tax revenues, and helping Washington compete in today's global marketplace. Therefore, the legislature intends to promote entrepreneurship and investment in the state's small businesses.

NEW SECTION.  Sec. 2   A new section is added to chapter 43.330 RCW to read as follows:
     (1) Subject to the availability of amounts appropriated for this specific purpose, the department, in collaboration with the Washington economic development finance authority, small business development center, and department of financial institutions, and in consultation with the United States small business administration and other organizations with business financing programs or expertise, must develop and offer a small business loan or loan guarantee program of up to one hundred million dollars. The purpose of the program is to provide access to capital for qualified small businesses which are unable to obtain funding from private commercial lenders on commercially reasonable terms or to qualify for federal small business administration loans. Loans made through the program may be for general business purposes, including working capital, machinery and equipment, furniture and fixtures, land and building, including purchase, renovation, and new construction, leasehold improvements, and, under conditions determined by the department, debt refinancing.
     (2) The department may:
     (a) Offer the loan or loan guarantee program described in subsection (1) of this section through a contract with a qualified entity; and
     (b) Adopt rules governing the program, including the terms and conditions of borrower participation in the program and borrower eligibility criteria.
     (3) The department of commerce may not use any Washington state funds or funds that come from the public treasury of the state of Washington to make loans or to make any payment under a loan or loan guarantee agreement.
     (4) The department, in collaboration with the Washington economic development finance authority, small business development center, and department of financial institutions, must submit a report on the activities and outcomes of the small business loan or loan guarantee program to the governor and appropriate legislative committees by December 1, 2011, and annually thereafter.
     (5) For purposes of this section:
     (a) "Small business" means a business in its first year of operations or with fifty or fewer employees.
     (b) "Small business loan" means a loan made for use exclusively in Washington to retain or expand a qualified small business.
     (c) "Qualified small business" is a small business that has demonstrated a reasonable prospect of loan repayment of a small business loan.

