BILL REQ. #:  S-1489.1 

Read first time 02/15/11.   Referred to Committee on Economic Development, Trade & Innovation.

     AN ACT Relating to the innovative industries for economic development; and adding a new chapter to Title 43 RCW.

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

NEW SECTION.  Sec. 1   This chapter may be known and cited as the Washington innovative industries enabling act. This chapter is enacted in the exercise of the police powers of this state for the purpose of protecting the economic well-being and general welfare of the people of this state.

NEW SECTION.  Sec. 2   (1) The legislature declares that the promotion of industrial innovation is a fundamental purpose of state government and that the commercialization and manufacture of products within this state is in the public interest. The history, economy, culture, and the future of Washington state all involve innovation in industrial production.
     (2) By this act, the legislature intends to further the continued commercialization and manufacture of innovative products in Washington, and the promotion of Washington's industrial products. It is the purpose of this act to:
     (a) Enable industry-sponsored organizations to provide technical and other assistance to help industrial producers meet their research, commercialization, financial, workforce training, marketing, exporting, and other industry identified needs;
     (b) Assist industrial producers to improve productivity and reduce costs within a globally competitive environment and remove impairments to their ability to compete in local, domestic, and foreign markets; and
     (c) Promote industry sectors individually and as part of a comprehensive strategy to enhance the quality, reputation, and sales of Washington's industrial products.

NEW SECTION.  Sec. 3   The definitions in this section apply throughout this chapter unless the context clearly requires otherwise.
     (1) "Base year taxation" means the state business and occupation taxes reported by all business entities within a certified industry sector for the calendar year preceding the certification of the industry sector by the director of the department.
     (2) "Certified industry sector" means an industry sector which has been certified by the director as eligible for assistance through industry development organization grants.
     (3) "Department" means the department of commerce of the state of Washington.
     (4) "Director" means the director of the department of commerce or his or her duly appointed representative. The phrase "director or his or her designee" means the director unless he or she has designated an administrator, board, or other designee to act in the matter designated, in which case "director or his or her designee" means the administrator, board, or other person(s) so designated and not the director.
     (5) "Industry development organization" means a nonprofit, membership-based organization formed by firms within an industry sector for the purpose of providing technical assistance and support to firms within the industry sector. Industry development organization membership may be either statewide in scope or a workforce development area as determined under the federal workforce investment act, P.L. 105-220.
     (6) "Industry development organization grants" means the grants awarded to industry development organizations under section 6 of this act.
     (7) "Industry sector" means a group of firms that share a NAICS classification code or related NAICS classification codes as assigned by the department of revenue.
     (8) "Innovation allocation" means an amount, not to exceed one million dollars, that is the greater of zero or:
     (a) For the calendar year in which certification of an industry sector occurs, fifty percent of the amount, if any, that business and occupation tax revenue reported for that calendar year by all business entities within that certified industry sector exceeds the base year taxation for that certified industry sector; and
     (b) For subsequent calendar years either:
     (i) Fifty percent of the amount, if any, that business and occupation tax revenue reported for the calendar year by all business entities with the certified industry sector exceeds the previous calendar year's business and occupation taxes reported by all business entities within the certified industry sector; or
     (ii) If the business and occupation tax revenue reported for the calendar year by all business entities within the certified industrial sector does not exceed the previous calendar year's business and occupation taxes reported by all business entities within that certified industry sector, fifty percent of the amount, if any, that business and occupation tax revenue reported for the calendar year by all business entities within the certified industry sector exceeds the base year.
     (9) "NAICS" means the North American industry classification system.

NEW SECTION.  Sec. 4   (1) The director is hereby authorized to implement, administer, and enforce this chapter. The director may adopt such rules as are necessary to carry out the provisions of this chapter, including rules that provide for a method to fund the actual costs, including personnel costs, for carrying out the department's obligations under this chapter if the costs are not directly funded by the legislature.
     (2) The director must:
     (a) Establish the process by which firms or industry development organizations may petition for certification of an industry sector. The process must reference the minimum number of firms, or the minimum percent of the firms within an industry sector, that must join in the petition;
     (b) Establish industry sector certification standards. The certification standards must reference:
     (i) The minimum number of firms, which must be at least three, that may be in a certified industry sector;
     (ii) The minimum rate of employment growth within the certified industry sector;
     (iii) The minimum rate of revenue growth within the certified industry sector; and
     (iv) Any other quantitative and qualitative factors as the director determines are appropriate;
     (c) Certify, via certification orders, industry sectors that meet the certification standards established by the director. The director may amend or terminate certification orders, consistent with the standards and rules adopted by the director;
     (d) Make the final determination on the NAICS codes that define a certified industry sector;
     (e) Notify the director of the department of revenue when an industry sector has been certified;
     (f) Establish the application process, selection criteria, and contractual requirements relating to innovating industries grants; and
     (g) Provide bona fide applicants for industry development organization grants with contact information for firms within the relevant certified industry sector.

