BILL REQ. #:  H-2455.1 

Read first time 04/18/13.   Referred to Committee on Finance.

     AN ACT Relating to creating the new economy scholars fund; amending RCW 82.04.4452 and 82.63.030; reenacting and amending RCW 43.79A.040; adding a new section to chapter 28B.77 RCW; and adding a new section to chapter 82.32 RCW.

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

NEW SECTION.  Sec. 1   A new section is added to chapter 28B.77 RCW to read as follows:
     (1) The new economy scholars fund is established in section 4 of this act with the purpose of expanding high employer demand programs of study at institutions of higher education to meet the needs of the new economy. The fund shall be administered by the council.
     (2) The council's administration duties include the following:
     (a) Recommend to the higher education and appropriation committees of the legislature the number of additional enrollments needed for each high employer demand program of study at each level of higher education based on the most recent assessment of the number and type of higher education and training credentials required to match employer demand for a skilled and educated workforce as in RCW 28B.77.080. The legislature may base new economy fund allocations to the four-year institutions of higher education on these recommendations. The council must include these recommendations in their short-term strategic action plan;
     (b) Identify the appropriate course codes that qualify for allocations from the new economy scholars fund;
     (c) Enter into an interagency agreement with the state board for community and technical colleges who shall manage new economy scholars fund allocations through a solicitation of competitive requests for proposals from the community and technical colleges; and
     (d) By December 1, 2015, and every two years thereafter, and in compliance with RCW 43.01.036, the council must submit a report to the governor and the higher education and appropriation committees of the legislature that details expansion in high employer demand programs of study resulting from the new economy scholars fund.
     (3) The state board for community and technical colleges and the four-year institutions of higher education receiving an allocation from the new economy scholars fund shall establish program baselines and demonstrate enrollment increases in high employer demand programs of study for which they receive funds and provide this data to the council for inclusion in the report in subsection (2)(d) of this section.
     (4) For the purposes of the new economy scholars fund, "high employer demand program of study" means an undergraduate or graduate certificate or degree program in which the number of students prepared for employment per year from in-state institutions is substantially less than the number of projected job openings per year in that field, statewide, or in a substate region.