NEW SECTION.  Sec. 3   A new section is added to chapter 82.04 RCW to read as follows:
     (1) A credit is allowed against the tax due under this chapter for new qualified employment positions created as provided in this section.
     (2) The credit equals:
     (a) Four thousand dollars for each qualified employment position with wages and benefits greater than forty thousand dollars annually, and for which the business offers a health care plan, that is directly created in an eligible business; or
     (b) Two thousand dollars for each qualified employment position with wages and benefits no less than one hundred fifty percent of the minimum wage and no more than forty thousand dollars annually, and for which the business offers a health care plan.
     (3) For purposes of calculating the amount of credit under subsection (2) of this section with respect to qualified employment positions, the following applies:
     (a) In determining the number of qualified employment positions, a fractional amount is rounded down to the nearest whole number; and
     (b) Wages and benefits for each qualified employment position are equal to the quotient derived by dividing:
     (i) The sum of the wages and benefits earned for the four consecutive full calendar quarters for which a credit under this section is earned by all of the person's new seasonal employees hired during that period; by
     (ii) The number of qualified employment positions plus any fractional amount subject to rounding as provided under (a) of this subsection.
     (4) For purposes of this section, a credit is earned for the four consecutive full calendar quarters after the calendar quarter during which the first qualified employment position is filled.
     (5) The department must keep a running total of all credits allowed under this section during each fiscal year. The department may not allow any credits which would cause the total to exceed five million dollars in any fiscal year. If all or part of an application for credit is disallowed under this subsection, the disallowed portion must 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.
     (6) No recipient may use the tax credits to decertify a union or to displace existing jobs in any community in the state.
     (7) The credit may be used against any tax due under this chapter, and may be carried over until used. No refunds may be granted for credits under this section.
     (8) Application for tax credits under this section must be made within ninety consecutive days after the first qualified employment position is filled. 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 business, the applicant's average employment, if any, at the facility for the four consecutive full calendar quarters immediately preceding the earlier of the calendar quarter during which the application required by this section is submitted to the department or the first qualified employment position is filled, estimated or actual new employment related to the business, estimated or actual wages of employees related to the business, estimated or actual costs, time schedules for completion and operation, and other information required by the department. The department must prescribe a method for calculating a seasonal employer's average employment levels. The department must rule on the application within sixty days.
     (9)(a) Each recipient must submit a report to the department by the last day of the month immediately following the end of the four consecutive full calendar quarters for which a credit under this section is earned. The report must contain information, as required by the department, from which the department may determine whether the recipient is meeting the requirements of this section. If the recipient fails to submit a report or submits an inadequate report, the department may declare the amount of taxes for which a credit has been used to be immediately assessed and payable. The recipient must keep records, such as payroll records showing the date of hire and employment security reports, to verify eligibility under this subsection (9).
     (b) If, on the basis of a report under this section or other information, the department finds that a business is not eligible for tax credit under this section for reasons other than failure to create the required number of qualified employment positions, the amount of taxes for which a credit has been used is immediately due.
     (c) If, on the basis of a report under this subsection (9) or other information, the department finds that a business has failed to create the specified number of qualified employment positions, the department must assess interest, but not penalties, on the credited taxes for which a credit has been used. The interest must be assessed at the rate provided for delinquent excise taxes, must be assessed retroactively to the date of the tax credit, and must accrue until the taxes for which a credit has been used are repaid.
     (10) The employment security department must provide such information needed for the department to certify all determinations of employment and wages under this section.
     (11) Applications, reports, and any other information received by the department under this section are subject to disclosure to the extent disclosure is not otherwise prohibited by state or federal law.
     (12) A person claiming credit under chapter 82.62 RCW or RCW 82.04.44525 or 82.04.448 cannot claim a credit under this section.
     (13) The following definitions apply throughout this section, unless the context clearly requires otherwise.
     (a) "Applicant" means a person applying for a tax credit under this section.
     (b) "Eligible business" means a business in its first year of operations or with fifty or fewer employees.
     (c) "First qualified employment position" means the first qualified employment position filled for which a credit under this section is sought.
     (d) "Health care plan" means any "employee welfare benefit plan" as defined by the employee retirement income security act of 1974, Title 29 U.S.C. Sec. 1001 et seq., and any "health plan" or "health benefit plan" as defined in RCW 48.43.005, for the purpose of providing for its employees or their beneficiaries, through the purchase of insurance or otherwise, health care services. For the purposes of this section, "health care services" means services offered or provided by health care facilities and health care providers relating to the prevention, cure, or treatment of illness, injury, or disease.
     (e)(i)(A) "Qualified employment position" means a permanent full-time employee employed in the eligible business in Washington during four consecutive full calendar quarters.
     (B) For seasonal employers, "qualified employment position" also includes the equivalent of a full-time employee in work hours for four consecutive full calendar quarters.
     (ii) For purposes of this subsection (13)(d), "full time" means a normal work week of at least thirty-five hours.
     (iii) 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:
     (A) The cumulative period of any vacancies in that position is not more than one hundred twenty days in the four quarter period; and
     (B) During a vacancy, the employer is training or actively recruiting a replacement permanent, full-time employee for the position.
     (f) "Recipient" means a person receiving tax credits under this section.
     (g) "Seasonal basis" means a continuous employment period of less than twelve consecutive months, for the purposes of "seasonal employee" and "seasonal employer" under this section.
     (h) "Seasonal employee" means an employee of a seasonal employer who works on a seasonal basis.
     (i) "Seasonal employer" means a person who regularly hires more than fifty percent of its employees to work on a seasonal basis.
     (14) No applications may be accepted after June 30, 2012.

NEW SECTION.  Sec. 4   This chapter is known and cited as the "Washington small business taxpayer bill of rights."

