BILL REQ. #:  S-3951.1 



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SENATE BILL 6550
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State of Washington62nd Legislature2012 Regular Session

By Senators Frockt, Keiser, Kohl-Welles, Ranker, and Kline

Read first time 01/31/12.   Referred to Committee on Ways & Means.



     AN ACT Relating to tax reform; amending RCW 82.32.010, 82.03.130, 82.03.140, 2.10.180, 2.12.090, 6.15.020, 41.24.240, 41.35.100, 41.40.052, 41.44.240, 43.43.310, 82.08.020, 82.04.261, 82.04.285, and 82.04.050; reenacting and amending RCW 41.32.052 and 41.26.053; adding a new title to the Revised Code of Washington to be codified as Title 82A RCW; creating a new section; repealing RCW 6.15.025, 82.04.230, 82.04.240, 82.04.2403, 82.04.2404, 82.04.250, 82.04.255, 82.04.257, 82.04.260, 82.04.263, 82.04.270, 82.04.272, 82.04.280, 82.04.290, 82.04.2905, 82.04.2906, 82.04.2907, 82.04.2908, 82.04.2909, 82.04.293, 82.04.294, and 82.04.298; prescribing penalties; providing contingent effective dates; providing an expiration date; and providing for submission of this act to a vote of the people.

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

PART I
DEFINITIONS

NEW SECTION.  Sec. 101   INTRODUCTORY. Unless the context clearly requires otherwise, the definitions in sections 102 through 114 of this act apply throughout this title.

NEW SECTION.  Sec. 102   ADJUSTED GROSS INCOME. "Adjusted gross income" means adjusted gross income as determined under the internal revenue code.

NEW SECTION.  Sec. 103   CORPORATION. "Corporation" means a person taxable as a corporation under the internal revenue code.

NEW SECTION.  Sec. 104   DEPARTMENT. "Department" means the state department of revenue.

NEW SECTION.  Sec. 105   FEDERAL BASE INCOME. "Federal base income" means:
     (1) For individuals, adjusted gross income.
     (2) For all other persons, except corporations and individuals, taxable income as determined under the internal revenue code.
     (3) For corporations, gross profits.

NEW SECTION.  Sec. 106   GROSS PROFITS. "Gross profits" means gross profit as determined under the internal revenue code for purposes of federal tax form 1120.

NEW SECTION.  Sec. 107   INDIVIDUAL. "Individual" means a natural person.

NEW SECTION.  Sec. 108   INTERNAL REVENUE CODE. "Internal revenue code" means the United States internal revenue code of 1986 and amendments thereto, as existing and in effect on January 1, 2013.

NEW SECTION.  Sec. 109   PERSON. "Person" includes individuals, partnerships, firms, companies, fiduciaries, estates, trusts, and corporations.

NEW SECTION.  Sec. 110   RESIDENT. "Resident" includes:
     (1) An individual who:
     (a) Has resided in this state for the entire taxable year; or
     (b) Is domiciled in this state unless the individual:
     (i) Maintains no permanent place of abode in this state; and
     (ii) Does maintain a permanent place of abode elsewhere; and
     (iii) Spends in the aggregate not more than thirty days in the taxable year in this state; or
     (c) Is not domiciled in this state, but maintains a permanent place of abode in this state and spends in the aggregate more than one hundred eighty-three days of the taxable year in this state unless the individual establishes to the satisfaction of the department that the individual is in the state only for temporary or transitory purposes; or
     (d) Claims the state of Washington as the individual's tax home for federal income tax purposes.
     (2) "Resident estate" means an estate of which a personal representative was appointed by a Washington court or an estate administered in this state.
     (3) "Resident trust" means a trust whose situs, as determined by RCW 11.96A.030, is within the state of Washington.

NEW SECTION.  Sec. 111   S CORPORATION. "S corporation" means an S corporation as defined in section 1361 of the internal revenue code.

NEW SECTION.  Sec. 112   TAXABLE INCOME. "Taxable income" means federal base income after making the additions, subtractions, apportionments, and allocations provided under this title.

NEW SECTION.  Sec. 113   TAXABLE YEAR. "Taxable year" means the taxpayer's taxable year as defined under the internal revenue code.

NEW SECTION.  Sec. 114   TAXPAYER. "Taxpayer" means a person receiving income subject to tax under this title.

NEW SECTION.  Sec. 115   DEFINITION OF TERMS GENERALLY. Except as provided in this Part, any term used in this title has the same meaning as when used in a comparable context in the internal revenue code.

PART II
TAXABLE INCOME MODIFICATIONS

NEW SECTION.  Sec. 201   INTRODUCTORY. In computing taxable income, modifications must be made to the taxpayer's federal base income as required under this Part, unless the modification has the effect of duplicating an item of income or deduction.

NEW SECTION.  Sec. 202   BUSINESS TAXES PAID FOR PERIODS BEFORE EFFECTIVE DATE. (1) Subtract gross income that was subject to tax under chapter 82.04 RCW for periods prior to the effective date of this section, to the extent the gross income was included in computing federal base income.
     (2) Add any expenses incurred in the production of amounts subtracted under subsection (1) of this section, to the extent the expenses have been deducted in computing federal base income.

NEW SECTION.  Sec. 203   CARRYOVERS. Add amounts that have been deducted in computing federal base income to the extent the amounts have been carried over from taxable years ending before the effective date of this section.

NEW SECTION.  Sec. 204   CARRYBACKS. Add amounts that have been deducted in computing federal base income to the extent the amounts have been carried back from future taxable years.

NEW SECTION.  Sec. 205   NONPROFIT ORGANIZATIONS. Add any amounts subject to tax under subchapter F, chapter 1, subtitle A of the internal revenue code. For the purposes of computations under this section, if a nonprofit organization has no federal base income, or a negative federal base income, federal base income must be treated as if it were zero.

NEW SECTION.  Sec. 206   S CORPORATIONS. Add amounts upon which an S corporation is subject to tax under subchapter S, chapter 1, subtitle A of the internal revenue code.

NEW SECTION.  Sec. 207   STATE AND LOCAL INCOME TAXES. Add taxes on or measured by net income that have been deducted under the internal revenue code in computing federal base income.

NEW SECTION.  Sec. 208   STATE AND LOCAL OBLIGATIONS. (1) For taxpayers other than corporations, add gross income that has been excluded under section 103 of the internal revenue code in computing federal base income, except gross income derived from obligations of the state of Washington or political subdivisions of the state of Washington.
     (2) Subtract any expenses incurred in the production of amounts added under subsection (1) of this section, to the extent the expenses have not been deducted in computing federal base income.

NEW SECTION.  Sec. 209   DEDUCTIONS REQUIRED BY FEDERAL LAW. (1) Subtract gross income that the state is prohibited from taxing under the Constitution or laws of the United States, to the extent the gross income was included in computing federal base income.
     (2) Add any expenses incurred in the production of amounts subtracted under subsection (1) of this section, to the extent the expenses have been deducted in computing federal base income.

NEW SECTION.  Sec. 210   TAX RETURNS FOR FRACTIONAL YEAR. If the first taxable year of any taxpayer with respect to which a tax is imposed by this title ends before December 31st of the calendar year in which this title becomes effective, referred to in this section as a fractional taxable year, the taxable income for the fractional taxable year must be the taxpayer's taxable income for the entire taxable year, adjusted by one of the following methods, at the taxpayer's election:
     (1) The taxable income must be multiplied by a fraction. The numerator of the fraction is the number of days in the fractional taxable year. The denominator of the fraction is the number of days in the entire taxable year.
     (2) The taxable income must be adjusted, in accordance with rules of the department, so as to include only such income and be reduced only by such deductions as can be clearly determined from the permanent records of the taxpayer to be attributable to the fractional taxable year.

PART III
DIVISION OF INCOME, MODIFICATIONS, AND CREDITS

NEW SECTION.  Sec. 301   APPORTIONMENT AND ALLOCATION OF INCOME--INDIVIDUALS, ESTATES, AND TRUSTS. (1) For resident individuals, estates, and trusts, all income must be apportioned and allocated to this state.
     (2) For nonresident individuals, estates, and trusts, income derived from sources within this state must be apportioned and allocated to this state. For purposes of this title:
     (a) The adjusted gross income of a nonresident derived from sources within this state is the net amount of items of income, gain, loss, and deduction of the nonresident's federal adjusted gross income that are derived from or connected with sources in this state including any distributive share of partnership income and deductions, and any share of estate or trust income and deductions, including any unrelated business income of an otherwise exempt trust or organization.
     (b) Items of income, gain, loss, and deduction derived from or connected with sources within this state are those items attributable to the ownership or disposition of any interest in real or tangible personal property in this state, and a business, trade, profession, or occupation carried on within this state. The department must issue rules to provide consistency of this section with the excise tax provisions.
     (c) Deduction with respect to expenses, capital losses, and net operating losses must be based solely on income, gains, losses, and deductions derived from or connected with sources in this state but must otherwise be determined in the same manner as the corresponding federal deduction except as provided in this title.
     (d) Income from intangible personal property, including annuities, dividends, interest, and gains from the disposition of intangible personal property, constitutes income derived from sources within the state of Washington only to the extent that such income is from property employed in a business, trade, profession, or occupation carried on within this state. However, distributed and undistributed income of an electing S corporation for federal tax purposes derived from or connected with sources within this state is income derived from sources within this state for a nonresident shareholder. A net operating loss of such corporation does constitute a loss or deduction connected with sources within this state for a nonresident shareholder.
     (e) Compensation paid by the United States for service in the armed forces of the United States performed in this state by a nonresident does not constitute income derived from sources within this state.
     (f) If a business, trade, profession, or occupation is carried on partly within and partly without this state, the determination of net income derived or connected with sources within this state, as provided in this section, must be made by apportionment and allocation under chapter 82.56 RCW.

