BILL REQ. #:  H-2554.1 

READ FIRST TIME 04/25/13.   

     AN ACT Relating to the taxation of large airplanes; amending RCW 47.68.250, 82.48.100, and 82.48.100; adding a new section to chapter 82.08 RCW; adding a new section to chapter 82.12 RCW; adding a new section to chapter 43.136 RCW; creating a new section; providing effective dates; and providing expiration dates.

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

NEW SECTION.  Sec. 1   The legislature finds that Washington is home to one of the workforces most skilled in the world in the manufacture, repair, and modification of aircraft. However, in a global marketplace, aircraft are increasingly delivered to out-of-state facilities for services like repair, cleaning, alteration, improvement, and storage, because Washington's current tax structure is disadvantageous, relative to the tax structures of other jurisdictions. As a result of this competitive disadvantage, Washington businesses are less likely to win contracts for the repair, cleaning, alteration, improvement, and storage of large private airplanes that are directly worth tens of millions of dollars to the Washington businesses, with indirect benefits to the state that may amount to several times the contract value. To help maintain and build upon Washington's aerospace industry, create jobs, and increase state revenues, the legislature intends to change its taxation of the modification, repair, storage, and sale of large airplanes, so as to help local businesses compete for these contracts against out-of-state businesses, on a level playing field.

NEW SECTION.  Sec. 2   A new section is added to chapter 82.08 RCW to read as follows:
     (1)(a) The tax levied by RCW 82.08.020 does not apply to:
     (i) Sales of large private airplanes to nonresidents of this state; and
     (ii) Sales of or charges for labor and services rendered in respect to repairing, cleaning, altering, or improving large private airplanes owned by nonresidents of this state.
     (b) The exemption provided by this section applies only when the large private airplane is not required to be registered with the department of transportation, or its successor, under chapter 47.68 RCW.
     (2) Sellers making tax-exempt sales under this section must either obtain an exemption certificate from the buyer or must capture the relevant data elements, including proof of out-of-state ownership, as allowed under the streamlined sales and use tax agreement. The exemption certificate must be in a form and manner prescribed by the department. The seller must retain a copy of the exemption certificate for the seller's files.
     (3) Upon request, the seller must provide to the department of revenue information needed by the department of revenue to verify that a sale qualified as tax-exempt under this section.
     (4) For purposes of this section "large private airplane" means an airplane not used in interstate commerce, not owned or leased by a government entity, weighing more than forty-one thousand pounds, and assigned a category A, B, C, or D test flow management system aircraft weight class by the federal aviation administration's office of aviation policy and plans.
     (5) This section expires January 1, 2024.

NEW SECTION.  Sec. 3   A new section is added to chapter 82.12 RCW to read as follows:
     (1)(a) The tax levied by RCW 82.12.020 does not apply to the use of:
     (i) Labor and services rendered in respect to repairing, cleaning, altering, or improving large private airplanes owned by nonresidents of this state; and
     (ii) Large private airplanes owned by nonresidents of this state.
     (b) The exemption provided by this section applies only when the large private airplane is not required to be registered with the department of transportation, or its successor, under chapter 47.68 RCW. The person claiming an exemption under this section must provide the department of revenue, upon request, any information the department may require.
     (2) For purposes of this section, "large private airplane" has the same meaning as established in section 2(4) of this act.
     (3) This section expires January 1, 2024.