NEW SECTION.  Sec. 5   (1) The legislature finds that taxes are one of the most sensitive points of contact between citizens and their government, and that there is a delicate balance between revenue collection and taxpayers' rights and responsibilities.
     (2) The legislature further finds that the Washington tax system is based largely on voluntary compliance. The legislature also finds that compliance is best achieved when: (a) The department provides accurate tax information, instructions, and procedures to assist taxpayers to voluntarily comply with applicable state excise tax laws; and (b) taxpayers are not penalized for inadvertent mistakes.
     (3) The legislature further finds that our excise tax system is complicated and as a consequence, small businesses, often lacking sophisticated tax advice, are especially at risk of making unintentional mistakes with respect to their state tax obligations.
     (4) The legislature intends to provide a small business taxpayer bill of rights that: (a) Provides relief from unintentional mistakes regarding state tax obligations; (b) requires the department to provide information about a business's industry specific tax obligations at the time of tax registration; and (c) requires the department to adhere to any specific official written advice unless the department later modifies the advice in writing.

NEW SECTION.  Sec. 6   The department must administer this chapter. The department must adopt rules as may be necessary to fully implement this chapter and the rights established under this chapter.

NEW SECTION.  Sec. 7   Small business taxpayers of the state of Washington have:
     (1) The right to receive industry specific tax guidance by the department at the time the taxpayer initially registers his or her business with the state;
     (2) The right to a written explanation of the basis for any tax deficiency assessments, interest, and penalties at the time the assessments are issued;
     (3) The right to have any interest and penalties on an assessment waived if the assessment was a result of an unintentional act of the taxpayer; and
     (4) The right to rely on specific official written advice and written tax reporting instructions from the department to that taxpayer, and to have interest, penalties, and tax deficiency assessments waived when the taxpayer has so relied to their proven detriment unless the department provided later written tax reporting instructions modifying the initial instructions.

NEW SECTION.  Sec. 8   Unless the context clearly requires otherwise, the definition in this section applies throughout this chapter.
     "Small business taxpayer" means a taxpayer in its first year of business operations or with fifty or fewer employees.

Sec. 9   RCW 82.32.105 and 1998 c 304 s 13 are each amended to read as follows:
     (1) If the department ((of revenue)) finds that the payment by a taxpayer of a tax less than that properly due or the failure of a taxpayer to pay any tax by the due date was the result of circumstances beyond the control of the taxpayer, the department ((of revenue shall)) must waive or cancel any penalties imposed under this chapter with respect to such tax.
     (2) The department ((shall)) must waive or cancel the penalty imposed under RCW 82.32.090(1) when the circumstances under which the delinquency occurred do not qualify for waiver or cancellation under subsection (1) of this section if:
     (a) The taxpayer requests the waiver for a tax return required to be filed under RCW 82.32.045, 82.14B.061, 82.23B.020, 82.27.060, 82.29A.050, or 84.33.086; and
     (b) The taxpayer has timely filed and remitted payment on all tax returns due for that tax program for a period of twenty-four months immediately preceding the period covered by the return for which the waiver is being requested.
     (3) The department ((shall)) must waive or cancel interest imposed under this chapter if:
     (a) The failure to timely pay the tax was the direct result of written instructions given the taxpayer by the department; or
     (b) The extension of a due date for payment of an assessment of deficiency was not at the request of the taxpayer and was for the sole convenience of the department.
     (4) The department must waive or cancel interest and penalties imposed under this chapter for a small business taxpayer if the failure to pay taxes due was not intentional. For the purposes of this subsection, "small business taxpayer" has the same meaning as provided in section 8 of this act.
     (5) The department ((of revenue shall)) must adopt rules for the waiver or cancellation of penalties and interest imposed by this chapter.