NEW SECTION.  Sec. 302   APPORTIONMENT AND ALLOCATION OF INCOME--CORPORATIONS. (1) For corporations other than financial organizations, all income must be apportioned and allocated to this state except income that is apportioned or allocated to another state under RCW 82.56.010.
     (2) For financial organizations, as defined in Article IV, section 1(d) and (f) of RCW 82.56.010, that are taxable both within this state and in another state within the meaning of Article IV, section 3 of RCW 82.56.010, the amount of net income to be apportioned or allocated, or both, to this state must be determined in accordance with rules adopted by the department. The rules must, as far as the department deems practical, be consistent with the provisions of Article IV of RCW 82.56.010. In developing the rules, the department must also give appropriate consideration to any uniform regulations adopted by the multistate tax commission pursuant to Article VII of RCW 82.56.010, and to the rules of other states in which the financial organizations and public utilities are also taxable.

NEW SECTION.  Sec. 303   COMBINED REPORTING. (1) The department may permit or require a corporation that is subject to taxation under this title and is a part of a water's edge combined group to file a combined report covering the combined operations of the group. The report must contain such information as is designated in rules adopted by the department.
     (2) A corporation is a part of a water's edge combined group if it is engaged in business activities that are integrated with, dependent upon, or that contribute to the business activities of the group as a whole. Only corporations meeting one or more of the following descriptions may be included in a water's edge combined group:
     (a) Corporations included or includable in a consolidated return for federal income tax purposes;
     (b) United States possessions corporations;
     (c) Corporations incorporated in any United States possession or territory;
     (d) Domestic international sales corporations or foreign sales corporations;
     (e) Corporations incorporated in a country that either does not impose an income tax or imposes an income tax at a rate lower than ninety percent of the federal tax rate on the federally defined income tax base, if:
     (i) Fifty percent or more of either the sales or purchases or of payments of income or expenses, exclusive of payments for intangible property, or payments of eighty percent or more of all expenses are made directly or indirectly to one or more members of a water's edge combined group; or
     (ii) The corporation conducts no significant economic activity;
     (f) Foreign corporations having at least a threshold level of business activity in the United States, as determined under rules of the department;
     (g) United States corporations that are members of a group of two or more corporations with a common owner or owners, either corporate or noncorporate, where more than fifty percent of the voting stock of each member corporation is directly or indirectly owned by the common owner or owners or by one or more of the member corporations.
     (3) The income attributable to the Washington activities of a corporation that is a part of a water's edge combined group must be determined by the apportionment of the entire business gross profits of the group and the allocation of nonbusiness income of the corporation, using the factors and methods in section 302 of this act and the rules of the department adopted under section 302 of this act. Business net income may include income of corporations that do not have federal taxable income because they are not subject to federal taxation.

NEW SECTION.  Sec. 304   PARTNERSHIPS, LIMITED LIABILITY COMPANY, AND S CORPORATIONS. (1) The taxable incomes of partners must be computed by including a pro rata share of the modifications under Part II and sections 301 through 303 of this act and the credits allowed under section 402 of this act, if the modification or credit relates to the income of the partnership or limited liability company. Each partner's pro rata share of a modification or credit is the amount of modification or credit multiplied by a fraction. The numerator of the fraction is the partner's or member's distributive share of partnership or company income. The denominator of the fraction is the total partnership or limited liability company income. The fraction may never be greater than one.
     (2) The taxable incomes of shareholders of S corporations must be computed by including a share of the modifications under Part II and sections 301 through 303 of this act and the credits allowed under section 402 of this act, if the modification or credit relates to the income of the S corporation. Each shareholder's share of a modification or credit is the amount of modification or credit multiplied by a fraction. The numerator of the fraction is the shareholder's pro rata share of S corporation income. The denominator of the fraction is the total S corporation income. The fraction may never be greater than one.
     (3) As used in this section:
     (a) "S corporation income" includes both distributed and undistributed federal taxable income of the S corporation less any amount subject to tax under section 402 of this act.
     (b) "Pro rata share" means pro rata share as determined under section 1366(a) of the internal revenue code.

NEW SECTION.  Sec. 305   ESTATES, TRUSTS, AND BENEFICIARIES. (1) The taxable incomes of estates, trusts, and beneficiaries thereof must be computed by including a share of the modifications under Part II and sections 301 through 303 of this act and the credits allowed under section 402 of this act.
     Each taxpayer's share of a modification or credit is the amount of modification or credit multiplied by a fraction. The numerator of the fraction is the taxpayer's share of the distributable net income of the estate or trust. The denominator of the fraction is the total distributable net income of the estate or trust. The fraction may never be greater than one.
     (2) As used in this section, "distributable net income" means distributable net income as defined in the internal revenue code. If an estate or trust has no federal distributable net income, the term means the income of the estate or trust which is distributed or is required to be distributed during the taxable year under local law or the terms of the estate or trust instrument.
     (3) Any portion of a modification that is not included in calculating the taxable incomes of the beneficiaries must be included in calculating the taxable income of the trust or estate.

PART IV
RATES AND CREDITS

NEW SECTION.  Sec. 401   PERSONAL INCOME TAX IMPOSED. (1) Beginning January 1, 2015, a tax is imposed at the rate of one percent for each taxable year on the taxable income of individuals, estates, and trusts as provided in this section.
     (2) The taxes imposed in this section may never be less than zero.

NEW SECTION.  Sec. 402   CREDIT FOR INCOME TAXES DUE ANOTHER JURISDICTION. (1) The intent of this section is to prevent double taxation of income potentially subject to tax in both Washington and another jurisdiction.
     (2) As used in this section, "another jurisdiction" means another state or foreign country or a political subdivision of another state or foreign country.
     (3) A resident individual, estate, or trust is allowed a credit against the tax imposed under this title equal to the lesser of:
     (a) The amount of tax paid to another jurisdiction on net income derived from sources within the other jurisdiction; or
     (b) The amount of tax due under this title, before application of credits allowable by this title, multiplied by a fraction. The numerator of the fraction is the amount of the taxpayer's adjusted gross income subject to tax in the other jurisdiction. The denominator of the fraction is the taxpayer's total adjusted gross income as modified under Part II of this title. The fraction may never be greater than one.
     (4) If the laws of another jurisdiction contain a provision exempting a resident of Washington from net income taxes on income derived from sources in that jurisdiction, the director of revenue is authorized to enter into a reciprocal agreement with that jurisdiction providing a similar tax exemption for residents of that jurisdiction for income derived from sources within Washington.
     (5) The amount of tax credits received by any taxpayer under this section may not exceed the total amount of tax due, and there may be no carryback or carryforward of any unused credits.

NEW SECTION.  Sec. 403   DUAL RESIDENCE. If an individual is regarded as a resident both of this state and another jurisdiction for state personal income tax purposes, the department must reduce the tax on that portion of the individual's income that is subjected to tax in both jurisdictions solely by virtue of dual residence, if the other taxing jurisdiction allows a similar reduction. The reduction must equal the lower of the two taxes applicable to the income taxed twice, multiplied by a fraction. The numerator of the fraction is the tax imposed by this state on the income taxed twice. The denominator of the fraction is the tax imposed by both jurisdictions on the income taxed twice. The fraction may never be greater than one.

NEW SECTION.  Sec. 404   CORPORATE PRIVILEGE TAXES IMPOSED. Beginning January 1, 2015, a tax is imposed at the rate of one percent for each taxable year on the taxable income of corporations.

NEW SECTION.  Sec. 405   EXEMPTION--INSURERS. The taxes imposed in this title do not apply to any person in respect to an insurance business that is subject to a state tax on gross premiums.

NEW SECTION.  Sec. 406   Taxes collected under sections 401 and 404 of this act must be used as follows:
     (1) Seven and two-tenths percent must be deposited into the state educational trust fund created in RCW 28B.92.140 and used exclusively for the purposes of the state need grant program under chapter 28B.92 RCW.
     (2) Seven and two-tenths percent must be deposited into the education legacy trust account created in RCW 83.100.230. Revenues deposited into the education legacy trust account under this subsection must be used to provide universal access for students to colleges and universities, which includes a waiver of: An academic year of tuition and fees at community and technical colleges including tuition and fees for apprentice students; two quarters of tuition and fees at regional universities and The Evergreen State College; one-quarter of tuition and fees at the University of Washington; and one-third of tuition and fees for one year at Washington State University.

PART V
WITHHOLDING AND ESTIMATED TAX

NEW SECTION.  Sec. 501   EMPLOYER WITHHOLDING--REQUIREMENTS. (1) Beginning January 1, 2015, every employer making a payment of wages or salaries earned in this state, regardless of the place where the payment is made, and who is required by the internal revenue code to withhold taxes, must deduct and withhold tax as prescribed by the department by rule. The rules prescribed must reasonably reflect the employee's annual tax liability under this title. Every employer making such a deduction and withholding must furnish to the employee a record of the amount of tax deducted and withheld from the employee on forms provided by the department.
     (2) If the employee is a resident of this state and earns income from personal services entirely performed in another state that imposes an income tax on the income, and the employer withholds income taxes under the laws of the state in which the income is earned, the employer is not required to withhold any tax imposed by this title on the income if the laws of the state in which the income is earned allow a similar exemption for its residents who earn income in this state.

NEW SECTION.  Sec. 502   LIABILITY OF EMPLOYER FOR TAX WITHHELD. Any person required to deduct and withhold the tax imposed by this title is liable to the department for the payment of the amount deducted and withheld, and is not liable to any other person for the amount of tax deducted and withheld under this title or for the act of withholding. The amount of tax so deducted and withheld must be held to be a special fund in trust for this state.

NEW SECTION.  Sec. 503   CREDIT FOR TAX WITHHELD--HOW CLAIMED. The amount deducted and withheld as tax under section 501 of this act during any taxable year must be allowed as a credit against the tax imposed for the taxable year by this title. If the liability of any individual for taxes, interest, penalties, or other amounts due the state of Washington is less than the total amount of the credit that the individual is entitled to claim under this section, the individual is entitled to a refund from the department in the amount of the excess of the credit over the amounts otherwise due. If any individual entitled to claim a credit under this section is not otherwise required by this title to file a return, a refund may be obtained in the amount of the credit by filing a return, with applicable sections completed, to claim the refund. No credit or refund is allowed under this section unless the credit or refund is claimed on a return filed for the taxable year for which the amount was deducted and withheld.