Sec. 2   RCW 82.04.4452 and 2010 c 114 s 114 are each amended to read as follows:
     (1) In computing the tax imposed under this chapter, a credit is allowed for each person whose research and development spending during the year in which the credit is claimed exceeds 0.92 percent of the person's taxable amount during the same calendar year.
     (2)(a) The credit is calculated as follows:
     (((a))) (i) Determine the greater of the amount of qualified research and development expenditures of a person or eighty percent of amounts received by a person other than a public educational or research institution in compensation for the conduct of qualified research and development;
     (((b))) (ii) Subtract 0.92 percent of the person's taxable amount from the amount determined under (a)(i) of this subsection;
     (((c))) (iii) Multiply the amount determined under (((b))) (a)(ii) of this subsection by ((the following:
     (i) For the period June 10, 2004, through December 31, 2006, the person's average tax rate for the calendar year for which the credit is claimed;
     (ii) For the calendar year ending December 31, 2007, the greater of the person's average tax rate for that calendar year or 0.75 percent;
     (iii) For the calendar year ending December 31, 2008, the greater of the person's average tax rate for that calendar year or 1.0 percent;
     (iv) For the calendar year ending December 31, 2009, the greater of the person's average tax rate for that calendar year or 1.25 percent;
     (v) For the calendar year ending December 31, 2010, and thereafter,)) 1.50 percent.
     (b) For purposes of calculating the credit, if a person's reporting period is less than annual, the person may use an estimated average tax rate for the calendar year for which the credit is claimed by using the person's average tax rate for each reporting period. A person who uses an estimated average tax rate must make an adjustment to the total credit claimed for the calendar year using the person's actual average tax rate for the calendar year when the person files its last return for the calendar year for which the credit is claimed.
     (3) Any person entitled to the credit provided in subsection (2) of this section as a result of qualified research and development conducted under contract may assign all or any portion of the credit to the person contracting for the performance of the qualified research and development.
     (4) The credit, including any credit assigned to a person under subsection (3) of this section, must be claimed against taxes due for the same calendar year in which the qualified research and development expenditures are incurred. The credit, including any credit assigned to a person under subsection (3) of this section, for each calendar year may not exceed the lesser of two million dollars or the amount of tax otherwise due under this chapter for the calendar year.
     (5) For any person claiming the credit, including any credit assigned to a person under subsection (3) of this section, whose research and development spending during the calendar year in which the credit is claimed fails to exceed 0.92 percent of the person's taxable amount during the same calendar year or who is otherwise ineligible, the department must declare the taxes against which the credit was claimed to be immediately due and payable. The department must assess interest, but not penalties, on the taxes against which the credit was claimed. Interest must be assessed at the rate provided for delinquent excise taxes under chapter 82.32 RCW, retroactively to the date the credit was claimed, and accrues until the taxes against which the credit was claimed are repaid. Any credit assigned to a person under subsection (3) of this section that is disallowed as a result of this section may be claimed by the person who performed the qualified research and development subject to the limitations set forth in subsection (4) of this section.
     (6) A person may not claim a credit under this section if the person reported an annual gross amount of ten million dollars or more in the prior calendar year. Taxpayers disallowed from claiming the credit under this subsection are not required to refund any credit claimed in calendar year 2013 prior to the effective date of this section.
     (7) A person claiming the credit provided in this section must file a complete annual survey with the department under RCW 82.32.585.
     (((7) For the purpose of this section:)) The definitions in this subsection apply throughout this section unless the context clearly requires otherwise.
     (8)(a) "Average tax rate" means a person's total tax liability under this chapter for the calendar year for which the credit is claimed divided by the taxpayer's total taxable amount under this chapter for the calendar year for which the credit is claimed.
     (b) "Qualified research and development expenditures" means operating expenses, including wages, compensation of a proprietor or a partner in a partnership as determined under rules adopted by the department, benefits, supplies, and computer expenses, directly incurred in qualified research and development by a person claiming the credit provided in this section. The term does not include amounts paid to a person other than a public educational or research institution to conduct qualified research and development. Nor does the term include capital costs and overhead, such as expenses for land, structures, or depreciable property.
     (c) "Qualified research and development" ((shall have)) has the same meaning as provided in RCW 82.63.010.
     (d) "Research and development spending" means qualified research and development expenditures plus eighty percent of amounts paid to a person other than a public educational or research institution to conduct qualified research and development.
     (e) "Taxable amount" means the taxable amount subject to the tax imposed in this chapter required to be reported on the person's combined excise tax returns for the calendar year for which the credit is claimed, less any taxable amount for which a credit is allowed under RCW 82.04.440.
     (((8))) (9) This section expires January 1, 2015.

Sec. 3   RCW 82.63.030 and 2008 c 15 s 4 are each amended to read as follows:
     (1) Except as provided in subsection (2) of this section, the department shall issue a sales and use tax deferral certificate for state and local sales and use taxes due under chapters 82.08, 82.12, and 82.14 RCW on each eligible investment project.
     (2) No certificate may be issued for an investment project that has already received a deferral under chapter 82.60 RCW or this chapter, except that an investment project for qualified research and development that has already received a deferral may also receive an additional deferral certificate for adapting the investment project for use in pilot scale manufacturing.
     (3) ((This section shall expire January 1, 2015.)) The department may not issue a certificate under this section on or after July 1, 2013.

NEW SECTION.  Sec. 4   A new section is added to chapter 82.32 RCW to read as follows:
     (1) By August 31, 2014, the department must estimate the increase in state revenue resulting from the termination of the research and development tax credit or deferral in RCW 82.04.4452 and 82.63.030 for the prior fiscal year and certify the estimated amount to the state treasurer.
     (2) By September 30, 2014, and by September 30th of every year thereafter, the state treasurer must transfer the amount certified by the department under subsection (1) of this section from the state general fund into the new economy scholars account.
     (3) The new economy scholars account is created in the custody of the state treasurer. Money in the account must be used solely for the purposes specified in section 1 of this act with fifty percent of the moneys solely for two-year institutions of higher education and fifty percent of the moneys solely for the four-year institutions of higher education. Only the director of the council or the director's designee may authorize expenditures from the account. The account is subject to allotment procedures under chapter 43.88 RCW, but an appropriation is not required for expenditures. The account may retain all of the interest earnings.