Sec. 4   RCW 47.68.250 and 2003 c 375 s 4 are each amended to read as follows:
     (1) Every aircraft ((shall)) must be registered with the department for each calendar year in which the aircraft is operated or is based within this state. A fee of fifteen dollars ((shall be)) is charged for each such registration and each annual renewal thereof.
     (2) Possession of the appropriate effective federal certificate, permit, rating, or license relating to ownership and airworthiness of the aircraft, and payment of the excise tax imposed by Title 82 RCW for the privilege of using the aircraft within this state during the year for which the registration is sought, and payment of the registration fee required by this section ((shall be)) are the only requisites for registration of an aircraft under this section.
     (3) The registration fee imposed by this section ((shall)) must be payable to and collected by the secretary. The fee for any calendar year must be paid during the month of January, and ((shall)) must be collected by the secretary at the time of the collection by him or her of the said excise tax. If the secretary is satisfied that the requirements for registration of the aircraft have been met, he or she ((shall)) must thereupon issue to the owner of the aircraft a certificate of registration therefor. The secretary ((shall)) must pay to the state treasurer the registration fees collected under this section, which registration fees shall be credited to the aeronautics account in the transportation fund.
     (4) It ((shall)) is not ((be)) necessary for the registrant to provide the secretary with originals or copies of federal certificates, permits, ratings, or licenses. The secretary ((shall)) must issue certificates of registration, or such other evidences of registration or payment of fees as he or she may deem proper; and in connection therewith may prescribe requirements for the possession and exhibition of such certificates or other evidences.
     (5) The provisions of this section ((shall)) do not apply to:
     (((1))) (a) An aircraft owned by and used exclusively in the service of any government or any political subdivision thereof, including the government of the United States, any state, territory, or possession of the United States, or the District of Columbia, which is not engaged in carrying persons or property for commercial purposes;
     (((2))) (b) An aircraft registered under the laws of a foreign country;
     (((3))) (c) An aircraft ((which is)), owned by a nonresident ((and registered in another state: PROVIDED, That if said aircraft shall remain in and/or be based in this state for a period of ninety days or longer it shall not be exempt under this section;
     (4))), which remains in this state, is based in this state, or both, for a period of less than ninety days;
     (d) An aircraft engaged principally in commercial flying constituting an act of interstate or foreign commerce;
     (((5))) (e) An aircraft owned by the commercial manufacturer thereof while being operated for test or experimental purposes, or for the purpose of training crews for purchasers of the aircraft;
     (((6))) (f) An aircraft being held for sale, exchange, delivery, test, or demonstration purposes solely as stock in trade of an aircraft dealer licensed under Title 14 RCW;
     (((7))) (g) An aircraft based within the state that is in an unairworthy condition, is not operated within the registration period, and has obtained a written exemption issued by the secretary; and
     (h) A large private airplane, as defined in section 2(4) of this act, delivered within the state exclusively for the purpose of continual storage of one full calendar year or more, repairs, alterations, or reconstruction, when the airplane:
     (i) Is owned by a nonresident; and
     (ii) Is not flown during the time it is within the state, except when it is flown for the purpose of flight testing related to the repairs, alterations, or reconstruction, and an employee of the facility providing these services is on board during the flight testing.
     (6) The secretary ((shall)) must be notified within thirty days of any change in ownership of a registered aircraft. The notification ((shall)) must contain the N, NC, NR, NL, or NX number of the aircraft, the full name and address of the former owner, and the full name and address of the new owner. For failure to so notify the secretary, the registration of that aircraft may be canceled by the secretary, subject to reinstatement upon application and payment of a reinstatement fee of ten dollars by the new owner.
     (7) A municipality or port district that owns, operates, or leases an airport, as defined in RCW 47.68.020, with the intent to operate, ((shall)) must require from an aircraft owner proof of aircraft registration as a condition of leasing or selling tiedown or hanger space for an aircraft. It is the responsibility of the lessee or purchaser to register the aircraft. The airport ((shall)) must work with the aviation division to assist in its efforts to register aircraft by providing information about based aircraft on an annual basis as requested by the division.