NEW SECTION.  Sec. 504   WITHHOLDING--FAILURE TO PAY OR COLLECT--PENALTIES. (1) The tax required by this title to be collected by the employer must be deemed to be held in trust by the employer until paid to the department.
     (2) In case any employer, or a responsible person within the meaning of internal revenue code section 6672, fails to collect the tax imposed by this title or having collected the tax fails to pay it to the department, the employer or responsible person must, nevertheless, be personally liable to the state for the amount of the tax. The interest and penalty provisions of chapter 82.32 RCW apply to this section.

NEW SECTION.  Sec. 505   ESTIMATED TAX IMPOSED--DUE DATE OF ESTIMATED TAXES--AMOUNT OF ESTIMATED TAX--UNDERPAYMENT PENALTY. (1) Beginning January 1, 2015, each taxpayer who is required by the internal revenue code to make payment of estimated taxes must pay to the department on forms prescribed by the department the estimated taxes due under this title.
     (2) The provisions of the internal revenue code relating to the determination of reporting periods and due dates of payments of estimated tax apply to the estimated tax payments due under this section.
     (3) The amount of the estimated tax must be the annualized tax divided by the number of months in the reporting period. No estimated tax is due if the annualized tax is less than five hundred dollars. The provisions of RCW 82.32.050 and 82.32.090 must apply to underpayments of estimated tax but may not apply to underpayments if the tax remitted to the department under this Part is either ninety percent of the tax shown on the return or one hundred percent of the tax shown on the previous year's tax return.
     (4) For purposes of this section, the annualized tax is the taxpayer's projected tax liability for the taxable year as computed under internal revenue code section 6654 and the regulations thereunder.

PART VI
CRIMES

NEW SECTION.  Sec. 601   CRIMES. (1) Any person who knowingly attempts to evade the tax imposed under this title or payment thereof is guilty of a class C felony as provided in chapter 9A.20 RCW.
     (2) Any person required to collect tax imposed under this title who knowingly fails to collect, truthfully account for, or pay over the tax is guilty of a class C felony as provided in chapter 9A.20 RCW.
     (3) Any person who knowingly fails to pay tax, pay estimated tax, make returns, keep records, or supply information, as required under this title, is guilty of a gross misdemeanor as provided in chapter 9A.20 RCW.

PART VII
ADMINISTRATION AND ENFORCEMENT

NEW SECTION.  Sec. 701   METHOD OF ACCOUNTING. (1) A taxpayer's method of accounting for purposes of the tax imposed under this title must be the same as the taxpayer's method of accounting for federal income tax purposes. If no method of accounting has been regularly used by a taxpayer for federal income tax purposes or if the method used does not clearly reflect income, tax due under this title must be computed by a method of accounting that in the opinion of the department fairly reflects income.
     (2) If a person's method of accounting is changed for federal income tax purposes, it must be similarly changed for purposes of this title.

NEW SECTION.  Sec. 702   PERSONS REQUIRED TO FILE RETURNS. (1) All taxpayers must file with the department, on forms prescribed by the department, an income tax return for each taxable year. An individual owing no tax for a taxable year is not required to file a return for that year. Each person required to file a return under this title must, without assessment, notice, or demand, pay any tax due thereon to the department on or before the date fixed for the filing of the return.
     (2) The department may by rule require that certain taxpayers file, on forms prescribed by the department, informational returns for any period.
     (3) If an adjustment to a taxpayer's federal return is made by the taxpayer or the internal revenue service, the taxpayer must, within ninety days of the final determination of the adjustment by the internal revenue service or within thirty days of the filing of a federal return adjusted by the taxpayer, file with the department on forms prescribed by the department, a corrected return reflecting the adjustments as finally determined. The taxpayer must pay any additional tax due resulting from the finally determined internal revenue service adjustment or a taxpayer adjustment without notice and assessment. Notwithstanding any provision of this title or any other title to the contrary, the period of limitation for the collection of the additional tax, interest, and penalty due as a result of an adjustment by the taxpayer or a finally determined internal revenue service adjustment must begin at the later of thirty days following the final determination of the adjustment or the date of the filing of the corrected return.

NEW SECTION.  Sec. 703   DUE DATE FOR FILING A RETURN--EXTENSIONS--INTEREST AND PENALTIES. The due date of a return required to be filed with the department must be the due date of the federal income tax return or informational return for federal income tax purposes. The department has the authority to grant extensions of times by which returns required to be filed by this title may be submitted. The department also has the authority to grant extensions of time to pay tax with regard to taxes imposed by this title. Interest at the rate as specified in RCW 82.32.050 must accrue during any extension period and the interest and penalty provisions of chapter 82.32 RCW must apply to late payments and deficiencies. Notwithstanding the limitation of RCW 82.32.090, in the case of the late filing of an informational return, there must be imposed a penalty the amount of which must be established by the department by rule. The penalty may not exceed fifty dollars per month for a maximum of ten months. RCW 82.32.105 must apply to this section.

NEW SECTION.  Sec. 704   JOINT RETURN. (1) If the federal income tax liabilities of both spouses are determined on a joint federal return for the taxable year, they must file a joint return under this title.
     (2) If neither spouse is required to file a federal income tax return for the taxable year, a joint return is required to be filed under this title under the same conditions under which a joint return may be filed for purposes of the federal income tax.
     (3) Except as provided in subsection (5) of this section, if the federal income tax liability of either spouse is determined on a separate federal return for the taxable year, they must file separate returns under this title.
     (4) In any case in which a joint return is filed under this section, the liability of the husband and wife or partners is joint and several, unless the spouse or partner is relieved of liability under section 6013 of the internal revenue code.
     (5) Partners in a state registered domestic partnership may file a joint return under this title.

NEW SECTION.  Sec. 705   RECORDS--RETURNS. (1) Every taxpayer and every person required to deduct and withhold the tax imposed under this title must keep records, render statements, make returns, file reports, and perform other acts as the department requires by rule. Each return must be made under penalty of perjury and on forms prescribed by the department. The department may require other statements and reports be made under penalty of perjury and on forms prescribed by the department. The department may require any taxpayer and any person required to deduct and withhold the tax imposed under this title to furnish to the department a correct copy of any return or document that the taxpayer has filed with the internal revenue service or received from the internal revenue service.
     (2) All books and records and other papers and documents required to be kept under this title are subject to inspection by the department at all times during business hours of the day.

NEW SECTION.  Sec. 706   ESTIMATION AGREEMENTS. The department may reasonably estimate the items of business or nonbusiness income of a taxpayer having an office within the state and one or more other states or foreign countries that may be apportioned or allocated to the state and may enter into estimation agreements with such taxpayers for the determination of their liability for the tax imposed by this title.

NEW SECTION.  Sec. 707   PROVISIONS OF INTERNAL REVENUE CODE CONTROL. (1) To the extent possible without being inconsistent with this title, all of the provisions of the internal revenue code relating to the following subjects apply to the taxes imposed under this title:
     (a) Time of payment of tax deducted and withheld under section 501 of this act;
     (b) Liability of transferees;
     (c) Time and manner of making returns, extensions of time for filing returns, verification of returns, and the time when a return is deemed filed.
     (2) The department by rule may provide modifications and exceptions to the provisions listed in subsection (1) of this section, if reasonably necessary to facilitate the prompt, efficient, and equitable collection of tax under this title.

NEW SECTION.  Sec. 708   REFUNDS OF OVERPAYMENTS--OTHER ADMINISTRATIVE PROVISIONS. (1) The department must refund all taxes improperly paid or collected.
     (2) The following sections apply to the administration of taxes imposed under this title: RCW 82.32.050, 82.32.055, 82.32.060, 82.32.070, 82.32.080, 82.32.090, 82.32.100, 82.32.105, 82.32.110, 82.32.117, 82.32.120, 82.32.130, 82.32.135, 82.32.140, 82.32.150, 82.32.160, 82.32.170, 82.32.180, 82.32.190, 82.32.200, 82.32.210, 82.32.212, 82.32.220, 82.32.230, 82.32.235, 82.32.237, 82.32.240, 82.32.245, 82.32.260, 82.32.265, 82.32.310, 82.32.320, 82.32.330, 82.32.340, 82.32.350, 82.32.360, 82.32.380, and 82.32.410.

NEW SECTION.  Sec. 709   RULES. The department may adopt rules under chapter 34.05 RCW for the administration and enforcement of this title. The rules, to the extent possible without being inconsistent with this title, must follow the internal revenue code and the regulations and rulings of the United States treasury department with respect to the federal income tax. The department may adopt as a part of these rules any portions of the internal revenue code and treasury department regulations and rulings, in whole or in part.

Sec. 710   RCW 82.32.010 and 2010 1st sp.s. c 19 s 13 are each amended to read as follows:
     The provisions of this chapter apply with respect to the taxes imposed under chapters 82.04 through 82.14 RCW, under chapter 82.14B RCW, under chapters 82.16 through 82.29A RCW of this title, under chapter 84.33 RCW, under Title 82A RCW (the new title created in section 1302 of this act), and under other titles, chapters, and sections in such manner and to such extent as indicated in each such title, chapter, or section.

PART VIII
APPEALS

Sec. 801   RCW 82.03.130 and 2005 c 253 s 7 are each amended to read as follows:
     (1) The board ((shall have)) has jurisdiction to decide the following types of appeals:
     (a) Appeals taken pursuant to RCW 82.03.190.
     (b) Appeals from a county board of equalization pursuant to RCW 84.08.130.
     (c) Appeals by an assessor or landowner from an order of the director of revenue made pursuant to RCW 84.08.010 and 84.08.060, if filed with the board of tax appeals within thirty days after the mailing of the order, the right to such an appeal being hereby established.
     (d) Appeals by an assessor or owner of an intercounty public utility or private car company from determinations by the director of revenue of equalized assessed valuation of property and the apportionment thereof to a county made pursuant to chapter 84.12 and 84.16 RCW, if filed with the board of tax appeals within thirty days after mailing of the determination, the right to such appeal being hereby established.
     (e) Appeals by an assessor, landowner, or owner of an intercounty public utility or private car company from a determination of any county indicated ratio for such county compiled by the department of revenue pursuant to RCW 84.48.075((: PROVIDED, That)).
     (i) ((Said)) The appeal be filed after review of the ratio under RCW 84.48.075(3) and not later than fifteen days after the mailing of the certification; and
     (ii) The hearing before the board ((shall)) must be expeditiously held in accordance with rules prescribed by the board and ((shall)) takes precedence over all matters of the same character.
     (f) Appeals from the decisions of sale price of second class shorelands on navigable lakes by the department of natural resources pursuant to RCW ((79.94.210)) 79.125.450.
     (g) Appeals from urban redevelopment property tax apportionment district proposals established by governmental ordinances pursuant to RCW 39.88.060.
     (h) Appeals from interest rates as determined by the department of revenue for use in valuing farmland under current use assessment pursuant to RCW 84.34.065.
     (i) Appeals from revisions to stumpage value tables used to determine value by the department of revenue pursuant to RCW 84.33.091.
     (j) Appeals from denial of tax exemption application by the department of revenue pursuant to RCW 84.36.850.
     (k) Appeals pursuant to RCW 84.40.038(3).
     (l) Appeals pursuant to RCW 84.39.020.
     (m) Appeals relating to income tax deficiencies and refunds, including penalties and interest, under Title 82A RCW (the new title created in section 1302 of this act).
     (2) Except as otherwise specifically provided by law hereafter, the provisions of RCW 1.12.070 ((shall apply)) applies to all notices of appeal filed with the board of tax appeals.