NEW SECTION.  Sec. 5   (1) Upon receipt of a certification order from the director of the department, the department of revenue must establish the base year taxation for a certified industry sector. The department of revenue must establish the base year taxation by the later of sixty days following the receipt of the certification order or September 1st of the year in which the certification order was received. In determining the base year taxation the department of revenue must use existing data that is compiled in the department's normal course of business and used for other purposes. No corrections to the base year taxation for a certified industry sector may be made after the department of revenue determines the initial innovation allocation for that certified industry sector.
     (2) The department of revenue must determine the annual innovation allocation attributable to each certified industry sector. Such determination must be made by September 1st of each year. In determining the base year taxation the department of revenue must use existing data that is compiled in the department's normal course of business and used for other purposes. No changes to the innovation allocation for a certified industry sector may be made after the department of revenue notifies the state treasurer of that innovation allocation as required in subsection (3) of this section.
     (3) The department of revenue must notify the state treasurer of the innovation allocations determined under subsection (2) of this section. When innovation allocations are greater than zero, the state treasurer must transfer such amounts from the general fund to the industry development organization grant account created in section 7 of this act, subject to the limitation in subsection (5) of this section.
     (4) The department of revenue must annually provide to the director of the department such contact information for firms within a certified industry sector as is subject to disclosure under RCW 82.32.330(3)(k). The information required under this subsection must be provided by a date mutually agreed to by the department of revenue and the department.
     (5) No more than ten million dollars may be deposited in the industry development organization grant account in any fiscal year.

NEW SECTION.  Sec. 6   (1) The industry development organization grant program is established in the department. The director may award grants via contract with industry development organizations to assist certified industry sectors consistent with the purpose of this act. The grant amount awarded to an industry development organization must not exceed one million dollars per year. Applicants must indicate by NAICS code the makeup of the sector and its geographic boundaries. The director must set qualification standards for industry development organizations applying for grants under the program including, but not limited to, the number of member firms, and the percentage of sector firms in the geographic area that are members of the industry development organization.
     (2) Grantees may use industry development organization grant funds for any of the following:
     (a) Research and development of better and more efficient production, processing, transportation, handling, and marketing of value-added products;
     (b) Assistance with quality control and testing of products and processes;
     (c) Workforce training;
     (d) Incubation services;
     (e) Export assistance, including the prevention, modification, or elimination of trade barriers;
     (f) Providing marketing information and services including the development of cooperative efforts;
     (g) Providing information and services for meeting energy efficiency and conservation objectives; and
     (h) Any other services as are approved by the director.
     (3) Grantees may not use industry development organization grant funds for:
     (a) Lobbying;
     (b) Providing financial support in any manner; or
     (c) Any other purpose prohibited by the director through rule or contract.
     (4) The contracts with industry development organizations must specify the expected deliverables and performance and must be for a period not to exceed two years.
     (5) Priority will be given to those applicants who demonstrate:
     (a) The capacity to serve all firms in an industry sector;
     (b) Collaboration with, and the ability to facilitate the goals of, innovation partnership zones established under RCW 43.330.270; and
     (c) Collaboration with centers of excellence established under RCW 28B.50.902.
     (6) Grantees may contract with other technical assistance providers for the delivery of services.

NEW SECTION.  Sec. 7   (1) The industry development organization grant account is created in the custody of the state treasury. All receipts from innovation allocations collected by the department of revenue under section 5 of this act must be deposited in the account. Expenditures from the account may be used only for the industry development organization grant program and the costs associated with carrying out the department's obligations under this chapter. Only the director of commerce or the director's designee may authorize expenditures from the account. The account is subject to allotment procedures under chapter 43.88 RCW, but an appropriation is not required for expenditures.
     (2) The director of the department must keep subaccounts for each certified industry sector and must:
     (a) Deposit the innovation allocation attributable to each certified industry sector into its subaccount after deducting for the department's costs; and
     (b) Make industry development organization grants to industry development organizations from the appropriate certified industry sector subaccount.

NEW SECTION.  Sec. 8   Sections 1 through 7 of this act constitute a new chapter in Title 43 RCW.