Sec. 5   RCW 82.48.100 and 2010 1st sp.s. c 12 s 2 are each amended to read as follows:
     This chapter does not apply to:
     (1) Aircraft owned by and used exclusively in the service of any government or any political subdivision thereof, including the government of the United States, any state, territory, or possession of the United States, or the District of Columbia, which are not engaged in carrying persons or property for commercial purposes;
     (2) Aircraft registered under the laws of a foreign country;
     (3) Aircraft ((which)) that are owned by a nonresident and registered in another state((. However, if any such aircraft remains in and/or is based in this state for a period of ninety days or longer it is not exempt under this section)), if the aircraft remains in this state or is based in this state, or both, for a period less than ninety days;
     (4)(a) Aircraft engaged principally in commercial flying ((which)) that constitutes interstate or foreign commerce((; and)), except as provided in (b) of this subsection.
     (b) The exemption provided by (a) of this subsection does not apply to aircraft engaged principally in commercial flying that constitutes interstate or foreign commerce when such aircraft will be in this state exclusively for the purpose of continual storage of not less than one full calendar year;
     (5) Aircraft owned by the manufacturer thereof while being operated for test or experimental purposes, or for the purpose of training crews for purchasers of the aircraft;
     (((5))) (6) Aircraft being held for sale, exchange, delivery, test, or demonstration purposes solely as stock in trade of an aircraft dealer licensed under Title 14 RCW;
     (((6))) (7) Aircraft owned by a nonresident of this state if the aircraft is kept at an airport in this state and that airport is jointly owned or operated by a municipal corporation or other governmental entity of this state and a municipal corporation or other governmental entity of another state, and the owner or operator of the aircraft provides the department with proof that the owner or operator has paid all taxes, license fees, and registration fees required by the state in which the owner or operator resides; and
     (((7))) (8) Aircraft that are: (a) Owned by a nonprofit organization that is exempt from federal income taxation under 26 U.S.C. Sec. 501(c)(3) of the federal internal revenue code; and (b) exclusively used to provide emergency medical transportation services.

Sec. 6   RCW 82.48.100 and 1999 c 302 s 3 are each amended to read as follows:
     This chapter ((shall)) does not apply to:
     (1) Aircraft owned by and used exclusively in the service of any government or any political subdivision thereof, including the government of the United States, any state, territory, or possession of the United States, or the District of Columbia, which are not engaged in carrying persons or property for commercial purposes;
     (2) Aircraft registered under the laws of a foreign country;
     (3) Aircraft ((which)) that are owned by a nonresident and registered in another state((: PROVIDED, That if any such aircraft shall remain in and/or be based in this state for a period of ninety days or longer it shall not be exempt under this section)), if the aircraft remains in this state or is based in this state, or both, for a period less than ninety days;
     (4)(a) Aircraft engaged principally in commercial flying ((which)) that constitutes interstate or foreign commerce((; and)), except as provided in (b) of this subsection.
     (b) The exemption provided by (a) of this subsection does not apply to aircraft engaged principally in commercial flying that constitutes interstate or foreign commerce when such aircraft will be in this state exclusively for the purpose of continual storage of not less than one full calendar year;
     (5) Aircraft owned by the manufacturer thereof while being operated for test or experimental purposes, or for the purpose of training crews for purchasers of the aircraft;
     (6) Aircraft being held for sale, exchange, delivery, test, or demonstration purposes solely as stock in trade of an aircraft dealer licensed under Title 14 RCW;
     (7) Aircraft owned by a nonresident of this state if the aircraft is kept at an airport in this state and that airport is jointly owned or operated by a municipal corporation or other governmental entity of this state and a municipal corporation or other governmental entity of another state, and the owner or operator of the aircraft provides the department with proof that the owner or operator has paid all taxes, license fees, and registration fees required by the state in which the owner or operator resides.

NEW SECTION.  Sec. 7   A new section is added to chapter 43.136 RCW to read as follows:
     (1) The legislature finds that accountability and the effectiveness of attempts to foster job creation and retention are important aspects of setting tax policy. In order to make policy choices regarding the best use of limited state resources, the legislature needs to know how the incentives are used, and the degree to which they meet the legislature's intent.
     (2) To determine whether the tax preferences are achieving their intended purpose of promoting economic development, the joint legislative audit and review committee must review the performance of the tax preferences with respect to the following performance benchmarks:
     (a) The number and value of contracts for modification, completion work, retrofitting, or any other repair work or storage performed on planes owned by taxpayers claiming the tax preferences, subject to data availability; and
     (b) The difference in the amount of business and occupation tax revenue reported to the state under chapter 82.04 RCW by Washington businesses making tax exempt sales of planes and labor and services pursuant to the exemptions created in this act, as compared to the 2012 baseline.
     (3) The department of revenue, department of employment security, and sellers making tax exempt sales pursuant to the preferences created in this act must cooperate with the joint legislative audit and review committee by providing any data requested.

NEW SECTION.  Sec. 8   Section 5 of this act expires January 1, 2020.

NEW SECTION.  Sec. 9   (1) Except as provided otherwise in this section, this act takes effect January 1, 2014.
     (2) Section 6 of this act takes effect January 1, 2020.