Sec. 802   RCW 82.03.140 and 2000 c 103 s 1 are each amended to read as follows:
     In all appeals over which the board has jurisdiction under RCW 82.03.130, a party taking an appeal may elect either a formal or an informal hearing, such election to be made according to rules of practice and procedure to be promulgated by the board((: PROVIDED, That)). However, nothing ((shall)) prevents the assessor or taxpayer, as a party to an appeal pursuant to RCW 84.08.130, within twenty days from the date of the receipt of the notice of appeal, from filing with the clerk of the board notice of intention that the hearing be a formal one((: PROVIDED, HOWEVER, That)). Moreover, nothing ((herein shall)) in this section may be construed to modify the provisions of RCW 82.03.190((: AND PROVIDED FURTHER, That)) and upon an appeal under RCW 82.03.130(1) (e) or (m), the director of revenue may, within ten days from the date of its receipt of the notice of appeal, file with the clerk of the board notice of its ((intention that the hearing be held pursuant to chapter 34.05 RCW)) election of a formal hearing. In the event that appeals are taken from the same decision, order, or determination, as the case may be, by different parties and only one of such parties elects a formal hearing, a formal hearing ((shall)) must be granted.

PART IX
CONFORMING AMENDMENTS

Sec. 901   RCW 2.10.180 and 1991 c 365 s 18 are each amended to read as follows:
     (1) Except as provided in subsections (2), (3), ((and)) (4), and (5) of this section, the right of a person to a retirement allowance, disability allowance, or death benefit, the retirement, disability or death allowance itself, any optional benefit, any other right accrued or accruing to any person under the provisions of this chapter, and the moneys in the fund created under this chapter, are hereby exempt from any state, county, municipal, or other local tax and ((shall)) are not ((be)) subject to execution, garnishment, or any other process of law whatsoever.
     (2) Subsection (1) of this section ((shall)) may not be deemed to prohibit a beneficiary of a retirement allowance from authorizing deductions therefrom for payment of premiums due on any group insurance policy or plan issued for the benefit of a group comprised of public employees of the state of Washington.
     (3) Deductions made in the past from retirement benefits are hereby expressly recognized, ratified, and affirmed. Future deductions may only be made in accordance with this section.
     (4) Subsection (1) of this section ((shall)) does not prohibit the department of retirement systems from complying with (a) a wage assignment order for child support issued pursuant to chapter 26.18 RCW, (b) a notice of payroll deduction issued under chapter 26.23 RCW, (c) an order to withhold and deliver issued pursuant to chapter 74.20A RCW, (d) a mandatory benefits assignment order issued pursuant to chapter 41.50 RCW, (e) a court order directing the department of retirement systems to pay benefits directly to an obligee under a dissolution order as defined in RCW 41.50.500(3) which fully complies with RCW 41.50.670 and 41.50.700, or (f) any administrative or court order expressly authorized by federal law.
     (5) Subsection (1) of this section does not exempt any pension or other benefit received under this chapter from tax under Title 82A RCW (the new title created in section 1302 of this act), nor does it prohibit the department of retirement systems from complying with the tax withholding requirements of that title.

Sec. 902   RCW 2.12.090 and 1991 c 365 s 19 are each amended to read as follows:
     (1) Except as provided in subsections (2), (3), ((and)) (4), and (5) of this section, the right of any person to a retirement allowance or optional retirement allowance under the provisions of this chapter and all moneys and investments and income thereof are exempt from any state, county, municipal, or other local tax and ((shall not be)) is not subject to execution, garnishment, attachment, the operation of bankruptcy or the insolvency laws, or other processes of law whatsoever and ((shall be)) is unassignable except as herein specifically provided.
     (2) Subsection (1) of this section ((shall)) does not prohibit the department of retirement systems from complying with (a) a wage assignment order for child support issued pursuant to chapter 26.18 RCW, (b) a notice of payroll deduction issued under chapter 26.23 RCW, (c) an order to withhold and deliver issued pursuant to chapter 74.20A RCW, (d) a mandatory benefits assignment order issued pursuant to chapter 41.50 RCW, (e) a court order directing the department of retirement systems to pay benefits directly to an obligee under a dissolution order as defined in RCW 41.50.500(3) which fully complies with RCW 41.50.670 and 41.50.700, or (f) any administrative or court order expressly authorized by federal law.
     (3) Subsection (1) of this section ((shall)) may not be deemed to prohibit a beneficiary of a retirement allowance from authorizing deductions therefrom for payment of premiums due on any group insurance policy or plan issued for the benefit of a group comprised of public employees of the state of Washington.
     (4) Deductions made in the past from retirement benefits are hereby expressly recognized, ratified, and affirmed. Future deductions may only be made in accordance with this section.
     (5) Subsection (1) of this section does not exempt any pension or other benefit received under this chapter from tax under Title 82A RCW (the new title created in section 1302 of this act), nor does it prohibit the department of retirement systems from complying with the tax withholding requirements of that title.

Sec. 903   RCW 6.15.020 and 2011 c 162 s 3 are each amended to read as follows:
     (1) It is the policy of the state of Washington to ensure the well-being of its citizens by protecting retirement income to which they are or may become entitled. For that purpose generally and pursuant to the authority granted to the state of Washington under 11 U.S.C. Sec. 522(b)(2), the exemptions in this section relating to retirement benefits are provided.
     (2) Unless otherwise provided by federal law, any money received by any citizen of the state of Washington as a pension from the government of the United States, whether the same be in the actual possession of such person or be deposited or loaned, ((shall be)) is exempt from execution, attachment, garnishment, or seizure by or under any legal process whatever, and when a debtor dies, or absconds, and leaves his or her family any money exempted by this subsection, the same ((shall be)) is exempt to the family as provided in this subsection. This subsection ((shall)) does not apply to child support collection actions issued under chapter 26.18, 26.23, or 74.20A RCW, if otherwise permitted by federal law, or to collection actions for taxes imposed under Title 82A RCW (the new title created in section 1302 of this act).
     (3) The right of a person to a pension, annuity, or retirement allowance or disability allowance, or death benefits, or any optional benefit, or any other right accrued or accruing to any citizen of the state of Washington under any employee benefit plan, and any fund created by such a plan or arrangement, ((shall be)) is exempt from execution, attachment, garnishment, or seizure by or under any legal process whatever. This subsection ((shall)) does not apply to child support collection actions issued under chapter 26.18, 26.23, or 74.20A RCW if otherwise permitted by federal law, or to collection actions for taxes imposed under Title 82A RCW (the new title created in section 1302 of this act). This subsection ((shall)) permits benefits under any such plan or arrangement to be payable to a spouse, former spouse, child, or other dependent of a participant in such plan to the extent expressly provided for in a qualified domestic relations order that meets the requirements for such orders under the plan, or, in the case of benefits payable under a plan described in 26 U.S.C. Sec. 403(b) or 408 of the internal revenue code of 1986, as amended, or section 409 of such code as in effect before January 1, 1984, to the extent provided in any order issued by a court of competent jurisdiction that provides for maintenance or support. This subsection does not prohibit actions against an employee benefit plan, or fund for valid obligations incurred by the plan or fund for the benefit of the plan or fund.
     (4) For the purposes of this section, the term "employee benefit plan" means any plan or arrangement that is described in RCW 49.64.020, including any Keogh plan, whether funded by a trust or by an annuity contract, and in 26 U.S.C. Sec. 401(a) or 403(a) of the internal revenue code of 1986, as amended; or that is a tax-sheltered annuity or a custodial account described in section 403(b) of such code or an individual retirement account or an individual retirement annuity described in section 408 of such code; or a Roth individual retirement account described in section 408A of such code; or a medical savings account or a health savings account described in sections 220 and 223, respectively, of such code; or a retirement bond described in section 409 of such code as in effect before January 1, 1984. The term "employee benefit plan" ((shall)) does not include any employee benefit plan that is established or maintained for its employees by the government of the United States, by the state of Washington under chapter 2.10, 2.12, 41.26, 41.32, 41.34, 41.35, 41.37, 41.40, or 43.43 RCW or RCW 41.50.770, or by any agency or instrumentality of the government of the United States.
     (5) An employee benefit plan ((shall be)) is deemed to be a spendthrift trust, regardless of the source of funds, the relationship between the trustee or custodian of the plan and the beneficiary, or the ability of the debtor to withdraw or borrow or otherwise become entitled to benefits from the plan before retirement. This subsection ((shall)) does not apply to child support collection actions issued under chapter 26.18, 26.23, or 74.20A RCW, if otherwise permitted by federal law, or to collection actions for taxes imposed under Title 82A RCW (the new title created in section 1302 of this act). This subsection ((shall)) permits benefits under any such plan or arrangement to be payable to a spouse, former spouse, child, or other dependent of a participant in such plan to the extent expressly provided for in a qualified domestic relations order that meets the requirements for such orders under the plan, or, in the case of benefits payable under a plan described in 26 U.S.C. Sec. 403(b) or 408 of the internal revenue code of 1986, as amended, or section 409 of such code as in effect before January 1, 1984, to the extent provided in any order issued by a court of competent jurisdiction that provides for maintenance or support.
     (6) Unless prohibited by federal law, nothing contained in subsection (3), (4), or (5) of this section ((shall)) may be construed as a termination or limitation of a spouse's community property interest in an employee benefit plan held in the name of or on account of the other spouse, who is the participant or the account holder spouse. Unless prohibited by applicable federal law, at the death of the nonparticipant, nonaccount holder spouse, the nonparticipant, nonaccount holder spouse may transfer or distribute the community property interest of the nonparticipant, nonaccount holder spouse in the participant or account holder spouse's employee benefit plan to the nonparticipant, nonaccount holder spouse's estate, testamentary trust, inter vivos trust, or other successor or successors pursuant to the last will of the nonparticipant, nonaccount holder spouse or the law of intestate succession, and that distributee may, but ((shall)) is not ((be)) required to, obtain an order of a court of competent jurisdiction, including a nonjudicial binding agreement or order entered under chapter 11.96A RCW, to confirm the distribution. For purposes of subsection (3) of this section, the distributee of the nonparticipant, nonaccount holder spouse's community property interest in an employee benefit plan ((shall be)) is considered a person entitled to the full protection of subsection (3) of this section. The nonparticipant, nonaccount holder spouse's consent to a beneficiary designation by the participant or account holder spouse with respect to an employee benefit plan ((shall)) is not, absent clear and convincing evidence to the contrary, be deemed a release, gift, relinquishment, termination, limitation, or transfer of the nonparticipant, nonaccount holder spouse's community property interest in an employee benefit plan. For purposes of this subsection, the term "nonparticipant, nonaccount holder spouse" means the spouse of the person who is a participant in an employee benefit plan or in whose name an individual retirement account is maintained. As used in this subsection, an order of a court of competent jurisdiction entered under chapter 11.96A RCW includes an agreement, as that term is used under RCW 11.96A.220.