Sec. 5   RCW 43.79A.040 and 2012 c 198 s 8, 2012 c 196 s 6, 2012 c 187 s 13, and 2012 c 114 s 3 are each reenacted and amended to read as follows:
     (1) Money in the treasurer's trust fund may be deposited, invested, and reinvested by the state treasurer in accordance with RCW 43.84.080 in the same manner and to the same extent as if the money were in the state treasury, and may be commingled with moneys in the state treasury for cash management and cash balance purposes.
     (2) All income received from investment of the treasurer's trust fund must be set aside in an account in the treasury trust fund to be known as the investment income account.
     (3) The investment income account may be utilized for the payment of purchased banking services on behalf of treasurer's trust funds including, but not limited to, depository, safekeeping, and disbursement functions for the state treasurer or affected state agencies. The investment income account is subject in all respects to chapter 43.88 RCW, but no appropriation is required for payments to financial institutions. Payments must occur prior to distribution of earnings set forth in subsection (4) of this section.
     (4)(a) Monthly, the state treasurer must distribute the earnings credited to the investment income account to the state general fund except under (b), (c), and (d) of this subsection.
     (b) The following accounts and funds must receive their proportionate share of earnings based upon each account's or fund's average daily balance for the period: The Washington promise scholarship account, the Washington advanced college tuition payment program account, the accessible communities account, the community and technical college innovation account, the agricultural local fund, the American Indian scholarship endowment fund, the foster care scholarship endowment fund, the foster care endowed scholarship trust fund, the basic health plan self-insurance reserve account, the contract harvesting revolving account, the Washington state combined fund drive account, the commemorative works account, the county enhanced 911 excise tax account, the toll collection account, the developmental disabilities endowment trust fund, the energy account, the fair fund, the family leave insurance account, the food animal veterinarian conditional scholarship account, the fruit and vegetable inspection account, the future teachers conditional scholarship account, the game farm alternative account, the GET ready for math and science scholarship account, the Washington global health technologies and product development account, the grain inspection revolving fund, the industrial insurance rainy day fund, the juvenile accountability incentive account, the law enforcement officers' and firefighters' plan 2 expense fund, the local tourism promotion account, the new economy scholars account, the multiagency permitting team account, the pilotage account, the produce railcar pool account, the regional transportation investment district account, the rural rehabilitation account, the stadium and exhibition center account, the youth athletic facility account, the self-insurance revolving fund, the children's trust fund, the Washington horse racing commission Washington bred owners' bonus fund and breeder awards account, the Washington horse racing commission class C purse fund account, the individual development account program account, the Washington horse racing commission operating account (earnings from the Washington horse racing commission operating account must be credited to the Washington horse racing commission class C purse fund account), the life sciences discovery fund, the Washington state heritage center account, ((and)) the reduced cigarette ignition propensity account, the center for childhood deafness and hearing loss account, ((and)) the school for the blind account, the Millersylvania park trust fund, the public employees' and retirees' insurance reserve fund, and the radiation perpetual maintenance fund.
     (c) The following accounts and funds must receive eighty percent of their proportionate share of earnings based upon each account's or fund's average daily balance for the period: The advanced right-of-way revolving fund, the advanced environmental mitigation revolving account, the federal narcotics asset forfeitures account, the high occupancy vehicle account, the local rail service assistance account, and the miscellaneous transportation programs account.
     (d) Any state agency that has independent authority over accounts or funds not statutorily required to be held in the custody of the state treasurer that deposits funds into a fund or account in the custody of the state treasurer pursuant to an agreement with the office of the state treasurer shall receive its proportionate share of earnings based upon each account's or fund's average daily balance for the period.
     (5) In conformance with Article II, section 37 of the state Constitution, no trust accounts or funds shall be allocated earnings without the specific affirmative directive of this section.