Sec. 10   RCW 43.330.060 and 2010 c 165 s 2 are each amended to read as follows:
     (1) The department ((shall)) must (a) assist in expanding the state's role as an international center of trade, culture, and finance; (b) promote and market the state's products and services both nationally and internationally; (c) work in close cooperation with other private and public international trade efforts; (d) act as a centralized location for the assimilation and distribution of trade information; and (e) establish and operate foreign offices promoting overseas trade and commerce.
     (2) The department ((shall)) must identify and work with Washington businesses that can use local, state, and federal assistance to increase domestic and foreign exports of goods and services.
     (3)(a) The department ((shall)) must work generally with small businesses and other employers to facilitate resolution of siting, regulatory, expansion, and retention problems. This assistance ((shall)) includes but is not ((be)) limited to assisting in workforce training and infrastructure needs, identifying and locating suitable business sites, and resolving problems with government licensing and regulatory requirements.
     (b) The department must establish and continuously update an online portal to provide small businesses with information about a broad array of state, federal, and local services, including but not limited to: A directory of state, federal, and local agencies; training and business counseling services; financing programs; and licensing, permitting, taxes, and other regulatory information.
     (c) The department ((shall)) must identify gaps in needed services and develop steps to address them including private sector support and purchase of these services.
     (4) The department ((shall)) must work to increase the availability of capital to small businesses by developing new and flexible investment tools; by assisting in targeting and improving the efficiency of existing investment mechanisms; and by assisting in the procurement of managerial and technical assistance necessary to attract potential investors.
     (5) The department ((shall)) must assist women and minority-owned businesses in overcoming barriers to entrepreneurial success. The department shall contract with public and private agencies, institutions, and organizations to conduct entrepreneurial training courses for minority and women-owned businesses. The instruction ((shall)) must be intensive, practical training courses in financing, marketing, managing, accounting, and recordkeeping for a small business, with an emphasis on federal, state, local, or private programs available to assist small businesses. Instruction shall be offered in major population centers throughout the state at times and locations that are convenient for minority and women small business owners.
     (6)(a) Subject to the availability of amounts appropriated for this specific purpose, by December 1, 2010, the department, in conjunction with the small business development center, must prepare and present to the governor and appropriate legislative committees a specific, actionable plan to increase access to capital and technical assistance to small businesses and entrepreneurs beginning with the 2011-2013 biennium. In developing the plan, the department and the center may consult with the Washington state microenterprise association, and with other government, nonprofit, and private organizations as necessary. The plan must identify:
     (i) Existing sources of capital and technical assistance for small businesses and entrepreneurs;
     (ii) Critical gaps and barriers to availability of capital and delivery of technical assistance to small businesses and entrepreneurs;
     (iii) Workable solutions to filling the gaps and removing barriers identified in (a)(ii) of this subsection; and
     (iv) The financial resources and statutory changes necessary to put the plan into effect beginning with the 2011-2013 biennium.
     (b) With respect to increasing access to capital, the plan must identify specific, feasible sources of capital and practical mechanisms for expanding access to it.
     (c) The department and the center must include, within the analysis and recommendations in (a) of this subsection, any specific gaps, barriers, and solutions related to rural and low-income communities and small manufacturers interested in exporting.

NEW SECTION.  Sec. 11   A new section is added to chapter 19.02 RCW to read as follows:
     (1) Beginning October 1, 2011, master and renewal applications issued through the business license center must include a statement referencing the online business portal described in RCW 43.330.060(3)(b).
     (2) The statement required under subsection (1) of this section must be placed in a prominent location on at least one page of the paper and electronic master and renewal applications.

NEW SECTION.  Sec. 12   A new section is added to chapter 82.32 RCW to read as follows:
     (1) Beginning October 1, 2011, excise tax returns must include a statement referencing the online business portal described in RCW 43.330.060(3)(b).
     (2) The statement required under subsection (1) of this section must be placed in a prominent location on at least one page of the paper and electronic tax return.

NEW SECTION.  Sec. 13   The following acts or parts of acts are each repealed:
     (1) RCW 43.131.401 (Office of regulatory assistance -- Termination) and 2007 c 231 s 6, 2007 c 94 s 15, 2003 c 71 s 5, & 2002 c 153 s 13; and
     (2) RCW 43.131.402 (Office of regulatory assistance -- Repeal) and 2010 c 162 s 7.

NEW SECTION.  Sec. 14   Sections 4 through 8 of this act constitute a new chapter in Title 82 RCW.

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.