Sec. 904   RCW 41.24.240 and 1995 c 11 s 13 are each amended to read as follows:
     (1) The right of any person to any future payment under the provisions of this chapter ((shall)) is not ((be)) transferable or assignable at law or in equity, and none of the moneys paid or payable or the rights existing under this chapter, ((shall be)) is subject to execution, levy, attachment, garnishment, or other legal process, or to the operation of any bankruptcy or insolvency law. This section ((shall)) is not ((be)) applicable to any child support collection action taken under chapter 26.18, 26.23, or 74.20A RCW. Benefits under this chapter ((shall be)) are payable to a spouse or ex-spouse to the extent expressly provided for in any court decree of dissolution or legal separation or in any court order or court-approved property settlement agreement incident to any court decree of dissolution or legal separation.
     (2) Nothing in this chapter ((shall)) may be construed to deprive any participant, eligible to receive a pension hereunder, from receiving a pension under any other act to which that participant may become eligible by reason of services other than or in addition to his or her services under this chapter.
     (3) Subsection (1) of this section does not exempt any pension or other benefit received under this chapter from tax under Title 82A RCW (the new title created in section 1302 of this act), nor does it prohibit the department of retirement systems from complying with the tax withholding requirements of that title.

Sec. 905   RCW 41.32.052 and 1991 c 365 s 21 and 1991 c 35 s 63 are each reenacted and amended to read as follows:
     (1) Subject to subsections (2) ((and)), (3), and (4) of this section, the right of a person to a pension, an annuity, a retirement allowance, or disability allowance, to the return of contributions, any optional benefit or death benefit, any other right accrued or accruing to any person under the provisions of this chapter and the moneys in the various funds created by this chapter ((shall be)) is unassignable, and are hereby exempt from any state, county, municipal or other local tax, and ((shall)) are not ((be)) subject to execution, garnishment, attachment, the operation of bankruptcy or insolvency laws, or other process of law whatsoever.
     (2)(a) This section ((shall)) may not be deemed to prohibit a beneficiary of a retirement allowance who is eligible:
     (((a))) (i) Under RCW 41.05.080 from authorizing monthly deductions therefrom for payment of premiums due on any group insurance policy or plan issued for the benefit of a group comprised of public employees of the state of Washington or its political subdivisions;
     (((b))) (ii) Under a group health care benefit plan approved pursuant to RCW 28A.400.350 or 41.05.065 from authorizing monthly deductions therefrom, of the amount or amounts of subscription payments, premiums, or contributions to any person, firm, or corporation furnishing or providing medical, surgical, and hospital care or other health care insurance; or
     (((c))) (iii) Under this system from authorizing monthly deductions therefrom for payment of dues and other membership fees to any retirement association composed of retired teachers and/or public employees pursuant to a written agreement between the director and the retirement association.
     (b) Deductions under (a) ((and (b))) (i) and (ii) of this subsection ((shall)) must be made in accordance with rules that may be adopted by the director.
     (3) Subsection (1) of this section ((shall)) does not prohibit the department from complying with (a) a wage assignment order for child support issued pursuant to chapter 26.18 RCW, (b) an order to withhold and deliver issued pursuant to chapter 74.20A RCW, (c) a notice of payroll deduction issued pursuant to RCW 26.23.060, (d) a mandatory benefits assignment order issued by the department, (e) a court order directing the department of retirement systems to pay benefits directly to an obligee under a dissolution order as defined in RCW 41.50.500(3) which fully complies with RCW 41.50.670 and 41.50.700, or (f) any administrative or court order expressly authorized by federal law.
     (4) Subsection (1) of this section does not exempt any pension or other benefit received under this chapter from tax under Title 82A RCW (the new title created in section 1302 of this act), nor does it prohibit the department of retirement systems from complying with the tax withholding requirements of that title.

Sec. 906   RCW 41.35.100 and 1998 c 341 s 11 are each amended to read as follows:
     (1) Subject to subsections (2) ((and)), (3), and (4) of this section, the right of a person to a pension, an annuity, or retirement allowance, any optional benefit, any other right accrued or accruing to any person under the provisions of this chapter, the various funds created by this chapter, and all moneys and investments and income thereof, are hereby exempt from any state, county, municipal, or other local tax, and ((shall)) are not ((be)) subject to execution, garnishment, attachment, the operation of bankruptcy or insolvency laws, or other process of law whatsoever, and ((shall be)) is unassignable.
     (2) This section does not prohibit a beneficiary of a retirement allowance from authorizing deductions therefrom for payment of premiums due on any group insurance policy or plan issued for the benefit of a group comprised of public employees of the state of Washington or its political subdivisions and which has been approved for deduction in accordance with rules that may be adopted by the state health care authority and/or the department. This section also does not prohibit a beneficiary of a retirement allowance from authorizing deductions therefrom for payment of dues and other membership fees to any retirement association or organization the membership of which is composed of retired public employees, if a total of three hundred or more of such retired employees have authorized such deduction for payment to the same retirement association or organization.
     (3) Subsection (1) of this section does not prohibit the department from complying with (a) a wage assignment order for child support issued pursuant to chapter 26.18 RCW, (b) an order to withhold and deliver issued pursuant to chapter 74.20A RCW, (c) a notice of payroll deduction issued pursuant to RCW 26.23.060, (d) a mandatory benefits assignment order issued by the department, (e) a court order directing the department of retirement systems to pay benefits directly to an obligee under a dissolution order as defined in RCW 41.50.500(3) which fully complies with RCW 41.50.670 and 41.50.700, or (f) any administrative or court order expressly authorized by federal law.
     (4) Subsection (1) of this section does not exempt any pension or other benefit received under this chapter from tax under Title 82A RCW (the new title created in section 1302 of this act), nor does it prohibit the department of retirement systems from complying with the tax withholding requirements of that title.

Sec. 907   RCW 41.40.052 and 1999 c 83 s 1 are each amended to read as follows:
     (1) Subject to subsections (2) ((and)), (3), and (4) of this section, the right of a person to a pension, an annuity, or retirement allowance, any optional benefit, any other right accrued or accruing to any person under the provisions of this chapter, the various funds created by this chapter, and all moneys and investments and income thereof, are ((hereby)) exempt from any state, county, municipal, or other local tax, and ((shall)) are not ((be)) subject to execution, garnishment, attachment, the operation of bankruptcy or insolvency laws, or other process of law whatsoever, and ((shall be)) is unassignable.
     (2)(a) This section ((shall)) is not ((be)) deemed to prohibit a beneficiary of a retirement allowance from authorizing deductions therefrom for payment of premiums due on any group insurance policy or plan issued for the benefit of a group comprised of public employees of the state of Washington or its political subdivisions and which has been approved for deduction in accordance with rules that may be adopted by the state health care authority and/or the department, and this section ((shall)) may not be deemed to prohibit a beneficiary of a retirement allowance from authorizing deductions therefrom for payment of dues and other membership fees to any retirement association or organization the membership of which is composed of retired public employees, if a total of three hundred or more of such retired employees have authorized such deduction for payment to the same retirement association or organization.
     (b) This section does not prohibit a beneficiary of a retirement allowance from authorizing deductions from that allowance for charitable purposes on the same terms as employees and public officers under RCW 41.04.035 and 41.04.036.
     (3) Subsection (1) of this section ((shall)) does not prohibit the department from complying with (a) a wage assignment order for child support issued pursuant to chapter 26.18 RCW, (b) an order to withhold and deliver issued pursuant to chapter 74.20A RCW, (c) a notice of payroll deduction issued pursuant to RCW 26.23.060, (d) a mandatory benefits assignment order issued by the department, (e) a court order directing the department of retirement systems to pay benefits directly to an obligee under a dissolution order as defined in RCW 41.50.500(3) which fully complies with RCW 41.50.670 and 41.50.700, or (f) any administrative or court order expressly authorized by federal law.
     (4) Subsection (1) of this section does not exempt any pension or other benefit received under this chapter from tax under Title 82A RCW (the new title created in section 1302 of this act), nor does it prohibit the department of retirement systems from complying with the tax withholding requirements of that title.

Sec. 908   RCW 41.44.240 and 1989 c 360 s 28 are each amended to read as follows:
     (1) The right of a person to a pension, annuity or a retirement allowance, to the return of contribution, the pension, annuity or retirement allowance itself, any optional benefit, any other right accrued or accruing to any person under the provisions of this chapter, and the moneys in the fund created under this chapter ((shall)) are not ((be)) subject to execution, garnishment, or any other process whatsoever.
     (2) This section ((shall)) does not apply to child support collection actions taken under chapter 26.18, 26.23, or 74.20A RCW against benefits payable under any such plan or arrangement. Benefits under this chapter ((shall be)) are payable to a spouse or ex-spouse to the extent expressly provided for in any court decree of dissolution or legal separation or in any court order or court-approved property settlement agreement incident to any court decree of dissolution or legal separation.
     (3) Subsection (1) of this section does not exempt any pension or other benefit received under this chapter from tax under Title 82A RCW (the new title created in section 1302 of this act), nor does it prohibit the department of retirement systems from complying with the tax withholding requirements of that title.

Sec. 909   RCW 41.26.053 and 1991 c 365 s 20 and 1991 c 35 s 25 are each reenacted and amended to read as follows:
     (1) Subject to subsections (2) ((and)), (3), and (4) of this section, the right of a person to a retirement allowance, disability allowance, or death benefit, to the return of accumulated contributions, the retirement, disability or death allowance itself, any optional benefit, any other right accrued or accruing to any person under the provisions of this chapter, and the moneys in the fund created under this chapter, are ((hereby)) exempt from any state, county, municipal, or other local tax and ((shall)) are not ((be)) subject to execution, garnishment, attachment, the operation of bankruptcy or insolvency laws, or any other process of law whatsoever, and ((shall be)) are unassignable.
     (2) On the written request of any person eligible to receive benefits under this section, the department may deduct from such payments the premiums for life, health, or other insurance. The request on behalf of any child or children ((shall)) must be made by the legal guardian of such child or children. The department may provide for such persons one or more plans of group insurance, through contracts with regularly constituted insurance carriers or health care service contractors.
     (3) Subsection (1) of this section ((shall)) does not prohibit the department from complying with (a) a wage assignment order for child support issued pursuant to chapter 26.18 RCW, (b) an order to withhold and deliver issued pursuant to chapter 74.20A RCW, (c) a notice of payroll deduction issued pursuant to RCW 26.23.060, (d) a mandatory benefits assignment order issued by the department, (e) a court order directing the department of retirement systems to pay benefits directly to an obligee under a dissolution order as defined in RCW 41.50.500(3) which fully complies with RCW 41.50.670 and 41.50.700, or (f) any administrative or court order expressly authorized by federal law.
     (4) Subsection (1) of this section does not exempt any pension or other benefit received under this chapter from tax under Title 82A RCW (the new title created in section 1302 of this act), nor does it prohibit the department of retirement systems from complying with the tax withholding requirements of that title.

Sec. 910   RCW 43.43.310 and 1991 c 365 s 23 are each amended to read as follows:
     (1) Except as provided in subsections (2) ((and)), (3), and (4) of this section, the right of any person to a retirement allowance or optional retirement allowance under the provisions hereof and all moneys and investments and income thereof are exempt from any state, county, municipal, or other local tax and ((shall)) are not ((be)) subject to execution, garnishment, attachment, the operation of bankruptcy or the insolvency laws, or other processes of law whatsoever and ((shall be)) are unassignable except as herein specifically provided.
     (2) Subsection (1) of this section ((shall)) does not prohibit the department of retirement systems from complying with (a) a wage assignment order for child support issued pursuant to chapter 26.18 RCW, (b) an order to withhold and deliver issued pursuant to chapter 74.20A RCW, (c) a notice of payroll deduction issued pursuant to RCW 26.23.060, (d) a mandatory benefits assignment order issued pursuant to chapter 41.50 RCW, (e) a court order directing the department of retirement systems to pay benefits directly to an obligee under a dissolution order as defined in RCW 41.50.500(3) which fully complies with RCW 41.50.670 and 41.50.700, or (f) any administrative or court order expressly authorized by federal law.
     (3) Subsection (1) of this section ((shall)) may not be deemed to prohibit a beneficiary of a retirement allowance from authorizing deductions therefrom for payment of premiums due on any group insurance policy or plan issued for the benefit of a group comprised of members of the Washington state patrol or other public employees of the state of Washington, or for contributions to the Washington state patrol memorial foundation.
     (4) Subsection (1) of this section does not exempt any pension or other benefit received under this chapter from tax under Title 82A RCW (the new title created in section 1302 of this act), nor does it prohibit the department of retirement systems from complying with the tax withholding requirements of that title.

NEW SECTION.  Sec. 911   RCW 6.15.025 (Exemption of pension or retirement plan benefits from execution for judgment for out-of-state income tax) and 1991 c 123 s 3 are each repealed.

PART X
REDUCTION OF STATE SALES TAX RATE

Sec. 1001   RCW 82.08.020 and 2011 c 171 s 120 are each amended to read as follows:
     (1) There is levied and collected a tax equal to ((six and five-tenths)) five percent of the selling price on each retail sale in this state of:
     (a) Tangible personal property, unless the sale is specifically excluded from the RCW 82.04.050 definition of retail sale;
     (b) Digital goods, digital codes, and digital automated services, if the sale is included within the RCW 82.04.050 definition of retail sale;
     (c) Services, other than digital automated services, included within the RCW 82.04.050 definition of retail sale;
     (d) Extended warranties to consumers; and
     (e) Anything else, the sale of which is included within the RCW 82.04.050 definition of retail sale.
     (2) There is levied and collected an additional tax on each retail car rental, regardless of whether the vehicle is licensed in this state, equal to five and nine-tenths percent of the selling price. The revenue collected under this subsection must be deposited in the multimodal transportation account created in RCW 47.66.070.
     (3) Beginning July 1, 2003, there is levied and collected an additional tax of three-tenths of one percent of the selling price on each retail sale of a motor vehicle in this state, other than retail car rentals taxed under subsection (2) of this section. The revenue collected under this subsection must be deposited in the multimodal transportation account created in RCW 47.66.070.
     (4) For purposes of subsection (3) of this section, "motor vehicle" has the meaning provided in RCW 46.04.320, but does not include farm tractors or farm vehicles as defined in RCW 46.04.180 and 46.04.181, off-road vehicles as defined in RCW 46.04.365, nonhighway vehicles as defined in RCW 46.09.310, and snowmobiles as defined in RCW 46.04.546.
     (5) Beginning on December 8, 2005, 0.16 percent of the taxes collected under subsection (1) of this section must be dedicated to funding comprehensive performance audits required under RCW 43.09.470. The revenue identified in this subsection must be deposited in the performance audits of government account created in RCW 43.09.475.
     (6) The taxes imposed under this chapter apply to successive retail sales of the same property.
     (7) The rates provided in this section apply to taxes imposed under chapter 82.12 RCW as provided in RCW 82.12.020.

PART XI
ELIMINATION OF STATE BUSINESS AND OCCUPATION TAX

NEW SECTION.  Sec. 1101   The following acts or parts of acts are each repealed:
     (1) RCW 82.04.230 (Tax upon extractors) and 2006 c 300 s 5, 1993 sp.s. c 25 s 101, 1971 ex.s. c 281 s 2, 1969 ex.s. c 262 s 33, 1967 ex.s. c 149 s 7, & 1961 c 15 s 82.04.230;
     (2) RCW 82.04.240 (Tax on manufacturers) and 2010 c 114 s 104, 2004 c 24 s 4, 2003 c 149 s 3, 1998 c 312 s 3, 1993 sp.s. c 25 s 102, 1981 c 172 s 1, 1979 ex.s. c 196 s 1, 1971 ex.s. c 281 s 3, 1969 ex.s. c 262 s 34, 1967 ex.s. c 149 s 8, 1965 ex.s. c 173 s 5, & 1961 c 15 s 82.04.240;
     (3) RCW 82.04.2403 (Manufacturer tax not applicable to cleaning fish) and 1994 c 167 s 1;
     (4) RCW 82.04.2404 (Manufacturers -- Processors for hire--Semiconductor materials) and 2010 c 114 s 105 & 2006 c 84 s 2;
     (5) RCW 82.04.250 (Tax on retailers) and 2010 1st sp.s. c 23 s 509, (2010 1st sp.s. c 23 s 508 expired July 1, 2011), (2010 1st sp.s. c 23 s 507 expired July 13, 2010), 2010 1st sp.s. c 11 s 1, (2010 c 114 s 106 expired July 1, 2011), 2008 c 81 s 5, (2007 c 54 s 5 repealed by 2010 1st sp.s. c 11 s 7), 2006 c 177 s 5, 2003 2nd sp.s. c 1 s 2, & (2003 1st sp.s. c 2 s 1 expired July 1, 2006);
     (6) RCW 82.04.255 (Tax on real estate brokers) and 2011 c 322 s 2, 1997 c 7 s 1, 1996 c 1 s 1, 1993 sp.s. c 25 s 202, 1985 c 32 s 2, 1983 2nd ex.s. c 3 s 1, 1983 c 9 s 1, & 1970 ex.s. c 65 s 3;
     (7) RCW 82.04.257 (Tax on digital products and services) and 2010 c 111 s 301 & 2009 c 535 s 401;
     (8) RCW 82.04.260 (Tax on manufacturers and processors of various foods and by-products -- Research and development organizations -- Travel agents -- Certain international activities -- Stevedoring and associated activities -- Low-level waste disposers -- Insurance producers, surplus line brokers, and title insurance agents--Hospitals -- Commercial airplane activities -- Timber product activities -- Canned salmon processors) and 2011 c 2 s 203 (Initiative Measure No. 1107), 2010 1st sp.s. c 23 s 506, (2010 1st sp.s. c 23 s 505 expired June 10, 2010), & 2010 c 114 s 107;
     (9) RCW 82.04.263 (Tax on cleaning up radioactive waste and other by-products of weapons production and nuclear research and development) and 2009 c 469 s 202 & 1996 c 112 s 3;
     (10) RCW 82.04.270 (Tax on wholesalers) and 2004 c 24 s 5, 2003 2nd sp.s. c 1 s 5, 2001 1st sp.s. c 9 s 3, & 1999 c 358 s 2;
     (11) RCW 82.04.272 (Tax on warehousing and reselling prescription drugs) and 2003 c 168 s 401 & 1998 c 343 s 1;
     (12) RCW 82.04.280 (Tax on printers, publishers, highway contractors, extracting or processing for hire, cold storage warehouse or storage warehouse operation, insurance general agents, radio and television broadcasting, government contractors -- Cold storage warehouse defined -- Storage warehouse defined -- Periodical or magazine defined) and 2010 c 106 s 206, 2010 c 106 s 205, 2009 c 461 s 3, 2009 c 461 s 2, 2006 c 300 s 7, 2006 c 300 s 6, 2004 c 24 s 6, 2003 c 149 s 4, 1998 c 343 s 3, 1994 c 112 s 1, 1993 sp.s. c 25 s 303, 1993 sp.s. c 25 s 106, 1986 c 226 s 2, 1983 c 132 s 1, 1975 1st ex.s. c 90 s 3, 1971 ex.s. c 299 s 5, 1971 ex.s. c 281 s 7, & 1970 ex.s. c 8 s 2;
     (13) RCW 82.04.290 (Tax on international investment management services or other business or service activities) and 2011 c 174 s 101, 2008 c 81 s 6, 2005 c 369 s 8, 2004 c 174 s 2, 2003 c 343 s 2, 2001 1st sp.s. c 9 s 6, & (2001 1st sp.s. c 9 s 4 expired July 1, 2001);
     (14) RCW 82.04.2905 (Tax on providing day care) and 1998 c 312 s 7;
     (15) RCW 82.04.2906 (Tax on certain chemical dependency services) and 2003 c 343 s 1;
     (16) RCW 82.04.2907 (Tax on royalties) and 2010 1st sp.s. c 23 s 107, (2010 1st sp.s. c 23 s 106 expired July 1, 2010), 2010 c 111 s 302, 2009 c 535 s 407, 2001 c 320 s 3, & 1998 c 331 s 1;
     (17) RCW 82.04.2908 (Tax on provision of room and domiciliary care to boarding home residents) and 2005 c 514 s 302 & 2004 c 174 s 1;
     (18) RCW 82.04.2909 (Tax on aluminum smelters) and 2011 c 174 s 301;
     (19) RCW 82.04.293 (International investment management services--Definitions) and 1997 c 7 s 3 & 1995 c 229 s 1;
     (20) RCW 82.04.294 (Tax on manufacturers or wholesalers of solar energy systems) and 2011 c 179 s 1, 2010 c 114 s 109, 2009 c 469 s 501, 2007 c 54 s 8, & 2005 c 301 s 2; and
     (21) RCW 82.04.298 (Tax on qualified grocery distribution cooperatives) and 2011 c 2 s 204 (Initiative Measure No. 1107), 2010 1st sp.s. c 23 s 511, 2008 c 49 s 1, & 2001 1st sp.s. c 9 s 1.

Sec. 1102   RCW 82.04.261 and 2010 1st sp.s. c 23 s 510 are each amended to read as follows:
     (1) ((In addition to the taxes imposed under RCW 82.04.260(11),)) A surcharge is imposed on those persons who ((are)) would be subject to any of the taxes imposed under RCW 82.04.260(((11))) (12) if not for its repeal under section 1101 of this act. Except as otherwise provided in this section, the surcharge is equal to 0.052 percent. ((The surcharge is added to the rates provided in RCW 82.04.260(11) (a), (b), (c), and (d). The surcharge and this section expire July 1, 2024.))
     (2) All receipts from the surcharge imposed under this section must be deposited into the forest and fish support account created in RCW 76.09.405.
     (3)(a) The surcharge imposed under this section is suspended if:
     (i) Receipts from the surcharge total at least eight million dollars during any fiscal biennium; or
     (ii) The office of financial management certifies to the department that the federal government has appropriated at least two million dollars for participation in forest and fish report-related activities by federally recognized Indian tribes located within the geographical boundaries of the state of Washington for any federal fiscal year.
     (b)(i) The suspension of the surcharge under (a)(i) of this subsection (3) takes effect on the first day of the calendar month that is at least thirty days after the end of the month during which the department determines that receipts from the surcharge total at least eight million dollars during the fiscal biennium. The surcharge is imposed again at the beginning of the following fiscal biennium.
     (ii) The suspension of the surcharge under (a)(ii) of this subsection (3) takes effect on the later of the first day of October of any federal fiscal year for which the federal government appropriates at least two million dollars for participation in forest and fish report-related activities by federally recognized Indian tribes located within the geographical boundaries of the state of Washington, or the first day of a calendar month that is at least thirty days following the date that the office of financial management makes a certification to the department under subsection (5) of this section. The surcharge is imposed again on the first day of the following July.
     (4)(a) If, by October 1st of any federal fiscal year, the office of financial management certifies to the department that the federal government has appropriated funds for participation in forest and fish report-related activities by federally recognized Indian tribes located within the geographical boundaries of the state of Washington but the amount of the appropriation is less than two million dollars, the department must adjust the surcharge in accordance with this subsection.
     (b) The department must adjust the surcharge by an amount that the department estimates will cause the amount of funds deposited into the forest and fish support account for the state fiscal year that begins July 1st and that includes the beginning of the federal fiscal year for which the federal appropriation is made, to be reduced by twice the amount of the federal appropriation for participation in forest and fish report-related activities by federally recognized Indian tribes located within the geographical boundaries of the state of Washington.
     (c) Any adjustment in the surcharge takes effect at the beginning of a calendar month that is at least thirty days after the date that the office of financial management makes the certification under subsection (5) of this section.
     (d) The surcharge is imposed again at the rate provided in subsection (1) of this section on the first day of the following state fiscal year unless the surcharge is suspended under subsection (3) of this section or adjusted for that fiscal year under this subsection.
     (e) Adjustments of the amount of the surcharge by the department are final and may not be used to challenge the validity of the surcharge imposed under this section.
     (f) The department must provide timely notice to affected taxpayers of the suspension of the surcharge or an adjustment of the surcharge.
     (5) The office of financial management must make the certification to the department as to the status of federal appropriations for tribal participation in forest and fish report-related activities.
     (6) This section expires July 1, 2024.

Sec. 1103   RCW 82.04.285 and 2005 c 369 s 5 are each amended to read as follows:
     (1) Until July 1, 2015, upon every person engaging within this state in the business of operating contests of chance; as to such persons, the amount of tax with respect to the business of operating contests of chance is equal to the gross income of the business derived from contests of chance multiplied by the rate of 1.5 percent.
     (2) An additional tax is imposed on those persons subject to tax in subsection (1) of this section or who would otherwise be subject to the tax if not for its expiration on July 1, 2015. The amount of the additional tax with respect to the business of operating contests of chance is equal to the gross income of the business derived from contests of chance multiplied by the rate of 0.1 percent through June 30, 2006, and 0.13 percent thereafter. The money collected under this subsection (2) ((shall)) must be deposited in the problem gambling account created in RCW 43.20A.892. This subsection does not apply to businesses operating contests of chance when the gross income from the operation of contests of chance is less than fifty thousand dollars per year.
     (3) For the purpose of this section, "contests of chance" means any contests, games, gaming schemes, or gaming devices, other than the state lottery as defined in RCW 67.70.010, in which the outcome depends in a material degree upon an element of chance, notwithstanding that skill of the contestants may also be a factor in the outcome. The term includes social card games, bingo, raffle, and punchboard games, and pull-tabs as defined in chapter 9.46 RCW. The term does not include race meets for the conduct of which a license must be secured from the Washington horse racing commission, or "amusement game" as defined in RCW 9.46.0201.
     (4) "Gross income of the business" does not include the monetary value or actual cost of any prizes that are awarded, amounts paid to players for winning wagers, accrual of prizes for progressive jackpot contests, or repayment of amounts used to seed guaranteed progressive jackpot prizes.

PART XII
EXTENDING SALES TAX TO ALL SERVICES

Sec. 1201   RCW 82.04.050 and 2011 c 174 s 202 are each amended to read as follows:
     (1)(a) "Sale at retail" or "retail sale" means every sale of tangible personal property (including articles produced, fabricated, or imprinted) to all persons irrespective of the nature of their business and including, among others, without limiting the scope hereof, persons who install, repair, clean, alter, improve, construct, or decorate real or personal property of or for consumers other than a sale to a person who:
     (i) Purchases for the purpose of resale as tangible personal property in the regular course of business without intervening use by such person, but a purchase for the purpose of resale by a regional transit authority under RCW 81.112.300 is not a sale for resale; or
     (ii) Installs, repairs, cleans, alters, imprints, improves, constructs, or decorates real or personal property of or for consumers, if such tangible personal property becomes an ingredient or component of such real or personal property without intervening use by such person; or
     (iii) Purchases for the purpose of consuming the property purchased in producing for sale as a new article of tangible personal property or substance, of which such property becomes an ingredient or component or is a chemical used in processing, when the primary purpose of such chemical is to create a chemical reaction directly through contact with an ingredient of a new article being produced for sale; or
     (iv) Purchases for the purpose of consuming the property purchased in producing ferrosilicon which is subsequently used in producing magnesium for sale, if the primary purpose of such property is to create a chemical reaction directly through contact with an ingredient of ferrosilicon; or
     (v) Purchases for the purpose of providing the property to consumers as part of competitive telephone service, as defined in RCW 82.04.065; or
     (vi) Purchases for the purpose of satisfying the person's obligations under an extended warranty as defined in subsection (7) of this section, if such tangible personal property replaces or becomes an ingredient or component of property covered by the extended warranty without intervening use by such person.
     (b) The term includes every sale of tangible personal property that is used or consumed or to be used or consumed in the performance of any activity defined as a "sale at retail" or "retail sale" even though such property is resold or used as provided in (a)(i) through (vi) of this subsection following such use.
     (c) The term also means every sale of tangible personal property to persons engaged in any business that is taxable under RCW ((82.04.280(1) (a), (b), and (g),)) 82.04.290((,)) and 82.04.2908.
     (2) The term "sale at retail" or "retail sale" includes the sale of or charge made for tangible personal property consumed and/or for labor and services rendered in respect to the following:
     (a) The installing, repairing, cleaning, altering, imprinting, or improving of tangible personal property of or for consumers, including charges made for the mere use of facilities in respect thereto, but excluding charges made for the use of self-service laundry facilities, and also excluding sales of laundry service to nonprofit health care facilities, and excluding services rendered in respect to live animals, birds and insects;
     (b) The constructing, repairing, decorating, or improving of new or existing buildings or other structures under, upon, or above real property of or for consumers, including the installing or attaching of any article of tangible personal property therein or thereto, whether or not such personal property becomes a part of the realty by virtue of installation, and also includes the sale of services or charges made for the clearing of land and the moving of earth excepting the mere leveling of land used in commercial farming or agriculture;
     (c) The constructing, repairing, or improving of any structure upon, above, or under any real property owned by an owner who conveys the property by title, possession, or any other means to the person performing such construction, repair, or improvement for the purpose of performing such construction, repair, or improvement and the property is then reconveyed by title, possession, or any other means to the original owner;
     (d) The cleaning, fumigating, razing, or moving of existing buildings or structures, but does not include the charge made for janitorial services; and for purposes of this section the term "janitorial services" means those cleaning and caretaking services ordinarily performed by commercial janitor service businesses including, but not limited to, wall and window washing, floor cleaning and waxing, and the cleaning in place of rugs, drapes and upholstery. The term "janitorial services" does not include painting, papering, repairing, furnace or septic tank cleaning, snow removal or sandblasting;
     (e) Automobile towing and similar automotive transportation services, but not in respect to those required to report and pay taxes under chapter 82.16 RCW;
     (f) The furnishing of lodging and all other services by a hotel, rooming house, tourist court, motel, trailer camp, and the granting of any similar license to use real property, as distinguished from the renting or leasing of real property, and it is presumed that the occupancy of real property for a continuous period of one month or more constitutes a rental or lease of real property and not a mere license to use or enjoy the same. For the purposes of this subsection, it is presumed that the sale of and charge made for the furnishing of lodging for a continuous period of one month or more to a person is a rental or lease of real property and not a mere license to enjoy the same;
     (g) The installing, repairing, altering, or improving of digital goods for consumers;
     (h) Persons taxable under (a), (b), (c), (d), (e), (f), and (g) of this subsection when such sales or charges are for property, labor and services which are used or consumed in whole or in part by such persons in the performance of any activity defined as a "sale at retail" or "retail sale" even though such property, labor and services may be resold after such use or consumption. Nothing contained in this subsection may be construed to modify subsection (1) of this section and nothing contained in subsection (1) of this section may be construed to modify this subsection.
     (3) The term "sale at retail" or "retail sale" includes the sale of or charge made for all other personal, business, or professional services not otherwise specified under this section, including amounts designated as interest, rents, fees, admission, and other service emoluments however designated((, received by persons engaging in the following business activities:
     (a) Amusement and recreation services including but not limited to golf, pool, billiards, skating, bowling, ski lifts and tows, day trips for sightseeing purposes, and others, when provided to consumers;
     (b) Abstract, title insurance, and escrow services;
     (c) Credit bureau services;
     (d) Automobile parking and storage garage services;
     (e) Landscape maintenance and horticultural services but excluding (i) horticultural services provided to farmers and (ii) pruning, trimming, repairing, removing, and clearing of trees and brush near electric transmission or distribution lines or equipment, if performed by or at the direction of an electric utility;
     (f) Service charges associated with tickets to professional sporting events; and
     (g) The following personal services: Physical fitness services, tanning salon services, tattoo parlor services, steam bath services, turkish bath services, escort services, and dating services
)). Services provided by an employee to an employer are not included within the definition of retail sale under this subsection (3).
     (4)(a) The term also includes the renting or leasing of tangible personal property to consumers.
     (b) The term does not include the renting or leasing of tangible personal property where the lease or rental is for the purpose of sublease or subrent.
     (5) The term also includes the providing of "competitive telephone service," "telecommunications service," or "ancillary services," as those terms are defined in RCW 82.04.065, to consumers.
     (6)(a) The term also includes the sale of prewritten computer software to a consumer, regardless of the method of delivery to the end user. For purposes of this subsection (6)(a), the sale of prewritten computer software includes the sale of or charge made for a key or an enabling or activation code, where the key or code is required to activate prewritten computer software and put the software into use. There is no separate sale of the key or code from the prewritten computer software, regardless of how the sale may be characterized by the vendor or by the purchaser.
     The term "retail sale" does not include the sale of or charge made for:
     (i) Custom software; or
     (ii) The customization of prewritten computer software.
     (b)(i) The term also includes the charge made to consumers for the right to access and use prewritten computer software, where possession of the software is maintained by the seller or a third party, regardless of whether the charge for the service is on a per use, per user, per license, subscription, or some other basis.
     (ii)(A) The service described in (b)(i) of this subsection (6) includes the right to access and use prewritten computer software to perform data processing.
     (B) For purposes of this subsection (6)(b)(ii), "data processing" means the systematic performance of operations on data to extract the required information in an appropriate form or to convert the data to usable information. Data processing includes check processing, image processing, form processing, survey processing, payroll processing, claim processing, and similar activities.
     (7) The term also includes the sale of or charge made for an extended warranty to a consumer. For purposes of this subsection, "extended warranty" means an agreement for a specified duration to perform the replacement or repair of tangible personal property at no additional charge or a reduced charge for tangible personal property, labor, or both, or to provide indemnification for the replacement or repair of tangible personal property, based on the occurrence of specified events. The term "extended warranty" does not include an agreement, otherwise meeting the definition of extended warranty in this subsection, if no separate charge is made for the agreement and the value of the agreement is included in the sales price of the tangible personal property covered by the agreement. For purposes of this subsection, "sales price" has the same meaning as in RCW 82.08.010.
     (8)(a) The term also includes the following sales to consumers of digital goods, digital codes, and digital automated services:
     (i) Sales in which the seller has granted the purchaser the right of permanent use;
     (ii) Sales in which the seller has granted the purchaser a right of use that is less than permanent;
     (iii) Sales in which the purchaser is not obligated to make continued payment as a condition of the sale; and
     (iv) Sales in which the purchaser is obligated to make continued payment as a condition of the sale.
     (b) A retail sale of digital goods, digital codes, or digital automated services under this subsection (8) includes any services provided by the seller exclusively in connection with the digital goods, digital codes, or digital automated services, whether or not a separate charge is made for such services.
     (c) For purposes of this subsection, "permanent" means perpetual or for an indefinite or unspecified length of time. A right of permanent use is presumed to have been granted unless the agreement between the seller and the purchaser specifies or the circumstances surrounding the transaction suggest or indicate that the right to use terminates on the occurrence of a condition subsequent.
     (9) The term also includes the charge made for providing tangible personal property along with an operator for a fixed or indeterminate period of time. A consideration of this is that the operator is necessary for the tangible personal property to perform as designed. For the purpose of this subsection (9), an operator must do more than maintain, inspect, or set up the tangible personal property.
     (10) The term does not include the sale of or charge made for labor and services rendered in respect to the building, repairing, or improving of any street, place, road, highway, easement, right-of-way, mass public transportation terminal or parking facility, bridge, tunnel, or trestle which is owned by a municipal corporation or political subdivision of the state or by the United States and which is used or to be used primarily for foot or vehicular traffic including mass transportation vehicles of any kind.
     (11) The term also does not include sales of chemical sprays or washes to persons for the purpose of postharvest treatment of fruit for the prevention of scald, fungus, mold, or decay, nor does it include sales of feed, seed, seedlings, fertilizer, agents for enhanced pollination including insects such as bees, and spray materials to: (a) Persons who participate in the federal conservation reserve program, the environmental quality incentives program, the wetlands reserve program, and the wildlife habitat incentives program, or their successors administered by the United States department of agriculture; (b) farmers for the purpose of producing for sale any agricultural product; and (c) farmers acting under cooperative habitat development or access contracts with an organization exempt from federal income tax under 26 U.S.C. Sec. 501(c)(3) of the federal internal revenue code or the Washington state department of fish and wildlife to produce or improve wildlife habitat on land that the farmer owns or leases.
     (12) The term does not include the sale of or charge made for labor and services rendered in respect to the constructing, repairing, decorating, or improving of new or existing buildings or other structures under, upon, or above real property of or for the United States, any instrumentality thereof, or a county or city housing authority created pursuant to chapter 35.82 RCW, including the installing, or attaching of any article of tangible personal property therein or thereto, whether or not such personal property becomes a part of the realty by virtue of installation. Nor does the term include the sale of services or charges made for the clearing of land and the moving of earth of or for the United States, any instrumentality thereof, or a county or city housing authority. Nor does the term include the sale of services or charges made for cleaning up for the United States, or its instrumentalities, radioactive waste and other by-products of weapons production and nuclear research and development.
     (13) The term does not include the sale of or charge made for labor, services, or tangible personal property pursuant to agreements providing maintenance services for bus, rail, or rail fixed guideway equipment when a regional transit authority is the recipient of the labor, services, or tangible personal property, and a transit agency, as defined in RCW 81.104.015, performs the labor or services.
     (14) The term does not include the sale for resale of any service described in this section if the sale would otherwise constitute a "sale at retail" and "retail sale" under this section.

PART XIII
MISCELLANEOUS

NEW SECTION.  Sec. 1301   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.

NEW SECTION.  Sec. 1302   Sections 101 through 709 of this act constitute a new title in the Revised Code of Washington, to be codified as Title 82A RCW.

NEW SECTION.  Sec. 1303   (1) If this act is approved by the voters as provided in section 1306 of this act, except as otherwise provided in this section, this act takes effect January 1, 2015.
     (2) If this act is approved by the voters as provided in section 1306 of this act, parts XI and XII of this act take effect July 1, 2015.

NEW SECTION.  Sec. 1304   If any amendments in this act, or any sections enacted or affected by chapter . . ., Laws of 2012 (this act), are enacted in a 2012 legislative session that do not take cognizance of chapter . . ., Laws of 2012 (this act), the code reviser must prepare a bill for introduction in the 2013 or 2014 legislative session that incorporates any such amendments into the reorganization adopted by chapter . . ., Laws of 2012 (this act) and corrects any incorrect cross-references.

NEW SECTION.  Sec. 1305   This act may be known and cited as the higher opportunity promise for education act.

NEW SECTION.  Sec. 1306   The secretary of state shall submit this act to the people for their adoption and ratification, or rejection, at the next general election to be held in this state, in accordance with Article II, section 1 of the state Constitution and the laws adopted to facilitate its operation.

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